Can Anyone Really Create Jobs?
nytimes.com
nytimes.com
Technology's leveraging power has become so severe that a company like Apple can reasonably expect to supply the entire world market with smart phones. Another example is SpaceX, which is pioneering the future of space flight with a team of only 1300 employees.
Globalization depresses wages for traditional labor, while technology facilitates an extreme leverage for talent. These two forces are enough to obviate the vast majority of the domestic work force. As long as this reality is ignored, the discussion of potential solutions is futile.
Further reading: http://www.thelightsinthetunnel.com/
There are many jobs that are now obsolete, or will be due to technological progress. Not only are many 'labor' jobs being rendered obsolete, but so are many 'mundane' white collar jobs.
Toll-booth operators are obsolete (or will be)
Bookkeepers are obsolete (or will be)
Many back-office support-services can be automated or re-located
All cashiers could potentially be made obsolete
Many retail sales could be made obsolete (as people shop online)
Where do all these people go? During the last technological revolution, there was a relatively smooth transition from farming to manufacturing. But I honestly don't see how large swathes of the population that don't have specialized skills will fit in in the new economy.
Most of the people reading this comment will do just fine. But we face the really tough questions when dealing with the increasingly large number of people who don't have skills that are in the demand. And even if they all got the skills, employers simply wouldn't need all of them as labor becomes increasingly leveraged.
A couple professors fro MIT just wrote an e-book called 'Race Against the Machine' discussing this phenomena.
http://www.amazon.com/Race-Against-Machine-Accelerating-eboo...
In fact, developed nations in Europe and the Americas are importing vast numbers of low wage workers to do low value per hour jobs where humans are still better than machines. It continues in the face of a prolonged severe recession.
So the emerging problem of no available work to do does not seem to be materializing. In fact, it's hard to imagine. Does every public park and private garden in your city look as clean, inviting, and pretty as it could possibly be? Is every street paved smooth without cracks and potholes? Does a bumper crop of fruit never go bad for lack of harvesters? Is every home clean and freshly scrubbed all the time and is a freshly cooked meal always waiting? Does every corner have a crossing guard during school hours?
There's a lot of intellectually undemanding work to be done in a utopia if we want to pay for it.
Right now, we import foreign workers to do cheap labor but we could take unemployed citizens and subsidize their wages to have our own do those jobs instead. The unemployed citizens are living on private or public welfare and social insurance today but they could be working. We could kick in public money to make it possible to pay a legal wage with benefits for the jobs undocumented workers do and the employers would prefer to stay legal by hiring citizens. We could even document the undocumented and add enough subsidies to employ them too.
Economic change driving social change is disruptive. But let's remember that technological productivity is a positive change that makes us wealthier.
Unemployment that follows from energy shortages or global climate change, if those ever get serious, would be a much bigger worry.
That seems to be the trend, long-term. But you can't say 'most', not yet.
There are still many manufacturing jobs available in the US. My employer has an open reqs out for our six manufacturing sites in the States. We're not the only ones in our industry.
Why does this myth persist? It might be that these jobs are no longer in traditional manufacturing areas. A decaded ago we had two sites in traditional blue-collar areas: one in Mass, one in Washington. We closed them down and relocated the work to existing sites in Idaho and Wisconsin, expanded there.
Because the labor and other costs in the old sites were higher than the drive-past states.
So ... a guy in Mass sees a shuttered factory. A guy in Wisconsin sees new construction. Perhaps the guy in Mass needs to move to where the jobs are. We're hiring.
The fact that maid/cook wages have not dropped to $7.25/hour is strong evidence that unemployment is caused primarily by the unwillingness of many Americans to take available jobs. I'd happily pay $10/hour for a maid, but you simply can't find people this cheap where I live.
We don't need to subsidize people's wages to solve this problem. We just need to stop paying people not to work. After all, why clean people's houses for $7.25/hour when you can just collect unemployment for 99 weeks?
