Recession, tech kill middle-class jobs
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Seem like the real issue lies in the trend toward optimization in every part of the economy, from the small business owner to large corporations etc.
Case in point, I worked for a startup in 2008 that had a FT sysadmin and actual rack servers/real hardware etc. Same guys started a new company in 2012, minus a sysadmin and hardware. The ease/price of EC2 just makes too much sense. I saw that happening.
One has to be careful to watch the trends and not be on the wrong side of history (like a sysadmin who is not open to cloud and devops at this point). But how are most non-tech savvy employees going to keep up with the times? Most likely they will be outmoded and seen as expendable.
My question is how far will that go?
The problem is of course the growing disparity between pay. As the existing middle is eliminated, the majority of people are trending towards the lower segment of pay (the 29/2/~70 ratio mentioned). Ideally we'd find a way to elevate a large portion of those in the lower 70% area to higher paying jobs. I think the reality is, many of those people probably will never be suited for jobs in the $100k+ range. The only solution I can see being viable is further socialization (in the US) of things like medical care, transportation, etc. in order to ensure that just because you don't have a high salary, doesn't mean you can't have a high quality of life. Either that or accept that the US is devolving into a 3rd world country.
Bring on the "socialist" flames.
The problem with capitalism and tech is that the efficiency gains realized through automation nearly all go to the owners of the firms. The human laborers replaced by programs and robots are just S.O.L. Capitalism only works for a society as long as capital owners need human labor to carry out production.
"The only solution I can see being viable is further socialization (in the US) of things like medical care, transportation, etc. in order to ensure that just because you don't have a high salary, doesn't mean you can't have a high quality of life. Either that or accept that the US is devolving into a 3rd world country."
Yes. Either we implement basic income and universal healthcare, and improve access to public services, or we will end up with a tiny, but very wealthy "owner" class, and a very large, unemployed, impoverished majority.
Better to do it soon, while it's still a choice, rather than later, when it isn't. History has shown that the masses will only put up with so much inequality before they openly revolt.
An opposing force to this, though, is that increased automation will continue to reduce costs and barriers to entry, allowing people with almost no resources to start some form of income-generating online "lifestyle business." A lot of people are doing this now, but not nearly enough people are capable of it, for it to be a sustainable career option for almost the entire American middle class. Yet.
[1] http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and...
Another possibility is that inequality and exponential growth in CEO compensation are due to the fact that most companies are not free marketplaces internally. They are run like little communist dictatorships where compensation is allocated by social/political rank, not by value created. If companies had to pay people according to the actual marginal value of their work, perhaps the inequality wouldn't get quite so severe. But human workers would still have to gradually retrain themselves to perform non-automatable tasks en masse, and the transition period is still going to be painful. That part seems unavoidable.
Agreed, though this really only applies to younger generations. A large portion of our currently unemployed are in the 40-60 year old bracket (aging population). It's unlikely a lot of these people are going to strike out into new careers. I'm sure some will, but it doesn't seem enough to make a difference. So we need to figure out how to care for them. And if we set up a social safety-net for everyone in the process, all the better.
> As technology increases abundance, material goods will become cheaper.
Possibly. Innovations like 3D printing are particularly interesting. As they become more sophisticated, predominately foreign manufacturing could come back home, albeit in the hands of "robots". Hopefully this would lower costs of goods, but the steady upward march of inflation leads me to think that's unlikely.
As you mentioned, the real problem is the aging and obsolete workers in the short term.
If you understand what's about to happen - you'll quickly realise that everyone will be out of a job and unless we keep people consuming - things start to get scary - like revolution scary.
We're all socialists now.
Initially, everyone was required to either hunt or gather food (probably). After a bit, humanity settled down into farming, and fewer people were required to keep everybody fed. This allowed for more time for childbirth. Better understanding of agriculture led to the creation of larger towns with specialized jobs such as blacksmiths and stables which led to farm animals helping to improve yields even further. To create the tools, some people had to go into mining jobs.
