Analysis / Social' Types Wrong

Not everyone was happy to hear yesterday that there has been a sharp decline in unemployment. Not everyone joined the happiness of 33,000 people who found work in the first quarter of the year.

For many, it was almost a day of mourning. Only two years ago, they predicted the opposite would happen. Those "social" types said at the time that the budget cuts and Netanyahu's free-market policies would lead inevitably to disaster: a decline in growth, an increase in unemployment and a new series of crises.

Amir Peretz said at the time that "unemployment will continue to rise and surpass 11 percent." Haim Oron said "the only growth will be in the number of unemployed." And so the "knights of social concern" went on criticizing and complaining, until the data proved them wrong.

So maybe, all you knights of social concern, like Peretz, Oron, Benjamin Ben-Eliezer, Yitzhak Herzog and all the others, maybe free economics is the correct answer? Maybe the weight of the government in the economy should be reduced, maybe the budget should be cut, the deficit reduced, taxes lowered, and allotments cut, to encourage people to go to work? Maybe it is also correct to privatize government companies, and reforms should be conducted to increase competitiveness and reduce the power of the monopolies - from the ports to the Electric Corp.?

The excellent data - a decline to a 9.1 percent level of unemployment, which is the lowest in four years - surprised even the most optimistic of treasury officials, including Netanyahu. The data is much better than any prior expectations, and any of the treasury and central bank forecasts.

There cam be two reasons for a decline in unemployment: a growth in employment (a "good" reason) or a decline in the labor force (a "bad" reason).

It turns out that not only was there no decline in the size of the workforce, there was even a slight rise. In other words, more people worked or sought work actively. The conclusion is that the entire decline in unemployment is the result of an increase in employment. In numbers, that means 33,000 people joined the workforce in the first quarter of 2005, a most impressive figure.

Last year, when unemployment declined by a tenth of a percent a month, the critics, with a measure of justification, said most of the new jobs were part-time, while the public was seeking full-time work, which shows the exit from the recession was not genuine.

But now the picture has improved on that score, too. The number of full time workers has grown by 2.3 percent, and the number of part-time workers has dropped by 1.2 percent. It's happening because only now we're beginning to enjoy the fruits of last year's growth.

The additional employment always comes late. At first, employers make do with temporary workers, getting rid of hidden unemployment in the firm, and giving existing workers overtime if necessary. Only after they've used up all of those resources, they start adding full-time jobs, and that is what us happening now.

The next stage is wage hikes. And here's some news for Amir Peretz: The wage hikes are also coming, because when the demand for workers increases, so does their bargaining power with employers, who are forced to pay more. In other words, growth and going to work are necessary steps in the struggle against poverty and the improvement in the standard of living for the workers.