Tuesday, May 22, 2012

Straight Talk About Jobs

One of the first things written on this site was a lengthy six-part series on automation and its implications for the economy titled What Are People Good For? That article predicted continuing unemployment and decay, and sure enough, that's exactly what has occurred. You're sure to hear politicians blathering over the next few months about "creating jobs", while at the same time dismissing government jobs as somehow illegitimate and merely "waste". They will be sure and prescribe measures to get the private sector hiring again, which will be sure to be another round of tax cuts and subsidies. i.e. corporate socialism, to get employers to do what they should be doing anyway (and which will be ineffective).

The problem is a deep structural change in the economic order. We can do "necessary" tasks with a minimum of human labor. Thus, we need to make all sorts of unnecessary tasks for people to do so that we can continue to grow the economy. And increasingly we create nothing but claims on wealth, and businesses are turning to scams, social dysfunction or privatizing the commons to keep profits flowing (privatized prisons, security guards, online universities, etc.). One often misunderstood point is that we need to keep creating enough jobs for new entrants into the workforce, year in and year out, enough for billions of people worldwide, millions in individual countries (approximately 1.2 million per year in the U.S). And certainly the quality of those jobs matters - with so many in the low-paid service sector, competition for higher-paying higher-status jobs is fierce, so all sorts of barriers are put up to keep certain people out (high college tuition, professional licensure, etc.).

The mainstream commentariat will simply declare that the jobs will somehow come back as if by magic when demand reappears (from where?), or that the fault lies in workers just not having the right skills, and if only they would buckle down and learn what the economy demands, dammit, full employment would surely result. The always-excllent blogger Charles Hugh Smith takes a blowtorch to many of these notions, making points I've wanted to make myself much more elegantly and concisely (emphasis mine):
What policy makers and pundits dare not admit is that the global economy is entering the "end of paid work" foreseen by Jeremy Rifkin. I have covered this topic in depth many times, starting with End of Work, End of Affluence (December 5, 2008).

The industries that are rapidly increasing productivity and profits are doing so by eliminating jobs and the need for labor. The Web is chewing up industry after industry, wiping out entire sectors that once supported hundreds of thousands of jobs while creating a few thousand new jobs that require high-level skills and mobility.

Robotics are replacing factory labor throughout the world--yes, even in "low-wage" China. When I first toured a variety of factories in China in 2000, many were little more than simple warehouses filled with long tables where workers assembled and packaged cheap light fixtures, etc. by hand. Others had robotic machines stamping out circuit boards that were then hand-assembled into monitors, etc.

The defect rate was high in these settings. Machines are increasingly replacing hand labor in China. Much is made of "labor shortages" in certain southern cities, but what that actually means is a shortage of young workers (overwhelmingly preferred over older workers by manufacturers) willing to work for low wages.
The Internet has enabled enormous reductions of labor input. A mere 15 years ago when I first learned HTML (1997), you had to code your own site or learn some fairly sophisticated website creation/management software packages, and you needed to set up a server or pay a host. Now anyone can set up a Blogspot or equivalent blog for free in a few minutes with few (if any) technical skills, and the site is free.

A staggering range of complex business services are available for low cost, enabling one person to perform work that a mere 15 years ago required a half-dozen people. Everyone talks about offshoring as the primary cause of jobs being scarce in the U.S., but the much larger force is technology in the form of Web-enabled software.

That is simply one example of many. Here's another: a tax preparation program that costs $60 can (for the common conventional tax situations) typically replace an accountant that charged $500 or more.
And he follows up here with some truly great points:
One key reality that is rarely if ever discussed is that the number of workers needed to provide the bare essentials of life to the 313 million residents of America is modest. Let's stipulate that bare essentials include food, heat in winter, clean water, sewage and waste disposal, public health (innoculations against pandemics, etc.), public safety and enough energy to fuel these essentials. If life were suddenly reduced to these basics, and no energy were available for anything but these essentials, then how many full-time workers would be needed?

Roughly 1% of the workforce raises the vast majority of our food, and a modest number of workers maintain the water and sewage systems, natural gas pipelines, furnaces, etc., A similarly modest number of workers maintain public health and safety and provide transport of essentials.

