Global Unemployment, Longrun Economic Growth and Labour Market Rigidities: A Commentary

This short paper aims to contribute to the debate on the causes and remedies for high rates of unemployment and under-employment, which presently afflict large parts of both the North (industrial countries) and the South (developing countries). The starting point for the paper is a recent interesting and thoughtful examination of these questions by Isabelle Grunberg (1996). As against the emphasis on labour market flexibility and the concept of NAIRU, which dominate the mainstream theoretical discussions, as well as policy prescriptions for the global unemployment problem, Grunberg provides an unorthodox analysis. She regards failure on the demand side to be the main cause of unemployment and considers a range of structural factors connected with the increasing integration of the world economy (in terms of trade, finance and investment) which inhibit demand growth. The present author broadly agrees with Grunberg's general approach. This paper supplements her analysis by examining further some of the main themes presented in her contribution. Specifically, the paper will comment on the following issues: (a) The differences in the nature of the employment challenge which confronts industrial and developing countries. (b)The question of "jobless growth" and the effects of technical change on employment and unemployment. (c) The impact of globalisation and liberalisation on the rate of growth of demand in the world economy. The paper provides inter alia an analysis of the chief constraints on the demand as well as the supply side which may affect the long-term growth of output and employment in industrial and developing countries.