Jobless growth
Throughout the 20th and 21st centuries, economic growth and employment have been two of the main macroeconomic concerns and principal targets of economic policy, especially in post-recessionary periods. Nevertheless, in the late 70s economists started to observe how GDP and unemployment became less volatile and after 1984 the period of “The Great Moderation” started, posing great concern on how unemployment was no longer responding to output growth in the same way.[1] Although economic theory predicted a strong relation between output growth and employment, in reality unemployment was not declining as output grew and this tendency has become stronger first in the United States and OECD economies and more recently in emerging economies with high rates of GDP growth. The relationship between economic growth and job creation has changed, giving way to the phenomenon of jobless growth which has further consequences related to factor productivity and most importantly inequality and poverty.
Urban population has been continuously growing since the first Industrial Revolution while cities became the main drivers of economic growth. Lately economic growth became an end in itself and this has reflected on growing inequality, especially in urban areas. This is why the distributive effects of jobless growth need to be addressed in the policy agenda in order to improve access to jobs and improve quality of life in urban areas. There is a strong need to recognize that economic growth per se does not contribute to better quality of life, and instead there should be a strong effort to guarantee quality jobs for those portions of the population that need to enter the labor market, especially the young.
The evolution of international thinking about cities over the past decade is slowly leading to more focused attention on the urban economy. Global and national discussions of employment are stuck at the macro-economic level, ignoring that jobs can be most efficiently created in cities where their multiplying effects are greatest due to demographic and spatial advantages. A better knowledge on the urban economy will lead to better policies that can address labor market imperfections and information asymmetries, contributing to better human capital formation and most importantly more and better jobs. In this sense, a broader city perspective should be concerned with the productivity of the city and its ability to generate jobs, investment in education and health, the efficiency and equity of its spatial form, the city contribution to greenhouse gases and the risks cities face from a changing climate, and the often determining role of urban policy in affecting equality of opportunity and access to services. It is time to demonstrate that cities are part of the solution to urgent global problems.
Martha Susana Jaimes, 28 July 2016
[1] Dominicián Máté. “A Theoretical and Growth Accounting Approach of Jobless Growth”. Periodica Oeconomica, October 2010 (pp. 67-76).