Posts Tagged ‘unemployment’


The problem of the machine simply won’t go away.

In recent days, both Charles Arthur [ht: ja] and Richard H. Serlin have sounded the alarm about the effects of new technologies and forms of automation on work and workers.*

Even the Bank of America Merrill Lynch (pdf), while identifying the potential benefits (to consumers, based on lower prices, and some businesses, at least the first adopters) of the “creative disruption” occasioned by current forms of technological innovation, spends a good bit of time examining the possibility of rising inequality.

One of the great concerns of innovation is the potential disruptive effect upon the labor market. “Technological unemployment” is a long-held fear that is more relevant for certain individuals than whole economies – at least for now. The greater challenge is how creative disruption can give rise to winner-take-all and monopolistic outcomes. These can actually create incentives for entrenched incumbents to spend more effectively defending their monopoly rents than to innovate further: consider Microsoft’s defense of its Windows operation system near-monopoly for a time. Similarly, the first to market may benefit from sizable first-mover advantages that create strong network effects for the first, rather than the best, technology. In addition, digital innovations create much larger reach for any given entrepreneur, as near-zero marginal cost allows firms to scale up easily. All of these trends tend to concentrate market power and wealth, and thus can exacerbate trends toward greater inequality.

In addition, skill-biased technological change rewards the highly educated and highly skilled over others. More recently, innovative uses of data collection, processing and automation have reached well beyond the factory floor: bank tellers, x-ray technicians, paralegals, secretaries, and many other service positions that once were middle-skill and middle income have been disappearing to the relentless rise of innovation. It may be only a matter of time before jobs we now consider higher skill and higher wage are similarly replaced. As just one example, sophisticated automated systems for wealth management are already under development. Like so many digital services, these have low marginal costs and scale easily, resulting in much lower costs to produce and thus prices for consumers – but also fewer opportunities for employees.

The limiting case here would be general purpose robots that are effective substitutes for human labor but at a fraction of the cost. In that case, widespread unemployment could be an outcome – it depends on whether there develops a large enough sector in the economy where humans have a comparative advantage. This could be the arts and entertainment, or personal care services, or areas that involve deeper analytical thinking that is not amenable to existing forms of AI. The transitions from agriculture to manufacturing, and then manufacturing to services, were feared by some to result in mass unemployment. What happened instead is that some old jobs gradually disappeared as technological progress supplanted them, while new – often unanticipated – jobs arose in their place. This was not always ideal for individual workers, who may have found it very difficult or near impossible to make the kind of transitions needed to gain new work, but overall neither of these transitions caused a massive rise in unemployment. The same may well be true for the next transition.

It may—but I’m not holding my breath.

It is, of course, the case that workers’ wages depend on the number of workers looking for jobs and the rate of growth of employment opportunities, which in turn depend on both the degree of labor substitution in employers’ adoption of the new technologies and the overall rate of economic growth.

Slower expected growth in the years ahead, accompanied by corporations’ decisions to automate many production tasks (of both goods and services), represents a menacing prospect for the majority of workers. They will be adversely affected both by real technological unemployment and by the threat of technological unemployment.

One possibility is to worry about and search for measures to raise the rate of economic growth, so that displaced workers have a higher likelihood of finding jobs in new, growing sectors of the economy. Fast growth is unlikely but that’s what mainstream economists are focusing on today. The other possibility is to question the nature of the new technologies that are being adopted—to challenge not technology per se but, as I have argued before, capitalist technology.

The fact is, in an economy characterized by obscene levels of inequality in the distribution of income and wealth, the adoption of new technologies is guided by those inequalities—and is likely to make them even worse.

And that’s exactly what worries Stephen Hawking.


*But, as always, there’s Matthew Yglesias who attempts to argue that the problem is not automation, but the slowdown in the pace of productivity growth.

hourly earnings

We’re now six and a half years into the official recovery from the Great Recession and, according to the latest report from the Bureau of Labor Statistics, the headline unemployment rate has fallen to 5 percent.

However, just to keep things in perspective, the number of long-term unemployed (workers who have been without a job for 27 weeks or more) was essentially unchanged at 2.1 million in October and has shown little change since June. These individuals accounted for 26.8 percent of the unemployed in October.

And, as we can see from the chart above, workers’ wages, while increasing, have still recovered much more slowly than during the previous three business cycles.

As I wrote yesterday,

it is clear both that the initial downturn was much more protracted than mainstream economists (including central bankers, like Ben Bernanke) had the courage to admit and that the persistent negative effects of that crisis continue to depress actual rates of growth below the earlier trend.


We already knew that the number of Americans who are on disability has skyrocketed over the past three decades. But the usual response has been that they’re gaming the system, claiming disabilities that “lend themselves to subjective manipulation” and being encouraged to do so by overly generous government payouts. Therefore, the conclusion is, “taxpayers are paying able-bodied Americans to drop out of the work force, increasing the burden on those who are still working.”

That was the existing common sense—the widely shared view that society had the responsibility (in the name of all “those who are still working”) to identify the truly disabled, weed out the others who are falsely claiming disability, and force them to get back to work.

Now we know, thanks to a recently published study by Anne Case and Angus Deaton, that something else has been going on: American workers are suffering from an “epidemic of pain, suicide, and drug overdoses.”

Specifically, Case and Deaton show that, after 1998, there was a marked increase in the morbidity and mortality of middle-aged white non-Hispanic men and women in the United States, especially for workers with less education.

