EMPLOYMENT AND MOBILITY
By PROFESSOR A. C. PIGOU
IN current discussions of employment policy great stress is laid on securing an appropriate level of aggregate money demand for the output of industry and on keeping this aggregate demand stable. In particular, it is urged that the employment situation can be greatly bettered if, on occasions when private demand shows signs of falling off, the State- intervenes by creating a compensating new demand of its own. Nobody would deny that State action on these lines has a very useful part to play. This was fully understood at least as long ago as 1899, when the Poor Law Commissioners issued their Reports. But the matter is less simple, and this " remedy " for unemployment covers leis ground than is sometimes supposed.
Unemployment does not occur only when aggregate demand is low relatively to the current level of money wage rates. It may also occur in spite of a large aggregate demand if demand in particular occupations is abnormally low and the people who cannot find work there are unable to move into other jobs ; and, when demand falls off in one occupation, a compensatory expansion in another does no good unless either the people out-of-work in the depressed occupation can be transferred to the expanded one or there are already. an equivalent number of unemployed men there whom the new demand can call into work. Thus, as a general rule, when a large contraction ,of demand takes place in a particular occupation, unemployment is likely to be generated, even though at the same time expansions of demand are taking place elsewhere. More broadly, in periods when the demands 'for the services of different occupations are fluctuating widely in relation to one another, unemployment is likely to be heavy.
This conclusion has an important bearing on the problem of employment in the post-war period. For during that period it is to be expected that demand in a large number of industries will shift about in an abnormal degree. At first, for example, there will be a very great call for the services of people to make clothes, furni- ture and textiles, the stocks of which have been contracted on account of the war ; but presently this pent-up demand will be satisfied and a much smaller annual output will be needed. Much the same thing holds of the services of people who make repairs and replacements in the normal equipment of industry. On the other hand, the demand for services that can only be rendered with the help of appropriate equipment and raw materials cannot become effective until there has been time enough for the equipment and raw materials to be provided. Again, with the whole system of trade and industry disorganised, business men, hard put to it to foresee what the detailed structure of postwar demand will be, are sure to make a number of mistakes, which afterwards will have to be put right. It follows from all this that, not merely on the imme- diate impact of peace—when, of course, some industries, most notably that of aircraft production, will have to dismiss a large number of workpeople—but also for a considerable time afterwards, abnormally large relative movements of demand are likely to be taking place.
It has been said above that this kind of situation is likely to entail heavy unemployment of a sort that cannot be fully offset by any manipulation of aggregate demand.' The reason is, of course, that labour displaced in the contracted occupations cannot move freely Into others. If it could move quite freely—were perfectly mobile— the state of demand in particular industries would not affect employ- ment at all ; only the state of aggregate demand would do this. It is only because labour is imperfectly mobile that instability in the relative demands -of different occupations promotes unemployment. It is a very easy step from this to the conclusion that, subject to an unimportant qualification, in a world of fluctuating relative demands, the more mobile labour is, the less unemployment there is likely to be.
We are thus led on to the questions: on what does this mobility depend and how can it be developed? It depends 1mi-fly on power, partly on willingness to move. A man is not able to shift from one calling to another unless_ he can get the training necessary for the new job ; nor, if that job is in a place distant from the old one, unless he can afford the expense of transferring himself and his family. It is easy to see that the State can help here by' providing
training centres and assisting transfer, as it tried to do in some measure in the inter-war period, but much more energetically.
Willingness_ to move is less easy to stimulate. When the industry in which a man is engaged contracts and he loses his job, he is sure to hope that demand there will soon improve again, or at all events
that, if some people have to move away, he will not be among the unlucky ones. Liberal scales of unemployment benefit, desirable as they are from many points of view, here do damage, for they encourage men to hold on where they are in the hope of better times coming. For, after all, who knows what the future will bring ; how can a man be certain that, if he does uproot himself and change his industry, he will not presently find himself unemployed in the new one? The Ministry of Labour can help a little by making reasoned forecasts, based on the best advice it can obtain, on the prospects of different industries, and, in conjunction with the Education Authorities, it can offer advice and guidance to new entrants. Trade Unions can help by -not insisting too strictly on a rigid demarcation between jobs ; employers, by seeing to it that, when they have to dismiss men, they let. the younger and more mobile go ; insurance regulations by providing that, after a certain interval, it shall be a condition for receiving full benefit that a man accepts training for new and different work. But there is no complete solution of the difficulty. Mobility cannot be made perfect. Nevertheless, from the standpoint of employment policy, substantial good can be done by making it as little imperfect as we can.
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