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We’re not going to have a jobless recovery. We’re going to have a jobless future (buzzmachine.com)
275 points by yarapavan on Aug 5, 2011 | hide | past | favorite | 263 comments

"Our new economy is shrinking because technology leads to efficiency over growth."

Anyone who wants to make the claim that technology is net killing jobs has to be prepared to answer the question: why now? Technology has been killing (but not net killing) jobs for centuries. It's possible that technology could start to net kill jobs. But why now, when it hasn't in the past?

One possibility is that we have reached a point where the barriers to entry in what would be the job creating sectors are being held artificially high by a combination of regulatory capture and a global intellectual property regime that is tilted towards incumbent rights owners and against new entrants. Call it the Deadlock Hypothesis. You see it in medicine, where it's clear that there is a 30 year backlog of potential new technologies that cannot be brought to market because the process for clearing patent rights is too expensive for any organization small enough to be truly innovative (automated pathology labs to pick one example).You see it in the payment industry where it's effectively impossible for new entrants to innovate without the permission of the established players (cf. the story of Square). For all the rhetoric and ideology of free markets our regulatory infrastructure is geared towards incumbents in ways that make it insane to invest in industries that would be creating new jobs now and in the future.

PG, what probability would you assign to the propositions "This time things are different" (empirically: the jobs won't come back 5 years from now) vs. "This time things are not different" (empirically: the jobs will come back 5 years from now)? Warning, if your probabilities are extreme enough, someone might want to bet you on it.

Presuming things are different, I see five obvious answers to the original question (and "all of the above" is also an option).

1) The amount of regulation and regulatory burden has increased sufficiently between then and now, that new business relationships have a much harder time replacing old destroyed business relationships. I.e., it's now more expensive to hire a new employee.

2) It's a novel change in the financial side of the economy. Like, capital-holders now try to make killings by investing in the right HFT funds instead of trying to go out and invest in new businesses. Implausible? Maybe, but finance has changed a lot recently, so the difference, if there is one, might be there.

3) The amount of re-education required to get a new job has increased enough to be a killer barrier to re-employment, whether because of employers having imposed an arbitrary demand for bachelors' degrees or because the jobs are actually more complex.

4) Ricardo's Law does allow individual regions to lose as a result of tech improvements, because if someone else beats your comparative advantage, people will want to trade with them instead of you. There's nothing ahistorical about the Rust Belt having a persistent recession within the US. This is now happening to the whole US; people no longer want to trade with us, but China is growing plenty.

5) The Thiel hypothesis: Recent technological developments are intrinsically more boring than past technological developments; people are trying to build web apps that will sell to Google for $10 million instead of trying to invent the next "microchip" or "electricity". It's not that the 21st century poses a novel obstacle to forming new business relationships to replace old ones; rather, 21st-century technologies that obsolete jobs are missing a wow factor or wealth-generating factor that previously increased demand or increased total wealth at the same time as obsoleting jobs.

>5) The Thiel hypothesis: Recent technological developments are intrinsically more boring than past technological developments;

Shouldn't that be the Cuban hypothesis ?

Cuban in 2006 http://blogmaverick.com/2006/07/12/the-internet-is-old-news-...

Cuban in 2007 http://blogmaverick.com/2007/08/27/the-internet-is-still-dea...

Cuban in 2008 http://blogmaverick.com/2008/02/10/the-internet-is-officiall...

Thiel said it in 2011 ( or late 2010) if I'm not mistaken.

> Shouldn't that be the Cuban hypothesis ?

Stigler's law demands we call it the Thiel hypothesis.

(Stigler, of course, did not invent/discover it: https://secure.wikimedia.org/wikipedia/en/wiki/Stigler%27s_l... )

I, too, thought that the job losses were permanent. Until there was an article posted here the other week with quotes in news outlets from several different eras since the industrial revolution claiming the same thing. Plenty of reasonable sounding explanations are offered elsewhere in this thread for why this time is different, but then lots of reasonable sounding explanations were offered in the past.

I'd say it's 95% that job losses aren't permanent, although I'm not sure 5 years is enough time to settle it. I'm perfectly willing to believe we could be in a recession/depression for the next 10-20 years. That has precedent in our and other economies. However, I'm not prepared to believe that--simply because I can't imagine what people will do--people won't end up doing something. Everyone likes to be productive, and humanity has a really efficient means of organizing labor to trade around everyone's productivity.

I am all for 95% or 100% unemployment, though, if such a fantastical reality can come to pass!

>I, too, thought that the job losses were permanent. Until there was an article posted here the other week with quotes in news outlets from several different eras since the industrial revolution claiming the same thing.

// It's like peak oil isn't it. We keep getting "we're at [or passed] peak oil" but then a new oil field or new extraction method makes this seem less likely. Thing is that oil will run out.

To me technological changes haven't converted in to less jobs because we've exploited those changes to increase resource use, and hence production. As natural resources falter then we can no longer have the increased resource use and so the removal of jobs via technological improvements can't be mitigated by the addition of jobs in new areas.

There are various resource pressures and financial problems that suggest to me that we're at the turning point. It would be nice to be wrong about that in some ways.

Oil doesn't have to run out to drastically change the economy. The new methods of extraction are more expensive than the old, and the price of oil per barrel is a lot higher. One can easily imagine a system where the equilibrium unemployment with oil (ie: energy) at $X+10 per barrel is much higher than one with oil at $X per barrel.

Could you please share a link to the article ?

For an example of 100% unemployment watch Idiocracy.

> PG, what probability would you assign to the propositions "This time things are different" (empirically: the jobs won't come back 5 years from now) vs. "This time things are not different" (empirically: the jobs will come back 5 years from now)? Warning, if your probabilities are extreme enough, someone might want to bet you on it.

What odds would you bet on?

I'll lay you 10:1 that world GDP continues to trend up barring WWIII or other force majeure type event.

Some nations will net lose though. The American currency trades at roughly +25% worldwide due to stability/prestige, and the recent administrations are really doing all they can to undermine both of those. So, American could net lose jobs and net lose GDP (implausible, but possible). But worldwide? Massive increases.

So anyways, what odds on what proposition are you looking for, and what timeline? We're both semi-public figures, I reckon we'd both be good for the money :)

(Rest of the comment is insightful and huge fan of your work, rationality, HPMOR, etc, etc, etc. But I'll lay favorable odds on "this time is not different")

Edit: To clarify, I'm disputing this from the article as I think PG is: "Our new economy is shrinking because technology leads to efficiency over growth." I don't think it is. World GDP continues to massively increase. I also think if America would get out of making financial fuckery the top government and private priority and get back into the entrepreneurship/production/hardwork then the USA will continue to do quite well, too.

I'll take your bet, but you might want to look at this chart before you hand me your money.


And this one.


> I'll take your bet, but you might want to look at this chart before you hand me your money.

Yes, there was a serious recession in 2009. In 2010, world GDP increased by 3.9%, according to preliminary World Bank figures.

Historically, since WWII each rapid spike of oil prices over 2006 100$/barrel for a few months is followed with a recession one year later. If the trend stays true, 2012 will be a recession year.

If you define recovery as a return to the pre-recession peak income less transfer payments, we've never actually recovered.


I suspect this would resonate with a majority of Americans.

World GDP in a country with fast-growing economies and slow-growing economies, is not that useful a measure.

As an example, Brazil, China, India have actually been growing at rates that would be miraculous in the US, because they have labor-intensive industry and increasing oil supplies.

Old countries like the US, UK, France have barely moved the needle, and are scraping by through money-printing to finance massive deficits.

Why are you bringing up GDP? The discussion is about employment. Okun's Law isn't actually a law, it's a historically observed relationship.

It's hard not to see bringing up GDP as anything other than an attempt to derail the discussion. The author was talking about employment. Implying that the claim was that GDP would go down (which is much less likely), and defeating that claim would have no logical bearing on whether employment will recover.

But it might confuse people into thinking it will.

1. Regulatory burden in which fields? Low-skill trades have suffered the most recently, but I can't think of any new regulations against them.

#4 is inherently untrue, as the lower US dollar entices other countries to buy our stuff. As for "made in the USA" stuff, well, the Tea Party has ignored America's position as the third-largest exporter [0].

#5 is conceptual...I cant really speak to it.

I would put my money on #2, if only bc this fits with the anecdotes I've read from the Beige Book (credit conditions are high even though banks have money to lend). This is such a relatively boring story (relative to "the Internet has consumed everyone's jobs NOM NOM") that I'm not surprised that it isn't espoused more.

[0] https://www.cia.gov/library/publications/the-world-factbook/...

Regarding 3), I would guess that re-education always seems more difficult initially and the hurdles are reduced overtime. It must seem have seemed impossible that a farmer would be able to operate a machine in a factory, initially. Also, there are always new people entering the work force that are being educated under the new paradigm.

These days it appears that a lot of effort and innovation is focused on creating services that encourage the 'democratization of software development' which allows traditionally non-technical people to more easily create software and online services. Think Heroku, dotCloud, Twilio, etc. This innovation will continue to lower the barriers of entry into the new economy and allow normals to build.

When you hear people say 'this time it's different' it almost never is.

To be fair, assuming you are a developer or an entrepreneur, your basic job description could be boiled down to either constant self re-education (coding skills transferred to platforms that did not exist when you started) or adaptability.

I feel, being in this field that requires constant learning (there are some jobs that require only static ability, e.g. COBOL mainframe), that we have a jaded view of what it takes to learn something new. Going from accounting to HR is a big leap, completely different domain (not like picking up iOS after doing server-side Java)

6) The educational level (or mean cognitive ability) of the US population has been decreasing just as the cognitive thresholds for gainful employment are steadily increasing. You'd say education if you were on the left and might say cognition if you were on the right.

Someone should plot the time series of BLS occupational statistics, with the minimum required education/IQ levels for each job. On the one hand the IQ profile of the US is trending down. On the other hand, anecdotally job growth tends to be focused on those areas requiring high IQ, like programming. Squaring this circle may mean job growth outside the US.

Environment plays a huge role in the development and maintenance of IQ. And socioeconomic status (SES) can greatly affect the conduciveness of a child's environment to fostering IQ development. Accordingly, since more and more children are being born into low-SES households, it isn't surprising to see average IQ scores in decline.

Consider the following tidbit from the most recent national census: 50% of all babies born in the country right now are born into low-SES households (as defined as households dependent on governmental assistance, like food stamps). Forty-one percent of all babies born in the country are born to unmarried mothers (single-mother households being highly correlated with low SES).

The conclusion isn't that our generations are getting dumber, per se; it's that our generations are being born into poorer and poorer households. And the deck is pretty significantly stacked against someone born into a low-SES household.

