Posts Tagged ‘unemployment’

A new report from the UCLA Labor Center [ht: ja], “I am a #YOUNGWORKER,” challenges the prevailing cliché of “young people as self-indulgent millennials who live with their parents, idly wait for the perfect job, and collect paychecks mostly for shopping and weekend leisure.”

In reality, many employers rely on youth to supply “cheap, surplus, temporary and easy-to-discipline labor” that can be recruited or disposed of according to the whims of the business cycle. Adults often portray these early jobs as brief interludes or rites of passage to justify the precarious conditions of “youth” forms of work.

The study focuses on workers between the ages of 18 and 29 in retail and food service, the two largest employers of young people in Los Angeles. Together, they employ a quarter-million young workers—almost half (42.6%) their workforce.

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The authors of the report discovered that young workers are often employed in part-time jobs, they play an integral role in supporting their families, and one in ten live below the poverty line.

In addition, young workers struggle to balance work and school (“They need to work in order to afford school, and they need to attend school so they can get ahead at work”) and owe increasing amounts of educational debt (more than $19 thousand on average).

On the job, most (90 percent) do not have a set schedule, since they are forced to “depend on schedule assignments that are staggered weekly and build an intricate web of overlapping shifts that ensure that workers are constantly present on the store floor or stockrooms.” They are also vulnerable to various forms of wage threat (not getting paid for overtime or working off the clock), are often harassed by both bosses and customers, and do not receive the benefits (such as sick days, vacation, and health insurance) other workers have managed to secure.

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As if that were not bad enough, the youth unemployment rate (11.2 percent) is more than twice the official rate (5 percent).

In other words, young workers today are often living on a “dead end street.”

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As everyone knows, robots and artificial intelligence are coming. The question is, what effects will they have on us? In particular, will they replace workers and lead to massive unemployment? And what about the other workers, the ones who manage to keep their jobs?

According to Moshe Vardi [ht: ja], in a speech to the American Association for the Advancement of Science, “AI could drive global unemployment to 50%, wiping out middle-class jobs and exacerbating inequality.”

Unlike the industrial revolution, Vardi said, “the AI revolution” will not be a matter of physically powerful machines that outperform human laborers, but rather a contest between human wit and mechanical intelligence and strength. In China the question has already affected thousands of jobs, as electronics manufacturers, Foxconn and Samsung among them, develop precision robots to replace human workers.

Martin Ford, author of Rise Of The Robots: Technology and The Threat Of A Jobless Future, also foresees dire consequences for workers. Here are some excerpts of an interview with him by National Geographic:

An Oxford University survey suggested that 47 per cent of the world’s jobs will be taken by robots in the coming decades. What’s involved and which jobs are most at risk?
This is a big issue that is not science fiction and is happening already. It involves what we call narrow artificial intelligence, which can do relatively routine, predictable things. By predictable, I mean you can predict what a person doing a job is going to be doing based on that they’ve done in the past.

Like flipping burgers?
It could be flipping burgers or a lot of factory and warehouse jobs like stocking shelves. One of the most dramatic impacts isn’t going to involve actual robots. It’s going to involve software. Some of the people most threatened are what we might call office drones: people who sit in front of computers doing relatively routine, formulaic things. If your job is to produce the same kinds of reports again and again, software is getting smarter and better at doing that. We already have lots of examples, even in journalism. There’s smart software that is able to write basic news stories. Lots of white-collar jobs held by college graduates are going to be threatened.

What will the effect on the world economy be?
In the long run, it could have a dramatic impact and I think we are already beginning to see that. As you eliminate workers and people become unemployed or their wages fall, consumers will have less purchasing power to buy the products and services produced by the economy. As a result, there will be less and less demand. Economists all over the world are talking about this issue. In Europe, for example, there are concerns about inflation because there is not enough demand for products and services. If you project this forward, there are going to be a lot of people who are either unemployed, underemployed, or struggling financially, who simply won’t have discretionary income to spend.

