
Low pay and the rise of the machines - luu
http://timharford.com/2013/09/low-pay-and-the-rise-of-the-machines/
======
mberning
It is distressing that so many have become 'useless' in this modern economy. I
think we are all very aware of the problem as well as the fact that it is
likely to get worse.

What can be done? I have seen very little on this subject. Guaranteed basic
income is probably a step in the right direction. At least such a system
offers a real opportunity to drop what you are doing currently and sincerely
try for a new career.

~~~
ahoy
I like the universal basic income idea too, but haven't we gone through a
similar crisis during the industrial revolution? How did we pull out of that?

This is a genuine question, I'm a poor student of history.

~~~
rayiner
It's not clear that we ever did pull out of it. A certain small class of
people who couldn't move away from agriculture, say Native Americans who
wanted to maintain their traditional lifestyles, suffered tremendously as the
country industrialized and the valuable land was taken over for industrial
agriculture. They have never recovered, and are the poorest people in the U.S.
to this day.

What this means is that people need to move to whatever is next, and those who
don't, or more importantly can't, will be left behind. But what's next? During
the industrial revolution, people moved to cities to go work in factories. But
what's the way forward today? Arguably the key difference between today and
back then is that the industrial revolution caused a change in where labor was
demanded, while the automation revolution reduces the need for labor across
almost all sectors of the economy. Yes, some people need to program the
machines, but not that many. After all, during the industrial revolution it
wasn't mechanical engineering that offered job opportunities for the masses.

To me, the obvious "what's next" is this: those whose jobs are obsoleted by
automation personally service those whose jobs aren't. It's possible that the
future of America is 2/3 of the population acting as nannies, personal
assistants, etc, to the 1/3 whose jobs haven't been automated. I bet there are
a ton of people even now who would cook/clean/etc for $5/hour + board. You'd
already see this in the U.S. if it wasn't for the minimum wage/welfare. What
happens when automation drives the price of unskilled labor down to $2-3/hour?
The U.S. becomes Bangladesh is what happens. I think it's a social disaster in
the making, but I struggle to think of alternatives.

~~~
twoodfin
Being a cook isn't (necessarily) unskilled labor. Neither is being a
hairdresser, a personal shopper, a sommelier, or a yoga instructor.

You can make a very respectable income today in the U.S. at any of those jobs
if you're sufficiently skilled. Certainly there are many more people doing
those jobs today than there were a hundred years ago. And frankly, many of
them would probably much rather be doing such a "personal service" job over
their career options of decades ago.

And that's not counting plumbers, electricians, carpenters... Many of whom
find it much easier to develop recurring revenue streams than your typical YC
startup!

Automation is great. It _helps_ most of those people. Just think about how
much your local yoga studio or coffee shop relies on modern PoS systems for
payment processing and customer tracking, the web and social media for
marketing, Amazon-class logistics for supplies...

I just don't see things in such negative terms. I also don't think that
today's rates of unemployment were somehow inevitable. We automated like mad
in the '90's too (arguably even more dramatically than we are doing so today),
and yet unemployment dropped, incomes rose and labor markets were tight from
top to bottom. What's different today?

~~~
varjag
> We automated like mad in the '90's too (arguably even more dramatically than
> we are doing so today), and yet unemployment dropped, incomes rose and labor
> markets were tight from top to bottom. What's different today?

There are no vast failed commie economies left to piggyback on their recovery
and imminent growth. Right before the Warsaw Pact collapse and China's
conversion to capitalism, America and its allies were not doing particularly
well, in economic terms.

------
drcode
It's really distresses me whenever I read economic discussions on HN because
basic economics is relatively simple and objective and because most folks on
HN have the chops to understand this stuff, but it seems like many don't. In
particular, one big facet of economics is equilibrium as it pertains to
markets and most discussions here completely gloss over this (even though
everyone here is completely comfortable with the concept of equilibria in
other domains.)

I think a lot still needs to be done, and can be done, to educate the public
about basic economic principles. I hope to do my part to help by creating
quality online resources for this in the near future.

To give a more concrete example of what worries me: It should be _obvious_ to
everyone here that an idea like "minimum guaranteed income" is a very
dangerous idea. Yes, there are credible economists that believe these things
are a good idea (and it might even be a correct idea) but they believe this
for very different, and much better informed reasons than the arguments being
bandied about in this forum. Many of the arguments made here in favor of
"minimum guaranteed income" are wrong _and even the Economists who support
these things would agree that your arguments are wrong_.