Now, there's debate about causality in all of this, i.e., whether the existing population is actually getting poorer, or whether the poor are simply outbreeding the well-off. Based on census data, it seems to be a little of column A, and perhaps a bit more of column B. Either way, the younger generations are starting off on worse footing. And that leads to lower IQ scores and decreased future prospects.

Have to say something. Using statistics to quantify a change in IQ based SES is similar to using statistics to show that an algae bloom is due to increased sunlight only. The drop in IQ has more to do with limiting educational opportunities and community supports for struggling families. Yes, our government has let us down in many ways but it is a generational problem of trying to give the people what they need to survive and be successful without the people really understanding what it truly is, to be successful. Mass media promotes an idea of success that is NOT successful in terms of true human success and the average Joe buys into such fallacies. It should never be a handout but a hand up to a better life, short term, look for solutions, educate, change, move on. If that is not possible for a "family" to do this, it needs to be discovered specifically why, not just surface appearances of what may truly be stopping appropriate growth and development of the human being. It is never one thing only, there is always a system involved and the system is broken somewhere along the way preventing it from working entirely successfully. Who said it takes a VIllage? It really does, a whole village of people concentrated on the development of each individual within that village to ultimate success and success does not equal money or power unless it is a means to an end for change and a better future for all. 1. topnotch prenatal care for all 2. topnotch education and services from birth, identifying potential problems in development right from the start and providing supports to prevent issues 3. Proper diet and nutrition education and availability, across the board 4. Fewer identifiers of low SES on a daily basis for growing children to prevent the stigma from pushing them into poor decision making. 5. A village for every child

It is all out there, you have to fight for it sometimes and sometimes you are treated with suspicion just because you want to fight for it, but in the end, it will always be worth it, for posterity's sake.

"the IQ profile of the US is trending down."

citation needed.

Last time I looked, the flynn effect was still in full swing.

Citation needed? There's only one response to that:


Right at the top is this excerpt from wikipedia: "Recent research suggests that the Flynn effect may have ended in at least a few developed nations"

This from neuroanthropology.net: "A long-term rise and recent decline in intelligence test performance"

and so on


My disagreement was with the claim that "the Flynn Effect is in full swing". The recent small downwards trend you acknowledge is incompatible with that claim. From everything I've read on the topic, the Flynn Effect ended in the US about 20 years ago. FWIW, I administer Raven's APM tests in the course of my work.

Please speak for yourself about trolling wikipedia. I simply responded to the lazy GP's need for a citation with a google search of a relevant phrase. That said, the very article from which you quoted a sub-section has this in the header:

"Recent research suggests that the Flynn effect may have ended in at least a few developed nations"

This claim carries a citation on wp.

Your link at the bottom about educational attainment is completely irrelevant to the discussion. Intelligence and formal schooling are two different things.

There will always be plenty of jobs:


If we run out of jobs, people will start wearing coats made of auditable solved captchas or something, just to prove that they commanded more human labor than the next guy.

Some people may, but especially in this specific example, there's a large societal force that would positivley squash such behavior. We call it 'fashion' (which is actually quite often linked to inbuilt, brain-hardware based ideas about aesthetics that we can't change)

In the example I linked it is exactly the opposite; aesthetics changing based on the cost/labor to produce rather than anything fundamental to the brain like symmetry, etc.

One answer, and I don't know if this is the right answer, is that unlike in previous revolutions, a new class of jobs has not been created to (fully) replace the jobs that are being displaced. In the industrial revolution, farmers could move to the city and get a job in the factory. In the (first) information revolution, factory workers could become telephone operators. But as Tyler Cowen notes in "The Great Stagnation," jobs in the software industry are relatively few compared to the number of jobs that are being eliminated in other fields. It's unclear what new class of jobs would fully compensate for the loss of, say, many unskilled labor jobs to automation.

A second answer might be that we're only now fully realizing the effects of globalization -- outsourcing, moving factories to China, call centers to India, etc... due to the advances in telecommunications and whatnot. Perhaps there was an underlying structural shift as early as the 90's, but we were coasting on the housing boom. I recognize that that's a rather hand-wavey argument. IANAE.

IAAE, so I'll address this: jobs are not being "displaced" or permanently "eliminated" right now. There's a simple, plausible explanation for all of this:

1. Businesses are hesitant to invest in capital.

2. The housing market is terrible right now--especially housing starts.

3. Jobs related to #2 and #3 generally go to lower-skilled workers. They're the ones who are struggling right now (with something like 16% unemployment for men without a HS diploma).

This isn't the end of the American economy, people. Demand is low for goods produced by low-skilled, American-based labor. Things will improve with time.

It would improve faster if your bosses would engage in QE3 and started to inflate the economy. [Edit: that's an attack on the Board of Governors, certainly not you.]

Well, they're not my bosses anymore. I'm moving into software and applied stats now. :)

I'm torn about QE3. There's little evidence that businesses are waiting on it specifically to make capital expenditure decisions; it seems, from reading the Beige Book and other anecdotes that companies might be waiting for the other shoe to drop. QE3 would just adjust the shoe on the foot a bit.

Well, we could start charging the banks for carrying excess capital. I know, I know, everyone will start screaming about crappy balance sheets and all, but they're just sitting on boatloads of cash.

The problem isn't cash, its capital goods, and flooding the system with cash will just cause damage to companies who are to small to move fast enough to acquire large amounts of the flood.

Elaborate? You're being vague, and from what I've seen we have no problems with the capital we produce.

Whatever its actual economic merit it seems obvious that there will be another QE3 as soon as the derivatives and bad loans still in play cause another liquidity crisis. My personal investment strategy is exactly in line with what you describe businesses doing: stay out of the market until there's another crunch which looks severe enough that the USG will feel forced to intervene. (And stay out of USD in the meantime.)

Isn't a very large proportion of American labor unskilled? Real unemployment is always worse than the figure they give (when you account for people who stopped looking).

I can't say how many workers have less than a HS degree. A trip to bls.gov would help, but I'm on an iPhone.

I imagine the majority of American workers have a HS degree, at least.

<pedantic>There's no such thing as a HS degree. There is such a thing as a high school diploma.</pedantic>

Funny, I even called it a diploma above.

In the industrial revolution, farmers could move to the city and get a job in the factory.

Not true. The Industrial Revolution was preceded (in England) by an Agricultural Revolution that displaced peasants in large numbers to cities where they didn't have nearly enough work. (Many emigrated to the New World.)

Thus the later economic boom was preceded by economic hard times.

So maybe one significant difference is that this time, there isn't a new frontier for people in developed countries to immigrate to.

It's difficult for me to buy Tyler Cowen's thesis that all of the huge gains in marginal productivity have been tapped. If you're a developer, you tend to see incomprehensible inefficiency everywhere, especially if you consult for larger organizations or work on applications that involve human collaboration. I think a more probable explanation for "The Great Stagflation" is the unprecedented level of market intervention and regulation that did not exist during the industrial revolution.

Certainly, that is true. Unemployment would drop a great deal if the price of low wage labor were allowed to decline to where demand would equal supply. But that's illegal.

And its not just wage that must be considered. There are hidden costs of hiring and possibly having to fire an employee, all of which have gone up in recent decades.

People imagine that employers can be made to do all kinds of costly things without effect on employment. Or take home pay. And in good times, it may seem like there are no such effects.

But its in the bad times that consequences are felt, long after the legislation has been passed. If an employer cannot make money hiring a particular worker at the minimum legal wage, the worker isn't going to be hired (legally, anyway).

This has nothing to do with technology adoption.

As a support for your claim that new classes of jobs are not created , see pages 67-68 in http://www.thelightsinthetunnel.com/LIGHTSTUNNEL.PDF

There's a table called "U.S. Occupations with at least one million workers (2006)". Every type of job there has existed since 1948. There are no new job categories created with over a million workers.

But that isn't too surprising. Seventy-five years ago, we had "factory worker", "foreman", and "manager". Compare that to any large company today and see the variety of jobs being done.

Jobs, and therefore people, have specialized more, that's all.

>But why now, when it hasn't in the past?

One might well ask, why not now ?

Given a(t)t, where a(t) = rate of new jobs created per year

-b(t)t, where -b(t) = jobs lost due to technology per year

Problem is, the function a(t) is stable and predictable over time, because human populations are generally sigmoids ( http://en.wikipedia.org/wiki/Logistic_growth )

Whereas the function b(t) feeds on itself ( http://en.wikipedia.org/wiki/Autoregression ) If you deploy technology, and said technology is successful, you then deploy more of that technology, which is then more successful, and so on...At each step, b(t+1)>b(t).

Take a decent time window...say going back 50 years, for which we have reliable data for a(t) and b(t). Run the simulation. You will posit that '-b(t)t' beats 'a(t)t' at some point in time 't'. Why should t be 2011 ? Well, why not ? The curves have to meet up someplace. Might as well be 2011 :) However you slice it, they will intersect and from then on you will get net negative jobs at some point of time. Whether that's 2011 or whenever is immaterial.

The corollary here is quite interesting: if we imagine this extending quite a ways into the future, we might ask what sort of society we'd like to live in far in the future, where more and more jobs are lost because technology makes them pointless for humans to do.

Say only 10% of humans had any skill whatsoever that would provide value that could not be more cheaply obtained by deploying technology. Say it got further, to 1%.

Imagine a world where only a handful of the most incredibly skilled humans can do anything better (i.e. more cost effectively) than a computer, and the rest are rightfully unemployed, because they have nothing to offer. A world where your 20 years of hard earned programming expertise is utterly worthless in the marketplace because an open source program exists that will read a plain language spec and spit out a good approximation of the same code you would have written, except without buffer overrun bugs and it'll be done in 20 seconds instead of three weeks. Where "lawyer" and "doctor" are professions-that-were because humans aren't fit to compete, and where one by one all the other careers considered unassailable today are swallowed up by increasingly sophisticated automation. Sure, we might be left with a few professions that require physical humanity (people will still want to see people in entertainment, for instance), but in the end, most of the wealth in the world will not be created by humans in any direct way.

You might start to understand why it's not such a terrible idea to move closer towards a socialist society as time goes on - eventually we're all going to be unskilled labor, possibly even unemployable, and we're close enough to that point (I'd say within a couple generations, at the outside, barring some major disruptions that hold back further technological progress) that we should probably start thinking about the consequences.

"an open source program exists that will read a plain language spec and spit out a good approximation of the same code you would have written"

And who will write the spec? And why will it be any easier to write the spec than the program? "Plain language" is a misnomer. Idealistic people try to write legal contracts in plain language, but it doesn't work.

And who will write the spec? And why will it be any easier to write the spec than the program?

Sure, there will be people at the top of the command hierarchy dictating what needs are being met. That doesn't mean that spec-writing jobs will provide gainful employment for as many people as are employed fulfilling specs these days.