Of the official workforce of 154 million, how many fall into this "absolute essentials of life" category? Perhaps 10% or 15 million people? Even if we double that to include all sorts of non-essential but "critical" goods and services, then that's perhaps 30 million workers, roughly 10% of the population and about 12.5% of the real workforce of 240 million (the Federal government has relegated roughly 88 million working-age people to the zombie-status of "not in labor force" to keep the official unemployment rate low).

We all know the dynamic behind this dramatic reduction in the number of people needed to provide the essentials of life: enormous increases in productivity based on abundant fossil fuels and advanced technology.

Even well-made infrastructure requires maintenance, but this process of replacing aging transmission lines, water mains, highways, refineries, etc. requires a relatively modest number of workers because machines do much of the work. Ask how many frontline police officers are on your local force. Cities of a few hundred thousand might have 200-300 officers, larger cities might have 800-1,000. It's not a large number.
He goes on:
On a macro-scale, the challenge in advanced economies is creating "make-work" for 80% of the working age population. This is not an issue in developing economies, as most of the workforce is non-market and does not participate much in the cash economy. For example, only 7% of India's vast workforce of hundreds of millions of people gets a paycheck. The other 93% survive via barter, raising their own food, a bit of trade or occasional labor for cash, etc.

Before industrialization, roughly 50% of the U.S. population and workforce lived and worked on farms. The surplus of their labor fed the other 50% who lived in urban areas, and that cash supplied the few essentials the rural dwellers needed.

The paradox of post-industrial economies is that the cost of living rises even as the efficiencies of providing essentials reduces the number of essential jobs.
And finally, some great points here:
A lot of people are assuming the healthcare field will be permanently short of workers, but if enough people reach this conclusion then qualified labor will be in oversupply. The same can be said of MBAs and a number of other degrees that are widely viewed as "meal tickets" to a secure job. Since millions of other people are pursuing the same path, there is now a glut of MBAs and lawyers.

The problem is that the job market is not causally aligned with education. If we encourage a million students to get PhDs in physics and biochemistry, that doesn't mean the economy will magically create 1 million jobs in these fields. These fields are small not because there is a shortage of qualified labor, but for other reasons: the limitations of Research and Development funding, the limited market for products in these fields, and so on.

While a highly educated workforce can do a wider range of work, it doesn't necessarily follow that the economy has more higher-level jobs. One of the key reasons for the confidence that higher degrees were secure "meal tickets" was their relative scarcity: there are relatively few PhDs in math, relatively few physicians, etc.

But this belief is implicitly based on unlimited funding. When funding goes away, then there is suddenly a surplus of once-scarce "knowledge" workers. As more people get college educations and advanced degrees, the scarcity value of those degrees declines. In many fields, the scarcity value is zero: there is an abundance of people with degrees and a shortage of paid jobs.

If security is the goal, there will be stiff competition for "essential" jobs, as everyone else sees these as secure, too. This is where graft and corruption come in handy; in corrupt locales, the few plum secure positions are passed on to family members or those who paid a hefty bribe.

If you want to make a lot of money in the Status Quo, the competition will also be fierce. ...When competition is fierce, you not only have to possess the requisite drive and perseverance, you also have to love the trade. If you're just hoping for a secure job but could care less (or even actively dislike) the work itself, you will probably lose out at some point to someone who wakes up excited to go to work.
Spot-on as always. Thank you, Charles, for busting a lot of the myths our leaders like to throw at us to keep us complacent, or to make us feel that we workers are somehow to blame for the dismal state of the economy and falling living standards when we are collectively more educated and productive than ever before in human history. During the full employment years of the 1950's less than five percent of Americans have college degrees. Today with the real unemployment rate hovering around twenty percent, a quarter of Americans have degrees, and many more advanced degrees to boot. Any human population will show a roughly normal distribution of talent and cognitive skills. News flash: you need to create jobs for all of them, not just PhD's., and not just STEM field graduates.