Anyway, as I said, I hope to create some online resources soon that will show
more clearly what the difficulty is with these types of ideas.

EDIT: For those asking me what the precise problem is with "minimum guaranteed
income", I can't give you a satisfying answer, because I can only make an
obvious qualitative argument right now (i.e. people will stop taking minimum
wage jobs if they can get the same income without working, or by working in
some less efficient fashion prescribed by a "guaranteed minimum income"
scheme.) What needs to be done is to bring this discussion into the realm of
mathematical "economic models" so we can quantify these things and ask
questions like " _How much_ will a guaranteed income help people?" and " _How
much_ will poor people be hurt indirectly by putting such a scheme in place?"
(and of course ask additional meta questions such as "Is this model
appropriate?") But these types of questions can't be addressed in an HN thread
and require a more in depth treatment.

~~~
johnchristopher
Frankly, I am still waiting for a good introduction to general economic
principles. I literally feel like an idiot when following economic
discussions: it seems to me like it's all a long infinite chain of valid
arguments and counter-arguments that are perfectly valid, true and completely
opposite.

Hope you get something online soon.

~~~
jwallaceparker
"Economics in One Lesson" by Henry Hazlitt
[http://mises.org/books/economics_in_one_lesson_hazlitt.pdf](http://mises.org/books/economics_in_one_lesson_hazlitt.pdf)

This book is an outstanding place to start. It addresses a myriad of economic
concepts in simple language. It's available for free through the Mises
Institute.

"How an Economy Grows and Why It Crashes" by Peter Schiff
[http://www.amazon.com/How-Economy-Grows-Why-
Crashes/dp/04705...](http://www.amazon.com/How-Economy-Grows-Why-
Crashes/dp/047052670X)

This book gives a simple overview of macro issues and is an interesting and
well-presented tale about how economies grow from the basic "man on an island"
scenario to a complex market. It also covers Austrian business cycle theory
which explains the boom-bust cycle in economies.

Both of these books are from the "Austrian School" of economics, which is
named for its Austrian founder, Carl Menger. I find these arguments compelling
as they are firmly grounded in logic and are based on the principle that the
human individual and her actions form the basis of all economic activity.

The giants of the Austrian school are Ludwig von Mises and Murray Rothbard
(highly readable) if you want to seek out more advanced theory.

~~~
Locke1689
Do not do this. The Austrian school of economics is neither scientific nor
respected in the wider economic sphere.

If you want a good introduction to economics that is 1) amenable to the
perspective of an engineer (i.e., mathematical theory and significant amounts
of modeling and game theory) and 2) close to how actual professional
economists approach economic problems, the best free textbook is one
originally authored by an economist at CalTech who is also Yahooo!'s head of
an economic research team.

[http://www.mcafee.cc/Introecon/IEA.pdf](http://www.mcafee.cc/Introecon/IEA.pdf)

~~~
jwallaceparker
> The Austrian school of economics is neither scientific

This is a somewhat vague statement but I'm assuming you're referring to the
Austrians' "a priori" approach to economics.

> nor respected in the wider economic sphere.

Given the adversarial stance that the Austrians take toward government
intervention in the economy it is no surprise that their ideas are not
endorsed by academics.

Individuals should make their own judgement about the persuasiveness of the
Austrian arguments and not dismiss them because they are unpopular.

If you have the time, I'd welcome a critique of any argument contained in that
Hazlitt book quoted above.

~~~
wutbrodo
I assume that the complaint was not "no one should ever read the Austrians"
but rather that it's not appropriate introduction to economics.

One may think that string theory is sound, but still think it unwise to
introduce someone to physics starting with string theory.

"Individuals should make their own judgment about the persuasiveness of
Austrian arguments"

I agree with this, but it seems wiser to do so once you have some basic
knowledge of more mainstream economics so that you can critically compare the
two schools of thought.

~~~
jwallaceparker
But that's a gross mischaracterization of Austrian economics. It's nothing
like the 'string theory' of economics and is indeed rather simple.

All the seminal works (especially "Economics in One Lesson") are very
elementary. You need no prior exposure to economics.

