Saw this today. I agree with nearly all she has to say:
We have 7 billion people on the planet now.
A percentage of these will be of working age, i.e. 18 to 65 say. I imagine it might be something like half. So that’s 3.5 billion people who are of working age and if they all lived the lifestyle we have in the westernised countries (and increasingly they are), then these people would have a job each.
And what are jobs for? What do people do when they’re at these jobs? Well if they’re in the private sector, they produce a product or provide a service. So they might be making widgets or serving cappuccinos. If they’re in the public service then they are taking care of some aspect of society. So they might be cleaning the streets or providing an electricity supply.
But the idea is the same either way, these people are engaged in providing a product or service. And they usually work for a company who pays them a wage or salary. And this is how they survive, how they pay the rent, buy their food and so on.
Now this assumes of course that there’s someone else who is paying to consume this product or service. A bunch of people who are going to pay for that cappuccino or that unit of electricity. And so far there has been and it all works well. They call this capitalism and it utilises the free market.
However, as Bob Dylan once said, times they are a changing. How? Well the thing is we simply don’t need 3.5 billion people to provide the products and services the 7 billion of us need. Why? Well we’ve been getting very good at increasing labour productivity, that’s why. What does this mean? Well essentially it means we need less people to produce the same amount of stuff.
And so we’re seeing long lasting unemployment in westernised countries now. Just look at this:
Eurozone crisis live: Global jobless to hit record 200m this year
LiveThe UN jobs watchdog says global spillover from the recession in Europe is driving unemployment higher
Why is this happening? Well basically we’ve gotten very good at producing a lot of stuff very cheaply and easily. As an example, take food production. Only a few decades ago, 50% of US families were farming families, now that figure is 1-2%. And this is achieved by mechanisation, better growing methods (technology) etc.
So our societies are going to have to change to accommodate this. How? Well I’m not sure and I’m not sure it’s even really being addressed. Everyone’s still focussing on how we can create more jobs. And this debate is happening in every developed and developing country. Here’s an example of that. Very few are pointing out that we will never have full employment again.
I did come across this article which addresses the issue. In it the author says this:
The key question to ask is how does the individual live in a society where the “reservation job” now pays a lot less?
The simple answer seems to be that we allow people in this situation the opportunity to increase their skills, and where they can’t redistribute some of the gains from mechanisation to these people in the form of an income payment – where the income payment represents the fact that the “reservation job” that previously gave an individual a certain standard of living no longer exists.
The existence of an unemployment benefit, the existence of student loans, and the subsidisation of education are clear and consistent methods that society has already taken on board to deal with the possibility of the increasing mechanisation of low skilled work – and it is this these types of solutions that are appropriate moving forward, not an arbitrary call to stand in the way of technological innovation.
As a result, the rise of the robots is not something to fear, as long as society and the government that represents it are conscious of the changes that are occurring – and that they provide a security net for those who may otherwise lose out.
So he’s basically saying they go on the dole and that’s OK. Well I’m not sure that it is at all OK. People use their jobs to buy stuff, pay their mortgage etc. Are we going to agree that there’s a number of people who get this money for free, while the rest of us work? Wouldn’t we all want to be the ones who get the money for free instead of slaving away at some job we don’t even like?
Another way of addressing this is job sharing. This has been proposed for decades. So perhaps we work 2-3 days a week, with someone else working say 2-3 days a week to make up one full time job. And then we all have 3-4 days of leisure time each week, lovely.
Except this has never worked anywhere as far as I know. the thing is people kind of want to work (well most people anyway), for all sorts of reasons. Work provides people with a purpose, and some meaning in their life. It also just occupies their time! Many people don’t know what to do with 4 days a week to spend how they like. Maybe they don’t get on sowell with their wife/husband that they want to be around them 4 days a week. They want the structure, the social interaction, and lets face it they want the money too. If you can earn $x doing half a week’s work, then you can earn $2x working a full week.
And of course if you have leisure time, you probably want money to spend undertaking your leisure. And more and more people’s idea of leisure is not free stuff. they don’t want to spend it doing gardening or walking on the beach. They want to be at the mall, buying the shiny new gadgets, or partaking in the many and varied paid for activities.
People don’t want to live a time-rich but money-poor existence. They want the money so they can buy all the flash things. This gives them prestige etc.
And so we come full circle to the situation we have now. Which is that people who are highly skilled are in strong demand and paid a lot of money for the jobs they do. And those without many skills are finding no one wants to employ them at all. Their jobs can be done by robots or by people in another country for far less money and far less hassle.
Which leaves us with a section of the community that will be permanently unemployed. And so in various ways we have to pay for them. Here in NZ (and most developed countries) we pay for this via unemployment benefits, extra police, more jails etc.
The amount of crime in any country is related to the number of young men who are unemployed and disconnected from society. Young men with time on their hands, no one to keep them in line, who are not owners of property etc. are going to commit crime. And this is what we are seeing.
And yesterday I was intrigued to see John Key announcing that jails will be implementing a working lifestyle for their inmates. This is supposedly to prepare them for work on the outside. They will be used to getting up, going to work (albeit on jail grounds) and earning a paycheck, earning their place in society. Now this sounds good but of course raises a number of questions such as “What will they be making or doing for work?” i.e. how will this affect the private sector? and “Will there be a job for them when they come out?” i.e. with all the will in the world, can a lowly skilled convict find a job once they get out of jail? Or will they end up back on the dole with time on their hands again?
I think this is a huge issue that will not go away, but only get worse over time. It will be interesting to see how things work out.
Wow a new post!
I’ve been a bit inactive on the blog recently, just been doing other things!
This did peak my interest though:
Spain’s house prices to fall another 30pc as glut keeps growing
Spain’s property slump will deepen for much of the next decade, and tracts of buildings along the Mediterannean coast will have to be demolished, the country’s top consultants have warned.
So, 5 years after the GFC started, we’re still seeing similar headlines! Basically what’s been happening is that the banks have been artificially keeping up property prices (by doing things like rolling over defective loans etc.) for years hoping things would improve and they’d be able to make good the many defective loans they have on their books.
But 5 years on, prices are actually declining in Spain. And other measure look worse too, the unemployment rate of 26% is only getting worse, and all the young workers are leaving – which is exacerbating an ageing population problem.
Spain’s bank rescue from the EU bail-out fund (ESM) is bringing the crisis to a head quickly, and brutally. Brussels insists that Madrid crystallise the losses in the portfolios of the rescued banks, ending the “extend and pretend” policy that has concealed the full gravity of the crisis until now.
So the Spanish banks have been told by their European bosses that they have to crystallise the losses now. Wow. This has sent prices falling steeply. The banks are selling what they can before the state’s ‘bad’ bank sells it’s portfolio:
The big trio of healthy banks – Santander, BBVA, and Caixa – have all rushed to sell their backlog before the state’s “bad bank” unloads its holdings. They have already written down 95pc of the value of their land portfolio. “There is little more to lose,” said Mr Rodrigues de Acuña.
This is the sort of thing that happened in NZ after the ’87 crash. The banks just rushed to sell the properties they had loaned money on that were not performing by certain metrics. And they just sold them for what ever they could get. And I had expected this to happen again in NZ and Aussie after the GFC, but the banks look like they’ve been able to ride it out. They just held onto the bulk of their loans/properties and waited for the situation to improve and properties to rise in value again, and it looks like they’ve been successful in this. Interesting.