Labor Day 2012: The Future of Work (September 3, 2012)
Technology and the Web are destroying far more jobs than they create. We will need to develop a "Third Way" based on community rather than the Market or the State to adapt to this reality.
What better day to ponder the future of work than Labor Day? Long-time correspondent Robert Z. recently shared an essay on just this topic entitled Understanding the 'New' Economy.
The underlying political and financial assumption of the Status Quo is that technology will ultimately create more jobs than it destroys. Bob's insightful essay disputes that assumption:
Over the past 15 years, the global economy has experienced structural changes to a degree not seen in nearly 150 years. Put simply, the Industrial Revolution of the 1800s has given way to a post-industrial economy. In this post-industrial economy, technology has now evolved to the point where it destroys more jobs than it creates.
Thank you, Bob, for your forthright appraisal of technology and jobs. The decline in labor's share of the GDP (gross domestic product) is sobering:
Here are some other points to consider:
1. The build-out of a new technology creates a large but temporary number of jobs. This has been the case for some time: the construction of the railroads created a jobs boom that soon disappeared in a financial bust as rail was over-built and profits were non-existent for many of the extraneous or duplicate lines.
Telephony and telecom followed similar arcs, and did the build-out of the Internet infrastructure.
2. Technology maturation leads to diminishing return on labor as incremental advances in productivity are capital-intensive. Semiconductor manufacturing is a good example; fabrication facilities (fabs) cost upwards of $2 billion each even as the number of workers need to operate the fab declines. Profit margins on many high-technology products are razor-thin, flat-screen displays being a prime example, and diminishing margins further pressure labor costs.
3. Software is leading the next-generation industrial revolution, automating many tasks that were considered "safe" from automation. As Bob pointed out, this includes securities trading and accounting. (I would add tax preparation for the majority of tax situations.) Can the law, academia and government remain immune? Unlikely.
4. Although few dare contemplate this, the low-hanging fruit of technology may have already been plucked. Take healthcare as an example: antibiotics and vaccines virtually eliminated many diseases at a very low cost per dose (though some diseases are coming back due to unvaccinated host populations and bacterial adaptation).
Antibiotics are "one size fits all" technologies: they act basically the same on every target bacteria and in every host. Compare that universality to the spectrum of individual responses to cancer treatments and other medications: one size does not fit all, and many of the most profitable drugs of the past few decades treated symptoms, not the underlying illness.
It is increasingly clear that there is no "magic pill" that kills all cancers, or even specific cancers in all patients. Lifestyle diseases such as diabetes appear impervious to "magic bullet" cures, as the causal factors of the disease are complex. The same can be said of diseases of aging and environmental factors.
In other words, the notion that tens of billions of dollars in high-tech research will yield "one size fits all" low-cost treatments of complex diseases has been shown to be problematic, and very possibly a fantasy.
5. The Internet is destroying vast income streams that once supported tens of thousands of jobs in industries from finance to music. Craigslist has gutted the once-immense income stream from newspapers, and web-based marketing has shredded print-media advert page counts. Global competition and pressure to maintain profits and margins relentlessly drive enterprises to slash payrolls.
6. As I have discussed here many times over the years, the rising costs of taxes, benefits and regulations have squeezed small businesses. In response, many small companies rely on automation and software to perform tasks that until recently required a human worker.
Those small businesses that cannot prosper via technology are going under, and the risks posed by ever-higher costs have raised entry barriers to starting a small business. These trends are visible in this chart:
The array of web-based tools available to entrepreneurs now is astonishing. Why take on the risks of hiring people when you can do the work yourself with low-cost web tools and software? For many small enterprises, that is the only way to survive.
Advanced societies face a dilemma that cannot be solved by more debt or more technology: how to distribute not just the output of the economy, but the work and responsibility so that everyone has an opportunity to contribute and earn their keep.
Those who have plowed through my books know that I see community as the only viable
way forward. Many aspects of human life cannot be turned into a "market opportunity," nor
can they be taken over by the insolvent central-planning Central State. Paying people to
stay home and rot is not a solution, but neither is paying people more than they produce
in competitive markets. There is a "Third Way," but we've lost the skills and infrastructure
required. Of the three elements of civil society, the Market and the State have crowded out
Community. We either re-discover the labor-value of community or we devolve further
into a potentially "death spiral" social and financial instability.
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