They say you can identify an Austrian work by flipping through it, as it will
undoubtedly contain no graphs or formulas.

~~~
wutbrodo
The only goal of the comparison to string theory was that it's an alternative
theory that an educated observer should judge on its own merits. I'm saying
that the background of one's introduction to economics should be based in the
mainstream, just as one's intro to physics should not be based in mainstream
physics vs string theory (saying nothing of how advanced the intro curriculum
need be).

My fundamental point is that alternative theories are invaluable and
essential, but being conservative and sticking with the mainstream is
generally well-advised for beginners. Once you're confident in your grounding
in the mainstream, you can approach alternatives with a critical, well-
informed eye.

------
kingmanaz
The pool of idle and unwanted labor will likely increase until the assumptions
underlying the industrial revolution are questioned. Great public works of art
and architecture are scarcely being erected today as their mere existence is
seen to be "inefficient". Efficiency is a means rather than an end.

From Tawney's "Acquisitive Society":

"Such societies may be called Acquisitive Societies, because their whole
tendency and interest and preoccupation is to promote the acquisition of
wealth. The {30} appeal of this conception must be powerful, for it has laid
the whole modern world under its spell. Since England first revealed the
possibilities of industrialism, it has gone from strength to strength, and as
industrial civilization invades countries hitherto remote from it, as Russia
and Japan and India and China are drawn into its orbit, each decade sees a
fresh extension of its influence. The secret of its triumph is obvious. It is
an invitation to men to use the powers with which they have been endowed by
nature or society, by skill or energy or relentless egotism or mere good
fortune, without inquiring whether there is any principle by which their
exercise should be limited. It assumes the social organization which
determines the opportunities which different classes shall in fact possess,
and concentrates attention upon the right of those who possess or can acquire
power to make the fullest use of it for their own self-advancement. By fixing
men's minds, not upon the discharge of social obligations, which restricts
their energy, because it defines the goal to which it should be directed, but
upon the exercise of the right to pursue their own self-interest, it offers
unlimited scope for the acquisition of riches, and therefore gives free play
to one of the most powerful of human instincts. To the strong it promises
unfettered freedom for the exercise of their strength; to the weak the hope
that they too one day may be strong. Before the eyes of both it suspends a
golden prize, which not all can attain, but for which each may strive, the
enchanting vision of infinite expansion. It assures men that there are no ends
other {31} than their ends, no law other than their desires, no limit other
than that which they think advisable. Thus it makes the individual the center
of his own universe, and dissolves moral principles into a choice of
expediences. And it immensely simplifies the problems of social life in
complex communities. For it relieves them of the necessity of discriminating
between different types of economic activity and different sources of wealth,
between enterprise and avarice, energy and unscrupulous greed, property which
is legitimate and property which is theft, the just enjoyment of the fruits of
labor and the idle parasitism of birth or fortune, because it treats all
economic activities as standing upon the same level, and suggests that excess
or defect, waste or superfluity, require no conscious effort of the social
will to avert them, but are corrected almost automatically by the mechanical
play of economic forces.

"Under the impulse of such ideas men do not become religious or wise or
artistic; for religion and wisdom and art imply the acceptance of limitations.
But they become powerful and rich. They inherit the earth and change the face
of nature, if they do not possess their own souls; and they have that
appearance of freedom which consists in the absence of obstacles between
opportunities for self-advancement and those whom birth or wealth or talent or
good fortune has placed in a position to seize them. It is not difficult
either for individuals or for societies to achieve their object, if that
object be sufficiently limited and immediate, and if they are not distracted
from its pursuit by other considerations. The temper which dedicates itself to
the cultivation of opportunities, and leaves obligations to take care of
themselves, is set upon an object which is at once simple and practicable. The
eighteenth century defined it. The twentieth century has very largely attained
it. Or, if it has not attained it, it has at least grasped the possibilities
of its attainment."

~~~
drcode
What evidence do you have for saying the unemployment rate will continue to go
up? It's gone up many times in the past and has always gone back to a
baseline:
[http://en.wikipedia.org/wiki/File:US_Unemployment_1890-2009....](http://en.wikipedia.org/wiki/File:US_Unemployment_1890-2009.gif)

~~~
kingmanaz
What evidence do you have that automation is not automating?

~~~
drcode
I don't know why I'm responding to such a poorly phrased question, but
interpreting it in the most charitable light: The unemployment graph I linked
to is clear evidence that previous automation has not "automated away humans".

~~~
kingmanaz
Talk to your neighbors. The economy is not as rosy as government portrays it.

