Energy consumption Affects Employment and Recession

March 13, 201912:25 pm
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ILO data on employment and unemployment in Asia-Pacific revealed that unemployment rates are high in Southern Asia and Eastern Asia, but only in Eastern Asia is the rate projected to increase slightly by 2020. In Asia-Pacific, the unemployed individual remains lowest at 4.1 percent, while the global rate is expected to decrease by 0.1 percentage point.

See also: Poor Working Condition is the New Employment Challenge

ILO data shows that unemployment rates had grown several time year to year. According to Siim Krusell study, that decrease of employment is caused by rapid changes in labour market and economy. The study revealed that exporting contracted, industrial production, and retail trade are among the causes of employment problem.

Meanwhile, Gail Tverberg, a researcher at Our Finite World, found that there is a close tie between the amount of energy consumed and number of people employed. Tverberg mentioned that the amount of energy consumption and employment are similar. For example, when energy consumption increases, employment will also increase. And when it decreases, employment will decrease. This close relationship between one another will long last. Tverberg wrote in her research that “economic growth is tied to job creation so it stands to reason that energy consumption would be tied to job growth.” Additionally, her following study on long-term relationship between energy consumption and economic growth showed that it will be very difficult to reduce energy consumption without a lot of unemployment. “I have to admit that I was surprised by the closeness of the relationships for the period shown,” added Tverberg.

Why rising energy cost leads to lower employment and less energy consumption

“The critical issue is that consumers’ incomes do not rise at the same time,” said Tverberg. When gases, oil prices does rise, the salary of employed person tends to be stable. This, then, leads to low income and those who are employed should go to underemployment to cover up paycheck – whereas underemployment is categorised as unemployment which affects job market.

For example as mentioned by Tverberg, “If an individual goes out to restaurant less, make fewer long-distance vacation trips, put off buying a new car, or contribute less to their favourite charities. Workers in discretionary sectors of economy tend to get laid off. Consequently, we have come to know this as part of recession.”

Moreover, economy of “Rest of the World” has been growing faster than the EU, USA, and Japan grouping since 2001. In fact, the growth has been much faster for nearly entire period. China, India, Bangladesh, and many small countries, plus oil exporters, such as Saudi Arabia and Mexico, are amongst those who have a rapid increase in energy consumptions. Tverberg said, “The increase in energy consumption since 2002 has been especially marked in Asia.” Thus, energy cost and consumption leads to Great Recession in 2007 – 2009. And yet – if we did not take action, great recession might hit hard once more time in next years.

The possibility to change relationship between energy consumption and number employed

When asked whether it is possible to change the relationship or not, Tverberg said, “Pretty clearly, yes, but lower wages may be part of the mix.” Lower average wages and flatter wages were a big part of the change. The other possible way is imported manufactured goods, changes to fuels other than oil, and more efficient use of oil. All of these could contribute to differences. Moreover, having more family member who work will be helpful. “With higher price of oil, salaries did not go as far, so having another family member working was a helpful strategy”, Tverberg added.

Likewise, in most cases creating energy efficiency can ripple upside down the rate of unemployed people. USAID mentioned that energy efficiency can create more jobs per dollar invested. It also creates more jobs in home of economy that can help unemployed or underemployed people to have working hours and create more salary for the family.

Read also: Do Less Give You More Energy (Adapting the 4-Day Working Week)