The changing face of employment in the 21st century | Upal Chakraborty

There are developments in the global economy where established, time-tested models are going for a toss and right inside the heart of global capitalism – USA. Once upon a time, the Phillips curve was seemingly self-evident for students of Economics and policy-makers. What the law stated was simple - as the level of unemployment goes up, wages tend to fall and vice-versa. Stands to reason because an unemployed individual is willing to join at a salary lower than his expectations. For this reason, capitalism tries to ensure that a certain percentage of the country’s workforce remains unemployed.

There may of course be variations. A section may find its skills high in high demand and command astronomical salaries even during times of depressed wages. We have witnessed this during the late 90s with IT professionals. Mid-level IT Managers from IT companies appearing for interviews used to complain about the total breakdown of hierarchies, and employees not bothering to comply to the diktats of their bosses. It must be mentioned, however, is that these were aberrations.

The phenomenon being observed in the capitalist world from the late 90s is of falling wage levels despite record low levels of unemployment. How did they manage to turn Phillip’s law on its head? Traceable to another phenomenon - the lowering of tariff barriers. Perhaps not so fresh in our memory are the 1999 Seattle WTO protests, referred to as the Battle of Seattle, when 40000 protesters gathered outside the WTO Ministerial Conference where a millennial round of trade negotiations was in progress. The negotiations were quickly overshadowed by massive street protests outside the hotels and the Washington State Convention and Trade Centre. Dwarfing all previous demonstrations in the United States against similar congregations.

Jobs started moving eastwards – manufacturing to China, service sector jobs to India and Philippines, Bangalore thrived in Information Technology. But that did not increase unemployment in the US despite share of manufacturing jobs falling by half since 2000 along with the percentage of people employed in this sector. The Service Sector, despite moving of jobs to India, Vietnam, Philippines and Ireland, had jobs to offer. The first thing that comes to our mind when we speak of this sector are the Financial Services and Tech guys, commanding astronomical salaries. They unfortunately contribute only a minuscule. We tend to forget the cleaners, gardeners, canteen helps, cooks, Uber drivers, delivery boys, nurses, security guards in condominiums, construction workers, domestic helps and even school teachers who are today paid much less today than what they were paid before the process of globalization commenced. Contract labour, temporary staff, gig employment have contributed to this phenomenon. The net result is that real wage levels in the US stagnate today at 1975 levels. For certain sectors, it is even lower.

What are the trade unions doing? It is not their fault -workers themselves are unwilling to join unions because of the general insecurity. Union membership stands at a record low of 10%. And while this happens - the rich, the brilliant tech guys and a section of skilled workers have never had it so good. Trump came in with the promise of reversing the trend. So did Bernie Sanders from the opposite end of the spectrum, though he failed to obtain the Democratic Party’s nomination. Trump, while in power promulgated an Act to reverse preferential tariffs for developing economies - Fair and Reciprocal Tariffs - ironically going by the acronym FART. And he still commands a sizeable support base which can only be countered by the Left, not by the Centre represented by Joe Biden.

The phenomenon has been very similar in India in the last ten or fifteen years. Unemployment levels have fallen (the pandemic is once again an exception) but the quality of jobs and the median salary has gone down for the majority. Only 7 to 8 % of the workforce today belongs to the organised sector – with the rest having no security of service, retirement or fringe benefits. And a section, including a section of the middle class, has grown richer by several orders of magnitude, the benefits trickling down through jobs in the unorganised sector – but just trickling down. 1% of the population earns 12% of the national income (not wealth which is far more skewed) and the bottom 50% gets to eat a paltry 22 % of the pie.

In short, the quality of jobs is going down for the majority, going up for some, and total unemployment per se is less. This situation will only accentuate with the introduction of AI and other forms of intelligent automation.

A scary and unsustainable situation, but ripe for an upheaval.

(Author: Upal Chakraborty has worked for various corporate organizations in a long career of 35 years, and, after retirement, currently focuses on writing articles on various social topics, consultancy and teaching )