Friday, November 18, 2011

The Jobs Picture

Ed left a good comment on my previous post, but it was unfortunately eaten by Blogger.  Since it is another insightful comment, I wanted to make sure it was posted:

"Off topic, but responding to the comment on my comment, I'm becoming interested in how peak oil will interact with what seems to be the increasing trend to eliminate jobs through automation (the mainstream bloggers I know alert to the latter are Stuart Sandiford (sp?) at Early Warning and Tyler Cowen at Marginal Revolution, and I don't think they have digested the implications).

Labor saving devices at the beginning of the industrial revolution put craftsmen and agricultural smallholders out of work, but allowed households to improve their material quality of life through acquiring relatively cheap mass produced goods that they didn't have access to before.  Current labor solving technology does not really increase the goods and services available to a household, you still get one washing machine even if it now can be produced with two thirds fewer workers.  It makes these products cheaper, but there is no increase in production that will absorb the redundant workers.
Essentially the end result is the same number of goods produced with cheaper inputs, instead of more goods produced with cheaper inputs.  WIthout factoring in peak oil, in principle this should not be difficult for societies to adjust to, you just put most of the population on some form of welfare, which doesn't have to be that high because it now costs much less to have a middle class standard of living (but watch for population constraints).  In practice this takes a huge cultural adjustment.

Will rising resource costs halt or reverse the trend towards automation?  Or will have it have no effect on automation, but put the world in a Malthusian crisis where "surplus" members of society have to be eliminated?  I'm not sure, but again we are dealing with a wind down that will be difficult but tolerable as opposed to a nightmare."

This has been a line of inquiry that has interested me for a while, as well.  I think the key point is a lack of effective management of social trends in modern society.  We don't have the political will to identify the crisis and the need to plan for the coming transition is sorely absent from any kind of conversation on what direction society is taking. 

The ideas of "structural unemployment" and "jobs that are never coming back" are probably two early warning signs of what direction we can expect things to take.  By extension, the people who held these surplus jobs also seem to be surplus, themselves.  I think the first time this was really addressed was when Walter Reuther was shown a machine that could make some union auto workers' jobs obsolete.  Reuther responded by asking how many cars those machines would buy? 

I tend to think that the same factors which reverse automation (unpayable debt, rising resource costs, etc) will simaltaneously wipe out the ability of nation-states to maintain a working entitlements system.  In turn, this will sharply cut the effective cost of labor again (which is itself largely falling -- here is the BLS report).  At some point, it will become cost-effective for those who still have some measure of wealth to hire large number of menial workers, not unlike what was the case in 19th century England where urban populations ballooned with no attendant expansion in available work. 

Also, I wrote a post on this a while back, with what I thought were three trends that people might undertake in response to having no work and few options.  I should note that I don't mean to romanticize or idealize any of them, but that they seem to be likely once the welfare checks stop coming and people need to find some way to keep a roof over their heads.

Again, thanks for the good comment, and it is something to start looking for while sifting through the news.

1 comment:

  1. The problem with companies automating their way to profitability comes from the Law of Diminishing Returns. To put it bluntly, a company that invests increasing amounts of money in labour-saving technology will find that the payoff dwindles after a period of time and the end result is that human labour becomes cheaper. That's why so many labour-intensive industries find it cheaper to move their operations to third-world nations and close rather than upgrade domestic operations. Of course this comes with a downside too. When an entire industry outsources its' domestic production they end up putting their own customers out of work and pretty soon nobody can afford to buy thier products. The American automobile industry is a good example of this. Ford, Chrysler and GM, in an effort to cut costs and increase profitability, ended up putting their own customers out of work and found themselves facing bankruptcy by first automating and then outsourcing production.