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What Gill Marcus thinks about the Internet

August 9, 2013

Reserve Bank governor Gill Marcus says that the Internet, mobile telephony, networked computing and – more recently – artificial intelligence have implications for the world of work and for our lives that are difficult to comprehend.

Speaking on July 31 at the 26th Annual Labour Law Conference, Marcus noted that pace of technological change appears to be accelerating exponentially.

“Is the unemployment we are witnessing today a result of a great dislocation of workers from manufacturing to services, or a replacement of workers – both skilled and unskilled – by artificial intelligence, or are there new work opportunities that are yet to be identified that could absorb the growing army of unemployed across the globe?”

The governor said that such trends pose complex questions for policymakers. “Should we protect certain sectors, and if so, how? Does protecting certain sectors or firms weaken the ability of the economy to transform or to innovate?”

The governor also spoke at length about the state of global unemployment amid an ongoing global financial crisis “to which there is no end in sight”.

Marcus said that one of the hardest hitting impacts has been on ordinary people from all walks of life, who have seen their hopes for the future evaporate; “millions will never work again; others will never know the dignity and independence that work brings”.

The governor noted that the International Labour Organisation estimates that there are about 200 million unemployed people in the world today. This figure excludes the millions more who are either underemployed or are discouraged from seeking employment.

The ILO estimates that the number of unemployed people in advanced economies is likely to remain above the pre- crisis level up to at least 2017, a full decade after the crisis first began. In South Africa, total employment is still about 400,000 below the peak reached in in 2008.

Unemployment crisis

“The unemployment crisis represents a massive waste of lives and resources,” Marcus said.

“It has profound social implications and its effects will be with us for decades to come. Economists refer to the term hysteresis, which in this context describes the loss of skills and productivity when a person has been out of the workforce for a long period of time, thereby lowering future potential growth.”

“Reducing unemployment on a sustainable basis is arguably the single most important economic objective at the present moment. In part, creating jobs is about raising the level of economic growth. However, it is also about addressing the structural factors that limit employment growth,” the Reserve Bank chief said.

Marcus said that the task of the Reserve Bank as a monetary authority is to provide a stable environment for balanced and sustainable economic growth to occur; to ensure that investors can take a longer term perspective and that the value of earnings and savings are not eroded by inflation.

Marcus said that there is also recognition by the Reserve Bank that structural reforms aimed at improving economic efficiency are needed to raise the level of employment.

These policies include tougher anti-competition policies and microeconomic reforms aimed at lowering costs in key network industries.

Education and training

“Education, training and the retraining of workers are essential to maintain long-run competitiveness and ensure higher levels of employment. After declining for decades, many advanced economies are spending more on education and training since the financial crisis, despite significant pressure to reduce public spending,” the governor said.

Marcus alluded to a number of structural weaknesses in South Africa, notwithstanding its legacy issues, and including uncompetitive product markets, low levels of fixed capital investment, a low savings rate, inadequate progress in improving education and training and poor public services.

In general, in South Africa, most jobs have been created in skills- intensive sectors, locking out low skilled workers. “Given the shortage of skilled workers, this trend has also pushed up the salaries of skilled people, contributing to rising inequality,” Marcus said.

“This shift to more skills-intensive jobs is not a uniquely South African phenomenon,” she added.

What about the youth?

South Africa’s youth unemployment rate is particularly high, now above 50%, the Reserve Bank noted.

Programmes to encourage firms to hire young people have so far not yielded the desired results.

“Our view is that it is possible to incentivise firms to hire younger people without the threat of displacing more experienced workers. Several OECD and developing countries have some variant of incentive, including tax breaks, to firms to hire inexperienced workers and young people while protecting the existing workforce and older workers,” Marcus said.

“From our perspective at the Reserve Bank, we will continue to contribute towards an environment conducive to creating jobs and encouraging long term investment,” the Governor said.

(Source: businesstech.co.za)

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