As for why it will be any easier to write the spec than the program, it already is. "Plain language" is exactly how people spec things out all the time these days, it serves me quite well when I'm getting work assignments ("The Fizzle button is making the back end Furble on Tuesday nights, fix it!", or "Add a coupon code field to our order page and an administration tab to add codes to the database - just make sure the same code can't be used more than once").

Idealistic people try to write legal contracts in plain language, but it doesn't work.

People tell their lawyers in plain everyday language what they care about achieving with a legal contract, and the lawyers fill in the blanks based on what they know. Similarly, normal people tell their programmers what they care about achieving, the programmers fill in the blanks. Sure, we can't automate that filling-in-the-blanks super well yet, and yes, there often has to be some back and forth to figure out what the person really wants (this is, IMO, on of the most important things missing in a lot of machine learning approaches, as human thought - especially language processing - involves a lot of feedback between systems and backtracking), but to me it's not hard at all to imagine all of that being extremely successfully automated once we have thirty years more NLP research under our belts and laptop computers that would put the most expensive Hadoop cluster you could construct today to shame...

Then again, I'm one of the weirdos that thinks that the "problem" of intelligence can be solved by a much less sophisticated algorithm than the one that our brains implement, under the theory that typically evolution only ever seems to do one thing well: create highly complex solutions to medium difficulty problems.

Is this an argument claiming something can't ever happen, not because its impossible, but because its -bloody hard-?

That's a ridiculous argument...and remember, the example was ridiculous, talking about a world where only 10% of people had jobs: People would build -very difficult- things to find employment. (incidentally, we're all of us doing harder(cognitively) things than our ancestors to find employment today.)

read "beggars in spain"

So far in the 20min discussion, I like this answer best as it tries to outline the factors for even a crude estimation. I do have another variable to add that nobody has mentioned.

I think the sentiment, not explicitly conveyed in the article, is that "there are less jobs for the number of employable people". And there lies the rub. Perhaps net total jobs is still on the rise, but the rate of population growth is that much faster than the rate of jobs created. And it's not flat rates, but changing rates as well. When technology provides efficiency (I'm thinking scale, atm), it would probably push rate of jobs create slightly lower. With more people on the planet, instead of competing with 1 other person for 1 spot, a person might be competing with 10 other people for 2 spots, hence the sense of joblessness, and a culprit to blame.

> Perhaps net total jobs is still on the rise, but the rate of population growth is that much faster than the rate of jobs created.

The rate of population growth is declining, especially in developed nations. The UN estimates that the world population will peak at ~9B in the 2050s and then begin falling. Also, the demographic balance is changing because there will be fewer young people in the job market.

So perhaps the jobs/people ratio will improve, but these same demographic changes (and increasing life expectancy) pose big questions about fewer workers supporting healthcare and government services for more older people.

Interesting point. In addition to population growth, you could say that this comes with progress in technology and policy, too.

Countries like China and India a good place to export our jobs, at a minimum, because they're stable enough. Even if we could trade with China in the late 1950's, the Great Leap Forward would've made such trade very unattractive. Why would I want to export my jobs to a country where the average citizen isn't even fed properly, assuming I could?

I posit that as countries such as North Korea and Libya stabilize, the global job growth rate will have to increase in order to main the job-to-employable-people ratio. A positive, but stable, job growth rate would not be enough.

I could be totally wrong about this in that there will always be some minimum political chaos in the world, but I'm an optimist :)

Well, population growth has also been the case all along (for centuries), so the "why now?" question would be the same. Increased population is also an increase in consumers.

Your question ("why not now?") dodges pg's main point: we've been through this many times before, and the catalysts behind this recession (especially poor financial liquidity) do not suggest a material, structural shift in the type of work available in our economy. The housing market is poor and businesses are hesitant to invest, but robots have not replaced the pimply kid at McDonald's just yet.

> we've been through this many times before

'past predicts future' is not exactly commensurate with a point of inflection. perhaps a real-life example can help - a medical transcription firm in India hires 25 Indians to transcribe medical records. I then sell the CEO a copy of voice recognition software. He is so happy with the results, he fires 24 and keeps 1 Indian to fix the occasional transcription typos! After one month, he finds the transcription error rate is unacceptably high, so he hires one more Indian to fix typos. For the past 1 year, these 2 Indians & that software has chugged along, making money. Now that CEO is happy, making money, and has opened his second office in India, with another copy of the software & just 2 more Indians to babysit and bugfix! True story. Any way you cut it, that's net job loss. First, a bunch of housewives in Atlanta who transcribed for a living lost their livelihood, but you can rationalize that by saying, hey atleast 25 Indians got hired. But 23 out of those 25 Indians lost jobs & 1 piece of software ended up doing the job! Now unless the Atlanta housewives and the 23 Indians end up working for the voice recognition software company ( a very remote possibility ) or end up in a brand new job ( even more remote possibility ) given their limited skills, there is definitely a block of time when there is net job loss. Ofcourse eventually some of these people will learn new skills and/or are absorbed into new jobs etc...atleast, that's the hope. But the intervening reality can't be wished away. I still think this story will have a happy ending, but so far I don't see it.

Those housewives and Indians will not be out of work for long. They are experiencing frictional unemployment right now; they'll retrain and take on a new role soon enough.

You don't see the happy ending yet because this was the worst financial crisis since the Great Depression. We love to trash finance types, but banks facilitate a lot of transactions--including home purchases and capital expenditures. When they hurt, our economy hurts in some non-obvious ways.

Frictional unemployment is a good way to handwave away the discovery, or not, of new jobs. You just wiped out that whole -type- of job, replaced it with (much lower employment) error checking.

If you assume that for a portion of the people in the transcribing job, that the transcribing job was the best marginal fit, then some of them don't re-enter the job market. Others have to take a worse job. If they could have been in a better job, they likely would have been. So their employment has gotten worse. May be quality, may be compensation, may be available time. Something's worse for them.

If they could have been in a better job, they likely would have been.

There are a number of reasons this is not the case. I'd wager that a main reason is "re-training takes too much time." If a worker gets laid off, gets his Associate's, and starts something new, well, that's a net positive scenario. He or she produces output in a new field, while the transcription software replaces their old output. Net positive outcome.

You call it "handwaving," but the above happens to many people. This is not some accounting trick economists have developed.

Don't mind the downvote but an explanation would be nice...

Jarvis here.... (that's my quote)....

I'm not sure; that's what I want to explore.

But I think the scale enabled by the net creates such profound efficiency and disintermediation. craig newmark sees himself as a philanthropist of classifieds; his (estimated) $100m business helped disrupt more than $13b in classified revenue. The funds are a dividend for the transactors so the value is not gone, but jobs are.

Look, too, to Clay Shirky's cognitive surplus. In the comments on this post at Google+, Eric Reasons brought up entertainment as an example. They get a double whammy. The people formerly known as the audience (TM Jay Rosen) now have more ways to entertain/distract themselves and can "consume" less entertainment. They also can make more entertainment, ending the scarcity and providing no end of free competition to the industry. There will be much more entertainment, but fewer jobs from it.

Look at retail. Practical necessity required there to be brick-and-mortar stores with much inventory and sales staff across the country as a channel of fulfillment. No more. RIP Borders. Now it is much more efficient, of course, to consolidate and fulfill commodity goods at a distance. Thank you, Amazon. Again, fewer jobs, which won't be replaced.

Transparent pricing in the market will lower prices and reduce the ability of retailers to benefit from pricing opacity. More efficiency. Less profit. Fewer jobs.

Even in my "trade," education, we know what's coming: open courseware will replace third-rate lectures.

Yes, I'm well aware that say, in the shift from agrarian to industrial economies, efficiency shifted jobs from farms (greater efficiency) to factories (greater wealth). The factory equivalents today -- startups -- create great wealth but with fewer jobs.

I say none of this to criticize technology. It's just reality. I will argue as I explore this topic that we must look at policy alternatives for more investment in entrepreneurial ventures and education (of both youth and displaced workers).

You reminded me of an interesting thought. The industrial revolution involved advances in information only incrementally; we went from letter-writing to (eventually) phone and television. The new mediums were very unambiguously new platforms each time.

But now we have a set of platforms(computers themselves, the operating systems, the networks, etc.) for all digitally encodable forms of information. We keep building new platforms on top of these systems; and the rate at which the platforms appear is increasing; 10 years ago you could not do the kinds of trivially focused apps that have become today's cliche.

This is a point of fundamental difference from productivity advancements in the industrial era; better machines meant more resources mined, more goods finished and delivered. And communication remained expensive throughout that period; I can recall long-distance calls still being relatively costly in my childhood(80s, early 90s).

In contrast, better information implies doing more with less, in the physical sense of time and effort. Taken to its literal extreme we have Twitter as an example - a broadcasting medium without the formality and overhead of TV or radio.

And if our advancements from here on out are mostly based on doing "less" and not "more" physically, the whole way in which our economy is measured today is going to become increasingly wrong.

I think it would be interesting to read up on what people thought about the speed and impact of the past transistions.

One possibility is that previous technological advancements facilitated dispersion of labor, while the current crop facilitates the concentration of it.

Advances in ocean-faring ships led to colonialism. Train travel led to a rapid westward expansion of the United States. New farms get established, and new towns crop up to serve them, needing homes and markets to be built, a local newspaper, a local grocer, a local bank, eventually local radio and television stations. Similar basic economic structures get replicated in many diverse geographic locations. Once one place gets saturated, people move and start up another franchise of the town model.

Skipping ahead fifty years or so, the web means I don't have as great a need for the local bookstore, the local newspaper, the local television or radio station, the local bank, etc. There are plenty of businesses that I still need locally, but they in turn don't have as great a need for the local advertising agency, the local newspaper's classifieds section, the local accountant, the local lawyer, the local travel agent - assuming there's still a local owner, with a local HR department, local management structure, etc.

Of the startups you see, how many are going to end up with a business whose operations need to be replicated in many geographic locations? How many are ever going to be more than an office in the Valley or NYC and maybe a few sales outposts? How many pitches are you getting that require large marginal outlays on labor in order to scale, and how would that requirement affect your investment decision?

I think a better way of putting would be "technology is killing old jobs, and people aren't stepping into the new jobs fast enough". The author is exactly right that the gov't and mainstream are trying to hold onto the old ways.

I think the mainstream is surprised by this technology shift, because technology is finally replacing non-tech industries that didn't expect to be replaced. Nobody was surprised when blacksmiths were replaced, because they were "old tech" being replaced with "new tech". When brick&mortar retail or law get replaced, there's a lot of gnashing of teeth.

I bet there was a lot of gnashing going on in the 19th and early 20th centuries, too. People don't like to change, yet technology forces them to.

In the early 19th century, the Luddites protested (and destroyed) automated looms that could be operated by cheap, relatively unskilled labor.