Note that where I used to live (Pune), plenty of people were employed as maids/cooks/etc without subsidies. They weren't paid not to work. Instead of welfare, they had the Gandhi Rural Employment Guarantee (styled after the New Deal).
http://en.wikipedia.org/wiki/Mahatma_Gandhi_National_Rural_E...
Relative to what, exactly? That transition was only smooth in retrospective. It took many decades and (among other things) spawned a major political ideology and a superpower based on it dominating a century.
Did you see that thing the other day where some people decided to make an entire music video in stop motion using Jelly Beans[1]? It took 30 persons 22 months. That is possible because "globalization combined with rapidly advancing technology" can drastically lower the amount of economic output each person needs to produce to sustain him or herself.
This also means that a person who is capable of filling an entire day with production of economic output has a drastically higher amount of wealth to spend on things not specifically "necessary" - such as feeding people making stop motion Jelly Beans films.
While I acknowledge how far capitalism has taken us in wealth creation, it has a blind spot: some forms of wealth are invisible, and either hard to measure, or hard to capture. Every person making a living with YouTube videos is a person who is not teaching in an inner-city school, or rehabilitating the homeless, or building a power grid in Somalia, or a thousand other useful things which don't dangle a direct profit motive (or enough of one to meet a threshold for action).
I'm as loathe as anyone to see a top-down "government" approach to these problems; setting aside the issues of corruption and perverse incentives, even the most well-meaning social programs tend to suffer from insane bloat with no metrics or feedback loops, and therefore mixed efficacy at best.
The only way I see to create this invisible wealth is to supplement markets with new bottom-up community-oriented economies, whether based on money, gift economy, reputation, or something entirely new. We have some precedent for these kinds of distributed institutions (Wikipedia, Linux, Anonymous), but when you compare these to the scale of Microsoft or the U.S. Army, you can see how far we have to go in giving people useful work that also lets them pay their bills.
(Side note: there is a case to be made that pure libertarianism would result in more wealth for everyone, meaning more people could afford voluntary charity and community spending. Bluntly, I don't have that much faith in human nature. At minimum, I could only see that working when coupled with the right sociocultural value system, which emphasized a balance between selfishness and community, rather than an adulation of greed.)
I'd argue that's a fallacy. Show a pre-industrial revolution subsistence farmer a car factory, and he'd throw his arms up in horror over the frivolity. Imagine his reaction to seeing a airplane factory producing billion dollar vehicles that are meant to freight hundreds of so-called "workers" to spend a week out of their FOUR annual vacation weeks drinking and dancing in southern Spain (where? the furthest this farmer has ever travelled is the next county over where his sister lives).
> (Side note: there is a case to be made that pure libertarianism would result in more wealth for everyone, meaning more people could afford voluntary charity and community spending. Bluntly, I don't have that much faith in human nature. At minimum, I could only see that working when coupled with the right sociocultural value system, which emphasized a balance between selfishness and community, rather than an adulation of greed.)
Governments enforcing sociocultural values only works when those values exist. In the old east-block, governments were hard at work enforcing a set of values it's citizens didn't share. It didn't work. The UK doesn't have a constitution, but it was much better at protecting it's citizens than these east-block countries whose constitutions, on paper, were vastly superior.
If the people broadly didn't care about inner city schools or the homeless, nothing would be done for them, government or not.
http://www.fee.org/library/books/economics-in-one-lesson/#0....
Please read that. It is a 40's era book that disputes several economic fallacys, specifically the "Curse of the Machine".
Both of these assumptions are quite untenable given our understanding of human biology and technological progress.
Or maybe some people can move to farms, supplying more farm labor, sending farm worker wages down, and lowering the price of food to close to nothing? Ohh wait... minimum wage laws stop that from happening.
1. computers replace people's minds, not their muscles
2. the machinery discussed in the article was physical machinery, which takes time and effort to manufacture and trnasport around the world. But software isn't a physical object, and it costs nothing to replicate a useful program a billion times and put it on every computer; therefore the extent to which software can concentrate wealth is a lot greater than machinery could.
