This post was contributed by Laura Nasr, senior at Mt. Holyoke College (US) who will be part of our new feature column written by university students.
With this in mind, college graduates, faced with record student debt and few job prospects, may decide to go to graduate school to wait out the bad economy.
Those who don’t go to graduate school may be either unemployed or underemployed. Either way, the effect is the same: young adults won’t make a comfortable wage until later in life. Certainly it won’t benefit the economy if a large segment of the population can’t afford to spend.
Even those graduates who find jobs may be crippled by record-high amounts of student debt: in 1999, the last year for which comprehensive data is available, average student debt for students in the United States was $19,400, which was about two thirds of per capita income for that year.
Debt in such high amounts affects the choices—spending and otherwise—that a person will make for years to come.
The economic impact of the recession has been discussed in great depth—as it should be—but it is necessary to consider the human effects as well. (more…)
What – or who – caused the crisis? Slate offers not one but 15 answers to that question here. But if you’d like a more official response, you might like to keep an eye on the Financial Crisis Inquiry Commission (FCIC) in the United States, which is due to begin public hearings this week. The ten-member commission was set up by Congress with a sweeping mandate to investigate the causes of the crisis – everything from the possible role of fraud and abuse in the financial sector to the way bankers are paid.
There are precedents for this sort of probe. In the early 1930s, the U.S. Senate’s Pecora Commission investigated the causes of the Great Depression, and “unearthed a secret financial history of the 1920s, demystifying the assorted frauds, scams and abuses that culminated in the 1929 crash”, according to Ron Chernow. That investigation had a long-term impact on the U.S. financial sector, leading to the establishment of the Securities and Exchange Commission (SEC) and the separation of commercial and investigation banking.
Whether the FCIC will have the same impact remains to be seen, but its chairman, Phil Angelides, has made it clear that he wants the commission to ask – and answer – some tough questions. “You have millions of people unemployed, millions have lost their homes, and Wall Street is having a record year with record profits and record bonuses,” he told ABC News. “People want to understand why.” What questions should the commission ask? The New York Times and The Huffington Post have some suggestions.
The Commission is due to report by mid-December 2010, but members have indicated they plan to post important findings on their website (under construction) before then.
We are publishing From Crisis to Recovery, a new book from the OECD Insights series here on the blog, chapter-by-chapter. This book traces the roots and the course of the crisis, how it has affected jobs, pensions and trade, while charting the prospects for recovery.
These chapters are “works in progress” and their content will evolve. Reader comments are encouraged and will be used in shaping the book.
By way of introduction…
Being forced out of a job is an unpleasant experience. Employers often prefer to use euphemisms such as “I’ll have to let you go” that imply it’s somehow liberating or what the worker wanted. Thomas Carlyle, the man who coined the expression “the dismal science” to describe economics, was much nearer the mark. Writing in 1840, he claimed that “A man willing to work, and unable to find work, is perhaps the saddest sight that fortune’s inequality exhibits under this sun.”
Modern research supports Carlyle’s view. For instance, finding yourself unemployed has a more detrimental effect on mental health than other life changes, including losing a partner or being involved in an accident. A long spell of joblessness has social costs too, whether at the level of individuals and families or whole communities.
Tackling unemployment and its consequences has to be a major part of governments’ response to the crisis.
This chapter looks at the workers and sectors most affected by the crisis and how policies can help workers weather the storm.
There are some signs that the economy is pulling out of the crisis , but when we say that the economy is recovering, what exactly do we mean? That economic activity is on the increase? Markets are up? While these are sure signs that world economies are beginning to regain some ground, there is one indicator that has everyone concerned, and that is employment.
From a 25-year low at 5.6% in 2007, the OECD unemployment rate rose to a postwar high of 8.8% in October 2009, corresponding to an increase of nearly 18 million in the number of unemployed – and the most rapid and sizeable increase in unemployment ever recorded in the postwar period. The latest OECD projections (in the November 2009 Economic Outlook) suggest that the unemployment rate in the OECD area will peak at 9.1% in the second quarter of 2010, but remain at 8.6% even by the end of 2011. Taking into account increases in the working age population, it will take around 23 million jobs to get back to 2007 levels of employment.
