201116 aug

The End of Employment – Eternal 20%+ Unemployment

Theses are some inconclusive thoughts I’ve been having lately, not a manifesto. They are somewhat re-inspired by Francine Hardaway’s recent write-up on the subject.

Industrial efficiencies are increasing exponentially, and are rising much faster than human productivity. It is now economically beneficial for factories in China to replace laborers with machines and computers, even when the workers are paid only dollars a day. This mirrors the job stagnation in the United States, where companies are finding they do not need as many employees as they once did, and competition for jobs requiring less skill overwhelms diminishing openings.

In the radical future, goods will be manufactured cheaply in our homes and neighborhoods. Computers will drive, design, harvest, and manage resources, even improve themselves, better than humans could. The need for “less skilled” labor will evaporate rapidly as we become both masters and slaves of terrifyingly efficient technology. We will have the real possibility of every human living for 500 years almost entirely supported by machines that can cater to our every need. Depending on your constitution, that could sound like paradise or hell – but we are already partially there and the next 50 years will be an era of staggering change in that direction.  The other possibility is continuing on the trend we are now, where a large portion of our population is becoming less employable and wealth is becoming unhealthily concentrated.

There are a few shorter term consequences to the wane of lesser skilled jobs:

1. The demand for unskilled labor has plummeted such that it greatly undershoots the supply — now and forever. We must learn to deal with the significant portion of the population that will always be unemployable in anything other than unskilled labor due to a lack of training, education, intelligence, discipline, interest, or other reason. There will be no recovery in jobs for these people, and while 20%+ employment could become the norm, it will exceed 50% for this group. Those exact numbers are arbitrary, but I think they are in the ballpark.

2. With less need to pay employees while generating wealth, that wealth increasingly flows to the few who can exploit these new technologies and efficiencies – the managers and investors in companies. A very small team can now design, produce, and distribute almost any product, and should that product be successful, most of the profits will go to that small team and their investors instead of being widely dispersed to factory workers, store owners, distributors, salespeople, and other shrinking economic actors.

3. Employment is declining as the primary distributor of wealth to support the middle class, and thereby the consumer economy. Employment really only served that purpose for the seventy or so years of manual-based industrial expansion, and there is no reason to expect it will happen again. We’ve all heard the story of Henry Ford generously paying his workers so they could one day afford his cars. Every year that goes by, he would need fewer and fewer workers to run his factories, and we could hardly expect companies to endlessly employ people they do not need.

What can we do? Truthfully, I have no solution to prevent the world from falling back into a medieval dichotomy of oligarchs and the economically detached masses. Here’s a few non-conclusive thoughts:

Education

It is to everyone’s benefit to bring as many people as possible into the skilled labor pool. Heavy investment in education is a no brainer. Unfortunately, simply increasing funding is not the answer – we already invest a lot in education by world standards and are still failing.

Taxes

In the past, generating wealth required heavy investment in people, and we could expect some of that wealth to trickle down to employees. While generating wealth still requires people, it now requires many fewer and therefore much less distribution of that wealth. Without employment, the only way to ensure our society isn’t undermined by poor, unemployed, dissatisfied masses, and to maintain the middle class necessary to drive our economy, is to tax the wealth and somehow make sure there is some proportional benefit to everyone.

Distribution of Wealth

Somehow we need to make sure we don’t have starving or unnecessarily sick people living in the streets, and instead have strong happy societies. In any implementation, this inherently involves a transfer of wealth from those who generate it to those who can not – “conservatives” must learn to face this unpleasant fact – the recent short-lived phenomenon of a job-based middle class is fading.

We could directly feed, house, treat, and clothe those who can not work, however that approach has the fundamental problem of undermining basic societal bonds and incentives. There is a perverse incentive to avoid self-sufficiency and economic entanglement. And how do we decide who gets subsidies? If some is not working, is it because they can’t or would prefer to live on the dole? When you try to transfer wealth to the unskilled, it’s often the skilled who exploit the system. Whether or not to help those who don’t help themselves depends on whether they can’t or won’t. This false distinction is fundamental to the battle between so-called conservatives and liberals in America. The distinction is false because both groups exist along a broad scale, but it is extremely difficult to know where someone lies and how much subsidy they should receive.

We can also increase government spending, but that always turns into a bureaucratic nightmare of inefficiency and corruption.

Another option might be to simply tax and distribute a portion of wealth evenly regardless of need, much as the conservative Sarah Palin territory Alaska and the United Arab Emirates do with their oil wealth. This is a clear, simple, fair distribution of wealth. Because of it’s fairness and lack of social engineering, it is less likely to undermine market economic incentives to work. You might argue it’s unfair to those who generate the wealth, but ultimately more wealth may be generated from a society with money to spend and the world will be a happier, more stable place for the rich to live in.

Relax

As a society, we are rapidly approaching a point where we could all be healthy and happy if we can find a way to marshall our resources. That’s a good thing. This is not a zero-sum game. Somehow, we need to find a new way for everyone to benefit from and contribute to economic growth, because we do not have the need for 6 billion employees.

 

3 responses to "The End of Employment – Eternal 20%+ Unemployment"

  1. francine hardaway August 16th, 2011 15:41 pm

    Every civilized society has to figure out how to take care of the poor and the weak. But you are right in seeing that every way of redistributing wealth has its downsides. The one way we don’t want to redistribute it is through violence. Sometimes Alaska’s way or the Saudi’s way is better. Now does that reduce incentive and motivation? IDK. I know socialism inherently can’t afford itself, so that doesn’t work either.

  2. Gary April 25th, 2012 03:02 am

    Interestingly, and with respect to your post, controversially, if the job based middle class recedes, demand will fall with the resulting inability to afford product purchases. What then becomes of the ‘free market’, consumers and society at large when many products are unaffordable or unattainable?

    We are rapidly moving away from a job driven economy – at an unsustainable pace. As citizens, employers, labourers – even humans, what can we do to recycle and distribute opportunities?

  3. Shmilfke November 14th, 2012 14:07 pm

    Think of the upside though;
    With machines, everything will be far cheaper to produce, meaning everyone will have everything they need. A welfare system will be able to provide for the perpetually unemployed, while the innovators/producers will indeed grow disproportionately in wealth.

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