The pattern here is that advancement allows fewer people in each economic area to provide the same benefits, freeing up labor for new economic areas.
So clearly, the modern move to automate jobs isn't necessarily anything new. People are now free to move into creating accounting software instead of manually filling out journals. The problem occurs when the people freed up from advances do not have any new work to move into.
The result may simply be de-urbanization - people moving back into the countryside to grow their own food. Most people can afford to buy a small plot of land in the middle of nowhere (small piece of land in the middle of Africa is practically free). Or the result may be socialism. Or the result may be new economic sectors being revealed by innovation. Fortune telling won't get us very far.
I'd love to see some sign that the US Government is starting to take this issue seriously and planning for it. While we're still years away from this becoming a critical social problem, I do believe that the brunt of the impact from this trend is inevitable and not too far off (certainly within my lifetime and I'm pretty old now).
I'm personally very much in favor of a hybrid socialist system where everyone gets a guaranteed minimum income but people who are able and willing to can still work to earn more. I think this helps in a number of ways, the first being avoiding societal collapse and possible revolution due to the massive amount of unemployed there will be relative to the current population and secondarily, it gives even driven people a buffer to live on while chasing their dreams. I think the end result would actually be more positive for humanity than the current system, though for obvious reasons it will not be supported by the capital gatekeepers who currently wield the money (and thus the power).
I find the idea that any degree of socialism will result in no progress is pretty insulting towards humanity. There will always be people who are driven (whether it be by ego or curiosity or whatever) to do great things.
It's a very interesting and serious problem, and I very much agree that a "hybrid socialist system" is not the disaster some say it would be. We're not talking about centralized bureaucratic communism, but rather what is already in place in parts in many Western countries.
There is certainly a truth in this, while a person could get by with a fourth grade education in the 1800's to someone who could get buy with "some high school" at the turn of the century, to needing a "high school diploma" by the end of the second World War. To needing a STEM degree in the 21st century.
So the real issue is not permanent job loss, but rather how do we take care of people as industry reinvents itself? The pace of this reinvention is accelerating, and has been accelerating for hundreds of years. In the near future, 20 years could result in a completely new job skills need. In fact, compare 1993 to 2013. Entire industries have sprung up while others died since then. Yet we do not lament the advent of the omnipresent internet because of the lost jobs in the newspaper, movie, music, and publishing industries. At least, not most of us. The same thing is simply happening today. Jobs will continue to exist. Just not right away. The real problem is only the short term: figuring out what to do when people get optimized out of some obsolete industry. There are many answers, we just have to think about it.
Socialism is an answer proposed by many people. I think I agree with them to some degree. Some kind of economic floor below which no person can descend. I don't know how this could be created, but I would argue that the "economic floor" has been steadily rising for hundreds of years. In the US, even poverty currently results in a significantly higher standard of living compared to the median income life in 1850.
As it is, I think the Coming Model is going to have to be some extended form of Danish-style "Flexicurity": a market economy with the means of production under mixed control (nationalization of common assets but no seizing private wealth), near-complete market flexibility, but a system of social insurances and social dividends that share out some portion of the total wealth and prevent actual poverty and destitution for everyone.
Then we'll see what people will actually create under such a model. It could well end up like the late '40s and the '50s-'60s: with a crisis resolved, demand is liberated, what had been financial wealth is converted into a real standard-of-living rise, and whole loads of new products and professions open up that can only exist because the working class is now secure and prosperous enough to support them.
An increase in the difference of relative wealth is not fundamentally bad if the absolute wealth increases for everybody. Of course no one thinks like this.
This doesn't mean we'd instantly all be equal- I would think we could look to communities of the ridiculously-wealthy today, in which case it looks like it would then be about having access to rare or unique things. In other words, no longer about money, but rather connections.
