The causes of employment changes to British industries and their health consequences, 1960-1990

• Main Author: Kong, Paul Yukey
• Published: London School of Economics and Political Science (University of London) 1994
• Subjects: 331.89
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.645420

Since the second world war, there have been enormous changes in Britain's production and employment patterns. Two possible explanations for this phenomenon are technical progress and demand shifts. We set out an industry model with imperfect competition to assess their roles. In many ways, the effects of technical progress and demand shifts are intertwined. Technical changes which lead to new products or higher quality of output will obviously increase demand and employment. On the other hand, technical progress in the form of productivity gains have an ambiguous effect in employment terms. This is one of the questions we address. In our model, we demonstrate that the impact of productivity gains on employment depend chiefly on the demand elasticity and the extent to which higher productive efficiency is passed on in lower prices. This implies that an understanding of "insider" power in wage setting is essential for evaluating these effects. In the long run, however, competition ensures that these "insider" effects are washed out and the long term effect of technical change depends chiefly on the demand elasticity. Under plausible assumptions and empirical estimates, we find these effects to be positive. On the role of demand shifts, we note that these influences depend on the demand elasticity and the slope of the industry supply curve. Empirical estimates are obtained for these factors. Ultimately, the overall effects depend on the size of the demand shifts themselves which we suspect to be substantial. We distinguish between secular changes in demand and its cyclical counterpart. Cyclical demand could have been adversely affected by persistently large deviations from purchasing power parity and the differential pace of product improvement and development relative to competing countries. Secular demand could have fallen due to a lower world income elasticity of demand for British industrial products. Given the huge rise of unemployment in the last two decades, we assess its impact on the health of workers. After controlling for age, sex, duration of unemployment, regional characteristics, macro-economic and secular factors, we find that unemployment shocks have significant impacts on mortality rates. The pattern of such impacts is rather complex and may explain why contrasting results have been obtained by different investigators.