~~~
drcode
Talk to your mom/dad what it was like in the 50s/60s/70s/80s: They'll probably
tell you people are, on the whole, better off now than they were then.

~~~
kingmanaz
I have and found that one man could comfortably support a family of five on a
40-hour-a-week factory worker salary. Such niceties began to fade in the 70s
and 80s, though, as the world _progressed_.

Now, do your part and honestly evaluate the world around you. Keep in mind
that the appeal to progress is just as much of a fallacy as the appeal to
tradition. Tomorrow is not inevitably better than yesterday.

~~~
drcode
That's news to me: So when the man's wife needed an MRI, his salary could
cover this back in the 70s? He was able to buy a car with airbags using his
salary? He was able to give his wife a cell phone in the 70s that she could
use in an emergency? He was able to buy himself a carbon monoxide detector for
his house? If he got testicular cancer, he would live more than a year with
his salary? etc. etc.

~~~
kingmanaz
Once open spaces are now subdivided, health care motivated by usury, and wages
lie stagnant since the seventies. Water crises, hemispheric pollution, and
thermonuclear warheads, all are modern _innovations_ which the prewar
generations would be thankful to escape.

The present isn't inevitably better than the past. The future will not
necessarily be rosier.

------
netcan
People get very attached to their theory of how economies and civilizations
work.

On one side we have "Luddites" who think that machines are taking over. We
have no use for most people's labour and we need to start dealing with that by
having a guaranteed basic income or somesuch. Seems like common sense. What
use are all the people that were working in factories or data entry or whatnot
in the robot age!

On the other side we have Misans? Ludwigians? (I dunno, I need a name for
Ludwig von Mises people). They point out that this current crop of Luddites
are just following in the footsteps of historical Luddites that think everyone
will be unemployed because of tractors or looms. The sky never fell. Economies
sort themselves out.

Realistically, we don't know. Technology has been moving very fast for a long
time and its accelerating. We don't know what this does to economic paradigms.
How can anyone be as confident as so many people seem to be about this stuff.

~~~
wutbrodo
Actually, the Luddites in the current conversation are the ones decrying
technological advancement itself. On the policy side, they tend to favor
propping up old, inefficient industries (essentially subsidizing them at the
expense of the rest of the population).

A basic income has been considered common sense in economic theory for a long,
long time (as in, it's been discussed by economists for at least a century).
It has less to do with the obsolescence of human labor than it does to the
fact that it's simply grossly inefficient to tie "the ability to take
entrepreneurial risk" to "I was born middle-class or higher".

~~~
lifeisstillgood
And thank you for crystallising that thought in my head - we are seeing a boom
in entrepreneurship because the cost and risk of being one is dropping.

And drop it further still will see an increase also - put your faith in
human's need to do creative productive work. No matter what.

------
kaa2102
Economic models would show that low wage jobs are such due to lack of
specialization and supply/demand for that job. Nonetheless, articles like this
make "the Economy" sound more and more like the Matrix. Do humans exist merely
to serve the Economy?

~~~
beyondarmonia
No they exist to serve the other humans who, in turn, serve them. What happens
when other humans don't need their service? Who will serve them then?

~~~
chamblin
I am not a slave, and I won't have any.

------
ChuckMcM
For an interesting counterpoint :
[http://www.technologyreview.com/view/519016/stop-saying-
robo...](http://www.technologyreview.com/view/519016/stop-saying-robots-are-
destroying-jobs-they-arent/)

------
kingmanaz
It's interesting that this article has garnered so much interest on hacker
news. Automation, streamlining, and outsourcing appears to have worked its way
"up" to the STEM fields. The technical minded may soon received a taste of
what the factory labor received in the eighties.

[http://www.vdare.com/print/17686](http://www.vdare.com/print/17686)

Perhaps in another decade lawyers will face the chopping block, and thereafter
the politicians who outsourced their nation.

------
kaonashi
>It means fixing inequality without the need to resort to redistributive
taxation.

National taxation in Britain doesn't redistribute, it regulates demand. The
British government does not need to tax a pound to spend a pound. The limits
on spending are inflation and real resources.

------
programminggeek
What exactly is the difference between a guaranteed minimum income and
welfare? Are people talking about you get paid X regardless of what you do,
because if you want to see what that kind of thing looks like, look at life on
an indian reservation. In many cases, that doesn't really solve the problems
of poverty, alcoholism, etc. even if there is humungous opportunity to work,
get a free education, etc.

Some people don't want to do what society asks of them. How do you solve that?

~~~
rayiner
My wife worked on an Indian reservation. There is no "humungous opportunity to
work, get a free education, etc." It's subsistence.

