October 10, 2019. All the good jobs are gone. The rise in underemployment and the societal consequences. Hélène Syed Zwick on the new book of David G. Blanchflower.

In his new book, GLO Research Director Danny Blanchflower has explained us why the job market is not as healthy as we think, in particular he promotes to look at underemployment instead of unemployment. glabor.org had announced the book earlier this year and published in the summer an interview with the author. In her book review for the LSE Review of Books website, GLO Fellow Hélène Syed Zwick provides more details and insights, but also formulates questions and challenges.

David G. Blanchflower: Not Working. Where Have All the Good Jobs Gone? Princeton University Press, 2019

GLO Research Director David G. Blanchflower. GLO bio. He is the Bruce V. Rauner Professor of Economics at Dartmouth College, Professor of Economics at the University of Stirling, and a Research Associate at the National Bureau of Economic Research.

GLO Fellow Hélène Syed Zwick. GLO bio. She is Executive Director of the ESLSCA Research Center and Associate Professor in Economics at ESLSCA University (Egypt).

Book review for the LSE Review of Books website:

“In Not Working: Where Have All the Good Jobs Gone?, David Blanchflower contributes to the already substantial stream of scholarship on job quality, happiness and economic downturns. The author, a prominent economist and former external member of the Bank of England’s Monetary Policy Committee (MPC) between 2006 and 2009, offers a praiseworthy, didactic and anticipated analysis ‘on well-paying [or good] jobs and the failure of policymakers to deliver them’ (11).

In the first part of the book, the author skillfully argues that most Western countries, especially the US and the UK, are far away from full employment, despite their respective low unemployment rates. Through a heavy reliance on data, he argues, and brilliantly demonstrates, that the unemployment rate is no longer an accurate signal of labour market slack. He repeats throughout his book that the main signal that confirms this hypothesis is the lack of sustained wage and price growths. Normally, Blanchflower explains, in a situation of full employment, there ‘would be so few people looking for jobs’ (25) that wages would grow rapidly and ‘workers would be able to climb the occupational ladder’ (140). Unfortunately, he writes, this is not happening either in the US or the UK. On the contrary, underemployment  – which relates to ‘unstable, precarious, low-paying, and temporary jobs’ (35) and which expanded after the Great Recession in most rich Western countries – appears as a significant new predictor of wage and inflation growth. Here we reach the central argument of the book: underemployment associated with weak bargaining power on the part of workers leads to contained wage pressure. Blanchflower advises that we therefore rely on underemployment rather than unemployment to analyse the labour market situation, especially within this post-recession period characterised by ‘an extended semi-slump, of subnormal prosperity’ (80).

If such a proposal is quite orthodox, three elements transversal to this first part capture the reader’s attention: the economics of walking about (EWA); the societal consequences; and house-ownership and mobility. Firstly, thanks to Blanchflower’s EWA approach which is ‘fundamental’ to the book (184), he is in contact with what has been happening to ordinary people. As he explains, Blanchflower believes in data from the real world. His thinking has been ‘driven mostly by observing how the world works and attempting to uncover fundamental truths and patterns in the data’ (9). Discussions with London cabbies or looking at jingle mails (the act of mailing the keys back to the mortgage lender) are common ways for Blanchflower to feel what is going on in societies. Secondly, he discusses the links between feelings of insecurity on the labour market, happiness and societal outcomes like obesity, mental disorders, depression and even suicide. Thirdly, he examines the negative impact of house ownership on mobility. He evokes the fall in the homeownership rate, especially in the US and the UK, and explains that an unconstrained housing market leads to more efficient labour markets and to a fall in the equilibrium unemployment rate thanks to higher mobility. These effects have too often been neglected by researchers, he argues.

The second part of Not Working is composed of five chapters and aims to study the response to the Great Recession. Blanchflower’s analysis led him to anticipate the crisis in 2007, while most of his colleagues did not. The author calls therefore for a ‘big rethink’ (11, 315), especially among policymakers, central bankers and economists. Scathingly, he denounces their obstinacy in relying on theoretical, mathematical-based models and prescriptions from the 1970s. As he argues, ‘the elites were stuck in the past’ (171) and ‘the experts were looking in the wrong places’ (162). Policymakers decided in 2009-10, under the recommendations of economists, to launch what Blanchflower names a ‘reckless and unnecessary austerity’ (173) ‘attacking the Keynesian school of thought from multiple directions’ (171). The author writes that this was a ‘unique opportunity [for them] to decrease the size of the state’ (173).

In this section of the book, Blanchflower’s efforts may appear overly detailed to the less specialised reader and not especially innovative for the specialists. Yet, he convincingly establishes the socio-economic, demographic and geographic profile of the ‘left-behinds’ in the US, the UK and Eurozone countries after 2010. Unsurprisingly, decreases in expenditure ‘hit the weak, the disabled and vulnerable’ (214). Such fractures between the have-nots and haves were already present before the Great Recession, which only ‘exacerbated them’ (37). He notes that the left-behinds from the US, the UK, France and Austria have been ‘strongly opposed to political and social developments they see as threatening sovereignty, identity and continuity’ (258). He therefore indicates that he was already expecting in 2010 a political ‘backlash’ (265) after all the pain and suffering. Why should politics not therefore suffer? Few can have ignored recent populist movements in the US with Donald Trump’s presidency, in the UK with the Brexit vote and in France with Marine Le Pen. The author establishes a direct relationship between the profile of the left-behinds and those who voted for populist parties.

This inquiry leads us to the third part dedicated to prescriptions and policy recommendations. Whilst the quality of analysis and richness of its scholarly references impresses across two-thirds of the book, here the author fails in making the reader optimistic or confident about the future. Why? First, because the recommendations he formulates are unoriginal and lack ambition, and second, because several dimensions elsewhere detailed in the book, like the decline in unionism and bargaining power, are not even discussed. Strictly speaking, the use of idioms and expressions in the titles and subtitles in this third part appear by far insufficient to convince me. Most of the Keynesian recommendations that he formulates are well-known and have been debated for decades. For instance, he recommends reaching full employment by decreasing the interest rate to boost wages and therefore living standards, investing more in infrastructure to create jobs, subsidising childcare services and providing incentives for low-skilled workers. From my point of view, such advice relies far too much on the intervention of public authorities, which seems quite inconsistent with Blanchflower’s lack of trust in policymakers and politicians that he claims throughout his book: ‘Why believe them?’ he asks several times. ‘Why should we trust any of them now? I don’t,’ he writes (211).

It could certainly be argued that this third part is disappointing as Blanchflower fails to provide sufficient depth in the formulation of his recommendations, which is essential once the analysis has been delivered. However, even with this limitation, this encyclopedic book is highly welcome and will be an unquestionably worthy addition to the bookshelves of a general readership as well as scholars in labour economics, macroeconomics, monetary economics and political science.”

Dr. Hélène Syed Zwick, Executive Director of ESLSCA Research Center, ESLSCA University, Egypt

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