We keep falling for the same mistakes. It makes me wonder why people hold their convictions for their theories of economics so strongly as opposed to, say, the theory that the speed of light can't be surpassed.
If we can approach physics with humility and admit ignorance until further study, why do people not adopt this attitude with things like economics? :(
This hasn't happened to humans yet because technology has not replaced all possible jobs humans can do. That doesn't mean it can't happen, it just means it hasn't happened yet.
I'm long past the point where someone was ignorant of something and it upset me. I've come to realize that I, myself, am ignorant of many things. I no longer see it as a crime. What I see as a crime is people acting and opining on things they haven't given plenty of thought to. We all need to be careful to not spout-out answers and opinions that we always carry at the tip of our tongue. It's worth it to be humble and skeptical all at once, but it's tough.
I think a key observation missing in all of these analyses is the most obvious one: that bottleneck is energy. What's different between 1995 and today? Well a barrel of oil cost about $25 2010 dollars back then, and costs almost $100 dollars now. We have an economy that is entirely driven by oil. When the cost of that goes up, because we've run out of the easy-to-reach stuff and have moved to expensive and difficult methods, then it's no surprise that the economic equilibrium shifts to a point with lower activity.
It was illustrative to me while reading the other HN articles on wealth. Some of those who have already sold their companies for millions haven't changed their life style much. They still buy the same things, still live pretty much the same way. Maybe travel more. Otherwise, the extra capital just goes into more investments that help to further inflate the established capital markets.
http://blogs.law.harvard.edu/philg/2010/08/08/unemployed-21s...
A quick google seems to show that the cost of milk has increased over time.
http://www2.census.gov/prod2/statcomp/documents/CT1970p1-06.... (page 31)
Data from 1890 - 1970.
That's not why.
When costs go up, producers become less willing to supply product at a given price. This shifts the supply curve left, and establishes a new equilibrium at a lower quantity but higher price. Of course, with regards to oil, demand has been exploding in developing nations, which has pushed the demand curve to the right. Now, picture pulling the supply and demand curves to the left and right, respectively, at the same time to see how that causes the equilibrium price to spike.
As for speculation, it's hard to tell what speculation is really doing here. Speculation is, to an extent, the mechanism through which the market incorporates knowledge about the future scarcity of a good into the price of the good. Whether or not we've hit "peak oil" we're clearly in a situation where oil extraction is getting more complex and expensive and demand is exploding. And oil resources are clearly finite and we'll run out sooner or later and there is no alternative in sight. Given these factors, the price of oil should be exploding.
But the insane volatility of the market, and rising prices completely out of proportion with the slowly, steadily increasing cost of extraction, is most definitely because of speculation.
And come on, how is that even slightly controversial? When someone with the capital to affect the price is in a position to profit whether the price goes up or down, what do you expect to happen to the price?
http://en.wikipedia.org/wiki/Lump_of_labour_fallacy
You are looking backwards. That is your first mistake. If you only look at what jobs exist now, then you are forced to look backwards and everything looks dark. Try to imagine what the future might actually be like.
Let's take a hypothetical example of some future industry:
It is well know that by the year 2050, the urrgh industry was central to the USA economy. Conceptually, the idea of urrghs was developed by Lisa Simon Beckworth of MIT, late in 2014. Michael Ardossa of Stanford developed the first working urrgh in the summer of 2016. However, urrghs remained an academic toy until 2019, when Herbert Boink of Cambridge developed a technique for mass production. Early in the 2020s it seemed like a number of old names from the tech industry were also going to dominate the urrgh industry: Sony, Samsung, IBM, Lenovo. However, it soon became clear that the old tech companies had the wrong kind of management structures for pioneering the new industry. A host of newer companies sprang up. The public only gradually became aware of urgghs. Many people point to 2026 as a turning point. If you measure the number of articles being written about urrghs in the popular press, there is a 10x jump between 2025 and 2027. By 2028 there were young people confidently describing themselves as "urrgh professionals", the implication being that they were going to make their whole careers in the new industry. The early 2030s saw explosive growth in the industry. After the recession of 2038, economists pointed out that the urrgh industry had been the leading cause of economic growth during the last business cycle, and would likely play a major role in the next business cycle. On the eve of the next recession, in 2046, the urrgh industry was employing 1 million people in the USA.
