When The Economy Speaks … Reversing National Unemployment Statistics

6 Things For A National Leader To Do

https://medium.com/series/when-the-economy-speaks-cdb62e49ad36

Peter looks down at his high school examination results transcript for the first time. It is not a pretty picture. He had been praying hard the results that would peer back at him would be different but he also knew deep down that it may not. He had been dreading this moment. It has arrived.

Still, he had wished for otherwise. He is a bright student. But it had not been an easy past few years. He had just lost his older sibling to a debilitating illness. They had been very close to each other. He is also dauntingly aware his parents are not close to each other and fears they may find other partners and break-up. What would that mean as a family? Where would he seek his counsel? Will he be intruding? That bothers him.

Turning his eyes back at the results, he knows he can do much better than what he sees. The reality is dawning at him. He is facing it squarely. These results are not going to help him get into his dream course at the university of his choice. It hurts him. What should he do now?

Suddenly he is remembering that he has to announce these results to his family. He has been known to be the one with a sound head on his shoulders. But now. With this. What would they think of him? Maybe they would not ask. He consoles himself.

But they did. He chose to keep quiet. Perhaps they will understand. He hopes. But meanwhile, he needs to come up with a strategy. Fast. So that his peers do not leave him behind.

He thinks.

He needs to get grades. Good grades. Fast. What subjects will help him do so? French. Perhaps. Grades that would help him put his foot through the door of a tertiary institution. What can he do so that he can catch up with his peers in the shortest possible time? He has the coming summer months to do so.

What jobs are out there that he should prepare for? He really did like the sounds of the field of nautical engineering. He had really enjoyed seeing and fiddling in the cockpit of a cruise ship during one of his summer vacations. It had made him feel happy and come alive. And he loves his Maths and Physics. But he has been told that manufacturing here is not a big deal in terms of jobs. What should he do? How should he decide?

Are his days of plain-sailing through life over? Will he face the same dilemmas when he out there in the big wide world looking for a job? With only four jobs available for every ten working age population, what will become of his chances with not so great grades? Supply of labour is now outstripping the demand for labour. Will jobs become too slim for his picking?

He will need to figure this out. He needs time. But does he have the time?

We all know a story like this.

One way or another.

And so. Here is the situation. You are now charged as the Head of this State. What would you do to turn around the situation?

Run, you say? Oh, you did not say that. Good! Invite more investors, locals as well as foreigners, to invest in the country?

Your predecessors have done that. Poured trillions for decades over with the help of past heads of states and a cabinet of citizen representatives. Yet, widespread unemployment today, has grown to now prevail at 60%! How did that happen?

You say perhaps “they” have not done enough. That you will do more than them. That is possible. For how long would you do more of the same? What went wrong? What else could we do?

Some measures are drastic and feels more like a bitter pill to swallow. But I hope it will make the tough actions we would need to take instead become easier to bear with. So here goes.

1. “EXPORT” UNEMPLOYMENT

Don’t have an agricultural and manufacturing bases? It has been too hard to build them? Well, no worries. Export unemployment at the same rate that we have been importing manufactured goods and the raw materials that were produced so that the unemployed follow the money you have spent buying them from outside the county (or the region).

2 “MATCH” BIRTHS TODAY TO JOB CREATION TOMORROW

If you know we will make more jobs tomorrow, go forth and multiply. But if you know, that we will not, … well, you get the drift.

A runaway population just means runaway unemployment figures that becomes hard to manage.

Supply of labour does not come from our education “system”. It is as the result of rates of births, not today, not just last year but from twenty years back. This is the time it takes for a young person to mature and readies himself for the job market.

Of course, it becomes tricky matching what happens in the bedroom today to the decisions we make in the boardroom twenty years on. The only consolation we can make is, the one who “creates” the child is the same one who plans today to “create” those jobs tomorrow. Well, no, I was not talking about God.

It is you and I. We needed to believe that we can create companies that can create those jobs for our children tomorrow. Companies are more than about hustling for clients to make money for us today or a shell to be used and discarded when we got what we need today. They are meant to create a legacy that makes jobs tomorrow. So, do you believe you can do that?