The Great Stagnation - http://www.amazon.com/Great-Stagnation-Low-Hanging-Eventuall...

We've picked all the low hanging fruit - in technology and resources.

Our cars haven't really change much in 100 years. Same basic engine, just added computers (we did that in the _1970'_).

We're only incrementally improving technology (cars with navigation).

Our current innovations (Twitter, FB, Google) don't produce many jobs and in fact reduce number of jobs. People will spend the night on FB vs going out to dinner, a movie, etc. You don't need to go out to cure boredom/socialize.

Also, Social websites don't produce much commercial activity (compared to say the automakers building Detroit into a first tier city in the last century).

We're patenting one click check outs, but we haven't found a good (economical at scale) replacement for the major components of our economy - e.g. the internal combustion engine and fossil fuels.

The US has has an abundance of cheap land an resources PLUS the country was lucky enough to grow up in the industrial revolution when technical innovation was relatively easy and world changing (compared to now where it's much more incremental).

We're going to stagnate until someone (US,Chinese,Indian,other) makes some big leaps in alternative energy and other advanced technology.

Web apps aren't going fix our economic problems (however useful they are).

Speaking only to the car comments -- although they put in question the rest.

Bull. There have been significant improvements to cars in just the last several years, and the 1970s (and before) were a complete disaster for cars. There has been great progress. Today's cars are way better than anything preceding them, beginning with build quality, through handling and braking, and ending with emissions. Not perfect, but vast improvements.

Is there more to do? Sure.

These things take time, and the progress may seem slow to many of us, but massive infrastructure changes cannot be accomplished quickly. Hey ... who is going to deny a poor person the desire for transportation, even if it is with a crappy old car. As much as we might want it to be faster, societal change is slow.

Don't forget the incredible advances in safety in modern cars.

My answer would be that there is a time delay inherent to being human between wanting to do something and being skilled enough to do it.

If humans were required to learn, say, programming in a week, they would completely fail. Learning an industrial job in more than a decade to transition away from farming is much easier.

It could be that the skills needed to be employable are too difficult for people to learn in the time available. I think this learning time is fluid. It could be a function of cultural expectation of self reliance, for example.

What is funny is that plenty of roboticists point to an inflection point in the future when service jobs become displaced, which will dwarf these problems. The change will be bigger and the time to adjust will be smaller.

I came here to post the same.. Which entry level tasks does the most recent wave of new technology require which may be performed by, say, a 45 year old factory worker of 25 years? How do you go about "spreading the load"?

Probably it is not happening now, but it should happen in a few years.

Historically technology has displaced humans, but there has always been something that is cheaper to retrain humans for than it is to build machines for. For one thing you can explain to humans what to do, and they could turn an incredible amount of computing power to figuring out, following, and filling out your instructions. Computers simply have not had anything close to a human brain.

However as the complexity of our machines goes up, and the costs of automation go down, eventually we'll come to a point where it is cheaper to design and build a machine for a new job than it is to train someone to do it. At that point humans will be displaced and new jobs won't show up for it.

By a back of the envelope estimate, we're perhaps 10-15 years away from having computers with the raw computational power of a human brain. Software will follow, and the successes of things like Watson suggest that it won't take that long for software to catch up enough to be economically useful.

Once it is possible to train a machine faster than a human, the cost of buying and running that machine puts a cap on what that human can expect to be paid. Given Moore's law, that cap will descend painfully quickly after it first becomes an issue.

And to think that 50 years ago, everyone expected to be living in luxury as robots did all the work. <:\

"Our new economy is shrinking because technology leads to efficiency over growth."

I disagree with this premise. IMHO, it is much simpler: we as individuals lived beyond our means for 20+ years by borrowing money against our houses and against our personal word (e.g. credit cards). We as governments lived beyond our means in terms of direct spending as well future spending promises (e.g. promising retirement/pension/medical benefits that are funded by borrowing or not funded at all). Big companies also promised retirement (pension) benefits that assumed a continuing growth of the investments that backed the pensions - that didn't work out so well.

"But why now, when it hasn't in the past?"

In the past, we relied on general growth exceeding our indebtedness, "growing" our way out of our debt. This is a game that cannot go on forever... and the longer it goes on, the worse the crash will be at the end. Right now, it is looking pretty tough.

In short, we lived beyond our means for 20+ years. We will have to live "below our means" for a substantial number of years to balance our past spending against our current and future incomes... and that assumes we have the will to make the hard decisions to truly reduce our spending rather than claiming to reduce spending, but the "reductions" are 2/5/10 years in the future.

A big part of living "below our means" is buying less, paying down our debt, which means lower demand and thus lower job levels.

This is absolutely right. Average personal savings rates in India and China: 30% and 50% (and that's of their gross income). Average personal savings in the USofA: -2%. We've lived so far beyond our means that it had to catch up to us.

The real scare for me is the potential for another, larger bubble: the "Credit Bubble". A bubble exists when asset price inflation rises beyond what incomes can sustain. A bubble represents people abandoning reason and prudence for hope and greed. (http://www.chrismartenson.com/crashcourse/chapter-15-bubbles)

The Credit Bubble will pop when the sum total of all of our society's debt prices (read: interest) exceeds our ability to pay. Experts think this could happen anywhere between 2015 and 2020. When that pops, the housing bubble will look minuscule.

The prudent should prepare now. Buy food storage. Become self reliant. And get out of debt!

> Average personal savings rates in India and China was: 30% and 50%

Yes, but if you take into account the 9% inflation in India, the savings might be a net loss.

As was pointed out to me earlier in another HN discussion, the only reason why the Indian government guarantees a seemingly too good to believe interest rate of 9% for the savings accounts of their senior citizens is because that rate cancels out inflation.

Wouldn't the rational decision for this scenario be to participate in the credit bubble and use the money to buy food storage and become more self-reliant?

There is a net increase in jobs, but that's mostly in developing countries. Technology (the internet, container shipping) has actually enabled an explosion of job growth in those countries. Unfortunately, these trends destroy jobs in developed countries.

So I think you are correct that there will be a net increase in jobs, but it may take quite a while for developed countries to experience this. In the meantime, they are on the look-out for explanations.

Haven't we finally reached the point where all the discoveries of the Industrial Age and Information Age are coming together to enable companies to produce goods as efficiently as humanly possible? And won't advances in AI and robotics enable us to push beyond those human limits?

I'd say that it hasn't in the past because up until 60 years ago, humans were the decision makers doing everything.

So what's the big technological difference between this year and, say, four years ago? Why was unemployment below 5% then?

There was a speculative bubble in the world real estate market. This led to a lot of real cash circulating (e.g. people refinancing to pay for kitchen remodels so that they can flip their home). That popped, and all the excess economic activity disappeared with it.

The article posits a broad trend. Short term boom and bust fluctuations will always happen.

The article posits a broad trend for which it provides no evidence, and indeed nobody has been able to provide evidence. This is the broad trend people have been positing since the ludites were smashing those newfangled automated looms.

I suppose my argument wouldn't hold if you look at just 4 years, but I think it would if you look over a few centuries, as pg noted.

I am not sure I agree with the author, but it seems to me that previous progress have chiefly made things faster (travel), cheaper (e.g mass production), lighter (computers), more accurate (measurement instruments) and more durable (steel versus iron versus stone).

Right now the IT industry is mostly making things cheaper and to some degree faster (you no longer have to wait until the next days paper to get to know what happened yesterday) however most of what is produced are final goods and there is only so much of the which can be consumed; whereas the amount of steel you might use if it were free is likely to be many thousands of times higher than today (since manufactures would use it everywhere they could) you aren't going to read even 50 newspapers a day if they were free -- you don't have that much time.

The same is the case with games and television -- you don't have the time to play more than a few hours a day at most so it doesn't matter whether Farmville is much cheaper than going to the chinema.

So the only way it seems different to me this time around is that today most of what is produced falls under my self created economy of final goods whereas previously much of the innovation and improvement has happened earlier in the value chain.

One notable exception to this seems to be open source server software (and computers in general, although they now seem to be much faster than the average person needs) which makes it much cheaper and easier to start a tech company (indeed patio11 famously spend $60 on bingocardcreator.com) but at the same time these companies also typically makes a lot less money than the companies they disrupt.

I'm a little late to this party, but:

Short answer: technology destroys jobs for dumb people and creates jobs for smart people. Until now this has been okay, because there have still been enough dumb jobs for all the dumb people. But as technology continues to progress, we (without genetic engineering or eugenics) run into the point where we have more dumb people than useful things for them to do. There are no jobs doing manual labour, and the dumber members of society aren't smart enough to perform the new jobs of maintaining the robots which do the manual labour for us. What, then, is the use of these people, and what do we do with them?

> Short answer: technology destroys jobs for dumb people and creates jobs for smart people.

It sounds like you're only considering high-tech jobs, like computer programmers or engineers. Those aren't all the jobs that technology creates, not by a long shot. Think about pizza deliverers, call center workers, fast food workers, etc.

Put aside service jobs like pizza delivery or baristas and think about manufacturing jobs or “dirty” jobs. Regarding manufacturing jobs I tend to think that technology didn’t replace those kind of jobs instead we opted to buy goods made in other countries. I can't find any current examples but the article below states that in 2007 the USA exported $4.6 billion in raw cotton and imported $52.4 billion in processed cotton goods. That’s a lot of money leaving our economy. We really need to start manufacturing again and as a nation get in to the mindset that it’s better to save and buy quality than to buy quantity. http://www.suite101.com/content/us-cotton-trade-statistics-a...

I think the difference is that technology, now, allows for far better distribution of effort around the globe. Previously, as you mention, technology was uplifting silo'd productivity - but was not allowing for whole industries to be either globally distributed (information based industries) or remotely centralized (agriculture exports).

We now have sufficient technology in all areas to allow for both; the global distribution of knowledge working, sufficient advancements in production technology to increase output efficiencies in specific areas that centralization of output for the global economy can occur (e.g. agri output from say brazil supporting a large % of global soybean consumption - and manifacturing in China supporting a large % of global doohickey consumption)

We are reaching a change in the overall model of economies, where previously each nation was duplicating a large portion of the industries as their production was only enough for internal consumption.

If you look at the entire planet as a single resource zone, then naturally you will have uneven distribution of resources, production, knowledge, etc... thus uneven distribution of labor to support this.

If we could see a heat map of the globe's resources to people to markets to [name a factor]... etc. but weighted by their pull in each direction, then maybe we could better model how the global economy really looks.

Extra Credit: weight the flow of this map to energy dependence and you'll really see how fragile this little world is.

Technology does not necessarily lead to efficiency. In the immediate, it leads to greater productivity. The same people, the same place, doing more, in the same period of time.

True efficiency emerges from high productivity when the technologies employed are thoroughly understood and applied properly. And that takes time.