We all know at some point in the future there will be some new industry that sweeps the world and generates a lot of economic growth. The only question is how much any one given nation will dominate that industry. But that raises a different issue, an issue about national competitiveness, which should not be confused with issues of one nations unemployment, unless you want to make the explicit argument that some nation is stealing jobs from some other nation. Which can be true in some circumstances, but those circumstances need to be made explicit, for the conversation to have any meaning.
The thing is, it's hard to know what the next big thing is. Generally, those countries that have the fastest growth in productivity also have the lowest unemployment rates. That might seem counter-intuitive, until you think about what productivity allows: it means you can produce more, at the same or higher quality, than you did before. If your productivity goes up at 10% a year, and your competitor only goes up at 5% a year, then pretty soon you can make more of whatever you make, at higher quality and lower cost, than your competitor. This applies to nations as well as companies. Back when Japan had 7% productivity gains every year, and the USA had 2% productivity gains every year, Japan had close to 0% unemployment. But if you believe, as you suggest, that rapidly rising productivity increases unemployment, rather than reducing it, then you would assume that Japan would have higher unemployment than the USA, back when its productivity was higher. But we know the opposite was true.
Even worse, if you took your own argument seriously, then you would have to argue that falling productivity is a good thing since it would mean more jobs for everyone. But I assume you are smart enough to avoid doing that.
The economy is a complex adaptive system that is not well-understood; are you so sure that there is no such thing as too much efficiency? After all, life itself is inefficient---if we want to get to our ultimate destination faster, it would be most efficient to kill ourselves. But I assume you are smart enough to avoid doing that.
I remember reading a comment from Steve Jobs to Obama that he would never build a factory in the US due to overly burdensome regulations and the like.
When the dollar started collapsing around 2008, I asked some friends who ran operations for the big manufacturing companies as to why they wouldn't bring the jobs back stateside. It made intuitive sense to me: wages rising in China, cheaper dollar, higher fuel costs. Not to mention its always harder to run things when your employees are half a world away.
The universal reaction was no way they'd bring manufacturing jobs back. Reasons: 1. Don't want to deal with unions. 2. Don't want to deal with hidden costs like healthcare etc. 3. Too many regulations. 4. Just too hard to scale up or down. Apparently in China if you need to scale up your factory, you send a bus into the countryside to pick up villagers. Train them for 3 weeks and bam you have a factory worker. Who's living in your factory dorm, so they're available for over-time etc.
It sounded insane actually, I can't imagine any normal person wanting to work like this.
But its great if you are running a factory.
What you describe is much more an effect on the developed work of the migration of manufacturing jobs to emergent economies than that of technology, which, on the contrary, helps the developed world itself to slow down the loss of manufacturing jobs through higher worked hour productivity.
The notion of systematic unemployment is bizarre. (No matter what justifications were invented to paper over its absurdity with.) It represents idle hands which have nothing to do. The US could have enormous productive output. The infrastructure and know-how is there; it's not like someone dropped bombs all over the place and reduced it to a 3rd world nation. But as a society, we choose not to use these resources, nor do we allocate much of our output to the "lower classes" of people.
"As a society", we choose nothing. If you believe their output is useful, why don't you hire some of them?
Structural theories of unemployment are merely theories which claim that you have no idea what job they can profitably perform, and they have no idea what jobs to bother applying to. Or, alternately, there are barriers preventing them from taking such a match (e.g., some people may consider unemployment benefits + leisure superior to a marginally higher paying job).
It's not that they have no idea which jobs they could profitable perform, but that there are no jobs which they could profitably perform. This is because their marginal rate of productivity is too low for any position. The way around this is to reduce income taxes, corporate taxes and sales taxes. This reduces the cost for employment and production, which brings the "you need to be this productive to be profitable for us" bar lower. This helps to make more room for on-the-job training as well.
