Leaving the labour force is not like unemployment …

This from Laila Harre at the Job Summit:

Ms Harre said people also need to keep in mind the “hidden redundancies” amongst the casual work force.

She said workers in the casual sector who leave are simply not replaced and that amounts to a redundancy.

People leaving jobs and leaving the workforce are fundamentally different to workers who are unemployed – and that distinction is VERY important when trying to understand the market failure surrounding the labour market.

The market failure stems from the labour market not clearing:  There are people who want to work at the current wage, but can’t.  This provides a “surplus” of labour.  If people are leaving the workforce, then the supply of labour is falling, something that helps moderate the size of this surplus.

If a worker leaves the labour market and is not replaced, it is because there is no demand for their position anymore.  Trying to get treat this the same way as unemployment degrads the REAL difficulties associated with actual unemployment – and the fundamental market failure we should be interested in helping to address (if the government is able to).

Policy that attempts to stop people who want to stop working under current conditions from leaving is not helpful.  Hopefully the job summit will not lead to more thinking along these lines …