Massive unemployment is one problem associated with the increased use of robots and artificial intelligence. The other concerns workers who, for whatever reason, are able to keep their jobs.

Think about the current situation at AT&T, which is seeking to retrain its workers and, at the same time, threatening to layoff up to one third of its workforce.

Eboni Bell, 24, a product manager for smartphone software in AT&T’s Atlanta office, sees the Vision 2020 retraining as the chance of a lifetime. The company provided tuition assistance for much of her two-year Udacity/Georgia Tech master’s degree in computer science, which it says cost $6,600. Single and childless, she doesn’t mind the hours it takes.

“I leave the office at 7 p.m., work at home until midnight, and Saturdays and Sundays are committed to school,” she said.

What we have, then, is a situation in which, as a consequence of robots and artificial intelligence, its’s quite possible that many workers will be made redundant, while workers who retain their jobs are going to face lower wages, increased work loads, and longer hours.

There’s nothing inevitable about these effects. It’s not robots and artificial intelligence per se that are going to negatively affect workers. What matters is how the robots and new kinds of software are created and utilized within the current set of economic institutions—as a way of increasing profits and exacerbating inequality.

We can, of course, imagine an entirely different set of effects—ways that robots and artificial intelligence might serve to eliminate onerous tasks and lessen the amount of work we all have to do.

But that’s going to require fundamentally changing the existing set of economic institutions. That, and not robots and artificial intelligence, is the real challenge facing us.

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William D. Cohan’s broadside [ht: ja] against Bernie Sanders hinges on a simple, but fundamentally wrong, argument: we all benefit from the risks taken by Wall Street.

Simply put, Wall Street’s purpose is to re-allocate capital from people who have it (savers) to those who want it (borrowers) and then use it to grow businesses that employ billions of people around the globe and help give them a modicum of wealth that they did not have before. One man’s speculation, in other words, is another man’s risk-taking. Without people willing to take those risks, and having the chance to reap their reward, there wouldn’t be an Apple, a Google, a Facebook, or countless other large corporations. The billions of people around the world who are employed by thriving companies would lose their jobs.

Clearly, Cohan doesn’t understand Wall Street (or, for that matter, the rest of the financial sector). It doesn’t collect capital from one group of savers and allocate it to another group of borrowers, which then creates jobs. Rather, it recycles the surplus created by people who work in order to allow those who appropriate the surplus to collect even more. In other words, Wall Street manages the surplus on behalf of a small group of wealthy individuals and large corporations. And it grows its own profits not as a reward for taking risks but by taking a cut of each and every financial transaction.

As we know, Wall Street does in fact take risks, as it did in the lead-up to the crash of 2007-08. But the risks were borne not by Wall Street, but by the rest of us—in the form of massive layoffs and foreclosures.

What about the other part of the argument, that Wall Street helps businesses grow?

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As it turns out, Matthew C. Klein addressed this issue just about a year ago. His argument, in short, is that productivity growth in rich countries started slowing down around the same time that the financial sector’s share of economic activity started rising rapidly.

First, the high salaries commanded in the financial sector — much of which can be attributed to too-big-to-fail subsidies and other forms of rent extraction — make it harder for genuinely innovative firms to hire researchers and invest in new technologies.

Second, the growth of the financial sector has been concentrated in mortgage lending, which means that more lending usually just leads to more building. That’s a problem for aggregate productivity, since the construction industry is one of the few that has consistently gotten less productive over time.

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In other words, as illustrated in the chart above, the growth rate in productivity was systematically faster when the finance sector was relatively smaller (from 1948 to 1975), and then when the finance sector got bigger, productivity growth got smaller (from 1976 to 2014).