Even in software development, there may only be limited growth due to its open and exponential nature. As more developers work on software, the more tools will be developed to make their work more productive and efficient. It's a self reinforcing feedback loop that might have an equilibrium that won't be sufficient to account for all of the jobs lost as a result of software. American manufacturing, for example, is still one of the biggest sub-economies in the world and is insanely productive compared to Chinese manufacturers per person, but it doesn't create anywhere near as many jobs as we have lost overseas. At the same time, manufacturers in industries like medical, aero, and defense are complaining that they can't get the skilled workers they need to grow and as a result are forced to invest way more into automation.
It's very likely that I just can't look at this period of human development without heavy bias but it seems to me that the ridiculously easy flow of information allowed by the internet has destabilized the equilibrium we've had with creative destruction and job growth.
So let's ask, then: what does the middle class lack today that an increase in production efficiency could make widely available?
The two major areas I can think of are health care and capital equipment.
Health care because surgeries and even basic procedures can be really expensive, especially for the uninsured. Already we can see hair transplant robots [1] that take the cosmetic doctors almost entirely out of the picture and I'm sure surgery robots are being developed. I don't see how this kind of industry can create more jobs than it eliminates. However, better education and awareness of chronic illnesses caused by lifestyle I think would help free up hundreds of billions of dollars that would then stay with the consumers (or non-healthcare corporations which might then just hold on to it).
If you decrease the cost of capital equipment by automating their production (aka, by making automation easier and cheaper), it will allow many more people to buy them and drive their price down further because of increasing volume. This could then lead to a diaspora of small time manufacturers and service providers who replace large entities, become more local, and drive down the prices of everything through competition. The consequences here would be wild and unpredictable. Maybe the sum generated economic activity would be much greater than the whole (as it often is with manufacturing industries), but we can't say that for sure because of the limited value add that these manufacturers can provide over their equipment (as it currently is with manufacturing...). The other consequence would be the devaluation of the equipment causing a devaluation of the service contracts, which would probably lead to more automation through modularity, machine learning, and data driven remote diagnostics of equipment.
But honestly all that above is wild speculation. The future is damn near impossible to predict and I think the presence of economic incentives going in all different directions for all parties involved just makes it a lot more uncertain.
I imagine when we get there, we are going to have an absurd concentration of wealth as the automated means of production are in the hands of very few ultra-wealthy, and everyone else is destitute because their factories and robots make everything for effectively free. That sounds like bloody revolution.
Or, on the other hand, the creative economy could turn into a huge engine of bespoke design and manufacturing, so that real people start to own mostly customized items. I can definitely see Etsy, crowdfunding, and merchandising sites heading this way. I guess "we are all My Little Pony dolls now".
But rather than toy fads, I was more referring to how each character or doll has accessories paired to them and only them. So rather than buying 2 dolls and 5 generic dresses and swapping pieces between the dolls, they're now selling 6 dolls with 6 dresses, plus more stupid little accessories and such.
My hypothesis was that as manufacturing of consumer goods gets cheaper and processes get better, real people are going to stop consuming mass-manufactured goods entirely and start to become more like the dolls. Instead of my buying clothes at a department store (for instance), and thus wearing much the same stuff as my friends, family and coworkers, it will start to become economical for me to go to a neo-clothier and purchase items specifically measured, designed, cut, manufactured and adjusted for me. Quality and uniqueness start to become emphasized in consumer goods over mass-production quantities.
Basically, "The Diamond Age". As people say, "the future is here, it's just unevenly distributed."
"Ah, you ask, but what about the people? Very good question. Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots."
So get used to a future where you either have a personal entourage, or will be busy doing errands for people who actually have money. And chances are much higher for the latter.
Based on these constructs he developed "Four Futures" as follows:
-Egalitarianism and abundance: communism
-Hierarchy and abundance: rentism
-Egalitarianism and scarcity: socialism
-Hierarchy and scarcity: exterminism
Frase definitely swings from one side of the fence, so it may not be your kind of thing - but it's one take on the idea.
He gave an excellent talk called "Are droids taking out jobs?" http://www.ted.com/talks/andrew_mcafee_are_droids_taking_our...
