The government is very proud about falling unemployment data in Britain. This article explains why its not really good news. The explanation is quite familiar to economists but the government does not seem to be worried about it. That is because it believes that a falling unemployment rate will help the government to win elections.
The increase in the employment rate would be a good thing if output was increasing along with rising employment. That is not happening in Britain. That means that the labor productivity rate is falling. The implication of low productivity growth is that wages will also decline. This is especially acute when productivity is growing faster in other nations. Britain has been falling behind other nations in productivity growth and is becoming less competitive as a result.
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