Tag Archives: unemployment

File Under: We Ain’t Seen Nuthin’ Yet…

A business school colleague of mine recently drew my attention to an article predicting how our lives will change in the next twenty years.

The changes that are predicted are all consequences of technology–mostly existing technology– and they are entirely plausible. If even half of them come to pass, however, we are likely to experience an economic and social upheaval that will far surpass the dislocations of the industrial revolution.

A few of those predictions:

  • Software will disrupt most traditional industries within the next 5-10 years. (We already see this with retailing.)
  •  Online legal advice (already widely available on the internet) will reduce the number of lawyers by 90%–only specialists will remain.
  • Self driving cars will be available in 2018;  by 2020, the entire auto industry will begin to be disrupted. People won’t own personal vehicles; they’ll call a car on the phone, it will show up and drive to the specified destination. (“You will not need to park it, you only pay for the driven distance and can be productive while driving. Our kids will never get a driver’s licence and will never own a car.”) The implications are enormous: fewer accidents will reduce the need for insurance–and the companies that sell it; many car companies will go bankrupt, millions of jobs (truck drivers, taxi drivers, etc.) will disappear. Land used for parking will be redeveloped. There’s much more.
  • Electricity will become incredibly cheap and clean: We will see the true impact of solar production, which has “been on an exponential curve for 30 years.”
  • Companies will introduce a medical device (called the “Tricorder” from Star Trek) that works with your phone, takes your retina scan and your blood sample and analyzes your breath.  It will then analyze 54 biomarkers that identify nearly any disease. It will be inexpensive enough to give everyone on the planet access to world-class medical analysis, nearly for free.
  • 3D printing will be ubiquitous. The price of the cheapest 3D printer went from $18,000 to $400 within 10 years, and over that same timeframe it became 100 times faster. Major shoe companies have already started 3D printing shoes; spare airplane parts are already 3D printed in remote airports, and the space station now has a printer that eliminates the need to stockpile large amount of spare parts as before. The Chinese have already 3D printed/built a 6-story office building.  By 2027, 10% of everything that’s being produced will be 3D printed.

These are just a few of the changes the article lists–there are many more.

It is difficult to envision the combined impact of these technologies; the author predicts that 70-80% of today’s jobs will disappear in the next 20 years. There will be new ones, of course, but it is unlikely that there will be enough new jobs to replace those going the way of the dinosaurs.

During my own lifetime, the pace of change has steadily accelerated. Much of the social and economic dysfunction we are currently experiencing is a direct outgrowth of that change–not just the economic stresses involved, but the disorientation people suffer as cultural attitudes shift and expectations about their future lives are upended.

If there is one thing that’s clear, it is that our current political system is not capable of meeting the challenges we will face. How will ideologues like Paul Ryan and those like him–lawmakers who think unemployed folks can just “pull themselves up by their own bootstraps”– react to massive joblessness? What about the “alt-right” bigots who justify their anti-immigrant rhetoric with the claim that the newcomers are taking American jobs? What will those on the left do when they can no longer blame job losses on outsourcing and trade? Where will all these culture warriors turn without their overly-simplified, convenient culprits? And who will they turn on?

And a far, far more important question: how will the fortunate remnant–the still-employed, highly skilled specialists–respond to the needs of the suddenly un- and under-employed? What policy interventions will they support? What sort of social contract will they recognize?

Twenty years isn’t a long time. It’s practically tomorrow.

It’s More Complicated Than That…

H.L. Mencken famously said that for every problem, there’s a solution that’s clear, simple  and wrong.

That’s an observation that has escaped lawmakers and economists for a long time, although in the last several years, many of them have come (grudgingly) to recognize its wisdom.

For a long time, economists predicted human behaviors using a “cost/benefit” framework; incentives were  “profit maximizing” and costs were, well, costs.  Of course, real human beings aren’t so one-dimensional. We don’t behave as the economists predicted, because what constitutes an incentive or disincentive for any particular person cannot be so neatly identified.

It isn’t that we humans don’t act in our own self-interest–we do. It’s just that “self-interest” means different things to different people. Teachers who could make more money in the private sector are rewarded by making a difference in children’s’ lives; lawyers for public-interest organizations forgo substantial monetary rewards but derive immense satisfaction from “doing justice.”

“Value” and “reward” are inescapably subjective.

The incentives to which people respond–what impels someone to work, or to work at this job rather than that one–is often a matter of cultural values and expectations. That’s why the widespread belief that a social safety net creates a “culture of dependency” has always been flawed. People don’t work just for sustenance; they work for cultural acceptance, meaning, self-esteem and personal pride, among other reasons.

A recent cross-national study has recently confirmed the lack of a relationship between the generosity of a country’s social safety net and the diligence with which unemployed people look for work. (It also found that receipt of social benefits didn’t make people happier or more satisfied. Depending on the kindness of strangers simply keeps folks fed and/or housed, not cheerful.)

In other words, feeding people who’ve lost their jobs doesn’t make them stop looking for work, and providing minimal support to those who are down and out doesn’t make us suckers.

It might, however, make us better humans.

What If? What Then?

Let me start this post with a caveat: I am not an economist. I don’t play one on TV. At most, I’m a reasonably well-informed consumer of economic news.

That news, however, is troubling. Following the various indicators could give you whiplash–housing may be recovering, but unemployment claims are up. No, unemployment claims are down, job creation’s up, but retail is down. No, retail is up this month, but…Well, you get the point.  If the economy were a car, it would be stuck in low gear.

There are as many theories about what ails the American economy as there are pundits and candidates for office. It’s too much government spending or not enough stimulus or the meltdown in the EU or GOP efforts to win the Presidency by delaying the recovery. And all of these  analyses clearly point to contributing factors.

But what if what we are seeing is the start of a long-predicted “structural change” brought about by technology? What if Europe calms down and we get past November only to discover that employment still doesn’t return to previous levels? And since I’m playing “what if” here, what if instead of the toxic political finger-pointing and infantile blaming that characterizes our current politics, we had a serious discussion about the appropriate response to that structural change?

Persistent high unemployment would present a huge challenge to social stability and economic health. Fewer people with money to spend would depress markets; more people needing social welfare support would stress the federal budget and make it more difficult to reduce the deficit. The existence of a persistent underclass would generate resentments and social unrest at a level that would dwarf today’s Occupy movement.

It seems to me–again, an admitted economic amateur–that such a scenario would require government to become an employer of last resort. Surely, hiring people to mow parks, clean streets, assist in classrooms and do similar jobs would be preferable to welfare, both for those being employed and society at large. The tasks being performed would improve the quality of life in our cities and towns, and productive employment would provide people with both self-respect and money to spend in the market.

Right now, of course, the rhetoric is all about heading in the opposite direction: laying off even badly needed government workers and pooh-poohing their value. If we are seeing the start of structural change, it’s going to be awfully hard to turn that tanker around.