The changes are dramatic. As we can see in the chart at the top of this post, even while mortality rates in other rich countries were declining (as were the rates for Hispanic and black Americans), U.S. white non-Hispanic mortality rose by half a percent per year. As they observed, “No other rich country saw a similar turnaround.” That turnaround in mortality was driven primarily by increasing death rates for those with a high-school degree or less. And, while their focus is on middle-age, they also make clear that all 5-year groups between 30 and 64 have also suffered increases in mortality.

mortality-causes fig4

According to Case and Deaton, the three causes of death that account for the mortality reversal among white non-Hispanics are not lung cancer (which is declining) or diabetes (which has remained relatively constant), but drug and alcohol poisoning, suicide, and chronic liver diseases and cirrhosis. All three increased year-on-year after 1998.

And it’s not just that white Americans are being killed by this epidemic; they’re also increasingly victims of poor health, both physical and mental, as well as of pain and alcohol consumption. What we’re talking about here is a dramatic increase in the walking wounded (who often find it difficult to even walk).

The question is, why? Why have the rates of mortality and morbidity for white non-Hispanic Americans risen so dramatically in the past 15 years?

Case and Deaton suggest the epidemic may have been caused by the increased availability of opioid prescriptions for pain (although it’s not at clear if the increase in opioid use or the increase in pain came first) as well as growing economic insecurity (which started even before the crash of 2007-08), which may in fact continue into the future, given the shift away from defined-benefit to defined-contribution pension plans, if U.S. workers “perceive stock market risk harder to manage than earnings risk, or if they have contributed inadequately to defined-contribution plans.”

What they don’t mention is the role of jobs. The fact is, most Americans are forced to have the freedom to sell their ability to work to someone else—and they suffer both when they have a job and when they don’t. When they’re fortunate enough to have a job, they’re working in Walmart stores, Amazon warehouses, and fast-food restaurants and suffering the physical and mental pains and indignities imposed by their employers. And when they don’t have a job—when they’ve been discarded by their employers—they’re suffering from the jobs they once held and from the struggle to find another job. As a consequence of both having jobs and joblessness, an increasing number of middle-age Americans are dying, committing suicide, and are the victims of pain, poor health, and psychological distress. And, unless we do something about it, the middle-age Americans who do survive the current epidemic will carry their pain and ill health into old age.

And the corporate elite doesn’t want to take responsibility for having used up and pushed aside these Americans or, once they’re disabled, paying the taxes to support them. It has simply discarded them.

As for the political consequences, Paul Starr suggests we may be witnessing a “dire collapse of hope.”

The role of suicide, drugs, and alcohol in the white midlife mortality reversal is a signal of heightened desperation among a population in measurable decline. We are not talking merely about “status anxiety” due to rising immigrant populations and changing racial and gender relations. Nor are we talking only about stagnation in wages as if the problem were merely one of take-home pay. The phenomenon Case and Deaton have identified suggests a dire collapse of hope, and that same collapse may be propelling support for more radical political change. Much of that support is now going to Republican candidates, notably Donald Trump.

And, I would add, support to Kentucky’s new elected governor Matt Bevin and to Tea Party favorites in other states (such as Maine’s Paul LePage, Kansas’s Sam Brownback, and Wisconsin’s Scott Walker). They’ve all enacted—or promised to enact—a wide variety of radical measures, from Right to Work laws to restrictions on welfare and federally funded healthcare programs.

We now live in a society in which, on one hand, those at the top have simply disabled the white non-Hispanic working-class and left it to suffer “an epidemic of pain, suicide, and drug overdoses.” And, on the other hand, many of those same workers have responded, out of fear and hopelessness, by electing public officials who are making their plight even worse.

Chester Conklin and Charles Chaplin in a scene from MODERN TIMES, 1936.

While we’re referring to the thinking of eminent scientists on capitalism and socialism, consider Stephen Hawking’s answer to a question about automation and “the possibility of technological unemployment”:

I’m rather late to the question-asking party, but I’ll ask anyway and hope. Have you thought about the possibility of technological unemployment, where we develop automated processes that ultimately cause large unemployment by performing jobs faster and/or cheaper than people can perform them? Some compare this thought to the thoughts of the Luddites, whose revolt was caused in part by perceived technological unemployment over 100 years ago. In particular, do you foresee a world where people work less because so much work is automated? Do you think people will always either find work or manufacture more work to be done? Thank you for your time and your contributions. I’ve found research to be a largely social endeavor, and you’ve been an inspiration to so many.


If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality.

In other words, the problem is not with machinery per se—which has the potential to create a “life of luxurious leisure”—but the capitalist use of machinery—which means “most people can end up miserably poor.”

The second option is more likely, according to Hawking, “if the machine-owners successfully lobby against wealth redistribution”—and, I would add, only if the rest of us are convinced by that lobbying.


According to the new report of the Solutions for Youth Employment Coalition (pdf), prepared by the World Bank, the International Labor Organization, and other groups, what we see today is a “generation in economic crisis.”

That’s because youth make up nearly a quarter of the world’s population, and nearly 85 percent live in lower-income countries and fragile states, but young people account for roughly 40 percent of the world’s unemployed and are at least twice as likely—and up to four times more likely—to be unemployed than adults. As a result, in 2014, about 500 million youth were unemployed, inactive, underemployed, or working in insecure jobs.

And, over the next decade, a billion more young people will enter the job market but only 40 percent are expected to be able to enter jobs that currently exist. Therefore, the global economy will need to create 600 million jobs over the next ten years: that’s 5 million jobs each month simply to keep employment rates constant!

And if we don’t? Then, according to the authors of the report,

governments forgo tax revenue and incur the cost of social safety nets, unemployment benefits and insurances, and lost productivity. Businesses risk losing a generation of consumers. Social costs are ever mounting as well. The Arab Spring and subsequent youth-led uprisings in many countries, along with the rise of economic insurgency and youth extremism, demand that we explore the links between economic participation, inequality, and community security, crime, and national fragility through a lens focused on youth.

In other words, an entire generation will be lost.


Special mention

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Special mention