Disruptive technologies increase productivity too, but stunt the emergence of efficiency by hindering the thorough understanding needed.

The last significant disruptive technology affecting jobs was the adoption of the internet -- circa 1997. Since then, organizations have had a lot of time to understand their technologies and improve upon them. I believe the layoffs we have seen in recent years, both in the office and on the shop floor, reflect that.

You'd think people were born 10 years ago sometimes. I'm old enough to remember the last two recessions (just), and both times these same ideas were propagated in articles and books and pub talk.

Don't confuse a contraction of investment with "the end of human labour", and then find a correlation with changes in technology. It's fallacious reasoning.

I agree with pg - but for a different reason.

In the past, one of the most significant limiting factors on business growth has been the cost of human labour, and technological development has focused on working around this limitation, eliminating manual jobs and creating jobs improving the technology.

However, as the world population grows and certain very important finite resources, such as fossil fuels, become severely depleted (especially fossil fuel reserves that can be extracted with less energy than the fossil fuel contains), these resources become a more important limiting factor than human time.

I therefore predict that in the future, far more work on technological development will go towards sustainability, and less will go towards minimising human labour. Employment will rise, while the price of anything which is not sustainably produced will rise in real terms relative to the cost of labour.

Due to the relatively higher costs of energy intensive transportation, I expect that there will be some degree of reversal of globalisation with respect to physical goods (but not other industries). Technology will probably play a role in allowing one family or small local community to do locally what currently takes a global network of large companies.

I think inequality will still be a real risk long term - if we ever reach the point where the food production system can be completely automated, and everyone had at least enough technology / capital to produce what they needed to survive and be healthy, poverty would be eliminated - but if only a few people owned all the capital, and squandered most of it on luxuries while others starved, that would be a significantly worse outcome.

I wonder if Jevons paradox applies here: http://en.wikipedia.org/wiki/Jevons_paradox

Jevons paradox is that "technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource". Watt's more efficient steam engine increased the consumption of coal, the cotton gin increased the consumption of slave labor, and virtualization has increased the consumption of servers. If technology can increase the efficiency of human labor, won't it increase the demand for labor as well?

It's probably not going to be "now" or any time soon but, barring a global-scale disaster, it's hard to imagine how the future may not be jobless, given enough time. There are only so many levels "higher up the stack" humans can go before most of theirs skills are rendered redundant by the machine. Even if The Singularity doesn't happen and humans continue being exclusively in charge of the thinking, decision making, strategizing, etc., will there be enough demand for multi-millions or billions of such jobs? I doubt it.

But will it matter? The more automated the production of essentials become, the less expensive they become. As a result, we may get to a point that the world economy is all about trading natural resources that go to providing people with their essentials. People can then build their own wants beyond that in a way similar to bartering.

The problem, of course, is the 10-20 years between "there are too few jobs" and "everything we need is available" and governments need to actively work to support populations through it. Unfortunately, very, very few governments seem to be able to look to the future.

Computer chess improved regularly for decades before becoming a true threat to master players. Why did it start toppling them in the 90s when it hadn't before? More recently, financial programs have carved out a huge niche of the market that was once dominated by human traders.

Why now? Because the technology is finally competitive with humans across a wide range of tasks. Yes newer, some new jobs opportunities do open up, but they're often jobs that those displaced are simply incapable of doing.

Technology has been improving our production capacities over the centuries. It also brought new needs that in turn created more jobs.

I think that the widespread criticism of consumerism is the sign of an important event : now that we have a car, a fridge, a computer, a TV, more clothes we need, hot water, and a fully equipped bathroom, we just don' have any more demands.

If the population had the same demands as in 1700, it would be trivial to fulfill them. It would require maybe one day of labor per month per individual. Our demands grew faster than our production capacities, making the working week just a bit shorter, but now the demands do not increasing at the same pace as our productivity.

We have just reached the point where our material needs are fulfilled and we demand immaterial things : free time, healthcare, etc...

Could this be the point of inflexion toward a post-scarcity economy. I really wish.

I don't know the answer, but I can see it as being something like:

In 1100's europe, there was land that was cleared for cultivation and forest. Most land holdings had areas of wilderness. They cleared it as the population increased. If the landholder could have instantly increased the population, he would have put the new people to work clearing land and planting crops (probably via leasing it to them as a landlord, or some kind of serfdom, but the mechanics of that don't matter here). So, the number of 'jobs' available on a given landholders property might have been 5000, while the population at the time was 400. There were more job openings than there were people.

Later, factories pulled population away from farms and improved farming allowed the land to feed more people than actually lived on it. This reduced the number of farmers needed as a proportion of the population, so if the population were the same as in 1100, the 5000 jobs we had before might have dropped, perhaps to 2000 jobs, or rather, food prices would have dropped so that lots of people no longer saw farming as the best idea. However, the population had increased greatly. My hypothesis here is that the number of jobs that could have been productively filled was still higher than the population.

This process can't continue forever. Sooner or later, the number of jobs simply crosses over the number of people looking for work. In history, I can imagine a leader, seeing lots of able bodied, desperate, and incredibly cheap manpower seeing an opportunity to raise an army and attempting to expand their own wealth by expanding their lands. That was a natural brake on the population line. Today, thankfully, we don't have any mechanisms that drastically reduce the population whenever people get desperate, there isn't wide areas of undeveloped land that can absorb as many people as we have over above the jobs line, and technology continues to increase productivity at a respectable rate.

So that is how I explain why the jobs line can cross over the population line now, and why we may now be in a situation where we might expect to have less jobs than people who want jobs for a long time.

Exactly. How about all the unemployed horseshoe manufacturers (blacksmiths)? Technology doesn't kill jobs, it improves efficiency so capital can be deployed elsewhere. The problem today are the hurtles government places in the way in the form of regulations and taxes that inhibit the efficient deployment of capital.

The divergence is that to form a single job a knowledge worker requires far less capital compared to a manufacturing job. A developer needs 10k in equipment to be productive compared to 100k's for a manufacturing job. When you actually adjust for the US regulatory and tax environment the gap increases even more, making overseas manufacturing a no-brainer.

Exactly. Whenever I see someone make the "technology destroys jobs" argument, I always think of Kurt Vonnegut's first (and worst) novel, Player Piano. The disruptive change in 1952 looked just as scary to those being disrupted as it does today.

>"It's possible that technology could start to net kill jobs. But why now, when it hasn't in the past?"

Two hundred years ago, most people worked in agriculture.

Then came technologies such as the McCormick Reaper, Whitney's Gin and Newcomen's engine - away went the vast majority of that work.

Yes much of it was replaced with something else and much of what replaced it was more pleasant, but the conclusion that the jobs which replaced agriculture are permanent is not forgone.

[edit] The technology upon which jobs depend in the modern era is finance, and that has been largely diverted to purposes other than creating jobs in the US over the past several decades.

Thank you for bringing up the cotton gin, etc. I was thinking that when I read the article.

The thing that's different today is that we've transitioned the economy increasingly to one where we provide services to each other rather than produce wealth.

In discussing potential Medicaid cuts in New York, advocates claim that over 12% of employed people in NYC are in healthcare. I have no idea whether that's true or not, but if so, it has real negative implications.

So its not technology that's the problem, it's the fact that we're going nothing to produce new wealth, and are exporting our wealth overseas via the importing of most manufactured goods.

I think it comes down to logistics.

Up till now, you couldn't really outsource the job cheaply enough. Now, it's cheaper to build something on the other side of the world and ship it here.

The only transformation comparable to the present phenomenon would be the migration from rural (farming) to urban factory settings that accumulated full force about a century ago. And it was a period that was marked with great tribulations and social and culture shattering apart -- immigrant labor, worker rights, great depression, altering of government social contract (i.e., New Deal), etc.…

The current technology revolution is even more overarching -- yes, there are new jobs being created, but at a fraction of the existing job base. This is not just a "claim" -- it's verifiable fact that can be easily concluded by perusing corporate employment ranks (GM used to employ nearly 1M workers -- contrast that to a modern internet company or even modern corporation which have been diminishing in employment ranks since the 90s). Review the government Labor department jobs reports -- most of the jobs created (outside of health care) are the kinds of jobs easily replaced by robotics / automation. The only damper that prevents a greater rate of transformation is the inexhaustible supply of cheap labor -- the presence of a humans willing to work at fraction of another, a seemingly bottomless pool. Might not be relevant for skilled jobs (though it is, at a lesser degree -- non immigrant visa workers supplanting American programmers for instance -- note that I am not making a case against immigration, just that immigration does have an economic effect on native workers).

See [Robotic Nation](http://www.marshallbrain.com/robotic-nation.htm) for a good summation of this -- yes, productivity and efficiency rise at an aggregate level, but the benefits do not accrue equally to all.

I wouldn't bet that technology should net kill jobs now. There's still a lot that must be done by humans to get to the next technological plateau. If jobs don't come back now it will be because of economic reasons. It's possible that our education and economic systems are weakened and can't keep up with the moderate tech advance we're experiencing.

But there should be a point in the foreseeable future at which technology will progress too quickly for mortals to keep up, despite the best education and economy. It wouldn't be the first paradigm shift of this magnitude. At one point in our past human population increased dramatically from farming, so even if people wanted to go back to hunting they could not. Then towns sprung up because farmers learned to produce a surplus. Then there wasn't enough land for everyone who wanted to farm.

Similarly today, we can have some people "farm" or do the essential work and produce such a large surplus of food, raw materials, technology, etc., that others will be freed from jobs, just as ancient towns were freed from farming.

Frankly we could make such changes with today's technology, but the economy and culture may not be ready. Instead we create contrived jobs.

Software as a service renders the manual organization of information obsolete.

A great deal of human labor in general is spent organizing information. Every industry from construction to tourism. Every scale, from villages to corporations.

It is fundamental to the very concept of "work", and it is being rendered obsolete very quickly thanks to high internet penetration rates and mobile computing.

To assume that humans are basically fungible when it comes to competing in an agrarian society makes sense. To make the same assumption in an industrial society is questionable. To assert so in a technologically complex, automated, digitalized, globally competitive post-industrial society is - being willfully blind. And that is why now is different.

To talk about jobs lost, there were 4 million farm horses in Briton before the industrial revolution, and then over a period of 25 years in the nineteenth century, that population dropped to under a million.

Ford, and every other company, ran a 48 hour work week in the united states until Ford decided his factories were efficient enough that he could hire more people, pay everyone the same for 8 hours less labor, and thus sell more cars. Most every industry followed.

Now we've nearly a tenth of the workforce unemployed, but the story people tend to ignore is the actual hours of employment demanded per capita. The far scarier story than the United states unemployment is its underemployment, where people are willing to work but only get a few hours. Employers want to employ more people...but they can't fill more labor-hours. They can split those hours up, and because of that, a lot of the job loss is hidden.