The mismatch between skills and demand for skills is real. This is mostly a result of government intervention and the business cycle causing unsustainable booms in industries.
That is indeed a way that the society you live in choose to spend money to create jobs. Other ways of spending money to create jobs are, for example to increase the size of the military, which may or may not be as useful for a nations economy as creating infrastructure, depending on the state of your infrastructure and the size of your military.
But some variant of the New Deal approach would be possible. For instance, instead of paying people not to work for 99 weeks (as we currently do), we could pay people wages equal to unemployment benefits for jobs that would otherwise be done by a unionized government employee. For instance, unemployed skilled workers could become DMV clerks and unemployed unskilled workers could become DMV janitors.
Such an approach would allow us to both create jobs and cut spending. Strangely, we don't go down that route. It's almost as if our elected officials and unelected bureaucrats aren't looking out for our best interests.
For megaprojects where a municipality might be creating new infrastructure or modifying infrastructure, sure. But there are plenty of big projects involving deferred maintenance that would require little or environmental impact work (or may have even had the environmental work done long ago).
Of course, this assumes that producing services is the government's actual goal. If funneling money to cronies (politically connected corporations, government unions, etc) is the goal, then this method won't accomplish that one so easily.
The current economic downturn has been called a housing crisis, a financial crisis and a debt crisis, but the simplifying logic of the political season has settled on what is really more a result than a cause. We are now, according to nearly everyone running for office, in a jobs crisis.
Jobs are like money -- they are the end of the process. They are the socres on the scoreboard, but you don't play the game by watching the score. These are metrics of results, not causes. I don't open a business with a chair and a big sign that says "give me money," even though money might be the way I judge success. Likewise, and for exactly the same reasons, you don't sit around trying to "create jobs" Jobs are the result of somebody creating value, they are not a goal in themselves.
I hate to say it, but this was a really bad article. I had a premonition of this when I looked at the title "Can Anyone Really Create Jobs?" It's yet another in a long line of political commentary that takes whatever the current problem is and announces that it is insolvable. This reached ludicrous levels in 2008, with lots of articles asking "Is this the end of capitalism?" I don't know how many of these you have to consume before you finally figure out that no, whatever is happening right now, it's not the end of something that's been going on for thousands of years.
Americans need to start getting honest about their economic situation, no matter what their politics. If you drop hundreds of billions of dollars paying for government workers that the government cannot afford, you are not simulating anything. Money is just continuing to be spent in the same patterns as before. Likewise, if you cut taxes for the rich, and they continue to spend their money in the same way, you are also not doing anything except to run up the debt. If you are living a house you cannot afford, no matter how much we help you, you are probably still stuck in a house you cannot afford, and the rest of us are much poorer. Simply because an idea sounds good to your political party doesn't mean that it accomplishes anything but buying votes. These facts sound cruel, and I apologize, but some of this commentary is beginning to sound like dispatches from somebody's fantasy land. People are smarter than that.
>If you drop hundreds of billions of dollars paying for government workers that the government cannot afford, you are not simulating anything [...] Likewise, if you cut taxes for the rich, and they continue to spend their money in the same way, you are also not doing anything except to run up the debt.
That is the exact point made in the article: that both the Keynesian (Dem) and Chicagoan (Rep) approaches are not going to help in creating jobs.
In addition, you claim the article
>takes whatever the current problem is and announces that it is insolvable
The article closes with noting "no economic theory offers [unemployed Americans] easy salvation" (which is certainly true) and suggests that having a more highly-skilled workforce would help the problem. Do you disagree with this point? Wouldn't it be easier to employ liberal arts majors if they developed a useful skill?
I'm a grad student in Economics, and usually I think the NY Times does an abysmal job reporting on economic issues, but this article did a decent job.