There are solutions: we could reduce the working hours for non-essential services to share the work, which would be logical considering our productivity courtesy the internet. We could print up money and hire people to do the services the private sector has ignored in it's desire for profits, and rebuild the nation's crumbling infrastructure, physical and social. As long as you're giving people the ability to buy back what the economy is inherently producing efficiently through automation, it won't be inflationary (inflation happens when too much money is chasing too few goods; automation can produce lots of goods quickly and cheaply). Or, we could just go underground, as Spain and Greece appears to be doing as documented just a few days ago.

So how long will people continue to accept the bullshit they're being spoon-fed as society decays around them? Let's take a look at some recent developments:
TOKYO — Canon Inc. is moving toward fully automating digital camera production in an effort to cut costs — a key change being played out across Japan, a world leader in robotics.

If successful, counting on machines can help preserve this nation’s technological power — not the stereotype of machines snatching assembly line jobs from workers, Jun Misumi — company spokesman, said Monday

he move toward machine-only production will likely be completed in the next few years, perhaps as soon as 2015, said Misumi, although he declined to give specific dates.

Japanese manufacturers have been moving production abroad recently to offset the earnings damage from the soaring yen.

And fears are growing about a hollowing-out of Japan Inc. as jobs move to China, India and the rest of Asia, where labor costs are cheaper.

Misumi was adamant that jobs won’t be cut at Canon.

“When machines become more sophisticated, human beings can be transferred to do new kinds of work,” he said.

Despite growing pressure from the high yen, Toyota is innovating production efficiency to keep annual Japan production at 3 million vehicles, about a third of its global production, by reducing costs through boosting robotics use.

Akihito Sano, professor at Nagoya Institute of Technology, said Japan needs to do more to fine-tune its sophisticated technology so robotics can become more practical, and was doing some soul-searching lately about practical applications.

Japan has tended to focus on research and come up with razzle-dazzle humanoids and then get been beaten in simple but practical products like the Roomba vacuum cleaner by iRobot Corp. of the United States, he said.

Honda Motor Co.’s walking and talking Asimo human-shaped robot comes with voice recognition, pours juice into a cup and can run around on two legs. But, unlike Roomba, it has yet to enter a real living room to do actual vacuuming and it merely plays mascot at events.

Since the late 1990s, like other manufacturers, Canon began using the “cell” production method, in which a team of workers or one worker puts together a major part, rather than doing a simple task over and over.

In recent years, robots have become so much a part of this cell production, Canon calls it “man-machine cell.” Eventually, human involvement will be phased out in making some products, according to Canon.

In the U.S., Amazon.com Inc. is buying Kiva Systems, which makes robots and software to help companies fulfill orders, for $775 million.

Amazon has been using automation at its order fulfillment centers for some time. But Kiva’s technology is designed to lower costs and will be used to help workers pick and pack books.

Sano, the academic, stressed the need for a system so workers can communicate with robots. He also stressed that there will always be room for human intelligence, using the Japanese for “craftsmanship,” or “takumi.”

“Human beings are needed to come up with innovations on how to use robots,” said Sano. “Going to a no-man operation at that level is still the world of science fiction.”
Canon moving toward robots-only full automation in digital camera production (Washington Post)
The main purpose of warehouse robots is to reduce labor costs, so there is no question that they are beginning to replace workers in large numbers. Kiva claims that workers in its automated warehouses are up to three times more productive. A silver lining to the job reductions is the possibility of improved working conditions for those remaining in warehouses using robots. The robot-equipped warehouses are typically quieter than those using conveyor belt systems and, because warehouse owners only need to climate control a small portion of the total space, they can do a better job of providing reasonable working conditions. That’s in contrast to the sweltering conditions reported at some non-robotic Amazon warehouses. It is fair to ask, though, given the increasing sophistication of the software running the warehouse, whether the computers or the human workers are the sorcerer.