Does anyone know of any other animals losing their jobs to robots?

Technology is improving at a higher rate than humans -- our wetware/body have fundamental limits than hardware/software. Hence, at some point -- sooner or later -- we start to run out of jobs that we are willing to pay humans to do instead of machines. (Lowering minimum wages could delay but not stop that.)

You could argue that in the skill level required to transition from destroyed jobs to created has changed. When the economy transitioned from farming to manufacturing a farmer could begin working in a factory with little training. Now automation is beginning to eliminate jobs at some skill levels. For these displaced workers to find new jobs years of training could be required. If the rate that jobs are being eliminated is greater than the rate that workers can train for newly created jobs and reenter the workforce then there could be a larger percentage of unemployed workers than has been seen historically.

> For these displaced workers to find new jobs years of training could be required.

I think we vastly overstate the importance of training.

Being a farmer, I enjoy following farm-related discussions. Farmers spend just as much time talking about the shortage of talent as tech companies do, if not more. What is interesting about farms is that the job needs to be done in a timely manner no matter what, so you have to hire the best you can, and hope they become good at the job eventually.

Being a software developer, I also enjoy following tech-related discussions. We read story after story of people going from absolutely no experience to profitable software company in weeks, yet we still believe that years and years of training are required to work on even the simplest of projects.

Tech companies come with the luxury of artificial timelines. A tech company can leave a position unfilled for months or even years without any significant impact to the bottom line. Your software codebase isn't going to shrivel up and die or your warehouse of stock isn't going to expire if it takes an additional month or two to complete a feature.

There is no reason why anyone with a few days of studying software development cannot join the team. We just don't need them. We can wait and hire the guy who scaled out Facebook and developed Watson while working on iOS on the side. That is the shift in employment we are seeing and no amount of training is going to resolve the underlying problem.

> But why now, when it hasn't in the past?

Maybe now, unlike ever before, computers and robots can do most of the tasks that (relatively) unskilled humans are capable of, for less than minimum wage.

It make sense on the long run, think about it, technology introduced new jobs to offset the ones it killed

But as we get better doing what we do, as we become more efficient we need less people to do a particular job.

Now without new types of Jobs being created by new technology, efficiency can net kill jobs

Another point to consider is that other factors are surely at play that accelerated the net killing of job, such as outsourcing and so on (outsourcing of course, is make available because of advancement in IT and communication)

Why now?

Well we are living in exponential era, everything that happened in the past has been fast forwarded exponentially. Fast Fast Fast forward, the rate is exponential.

Look at last 10yrs & compare the growth 20-30yrs ago, or rate of global warming, or how fast you travel today or efficiency in communication, or how much time did google take to become threat to Microsoft, or facebook to google, or even youngest billion air!

You name it! This rate can be catastrophic for us.

> Why now?

Because increases in consumption are no longer able to keep pace with increased productivity?

Perhaps it's not because of technological change per se, but an increasing rate of technological change. There are new jobs, but it is becoming more and more difficult for regular people to learn the skills necessary to fill those positions.

"Economics in One Lesson", chapter 7. Everyone should read that book


It says that jobs lost because of intoduction of labour saving machine are regained at later time thanks to increased demand caused by more efficient supply.

But what if we reached a point where one labour saving machine is replaced with even better labour saving machine before it had a chance to redeem lost jobs?

I anticipate transition of jobs and money toward trivial things. In 10 years John will cut hair of James for 1000$ and James will groom dog of John for 1000$. In the meantime theyll both enjoy nearly magical devices they bought for 10$ because they were made by robots.

Technology has been killing jobs for a long time. Why do you think it hasn't before? Do you find your self blacksmithing, or does a machine do that for you?

You're confusing job killers with net job killers, a distinction pg clearly makes in his post.

The efficiency of our production is rising for centuries indeed. Once, a peon on a field could hardly produce for his own family, a modern day farmer can supply food for thousands of people.

Same can be seen in almost all industries.

For centuries this trend was offset with appearance of new kinds of production. New fields opened new markets and new places for work.

Lets ignore the current situation and ponder where does it lead us. It is inevitable that in the future most of day-to-day stuff we use will be produced by robots with minimal up to none human oversight.

There is only that much that we can consume. There is only that much of different kinds of produciton we can require. And we can not all be working in a creative capacity, inventing new stuff and inventing new markets. Inavitably a day will come when it will be technologically possible to supply all day-to-day the needs of world's population with stuff and services supplied mostly by robots.

What will happen then?

From several hundreds years ago, when people produced mostly for themselves, to the distant future when we all be serviced by robots and efficient production chains we see a definite trend. Somewhere along the path there should be disruptive events for this to happen, when a 'tension' produced by efficiency leads to massive losses of jobs.

For most of the time during the whole history the argument "it is not different then the previous time it happen" will be valid, but there will be definitely times it wont be the case. And it is possible that now is one of those times. Rise in effeciency must lead to loss of jobs eventurally. May be the time is now.

Oh, and this future is not necesserily a very dark one. After all, having most stuff produced effectively only means that most of the population will not have to work. Mey be it will lead to large portion of the population being a "dead weight", burning their life in leasure, and small energetic minority engaging in moving us forward, I don't know. May be it will lead to a large production 'surplus' that we will use to colonize the solar system and beyond? May be something else...

But I think we need to start thinking of what the society will look like when most people will not have to work to lead a decent life? What incentives will we need to invent to still have enough people to move forward? How to prevent degradation? I don't think artificial limits on automation and technology is the answer, but we might eventually come to this. I can see a politician introducing a SaveTheJobsBill to outlaw massively automated factories. We need to start thinking about it now, before it actually happens.

Read "lights in the tunnel" by Martin Ford.

why now?

Because technology != technology.

I don't believe that technology has suddenly killed millions of jobs.

No, it's fear. Banks are afraid to lend, and so SMBs can't expand. Corporations, sitting on trillions of dollars, are afraid to hire because they think it's too risky.


I think the difference between today, and the past is the rate of change, and the barrier of entry for a displaced worker to move. The industrial revolution happened over decades, but the digital revolution happened in just a few years. People are being displaced first by 3rd world countries, and second by machines which is faster than they may be prepared to deal with. Additionally they may not be capable of making the jump. Its easy to take a farmer and place him in a factory. However it is slightly more difficult to take a factory worker, and put him in a web development shop.

> but the digital revolution happened in just a few years

Going to have to disagree on that one. I recall twenty-some years ago, the death of manufacturing due to robotics was a hot debate and something discussed all over mainstream media. The warnings were sent loud and clear.

Which always leaves me with concern. Why did the people in manufacturing not take the time to retool their skills over the past two decades when the fate was clear? When the technology industry ultimately suffers the same fate, will I see the signs and move on, or will I be left struggling to find work too?

fair enough

Technology does not kill jobs: instead it allows the new jobs to be created elsewhere.

50,000 BC: your "job" (finding food) so dominated your life that your entire community followed it around.

20,000 BC: farming began. Your "job" is in the field by your house.

1700 AD: agricultural revolution. Technology allows smaller number to produce food. This allows industrial revolution. More specifically, this creates surplus food which means people can move. And so jobs can move. But it also means that areas that cannot produce food competitively no longer have to. Surplus food allows jobs to move to where the water wheels and resources are to commence industrialization.

1800 AD: The invention of the steam engine frees jobs from the need to be near flowing water: i.e. to move to where the resources are, or where the need to be. For much of the UK this was near ports as raw materials (e.g. cotton) came by ship. Bonus if the port is near a coal field. Again, areas that do not have cheap access to transport and coal, no longer have jobs.

1970 AD: Oil, giant ships, containerization and "free" trade allows jobs to move where wages are cheaper. Entire nations are uncompetitive at manufacturing.

2005 AD: Communications revolution. International calls are free. Service industry jobs move to where wages are cheaper. Entire nations are uncompetitive for service industry.

2008 AD: Computer Vision revolution: computers can now do picking and sorting that previously required a human.

201X AD: Robot Dexterity revolution: computers can now do fine motor skills, such as stitching shoes. Nike finally stops using child labor.

What is left for humans?

Technology has been killing (but not net killing) jobs for centuries.

Is this true? Or is it the case that as technology kills jobs, the unemployed find make work? That is, even if the unemployment level in a country has stayed the same, does it mean that the new jobs that the displaced workers perform are useful, or just a drain on society? Sure in the 19th century there were new non-make-work jobs. But today? Example: people working at Hallmark stores. Example: layer upon layer of middle and upper management. Perhaps it doesn't matter: if society can support make-work jobs, because of efficiencies elsewhere, then as long as people are employed it doesn't matter how. The problem would be if those make-work jobs could no longer be supported. This is what is happening: it is not in China's interest any more to support the vast inefficiencies of the US economic system. Make-work jobs are going away.

Finally, WWII: we destroyed most of the world economy to the point where the US was the world economy (ok, 75% of it). Does this have anything to do with the US having full employment (i.e. hiding technology's job kill) - and if so, now that the rest of the world has caught up, might we now see that the US economy cant support the make-work jobs?

Do you have everything you want in life? I don't just mean, "do you have everything you want of what you could purchase with money today?" I mean everything you could want.

Articles like this one make me feel like there isn't a lot left to do in the world - that we're close to stopping our progress toward better living standards. If we are stopping or slowing our progress toward higher living standards, then yes efficiencies do kill jobs.

I don't see a jobless future. I see a future with a different mix of jobs. To be fair, the author does touch upon this a little as s/he is encouraging investment toward new industries. However, I don't share the author's sense that these new industries and new economies will definitionally employ fewer people. Automation and efficiencies have been seen since the industrial revolution. Two centuries in, all this automation doesn't seem to have driven unemployment to a skyward trend over the long run.

If we were pursuing a finite goal, greater efficiency would mean that we would need less labor. However, I don't believe that our quest for better lives is a finite goal. People are always talking about things they wished existed or things they wished they had. That sounds shallow, but I don't just mean commodities; I also mean medical treatments. As labor becomes freed from current tasks, it can be put toward other uses.

That doesn't mean it will be easy, but I think we're going to continue raising our standard of living and creating a better world. And that will require labor.

While I agree with you, history also shows that unemployment and wealth disparity often do rise high enough to cause massive civil unrest.

Yes, high unemployment isn't permanent or a long-term trend. That isn't really relevant though when you're talking about the prospect of blood in the streets prior to returning to decent levels.

The US seems completely arrogant in the sense that they don't seem to think this can happen to them, or that their military superiority somehow insulates them from civil unrest.

Or maybe it's not wealth disparity that causes civil unrest, but rather the absolute level of poverty on the low end. Here in the US there's no sign of any kind of generalized unrest. Far less than there was in the 70s when, according to the "disparity causes unrest" theory there should have been even less.

