Sunday, November 3, 2013

The Issue of Unemployment - Part 6 (Enter the Planner)

Monetarism will not guarantee solutions to equity and unemployment concerns. Likewise, it can not resolve structural problems at hand simply because the problems are no macroeconomic, but rather,  spatial in context.

Providing efficient mass transit systems to bridge the physical gap between work and home may be one of the obvious solutions to immobility. However, it may not change the physical proximity and may only lessen the travel time factor involved to  a certain extent. Other much more integrated type of approach must be thought of. For instance, the provision of affordable housing  close to where the jobs are may be  considered similar to what was implied in the Industry Commission  Report (cited in BIE, 1994). Residential segregation should likewise be  overcome  while social mix and other socially-desirable strategies (on taxes, superannuations, training, wage flexibilities etc.) may be included in the integrated approach.

Again, as all these are more spatial and in the micro-level  rather than macroeconomic, there is now a shift of burden from the macroeconomist to the planner in terms of drawing solutions to the structural unemployment problems. In the hands of the planner, more realistic solutions based on realistic experiences and views are expected to be conceived.

With the above conclusion, it follows that governments need not abandon their job-creation objectives and strategies under a Keynesian  approach. It will make more sense if instead, governments continue their interventionist role by deliberately creating jobs while at the same time, assisting the business/private sector in the expansion of their productive activities. There should be a foresight that supporting the private sector will mean  more people being employed in the long run.
As interventionist, the government may be able to ensure that the new money injected through public expenditures and private sector supports will accrue to increases in  production and  employment  and will not trigger inflationary effects. In other words, inflation may still be put under control without necessarily sacrificing  employment, thus, disproving the Phillips Curve. xxx

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