In recent years, unemployment has become the number one challenge worldwide.
Faced with this grim situation, countries have taken measures to stimulate economic growth and reduce unemployment pressure by printing money, promoting large-scale infrastructure construction and stimulating the real estate market.
However, there are some concerns about whether these policies will save the job as hoped.
Action to save the unemployed
According to the ILO's World of Work Monitoring Report, the number of unemployed worldwide is expected to be 191 million in 2023, equivalent to 5.3% of the global unemployment rate
Among them, the unemployment rate of some developing countries and emerging market countries soared to more than 10%, a record high.
In response, many countries have opted to print money to increase government spending, especially in infrastructure and real estate.
The United States passed a $1.9 trillion coronavirus relief package and a $2.3 trillion infrastructure plan in 2021;
In 2020 and 2021, China issued 3.65 trillion yuan of special bonds and increased support for the real estate market; the EU also launched a 750 billion euro recovery fund in 2021.
These measures appear to create jobs and boost economic growth, but they do not actually solve the root cause of unemployment.
On the one hand, these measures often have short-term effects rather than long-term structural unemployment.
As the pandemic has led to the transformation and adjustment of many industries and sectors, many jobs no longer exist or new skills and knowledge are required.
Traditional industries such as infrastructure and real estate often fail to provide these new demands, which may exacerbate imbalances in the employment structure.
On the other hand, these measures will also bring a series of negative effects, such as inflation, asset bubbles, debt risks, etc., which in turn will affect economic stability and sustainable development.
Panacea?
These measures are widely used to print money, build large infrastructure and real estate, mainly because they have a certain theoretical basis and practical experience.
Theoretically, when the economy is in a downturn, the government can stimulate aggregate demand through expansionary fiscal and monetary policies, thereby raising output and employment levels.
There are also many successful stories in history, and during the Great Depression of the 1930s, President Roosevelt introduced the New Deal plan to restore the American economy through massive public works and social benefits.
However, these measures are not omnipotent or without cost. The effectiveness of these measures depends on a variety of factors, such as policy design and implementation, market responses and expectations, international environment and coordination.
If these factors are unfavorable, then the effect of the policy will be greatly reduced, and it may even be counterproductive.
First, infrastructure investment and real estate investment have limited effect on job creation.
Although these two fields can directly absorb large amounts of labor, as technology advances and efficiency increases, their elasticity of demand for labor gradually decreases.
At the same time, because investment in these two areas is highly cyclical and uncertain, the jobs they create are not stable and sustainable.
In addition, because these two fields have low requirements for labor quality and skills, they cannot effectively improve the human capital level and competitiveness of the labor force.
Second, infrastructure investment and real estate investment exacerbate financial risks and resource misallocation. In order to support infrastructure investment and real estate investment, the Chinese government has adopted a relatively loose monetary and fiscal policy.
According to People's Bank of China data, in the first half of 2023, new RMB loans amounted to RMB15.7 trillion, an increase of RMB2.0 trillion year-on-year, and the stock of RMB loans, broad money (M2) and social financing at the end of June increased by 11.3%, 11.3% and 9.0% respectively year-on-year3.
These data show that the growth rate of money supply and social financing scale is higher than the growth rate of nominal economy, resulting in money over-issuance and credit overexpansion.
Much of this excess money and credit goes to infrastructure investment and real estate investment, rather than more innovative and productive areas.
This will cause a misallocation of financial resources, reduce financial efficiency, accumulate financial risks, and aggravate financial bubbles.
Third, infrastructure investment and real estate investment will affect the optimization and upgrading of the economic structure.
Although infrastructure investment and real estate investment can stimulate economic growth in the short term, they will also occupy a large amount of land, energy, capital and other resources, crowding out development space in other fields.
This will lead to an imbalance in the economic structure, delay industrial transformation and upgrading, and hinder the quality and efficiency of economic growth.
At the same time, because infrastructure investment and real estate investment have a large negative impact on the environment, they will also aggravate the deterioration of the ecological environment and undermine the goal of sustainable development.
Saving unemployment will require more innovation and reform
To truly save unemployment, we need more innovation and reforms to improve the dynamism and competitiveness of economies, increase the quality and efficiency of employment, and promote equity and inclusion in society.
Science and technology are the primary productive forces that promote economic development and are also the key factors in increasing the level of employment.
We should increase investment in scientific and technological research and development and talent training, support the development of emerging industries and strategic industries, promote the transformation and optimization of traditional industries, and cultivate more industries with high added value, high technology content and high employment flexibility.
Education is the foundation for improving human capital and a way to reduce imbalances in the structure of employment.
We should reform the education system and content, improve the quality and efficiency of education, meet the needs of social and economic development, and cultivate more talents with innovative spirit, comprehensive ability and adaptability.
Improve social security and labor market systems. Social security is an important means to ensure people's livelihood and an important mechanism for stabilizing employment expectations.
We should improve the social security system and system, improve the level and coverage of social security, and establish a fairer, more reasonable and sustainable social security system.
At the same time, we should also improve the labor market system and rules, improve the flexibility and efficiency of the labor market, and establish a more open, orderly and fair labor market.
In short, in the post-COVID world, it is urgent to save unemployment, but printing money for big infrastructure and real estate is not a panacea. We need more innovation and reform to achieve sustainable economic and social development.