Of course, automating with robots also creates jobs, in refitting the facilities as well as designing and building the robots, pods, and control systems. These are certainly better quality, and require more skill, than the jobs that are eliminated, but they are not nearly as numerous. The march of technology, and Moore’s law, also raise the question of when robots will be able to do their own tote loading. Certainly robots have been built which can pick up, move, and place arbitrary items. They are just expensive and slow — for now. It is only a matter of time before Amazon’s and the other 600,000 warehouses in the United States can go completely dark.
Warehouse Robots Come of Age (Extreme Tech)

And then there's this:
The first robots reached the world of industry over 60 years ago. Since then, for security reasons, they have performed their work isolated in cages, and that prevented collaboration between workers and machines. The research centre Tecnalia Research & Innovation is embarking on a new era by incorporating into European industry the first robot capable of working shoulder to shoulder with people. There are two aims: to improve the capacities of the workers in conditions of safety; and to increase the competitiveness of the factories in international markets. For this it has the robot Hiro, Japan's most closely guarded secret in recent years in the sphere of industrial robotics.

Through Hiro, Tecnalia is aiming to ensure worker safety, increase the capacities of European manufacturing plants, and fight off the competition existing in international markets. So it has committed itself to combining the intelligence of the human being with the characteristics of industrial robots, since 99% of the tasks are more efficient if the two are combined. What is new about Hiro is that it is a social robot, in other words, it is built to share working space with people in conditions of absolute safety, and should it come into physical contact with any human being, it is programmed to stop automatically. It should be added that robots will undertake to carry out tasks that could signify a health hazard for the workers, and that way staff safety can be guaranteed to a maximum.

It is reckoned that within six years 60% of the industrial base state-wide that performs final product assembly work will have this type of robot on its production lines. The sectors set to benefit from this new technology will be the automotive, auxiliary, plastics, food, timber, beverages, agricultural, aeronautical, railway and energy ones, among others.
Humanoid Robot Works Side by Side With People (Science Daily)

And see this from Early Warning: Global Robot Population:

Read the entire post, and see the excellent econfuture blog for more. What are the end results?
One in five new graduates is out of work, while many more are being forced to take jobs that do not require a degree, official figures show.

Data published by the Office for National Statistics reveals that the unemployment rate for new graduates stood at 18.9% in the final three months of 2011.

The report says that this rate has dipped slightly from a peak of 20.5% following the recent recession.

But the statistics also show a rise in the proportion of recent graduates who are taking up lower-skilled jobs after leaving university.

In the final three months of last year, one in three people (35.9%) who completed their degree in the last six years was working in a role that was suitable for a school leaver.
Fifth of new graduates unemployed (The Indepndant)
According to the Office for National Statistics (ONS), the proportion of graduates employed in jobs requiring less skill than they were trained for stands at 36 per cent, up from just over 25 per cent a decade ago.

The findings mean that around 500,000 people of the 1.5 million who graduated in the last six years are in low-skilled work.

The figures will lead young people to question the value of university education, according to recruitment experts.

The ONS said that around one new graduate in every five available for work is unemployed.
A third of graduates take low skilled jobs (Telegraph)
In 2010, a total of 44 million people nationally received food stamps or some other form of public aid, according to the U.S. Department of Agriculture. People who don't finish college are more likely to receive food stamps than are those who go to graduate school. The rolls of people on public assistance are dominated by people with less education. Nevertheless, the percentage of graduate-degree holders who receive food stamps or some other aid more than doubled between 2007 and 2010.

During that three-year period, the number of people with master's degrees who received food stamps and other aid climbed from 101,682 to 293,029, and the number of people with Ph.D.'s who received assistance rose from 9,776 to 33,655, according to tabulations of microdata done by Austin Nichols, a senior researcher with the Urban Institute. He drew on figures from the 2008 and 2011 Current Population Surveys done by the U.S. Census Bureau and the U.S. Bureau of Labor.
Meet the new generation of welfare queens: master's and doctorate degree holders who can't find work. (BoingBoing)

     Out of 9 million unemployed in April, 4.7 million had gone to college or graduated and 4.3 million had not, seasonally adjusted Labor Department data show.

    That's a swing of more than 2 million since the start of 1992, early in another jobless recovery, when 4.1 million who hadn't gone to college were jobless vs. 2.3 million jobless who had gone.

    Mostly, this dramatic shift reflects broad demographic forces. A greater share of the population has attended college, at least for a time. Meanwhile, older Americans who were less likely to pursue higher education are exiting the work force.