Seems like it would take a bit of both. If everyone is at least comfortable enough, no one will violently revolt and risk losing it (Counter-examples?). Conversely, if everyone is impoverished who do you rise up against?

I can't think of a single case where wealth disparity alone has been sufficient to cause civil unrest, massive or otherwise.

The Yellow Turban Rebellion was pretty much entirely caused by a loss of jobs -> massive wealth disparity


Like the French Revolution example, this was caused by exploitation and abuse rather than the simple fact of someone's bank account being fatter than someone else's.

No, the French Revolution occurred because of active exploitation and abuse of the lower classes. The French people were not sitting around debating whether to spend the evening playing with their PS3s, going out for pizza, or mailing out a few more resumes. They were sitting around starving.

This comment would imply the cause was wealth disparity. What were the rich doing to exploit the poor (other than not giving them money).

I can't even begin to do credit to the causes of the French Revolution in a HN post. There are a million better sources, but I think you'll find most of them will agree that "not giving the poor enough money" is not on the list of causes. Taking excessive amounts of money from the poor (and everybody else) is closer to the mark, but you still can't ignore the political climate. The lessons of the American Revolution weren't lost on the French, who came to see Louis XVI the way we saw George III.

TL,DR: the country was bankrupted by the usual zero-sum game of runaway government greed. The common people were tired of being forced to pay for stuff like Versailles ( http://en.wikipedia.org/wiki/Palace_of_Versailles ) and literally starved of patience.

Nothing like this is even remotely comparable to what's happening today in the US. If anything, we're heading towards feudalism rather than revolution.

Are we not being bankrupted by run-away corporate greed? Probably not, but more importantly, will the average American think we are? That has a much greater chance to be yes.

If some sort of revolutionary spirit starts in the US, corporations will be targeted just as much as the government. Big if, but we are much closer than we were 20 years ago.

While this is not necessarily untrue, the prediction has been made a few times before, most notably during the early-20th-century wave of automation. Even the rather intelligent Bertrand Russell wrote a book in 1923, "The Prospects of Industrial Civilization", which spent a good deal of time worrying about that problem (though some of the other stuff he worried about did come closer to being true, like the prevalence of hyper-regimented work among the remaining jobs).

So one of the interesting perspectives I ran across recently said basically that "industrialization destroyed a whole class of jobs leaving millions of workers with no further economic role ever. But those workers were horses."

... and which way do you take that; that, because we're not horses, we're ok? Or, that horse-skilled people can indeed be left out forever?

(It's possible; see this on the US' Supplemental Security Income (SSI):


The latter basically. Technology wiped out the work of horses, so there's no reason it can't move up the "skills ladder" and wipe out more skilled employees.

Very interesting. Are you suggesting horses play the part of Tyler Cowen's Zero Marginal Product workers in the Industrial Revolution?


Also, if you remember where you saw that point specifically, I'd love to read it.

I'm in the middle here. I don't think this piece holds much weight because he's connecting two unrelated phenomenon (a downturn caused by overuse of credit and automation). Note the retailers he cites (Circuit City, Sharper Image, KB Toys) were generally killed off by other local retailers (most notably Walmart but also Best Buy, Toys R Us, etc...)

That said I do believe automation will begin to eat away at jobs when we get to the point where robotics can duplicate the functions performed by low end labor. What I mean by that is up until now computers have largely replaced more cerebral occupations. That allowed the people in those occupations to move on to higher level thinking.

Think of the growth in economic theory since the computer was invented. That had a lot to do with the fact that we can now test economic models in minutes instead of months because a computer can do the calculation.

So in those cases the computer didn't replace the job it just enhanced it. But dock workers doing heavy lifting aren't going to to turn into robotics engineers. Meaning the change coming with robotics will be different from previous technology shifts. So in that sense I think he's correct.

I'm not convinced.

Auto workers sixty years ago didn't turn into robotics engineers either. And, largely, they didn't have to. They moved to the niches the robots weren't yet appropriate for, until they retired.

It was subsequent generations that simply didn't have the same wrench-turning job the older generation started at. What I've observed, over my years in Detroit, is that as automation pushes into the process, complexity grows, and jobs to support that complexity push out to smaller employers. GM doesn't have a million wrench turners, but a thousand CAD/CAM shops now exist.

Many of those shops are producing parts that didn't exist before automation made the more-complex, more-specialized, more-numerous designs feasible. Before the demand for precisely-designed/machined components existed.

Are there net fewer jobs? Not that I've ever seen or read. [1]

Similarly with the journalism example in the article. Thousands of dead-tree newspaper jobs are definitely going away. But how many thousands of online news jobs were created? How many people make their living blogging? Is the overall industry of bringing written information to the masses contracting? That's another argument I'd need to see employment studies on to believe.

Lastly, current unemployment isn't structural. Despite appeals to 'what we all know', there is no data to suggest that it's caused by job types going away or job seekers having skills that no-one needs anymore. All the evidence suggests that employers simply don't need many workers right now. That is: current unemployment is just a symptom of the lack of demand.

If this time is truly going to be different, it will have to be due to factors not outlined in the article.

[1] Detroit's overall labor situation might appear a counter-argument, but that has more to do with the industry decentralizing -- away from Detroit and away from the Big Three.

That said I do believe automation will begin to eat away at jobs when we get to the point where robotics can duplicate the functions performed by low end labor.

I have seen tire factories where the only time a tire is touched by a human is at the end of the line QC inspections. They basically have two types of workers operators who feed raw materials in to the machines and clear minor jams, and mechanics who perform maintenance and repair broken machines. Sure the change over to industrial automation isn't complete but it is much further along than you might suppose.

The Industrial Revolution was essentially what you're describing.

The original author lists companies that didn't exist prior to the rise of the personal computer (CompUSA? Circuit City?). If you'd taken an employee from 2009 and brought them back to 1970, their job literally wouldn't have existed. How about everyone working for AT&T Wireless, Sprint, Verizon Wireless and T-Mobile? Where was the cell phone industry in 1990? 1980?

Who in their right mind is going to tell you they're going to be employed by something that doesn't yet exist?

It's hard to look at the world today and see how the status quo projects forward. But if you don't mind wild ideas (personal computers! portable phones!) and can wait a decade, maybe things don't look so bad.

Counterpoint: What do I do during that decade?

*Creativity exercise: think of some things. What if we replaced massive power plants with massive amounts of tiny generators (wind, solar, water)? Who would install, build and maintain them? What would happen if we switched cars from gas to natural gas? What would happen to the money spent fighting cancer if a preventative therapy could be developed? What if we switched from batteries to capacitors?

Don’t fill potholes. That won’t fix the economy.

Uh, yes. Yes it will. The workers that fill those potholes will earn wages, which they can then use to pay for goods. By purchasing those goods, they pay other workers' wages, and the virtuous cycle continues.

Listen HN, I love your knowledge of technology and entrepreneurship. But the economics posts on here are deplorable. We've seen disruptive technologies many times before: the cotton gin, the television, steam power, the car. In every one of those instances, our work force has adapted and moved into new jobs.

The Internet is not some all-consuming monster; it cannot universally substitute for real goods; it will not replace jobs that need to happen in person.

Don't fall for the broken window fallacy. If the government wasn't taking money from people via taxation to pay for pothole fillers, then the taxpayers would have their money to spend on what they really want, which would also maintain the virtuous cycle. What you see is the pothole fillers spending money, but what you don't see is all the people who had their money taxed spending less. (If the taxpayers weren't spending their money, it would be in banks being loaned out to other people who would be spending it.)

If what you're talking about is Keynesian government stimulating the economy in bad times by going into debt, that could also be accomplished by cutting taxes rather than borrowing to pay pothole fillers.

Well, yes, instead of having potholes fixed, we'd be repairing the frame of our cars instead, at much much higher cost (and not doing other things). Further, pothole fillers end up employing lots of different kinds of people than a millionaire would. Finally, banks tend to loan to people with money... they don't typically loan to those who don't have money; it's not a zero-sum game.

I think you have a good point about filling potholes being cheaper than repairing cars, but that wasn't really the point I was making. (I'm not necessarily against filling potholes, just filling potholes excessively as make-work.) I was just pointing out that saying that government spending to hire pothole fillers for the express purpose of stimulating the economy is falling for the broken window fallacy. http://en.wikipedia.org/wiki/Broken_window_fallacy

It's actually not--you're misunderstanding the broken window fallacy.

The classic example goes like this: "Let's break windows and hire people to replace them! That's a stimulus!" OP did not suggest digging holes into the street and filling them, however--fixing road wear-and-tear is an investment in public infrastructure.

Maybe I misunderstood, but I got the feeling from the OP I was responding to that he was suggesting we fill more potholes in order to stimulate the economy. I'm kind of working off the assumption that we are already filling the important potholes often enough, so filling more potholes just to spend money sounds like make-work.

That's a good take, but the broken window fallacy assumes the intentional destruction of previous output. Thanks for clarifying your point.

if cutting taxes went to actual working people, that would be true. cutting taxes even more on rich people and companies leads to higher wealth inequality and not to economic stimulus.

What does reducing wealth inequality have to do with stimulating the economy? (I haven't heard that argument before.)

Yes, I'm talking about Keynesian economic stimulus. The economic jury is still out on whether tax cuts or deficit spending are more effective.

it will not replace jobs that need to happen in person.

I think we'll soon see robots take many of those jobs.

And yes, I'm frequently ridiculed for that opinion. But I really think it will happen during my (late) lifetime.

The lack of pickup in employment numbers is not surprising when viewed in an historical context.

There is very broad historical overview of sovereign crisis in “This Time Is Different”, by Reinhart and Rogoff, which also includes banking crisis. Looking at what I can find on Google books (I don’t have the book here), we have that historically the unemployment rate rises an average of %7 and that this lasts 4 years. Output falls more than 9 percent, but that down turn only lasts 2 years. So yes, a jobless recovery is what we should expect.

From their summary on pp. 224 [1] that on average:

- Housing prices decline %35 over 6 years. - Equity collapses %56 over about 3.5 years - Unemployment rises %7; down phases lasts 4 years - Output falls %9, downturn lasts 2 years. - Government debt rises %86. The main cause is not the bailout but from the collapse in tax revenues. - Frequent spike in government borrowing rates.

So I would say we are not living anything unexpected.

[1] http://books.google.com/books?id=Iihe6s0XincC&lpg=PP1...

Plenty of others have predicted the rise of unemployment in proportion to increased automation, and they've been wrong before. Maybe this time they'll be right. I don't know; I'm not economist nor do I possess a crystal ball.