If you get comparable intelligence - well then you're fucked if you do and fucked if you don't.
I agree, Technology has and is a great innovator and has created a lot of jobs. But when you begin reducing the number of low-effort jobs, what do you do with the people that used to be employed? It's a fact of averages that 50% of people are below the 100 IQ line - it seems that the new world economy has no place for them.
There is always work if you're willing to accept the pay. What we need to do is make sure that the benefits of automation go to reducing real consumer prices rather than corporate profits, so that the meager pay commanded by menial jobs is still enough to make a living.
The problem is corporations don't want to accept what that means: We would have to heavily subsidize alternative energy to sustainably reduce energy costs, which would "harm" the oil industry. We would have to subsidize (more) the construction of housing, which would "harm" the housing market, also known as making housing more affordable. So they lobby against it.
What has to happen is that profitable industries that make their profits from poor consumers have to be less profitable, so that the poor can keep more of their money. That's pretty much what it comes down to.
They did the complete opposite of what they should have done to achieve the policy goals they intended. If you want more people to own homes, you don't give people money to buy homes -- doing that causes an enormous chunk of the money to go toward just bidding up the prices on existing homes. What you should do is to build more homes. Subsidize new home construction and (especially) the construction of new high density housing in urban areas. Increase the supply, the price comes down, and more people can afford to buy a home or a condo.
This is where capitalism breaks down: its productive engine is one of the most powerful we know of, but its allocation system continues to write off large and growing portions of the population as undeserving. And the more people are undeserving, the less demand is available to support businesses, so the vast productive power of technology gets "eaten" as profits and rents for capital-owners rather than transformed into innovation and growth.
These are important lessons that the Western world was supposed to have learned through the Great Depression, World War II, and the post-war period of immense peace and prosperity unprecedented in human history. Eventually it's either support a working class (including both the "lower class" and the "middle class") secure and well-off enough to fuel the growth of industry, prop up your economy using government spending, or watch your economy collapse.
1950 was "better" in that it was both more egalitarian (for whom) and also more secure (which, I should note, made it inherently more egalitarian). Things like the GI Bill and post-war reconstruction made Major Life Purchases like housing, infrastructure, and education very affordable for large masses of the population. Production booms, government income-support programs, and unionization made incomes more secure (even when employment was culturally and personally repressive and conformist), allowing families to reinvest in building private savings. Employer-sponsored pension plans made retirement a real possibility and Social Security a fall-back. One spouse was expected to work, and the other spouse's labor was held in reserve for emergencies.
Contrast with today. Yes, in an absolute sense the economy is more productive, but it's also less egalitarian (income inequality is at historic highs in the United States and most other developed countries for which old measurements exist) and less secure (debt and leverage are not only rampant but the most common and expected ways of gaining access to housing and education, and few households can function without two incomes). The result is that for the median citizen, things haven't gotten better (few to no real-wage rises) since the 1970s, and the mean citizen (including people with very high nominal incomes) is vastly less secured against cash-flow disruptions. And since the housing, health-care, education and energy sectors are collecting massive economic rents, even the proliferation of cheap consumer goods hasn't actually done as much for the median and mean citizens as it should have: someone who has bare-minimum health insurance, and has to pay health premiums, taxes, ever-rising housing rent, and student-debt service on a salary in the range of $20k-$30k per year (assuming you live in the USA) simply cannot afford to consume that many Playstation 3 games.
>1950 was "better" in that it was both more egalitarian (for whom) and also more secure (which, I should note, made it inherently more egalitarian).
If you were white.
>Things like the GI Bill and post-war reconstruction made Major Life Purchases like housing, infrastructure, and education very affordable for large masses of the population.
If you were white.
>Employer-sponsored pension plans made retirement a real possibility and Social Security a fall-back.
65 was around the median age of death in 1950. "Retirement" was a hell of a lot shorter if you work almost until your death age. I can't call that better than now.
