We wrote about a particular economic phenomenon referred to in this post about economic cycles and particularly the Kuznets swing; which we find the most interesting and thought provoking cycle. The reason for this is that it is a generational cycle, only lasting or more accurately stated lasting anywhere between 15 – 25 years.
So where are we on this cycle and what does it mean for me, should be the two most obvious questions to answer?
Lets address both separately below.
Firstly we believe we are now around seven years into a downward phase of the Kuznets cycle, therefore to some analysts it would mean that we are either almost half way or to others around a third of the way through this cycle.
Secondly, and more importantly, the impact it has on market participants like all of us:
We believe that the downward phase of a Kuznets swing is the ‘exuberance‘ correcting phase; when markets and other factors of productions contributing to mostly normal market clearing activity ‘got slightly out of kilter’. The Kuznets swing is always there to bring these factors of production into alignment. It is a consolidation phase of the cycle and interestingly for this particular phase, it coincides with disruptive technological advances around Cloud Computing, dis-aggregation of intermediaries, especially in labour markets with labour or skills exchanges appearing everywhere. Examples include, Elance, oDesk, PeoplePerHour, etc..
Furthermore, and this is the most import action point for our readers to understand and appreciate, this consolidation and technological advance has a severe impact of wages levels and the distribution of where actual ‘work’ is being performed.
Hence headlines like the one we spotted this morning regarding real wages in Britain declining relative to other (very unproductive EU cousins) are not helpful without the pundit exploring and engaging n deeper analysis of the underlying drivers for the pressure.
Understand that the world of work is changing much faster than we had ever become used to in previous generations. As active able and willing participants in this market for labour and skills we have clear choices: Up-skill, be competitive appreciate and plan for volatility in the labour supply market, by ensuring flexibility in location, skills and prices. It is especially painful to suffer real wage declines, but remember this is the market’s subtle way of signalling a problem or challenge in that particular market and a way of adjusting in order to restore the natural balance and clearing prices.
We believe every interfering politician and educating commentator should always bear this in mind.
- Companies hire foreigners as British workers ‘unwilling to move’, says Chris Bryant (telegraph.co.uk)
- Opinion: On Immigration Labour Must Do Better (leftfootforward.org)
- Labour backs down over Tesco and Next row (theguardian.com)
- Tesco criticised over cheap labour (belfasttelegraph.co.uk)
- Tesco criticised over cheap labour (standard.co.uk)
- Pony ponderings… (themarketsoul.com)
- Bryant: ‘Employers recruit from low-wage EU countries’ (itv.com)
- Now Labour backtracks in immigration row and PRAISES Tesco and Next for ‘going the extra mile’ to hire British workers (dailymail.co.uk)
- Recent studies show the future of the European labour market are part-time jobs and project work (prweb.com)