    In 2011, 57% of those 25 and up had attended some college vs. 43% in 1992. Those without a high school diploma fell from 21% to 12% over that span.

    But along with the increasing prevalence of college attendance has come a growing number of dropouts, who have left school burdened by student loan debt but without much to kick-start their careers.

    For those in the labor force — either with a job or in active pursuit of one — 57% of high-school grads with no college (2.9 million of 5.1 million) have found a full-time job.
    For labor force members who have attended — and left — college or earned an associate degree, a depressing 64% (2.2 million of 3.5 million) have gained full-time employment.

    Among everyone up to age 24 who has left college or earned a two-year degree — including those not actively searching — the full-time employment-to-population ratio has plummeted from 69% in 2000 to 62% in 2003 to 54%.
The Benefits Of A College Education (Zero Hedge)

Are we just going to keep waiting forever for some technical innovation that's going to put all these people back to work (as opposed to replacing them)? Everything is falling apart, even whole societies. Our economy is in crisis. I don't have answers, but I know that we as a society are not asking the right questions. But first, we need to stop listening to excuses and stop believing the lies we're fed that everything's going to work itself out as if by magic.


  1. Excellent post, raising important questions.

    It continually surprises me that the many thinkers grappling with this issue never mention (to my knowledge) Kurt Vonnegut's first novel, Player Piano.

    The plot of the novel centers on automation's effects on the plant owners, for whom it is very good; and the former workers who performed the tasks and derived their dignity from the work, for whom it is not so good.

    This describes the process our society is going through right now pretty well, doesn't it?

    I keep wondering, how do we avoid the upheaval that Vonnegut imagines is the logical result, when TPTB don't seem to care whether we avoid it or not?

  2. Actually, I'll take a little bit of credit - WAPGF does refer to Player Piano. But what I find interesting is that, if I remember correctly (it's been awhile since I read it), the unemployed blue-collar men (that's a sign of the age of the novel right there) are able to live comfortably off a fairly generous welfare state, which was a vision consistent with the postwar prosperity when the novel was written (late fifties I believe). Today the welfare state and social benefits are being dismantled simultaneously with rising unemployment. And the unemployed are blamed for wrecking the economy! Because social programs are funded with taxes, as more people lose their jobs, tax revenue declines, and the government is unable to help people who lose their jobs. Raising taxes is said to hurt the economy, and going into debt is supposed to hurt the economy, so there's nothing left to do but watch in horror as society falls apart under the current paradigm.

    Not even PP was cynical enough to believe that the great masses of unemployed could just be abandoned without any kind of revolt. But that's exactly what's happening. PP talked about the dignity of work, but the real issue is simply being able for most people to survive with anything like the living standards their parents and grandparents enjoyed. Add to that, today's unemployed are men and women, white and blue collar, and heavily in debt to boot! PP was nowhere near as dystopian as actual reality!

    The generous welfare state of PP would be unimaginable today. It would be nice if it existed (it could), but it won't for reasons I discussed in WAPGF. I don't think that lack of work would be much of a problem in real life - There's always work to do - in my neighborhood people are always working on cars, fixing up their houses, gardening, and some weirdos even write blogs in their spare time ;)

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  4. There is always plenty of work to do. You hit it exactly on the head.

    Sorry I missed the PP reference in WAPGF. Still, that makes it the first time I have ever seen PP referenced in this context.

    Anyway, I see the whole thing ending in tears, unless we can make some of the fundamental changes that you mention in your discussion of ways out of the predicament in Part 6. I'm partial to some sort of guaranteed minimum income, but as you also pointed out, our Calvinist society would prevent the shift in consciousness required to stop blaming the victims for their disemployment and stop making judgments on recipients of the GMI.

    I don't see my fellow Americans as being capable of making that shift. I'm not sure that I can, either.

    Speaking of jobs involving unpaid work, back to converting my 8-year-old Powerbook into a Linux machine so it can handle my FTP site, VNC repeater and SVN server so I can turn off the big, old, powerhungry PC currently performing those tasks and save on electricity. I wish there was somebody who could pay me for that.

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