>One spouse was expected to work, and the other spouse's labor was held in reserve for emergencies.
If you were white. And both spouses working was an emergency situation because maintaining a household took a lot more effort in 1950 than it does today.
I just can't imagine things being better for people in 1950 than now.
>someone who has bare-minimum health insurance, and has to pay health premiums, taxes, ever-rising housing rent, and student-debt service on a salary in the range of $20k-$30k per year (assuming you live in the USA) simply cannot afford to consume that many Playstation 3 games.
I don't think I could afford to consume that many Playstation 3 games in 1950, either. In fact, I don't think anyone could afford to consume any. In fact, there would be a good chance that I wouldn't even own a television in 1950.
>I don't think I could afford to consume that many Playstation 3 games in 1950, either. In fact, I don't think anyone could afford to consume any.
Thank you for making part of my point for me. If someone couldn't consume PS3 games in 1953-1963 because they didn't exist, and someone can't consume PS3 games now because they're unaffordable on today's low salaries (well, low salaries for most people outside Hacker News), then what good is the existence of PS3 games to this person?
Where's the worth in increased production and variety of consumer goods only an elite minority can afford to enjoy?
But these things do not mean that the average and median standard of living has not risen for everyone in the United States since 1950, which I believe it has. I don't even see how this can be argued. Almost every quality of life metric I can think of has improved: education, life expectancy, and infant mortality have all improved, in addition to harder to measure increases in everyday comfort due to technology. In 2013, even most of the poor have a mobile phone. Almost anyone can walk into a library and talk to you or I on Hacker News. There are some metrics that have not improved, such as crime, incarceration rates, or income equality, and these are serious issues. But overall, I believe that the standard of living for the average US citizen has risen.
Anecdotal examples don't really prove much, but I'd like to give one anyway. My sister hasn't made the best decisions, and dropped out of college to move in with her boyfriend. They lived with his mother for a while, and lived on food stamps and in poverty. During this time, they had access to an Xbox 360, a car, cell phones, and a television. Their living situation was terrible by normal standards, and yet their standard of living would have been seen as good or even great by 1950 standards.
Simple: median real wages HAVE NOT RISEN AT ALL since 1970, while the cost of living (particularly prices for housing, health-care, education and energy) has... a lot.
So you can say that consumer technology has increased the quality of life in a non-tangible, non-quantified way. But in all the quantified ways, things are getting worse: people are losing the incomes that enabled them to access consumer goods (like consumer technologies) in the first place.
There are also many complaints about "kids these days", that a current-day education is "inflated" and less worthwhile or indicative of anything than a past one.
The poor don't have mobile phones because they can afford luxuries, they have them because mobile phones have become very, very cheap and, in some cases, government-subsidized.
As to life-expectancy, it's actually started to tick slightly downward for young people today since the Recession started. Infant mortality, too.
So, indicators that have gotten better over the past four decades: educational levels, life expectancy, infant mortality, crime rates (they're down quite a bit). Indicators that got worse in the past four decades: housing, health-care, education and energy costs, real wages, working hours (they increased noticeably). Indicators that started getting worse since 5 years ago: all of the above.
In the absence of the friction that corruption and rent-seeking create, the wealth curve would look much closer to a standard distribution, and the people on the right side of the hump would be much more likely to "deserve" their fortunes, in the sense of having earned them by contributing value.
Worst of all, we haven't even seen the robotics revolution yet. In the past, automated assembly lines, manufacturing plants, etc. were the realm of extremely large companies with volumes in the hundreds of millions and billions of dollars. Now, with embedded development becoming more and more accessible and interfaces becoming an important part of software, that automation will become cheaper and cheaper. Pretty soon we'll be able to use off the shelf hardware with Python and OpenCV to program complicated assembly lines and manufacturing pipelines (which we can to some extent already).
I think we are also at the point where we as individuals dont need a barrage of new physical things every year. We can still make significant progress with new virtual products and more efficient and durable physical goods.
Seriously?