Even if the economy rebounds relatively quickly, employment recovery could be slow. It took the US four or five years to reabsorb the sharp rises in unemployment following the 1970s oil shocks, and twice as long in Europe. There are fears that this time round, we could see a “jobless recovery” and that the increase in unemployment becomes structural as many of the unemployed drift into long-term joblessness or drop out of the labour force altogether. So it’s critical for governments to focus on building a “jobs rich recovery”. How can they do this?
In the short term, by offering partial unemployment benefits and allowing for flexible short-time working programs for workers faced with substantial earnings losses. These measures help companies and workers adjust to decreases in productivity without cutting jobs altogether. Job subsidies, recruitment incentives and public sector job creation schemes can also help tackle the worst impacts on employment, but after this damage limitation phase, it is essential to focus on helping people who have been laid off to avoid being left behind, through access to adequate benefits and employment services. The global economic crisis has accelerated changes in the job market, meaning that the demand for certain skills has also changed. So helping people re-train is also critical for employment.
Thanks to Stefano Scarpetta (OECD) for his contribution to this post.
They say that what you don’t know can’t hurt you. What about what you can’t see? Nanotechnology is the science of manipulating particles smaller than a billionth of a metre. At these sizes, materials can be used in new ways and some of them even change properties – silver becomes antimicrobial for instance and can be used to treat wounds.
Additives containing nanoparticles have been used for years, for example silica as an anti-caking agent to keep powders flowing freely, or even in a milkshake to enhance the taste.
The food industry’s current and potential uses of nanotech are discussed in a new report from the Science and Technology Committee of the House of Lords, the upper chamber of the UK parliament. (more…)
In an interview with La Croix newspaper (in French), the OECD’s Jean-Christophe Dumont looks at how the downturn has been affecting migrants. One major issue is unemployment – in a downturn, immigrants are more likely to lose their jobs than locals. Despite this, emigrants don’t appear to be returning home in large numbers. In part that’s because job prospects back home may be as bad as in emigrants’ destination countries. But it’s also because emigration is often a long-term project involving big adjustments like resettling families, buying property and so on. Most people would think twice before undoing such changes.
Still, the slump has had a noticeable impact on one area – remittances, or the money emigrants send back home. According to World Bank estimates, they’ll be 6% lower in 2009 compared with 2008. As it’s likely to be several years before remittances return to pre-crisis levels, many developing countries will face a continuing shortfall in this important source of income.
In 2008, people in Haiti were so hungry they were reduced to eating mud mixed with a little salt and margarine. A number of other countries saw riots sparked by a sudden hike in food prices, caused by a combination of factors.
Agricultural commodity prices have since fallen, but the benefits for many consumers have been wiped out by the recession, and today over a billion people in the world don’t have enough to eat.
We tend to think of food security as a problem for developing countries, and obviously the poor suffer most. However, some experts are worried that the world food system is heading into a perfect storm, as population grows by 50% from now to mid-century, agricultural land is lost to urbanisation, diets the world over shift towards the resource-intensive consumption typical of the West, and climate change throws a joker into the mix.
Many OECD governments are examining their long-term strategies for food and agriculture. The UK has just published Food to 2030, the government’s first food strategy since the post-war period.
The strategy is ambitious. Apart from seeking to produce more food in ways that protect and enhance the natural environment, it stresses the need to invest in the skills and knowledge needed to help the industry prosper. Farming as such is has only a small share in most OECD economies, but as the report points out, when you add food processing, the sector is worth over £80 billion to the UK economy and is the nation’s largest manufacturing sector.
Other goals include improved labelling so that consumers can make informed choices about what they buy and how it is produced; cutting food waste (see the post on “junked food” below); and using technologies that can create energy from the waste that can’t be avoided avoid.
The report is clear about the tensions and tradeoffs among a number of goals. For instance, increased fish consumption is one way to address low omega 3 levels in the typical UK diet, but UK aquaculture needs 10 kg of fish as feed for every kg it produces for the consumer.
The Insights series will be examining these questions in a new title on food and agriculture to be published later this year. We’ll keep you up to date with progress here on the blog, and would be happy to hear your views on feeding 9 billion people.