The ultimate irony is that Cohan actually makes Sanders’s case for breaking up Too Big to Fail banks and reigning in Wall Street:

Sanders is right that Wall Street still needs reform. The Dodd-Frank regulations fail to measure up; Wall Street lobbyists and $1000-an-hour attorneys work away each day to gut the meager reforms signed into law by President Barack Obama in July 2010. It is also unconscionable that Wall Street’s compensation system continues to reward bankers, traders, and executives to take big risks with other people’s money in hopes of getting big year-end bonuses. Thanks to this system, which has been prevalent since the 1970s, when Wall Street transformed itself from a bunch of undercapitalized private partnerships (where those partners had serious capital at risk every day) to a group of behemoth public companies (where the risk is borne by creditors and shareholders while the rewards go to the employees), Wall Street has become ground zero for one financial crisis after another.

Neither Sanders nor I could have said it better.

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Once again, Martin Luther King, Jr. is being justly recognized as one of the most important civil rights leaders this country has known—but his legacy of demanding economic justice for everyone is too often forgotten.

We need to remember that, in February 1968, members of King’s premier civil rights group, the Southern Christian Leadership Council, drafted a letter demanding “an economic and social Bill of Rights” that would promise all citizens the right to a job, the right to a minimum income, and the right to decent housing, among others. And on 10 March 1968, just weeks before his death, he spoke to a union group in New York about what he called “the other America.” He was preparing to launch a Poor People’s Campaign whose premise was that issues of jobs and of justice for all Americans, black and white, were inextricably intertwined.

So, while King would have pleased that death rates for black and Hispanic adults have fallen since 1999, he would have been horrified that death rates for whites, particularly women and young adults, have risen—mostly as a consequence of drug overdoses.

Researchers are struggling to come up with an answer to the question of why whites in particular are doing so poorly. No one has a clear answer, but researchers repeatedly speculate that the nation is seeing a cohort of whites who are isolated and left out of the economy and society and who have gotten ready access to cheap heroin and to prescription narcotic drugs.

“There are large numbers of people who never get established in the economy, who live outside family relationships and are on the edge of poverty,” Dr. Hayward said. Many end up taking prescription narcotics, he added.

“Poverty and stress, for example, are risk factors for misuse of prescription narcotics,” Dr. Hayward said.

Eileen Crimmins, a professor of gerontology at the University of Southern California, said the causes of death in these younger people were largely social — “violence and drinking and taking drugs.” Her research shows that social problems are concentrated in the lower education group.

“For too many, and especially for too many women,” she said, “they are not in stable relationships, they don’t have jobs, they have children they can’t feed and clothe, and they have no support network.”

“It’s not medical care, it’s life,” she said. “There are people whose lives are so hard they break.”

That’s why today, as much as in King’s time, we need an economic and social Bill of Rights for all Americans.

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In Iceland [ht: ra], by the end of 2015, 26 high-level bankers had been sentenced to a total of 74 years in prison.

It’s a move that “would make many capitalists’ head explode if it ever happened here.”

In the United States, all the major Wall Street financial firms nicknamed Too Big To Fail banks—Bank of America, JPMorganChase, Citigroup, Wells Fargo, and Goldman Sachs—have paid out settlements for illegal conduct in the mortgage-security markets that caused the 2007-08 crash. However, no individual executives have gone to jail or even faced prosecution for that conduct.

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In fact, according to report from researchers at Syracuse University, during 2015, federal prosecution for white-collar crime fell to a 20-year low.

The available records show an overall decline that began during the Clinton Administration, with a steady downward trend — except for a three-year jump early in the Obama years — continuing into the current fiscal year.

During the first nine months of FY 2015, the government brought 5,173 white collar crime prosecutions. If the monthly number of these kinds of cases continues at the same pace until the end of the current fiscal year on September 30, the total will be only 6,897 such matters — down by more than one third (36.8%) from levels seen two decades ago — despite the rise in population and economic activity in the nation during this period.

The projected FY 2015 total is 12.3 percent less than the previous year, and 29.1 percent down from five years ago.

Addendum

The argument in the United States has been that prosecuting and jailing banking executives would have disrupted the financial sector and the economy as a whole.

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While the recovery in Iceland from the financial crash has been anything but smooth, it’s still the case that unemployment has fallen to 4 percent and wages have been rising at an annual rate of 6.2 percent.

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Special mention

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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.