What should you do when the economy is in recession, when unemployment is on the increase, and when there is little sign of recovery on the horizon? Work longer and more productively, right? As an individual, this makes intuitive sense. When the cost of living is spiralling upwards, future labour market conditions are uncertain, and job security is under threat, putting your head down and working harder would seem to be the natural thing to do. Likewise when it comes to spending less and saving more. This may be so, but the same logic does not necessarily apply at the national level. If people work longer hours, the market in which they are offering their labour requires less of it from elsewhere with the likely result of an increase in unemployment. Similarly, conventional economic thinking suggests that in times of stagnation saving more will lower interest rates, spur investment and … (To read the full article, subscribe below)
Nicola Steuer is programme director at the New Economics Foundation.
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