"When this crisis ends, we’ll also be faced with other deep problems. Our tax code is a complex mess; we need a more effective education system; it’s hard to picture a healthy United States in 2050 without some major change in health care. Unlike the short-term jobs crisis, these are areas where we can find compromise. Let’s not do what we usually do by spending the bad times arguing over things that won’t happen and the good times ignoring the things that should. "
The most popular types of jobs programs involve state tax breaks or subsidies that seek to seduce a company from one state to another. While this can mean good news for “business-friendly” states like Texas, such policies don’t add to overall employment so much as they just shuffle jobs around.
Such subsidies can also seduce people from one country to another. And in that sense, they would indeed create jobs.
The same argument applies to the industry-specific legislation he mentions later.
Finally, he doesn't mention, on the first page, the very straightforward way that politicians can create jobs: by spending money on big infrastructure projects. Those certainly do create jobs, and they have been a common method to do so in a recession.
To top it off, lumping politicians in with "everybody else" seems unfair. As argued above, even politicians can and do "create jobs", but it is ludicrous to argue that the founders of Google or eBay or Paypal didn't create jobs. They created tens of millions of jobs that people live off of, in the US and in other parts of the world.
This is not true. You could cut taxes and reduce compensation for 23 million government workers.
And so, because each company know that cutting people's wages is a way to guarantee that they'll do a lousy job, businesses are overwhelmingly unwilling to cut people's wages at all. They would rather fire more people.
http://research.stlouisfed.org/fred2/series/ECICOM
Regardless, the government could cut overall comp without cutting any individual's comp and therefore never making anyone mad. They could simply freeze wages (rather than raising them, which they did during the recession) and apply the lower pay scales only for new hires/promotions.
I.e., a current G6 makes $30577 (ignoring COLA). When he upgrades to G7 under the current pay scale, he gets $33979. If all pay scales were lowered by $2500, the individual would continue making $30577 for as long as he is a G6. When he transitions to G7, his pay would only go up to $31479. No individual's pay is ever cut, but compensation for government workers as a whole is reduced.
Seems super simple enough and then the REAL job creators get the credits they are demanding. The fakes then have no excuses.
Smart businessmen (with smaller businesses) would just start a new company every year and move the profit from 1 to another. It isn't a very big accounting challenge to change which one of the companies you control shows a profit.
If they moved the profit and terminated the workers, that year they would still have to pay full taxes. The new company would not have people for a year so no credits - they also wouldn't have profits to pay taxes on either. There is no way to game the system, you cannot shuffle workers because you lose credits.
Why is this so complicated to appreciate? A large corporation's worth to society is not to ship jobs overseas but to create domestic jobs. How else do you encourage them to not ship jobs overseas and get slave labor for pennies?
Personally I don't think so. But perhaps that's because to me, Poonam is a real girl, very short, who makes frowny faces in google chat and real life when I tease her. Maybe I'd think differently if Poonam was a faceless foreign devil.
(Note: The girl is real, the name is not.)
Also, you are simply wrong that a corporation's value is creating jobs. It isn't. A corporation's worth is the consumer surplus their products create. If my company helps a woman find a dress she values at $100 and she pays $80 for it, she gains a consumer surplus of $20. How much of that $20 we are responsible for is dependent on what her NBA would have been.
What is that corporation's worth to society that it is not generating any domestic income and only extracting dollars from a society?
Then she will lower the cost of her labor until her prices become competitive, and people will then choose to hire her.
What is that corporation's worth to society that it is not generating any domestic income and only extracting dollars from a society?
Corporate value to society = consumer surplus generated - cost of printing green pieces of paper
(This assumes the corporation takes delivery of green pieces of paper rather than electrons, in which case it's value is even higher.)
Also, you still dodged the question of why your white girl deserves this job more than my brown girl. Is my girl simply less of a human being than your girl?
It's a shame that 1921 and the post-war boom have been buried under theories that tow the line for the managerial-state.
But with all that meddling causing the current crisis, we look for yet more government involvement to solve the problem. I look at history and theory and see that the injection of government involvement throughout the economy doesn't work. Ask the people who tried to hop over the Berlin wall!