Still thinking about unemployment

In addition, firms typically reorganize their job assignments after layoffs and discover that the same work can be performed with fewer workers and this, too, can slow the recovery period for employment relative to output. - Mark Thoma

If I'm right about productivity gains, this "typical" discovery will be more pronounced this time and unemployment very stubborn, particularly for some professions.

More on that productivity thing

The productivity figures are in line with what I suspected, that we are in the midst of seizing genuine productivity gains through forced lay-offs. But let me add another point: one of the reason that employment is sticky is agency cost. In larger concerns line-managers do not have the incentive to cut costs by firing their own people. At a minimum, somebody ends up doing more work, often the manager. It takes pressure from above or the outside to get it to happen.

Also why I see productivity gains in government as being only the result of increased work and legislature-limited resources. Huge amount of untapped IT productivity gains there.

Unpleasant economic thought

Judging from the work i actually see during my day job, I believe that the potential productivity (labor-saving) gains from IT have been understated because:

Like prices, employment is sticky. For a number of reasons, people don't usually get canned because of productivity gains, particularly in the small enterprise service sector where they are more difficult to quantify and may not represent full positions. The gains may simply mean more idle time.


But once those positions are gone due to a downturn like the current one, employers have little reason to reinstate them.

Basic Logic Lesson

A successful economy implies full employment
A successful economy implies maximum production of goods in demand

does NOT mean

Full employment implies maximum production of goods in demand

NOR does it mean

Maximum production of goods in demand implies full employment

Note: the premises were introduced as a definition implied by some current discussions, NOT because they represent the only or a complete definition.