3 NATIONAL & COMMUNITY DIALOGUES AS FAMILIES Q: what allows industries to grow?

The decisions we make as nations and as families are strongly intertwined.

The decisions to be skilled for the agriculture and manufacturing sector bases are happening within families and households But the data used to inform the decision is based on what they would hear and say is happening “out there”.

If we think the population is not skilled to do manufacturing and in turn as families we think the country is not doing enough to create jobs in manufacturing then there right there, we have a lose-lose situation as a nation.

So make the intentions and the reasons clear and talk through the concerns surrounding the issue and figure a way to share the information as a nation. If countries around the world today can do grocery shopping online, this is not as big a step as we believe it to be.

4 CONSTRUCT REGIONAL MATRIX-ED GOODS VALUE CHAINS MAP

Get your backyard in order. Know what you want and go for it.

Figure what the latticed structure of chains of raw material supplies that are driven by what customers need as a region looks like and develop a vibrant agricultural and manufacturing bases:
– Do not be led by products that you have but rather focus on what customers want when building the matrix. Construct a map.
– Identify how one good feeds into another cost-effectively for end-customer needs within the local, regional and the global markets
– Know what is available. And what is not.
– Forget the who has what at this point. That is for a later stage when the map is completed.
– Focus on identifying critical processes on the chains, those if unavailable would stall the development of the production and the chains.
– Do not wait for another region to develop their maps and approach the country or the region to conduct the manufacturing for them. You will lose the clout you would need in managing the process and gaining value.

When the mapping is complete, you now have a working document to get your act together and move forward as a nation and the region.

5 ALIGN AND BUILD HUMAN RESOURCES

Align and, where needed, develop human resource skills dedicated to the agriculture and manufacturing sectors with a particular emphasis on acquiring both core across the nation and advanced skills in English, Mathematics and Science, particularly with Physics and Chemistry, that makes them resilient & inclusive in the two sectors.

6 BUILD UP THE PYRAMID OF THE ECONOMY

Concerted setup of corporations in the sub-sectors of: the agriculture (crop or plant / raw material production) and manufacturing that fits in with the regional industry value chain matrix map and schedule.

Economies that rely heavily on extraction industries will have large pockets of unemployment that continue to persist in the nation. These industries gross high returns but they do so by employing fewer people and more machines to keep costs of operations under control and growth of the industry. This way the GDP would certainly look good (but not the food on our tables, which is the real GDP).

Machines do not create jobs for the unemployment rates.

Plant and animal based primary production and manufacturing economic sectors when well-developed have greater potential for creating and absorbing significant employment. Extraction based industries are typically technology driven and has lower capacity for employment of human resources.

As the nation shifts its focus to production, particularly in plants, it will learn to mitigate climate effects country-by-country that would allow the region to produce consistently throughout the year to keep the manufacturing sector humming.

Invite regional and global industry leaders global industry leaders or; incentivise and groom local captains of industry (by long-term overseas stints) to lead, chart and build the sub-sectors bottoms-up including from within households and education sectors.

Newspaper Column #2: Is unemployment, the real problem? The story of Demand for Labour – Part II

As it appeared in the Sunday Standard, Botswana on  Sunday Oct 28, 2012 edition.

Supply of Labour

Industries (be they by locals or foreigners) do not exist for the sole purpose of employing citizens.  Hard as it may be to accept this point, it really is not that difficult to see the reason.

What is harder to see is an unemployed economy will affect the growth of his industry.  Not immediately.  But eventually it will.  Think most political revolutions. It is a sign of a vicious circle.

In last week’s edition of this column, we uncovered two factors that influence persistent unemployment in any country.   These were:

  1. The rates of growth of demand for labour (by employers) vs.
  2. The rates of growth of supply of labour (by employees)

As the supply of labour (rising birth and migration rates) persistently exceeds demand, unemployment grows.  This does not mean that our attempts at correcting the problem will not be successful.  They will not be successful for the long-term.

On the other hand, as the demand for labour (number of new jobs created) persistently exceeds the supply, unemployment would decline (and literally disappear by itself).

This week, we explore the demand – a side commonly used by most of us when focussing on the problem of unemployment.  In the next edition of this column, we will get around to supply.

But before we continue, what does the picture of growing demand for labour look like?  We might say, well, that is obvious.  We would see companies and industries recruit and persons as employees of their organizations.  That’s where most of us would stop.

But that would not be quite enough here.  We should see increasing numbers employed for the long-term.  Possibly even for decades.  And it happens primarily in the private sector.  They are key. If these three conditions do not happen, then real and deliberate growth in demand for labour has not quite happened.  Yet.

But what influences the demand for labour to grow consistently (rather than ad-hoc)?

It would require industries and the country to post a healthy growth of its income margins or profits.  Year-on-year.

Margins / Profits = Level of Revenue Earned – Level of Costs Incurred

This difference needs to grow sustainably.  Where revenues grow and costs decline, the industry is well positioned to create new jobs each year and pay for higher wages in other years.  The reverse is also true.  When the margins are negative, we would face sustained unemployment.

What would cause the margins to grow sustainably for any industry?

Asking this question is deliberate in helping the mind steer itself to the inevitabilities.

Does sustainable growth of margins happen because we are able to apply “do more with less” strategy, really well?  Or, is it because sales have picked up for that industry.  Well, yes, partly.

However, here’s the inevitable.

The extent to which we see sustained growth of margins depends on the extent margins or profits grow across ALL the three levels of industries in any economy, i.e. primary, secondary and tertiary industries.  These three share a very tight systemic relationship!

As we take care of the whole, not parts of the economy, the nation grows.  We all know that.  AndI know we can turn this knowledge around with our hands and feet.

So what causes sustained systemic growth of all three types of industries?

Think tomato sauce.  The cost of manufacturing and eventually retailing that sauce would depend on the cost of the transport and distribution systems (secondary industries) needed to transport the raw materials to the factory or retail sites as well as the cost of producing the raw material itself (i.e. from seed to fruit by the farming industry).

The transport industry, in this regard is secondary to manufacturing while farming of tomatoes is primary to both transport and manufacturing.

Should however, the costs of the primary and secondary industries for each unit of product produced increase over time, the  tertiary industries would not be able to reverse those costs, much less grow without incurring further costs and will have their work cut out for them to stay afloat, much less see their margins grow in sustained ways.  That is the reality.  The experience will otherwise be like juggling balls.  It will be hard to take our eyes off them because we do not know when they will fall.

When these costs are passed on to the customers or citizens, it makes it harder for them to find ways to fund continued private sector development efforts.  Here we have now come full circle.

In most cases, the primary industry refers to raw material production, in particular crop production.  As we grow our raw materials (as we have achieved with sorghum production), its secondary (farm and brew trucks) and tertiary (brew production and retail) industries will begin to grow as well.

Just as the white farmers in South Africa in the primary industries (vegetables, fruits, dairy and livestock production) have done for the Chinese and the Indians in the secondary and tertiary industries there (as well as here in major supermarket chains).   This relationship, however, did not happen overnight.  It took almost one hundred and fifty years in the making in South Africa (and not forgetting two centuries before that in India).

So for a nation to thrive (not survive), think the root of a plant.  When the root thrives, so does the plant.  When it dies, so will it and the other healthy roots around it will suffocate the plant out.  Removing the top of the plant will not cause it to go away.  The root will bring it back.

I am sure you see it!  When the profit margins do not grow for all of the three industries, the number of new jobs created does not grow.  Instead, unemployment grows.What is the implication of these to employment, you ask?

Where are we today as a nation on this graph?

Which industries are dominant for the nation?  Which ones are not?  Which industry do you see as driving the others?  Would you like to be a part of or lead from that seat?  I am sure you can!

What would cause the health of primary industry or production of raw materials to grow over time?  This will be the subject of another column.  But till then, I wish you, happy thinking and discussing.

So is unemployment the real problem or could it just be the tip of another problem? The iceberg. How do you see this issue?  Go forward another twenty years from now.  What could these trends look like then?  Could this possibly affect the sovereignty of a nation?  For any nation?

The 3rd instalment in this three part series of this article will appear in the next edition of this column.  It will explore the supply side of the equation of labour and unemployment.   Watch this space.