What I do know is that this whole situation is terribly discouraging for young people fresh out of school. My partner, for instance, recently graduated with a degree in civil engineering from a very challenging private school. He's been unable to find work as a starting engineer after a six month search, and I'm frankly out of ideas on how to keep him optimistic. Add to all this that his dad, a senior electrical engineer, just got laid off, and any encouraging words I say start to sound very hollow indeed.

I fear that this high unemployment rate, temporary or not, is going to create a generation of career setbacks and failures to launch. A lot of people out there have it much worse, I know, but I still don't know what to say when this hard working young man can't even get responses back for internships and unpaid work.

That sucks. I graduated in 2009 with a degree in Biochemistry, I fought for 7 months to get a job-- and when I did, I was laid off pretty quickly.

I wish that I had watched this when I first started job hunting: http://tedxcmu.com/videos/charlie-hoehn

I think his plan is good. The job hunt is dumb, demoralizing, and at the end of the day you aren't really making anything. Your partner should learn something! (Maybe learn programming? There's lots of jobs in that-- that's what I switched to.) At the very least he should continue doing civil engineering projects on his own. Boost his portfolio.

(oh, also, my dad is an economist and he has a crystal ball. Best gag gift for an economist!)

I just watched that video. It's brilliant! I'm going to force my sister to watch it now :) Thanks so much for sharing the link

Plenty of others have predicted the rise of unemployment in proportion to increased automation, and they've been wrong before.

Have they? In the long term, definitely, but in the short term, a sharp increase in automation is sure to have an effect on the amount of human labor required. Isn't a normal cycle that technology begins to replace workers but then those workers retrain and then get new types of jobs and recover their employability? It seems we're currently doing a poor job training existing workers and future workers, if anything.

I was referring to the long term, but you make a good point. Asimov posited that increased automation would temporarily increase unemployment but that the net benefit would always be positive. He thought that automation would allow human beings to focus on more interesting and rewarding jobs.

The unspoken assumption is that these more interesting jobs are plentiful enough to support the displaced workers assuming that they're willing to train and transition into a new kind of job. Is this the case today? Are the "higher" jobs plentiful enough? The question is not rhetorical; I'm asking because I can't say. I work in software development and my perspective is limited.

Ok, cool, seems like we're thinking along similar lines :-) The problem I see, however, is perhaps different to the one you pose. As distasteful as this sounds, I suggest that perhaps the "average" person is ill equipped to deal with those more interesting and rewarding jobs, given that they're likely to require significant technical or creative skills.

Can we bring "the masses", as it were, up to the levels of talent and expertise we'll require in the future, or is there a limit to how good our education and training can be? Will we reach a point where a small number of people are, effectively, supporting the majority? A mini version of this seems to be happening in some Western countries with people who've lived their entire lives on welfare. Perhaps the future is just one where more of us end up on welfare and the government keeps us going on the spoils of the extremely smart and/or powerful.

Perhaps the future is just one where more of us end up on welfare and the government keeps us going on the spoils of the extremely smart and/or powerful.

I think that's essentially correct. The non-singularity non-fiscal-collapse endgame is that everything we need and almost everything we want can be produced by a small fraction of the population, and most people don't have sufficient skills and knowledge to be economically productive. When you're trying to cure cancer or build self-driving cars, 10 brilliant PhDs beat 1000 average high school graduates.

Prediction: the idea of a universal guaranteed income (e.g. Milton Friedman's negative income tax) will steadily become more popular.

Agreed - the idea of retraining "wrench turning" jobs to be computer programmers is, in my mind, optimistic. Because every startup wants at least a BS in some tech related field (so a 4 year barrier to entry)... in addition to the fact that it takes a lot more than 4 years of school to train someone to be a computer programmer (I think)

>He thought that automation would allow human beings to focus on more interesting and rewarding jobs.

i think he is right. There is a bunch of problems in theoretical physics that somebody need to attend to asap and specifically there are some in gravitational waves theory that i'd like to get into as soon as somebody automate the enterprise software development. In the meantime we can't find people to fill open positions (30%) in our department.

> My partner, for instance, recently graduated with a degree in civil engineering from a very challenging private school.

The challenge of civil engineering is that you need to be professionally licensed. As you know, a new graduate has only taken the EIT (Engineer in Training) exam. You need four or five years professional experience before you can sit for the PE exam. In fact, in at least one state (Massachusetts?), you need to submit at least four inches thick of completed engineering calculations to prove your experience. The PE exam is very difficult, especially for structural engineering. I have friends who failed twice (the passing curve is statistically determined after all tests are scored, in some regions).

That being said, I have a Civil Engineering degree, and I never was paid to do any engineering calculations.

What most people who do not go through an ABET-accredited engineering 4-yr program do not know -is that an engineering degree is a superb background for building problem solving skills. The entire curriculum is based on problem solving and later, problem definition.

I believe that if your partner so chooses, he could develop fluency in the programming language of his choice. The most important thing though is that either he wants to do software development or already had programming skills.

You cannot motivate someone by burning them, the fire must be lit inside them, by them.

Consider checking out this: http://www.kolbe.com/

$$ skills survey much better than MBTI

Thanks for the advice. You are absolutely right that motivation has to come from within. A fair amount of research shows that the happiest and most productive people are intrinsically motivated. My partner's true passion is transportation engineering and, more specifically, sustainable mass transportation -- but, as you note, it's a difficult field to break into.

A poster upthread linked a video about getting work. The speaker advocates doing free or nearly free work in whatever interests you most, the theory being that these activities will eventually pay off. I think it's a fabulous if rather unorthodox idea. Since we're financially stable with my income, I've told him to give it a shot.

From your other responses, it looks like you're American? If you're willing to move up to communist Canada (I kid, I kid), we're starving for engineers. Alberta needs civil engineers for their oil industry, and Ontario & the City of Toronto are hiring too.

Slightly further afield, communist Australia has major skills shortages. I doubt engineers would have serious visa problems.

I checked with my partner, and he's under the impression that getting a visa would require at least five years of experience, but he's going to double check. Is this not the case?

There are civil engineering jobs in places you probably don't want to go, like western North Dakota.

how wide a search area is the job search? is relocation an option?

Thanks for asking. He's been searching in the Bay Area and in the Dallas / Fort Worth metroplex primarily. Relocation is certainly an option; in fact, we would both love to live in the Bay Area, and it's a good chance that I could find rewarding work there. We're willing to spend time living apart if that's what it takes, but obviously that's not our first choice.

A lot of companies in the Bay Area can't find enough good programmers, even while offering very high salaries. If he has some downtime between his job hunt, it'd probably be very good for his eventual prospects if he spent some time learning to program and practiced, practiced, practiced.

I imagine it has a good number of uses in Civil Engineering as well (modeling? automating repetitive tasks?).

In an economy like this, you might be in for a rough ride only having two preferred places that are already popular for job seekers. I do wish you and yours luck.

Yeah. It would have been easier if we had both graduated at the same time. Now, we have less maneuverability. Thanks for the wishes.

Here's a different way to look at it.

We will soon be in a leisure economy and 'jobs' will be something completely different. It'll be about helping people waste time/kill time rather than producing something of value.

As we advance, we are moving to a scenario where there just isn't that much work to do. Leisure time is increasing more and more. More and more 'work' is becoming automated or being done by robots or algorithms. People just aren't needed in lots of places.

If wealth was distributed equitably or even a little inequitably, then it would mean that most people could just take time off and spend their money on entertainment. You could argue this is already a big trend with movies, video games, devices that aren't necessary, etc. taking up more and more time.

Since wealth is very inequitably distributed - it leads to lots of people being left in a leisure economy with very little money. These people 'need' jobs even though the economy itself doesn't have 'jobs'.

The net is that we have technology doing this ->

A small percentage are taking up most of the money and lots of people need jobs for money even though the economy doesn't really have jobs left for them. They will be forced to adapt to become entertainers/time waste-helpers rather than productive workers.

instead of this ->

People need to work less and wealth is reasonably distributed and people can do what they want without worrying about money.

I disagree. Technology does not kill jobs in manufacturing or services. It does in farming.

But in manufacturing, and services more technology merely means that people get more stuff. People buy more clothes more gadgets, more of everything. Or if they buy the same amount of gadgets their gadgets are more complex, etc. Thus, when technology results in higher production it is usually matched with higher consumption.

There are two things that are killing jobs in the US right now: the export of jobs offshore, and poverty. The US economy is actually creating shitloads of jobs, the problem is that we are creating them in China. China is still doing monetary tightening to slow down its growth.


The other thing is poverty. Since the new deal the US has usually had some kind of mechanism to ensure that the middle and lower middle class is relatively protected and relatively well off. This included unions, minimum wage legislation, and various government programs. Nowadays most of these things are being eroded. This means that people cannot buy more stuff, which means that there are fewer jobs, which means people buy even fewer stuff, which results in even fewer jobs, etc.

To determine whether technology is killing jobs, you can ask yourself the following hypothetical question: Does everybody in the world have every manufactured good or service they could possibly want? If the answer is true, then technology has killed all hope of future economic growth. But the answer is sooo far away from being true, that the question itself sounds ridiculous.

So no it is not technology. It is something else in the way our society is ordered and run that is doing it.

Perhaps this will prompt a substantial reorganization of society. Ideas like the http://en.wikipedia.org/wiki/Basic_income_guarantee might actually gain traction.

Marshall Brain's novel http://www.marshallbrain.com/manna1.htm is one recent exploration of similar ideas.

But personally I'm sceptical if this will actually happen in the near future. As long as we don't have "Strong-AI" there are many jobs only humans can do well and a lot of those jobs don't require extensive education (nanny, nursing home attendant, customer service etc.)

The reason why America doesn't have more good jobs is that America is no longer the preferred place to run capital-intensive businesses that can employ large numbers of semi-skilled workers at high wages. For a large part of the 20th century, America was the best place to locate high-tech factories. Cadillacs were built in Detroit. Now Apple iphones are built in Shenzhen.

The Americans that 40 years ago would be engaged in building and running factories employing hundreds and thousands of semi-skilled workers (requiring millions of dollars of capital), are now employing tens of high-skilled workers (requiring thousands of dollars of capital.)

In short, the capital per entrepreneur ratio in America has dropped. As a result, entrepreneurs are employing fewer people.

This is a classic economic fallacy. Invention of the plow improved efficiency and killed jobs, invention of the sewing machine improved efficiency and killed jobs, invention of the computer improved efficiency and killed jobs.

They killed jobs in the short run but they made everyone in society better off on the whole. Sure, some workers had to be retrained -- and some workers could never find a job again. However such is progress. We are better off now because the next generation doesn't have to all be farmers, some can do this or that. It is a good thing when we require less humans to do the same amount of work than before. It means we free up human capital for more valuable uses.

Because of the advancements in technology their children will have jobs that never could have existed if we still needed 90% of our population to farm just so that we would not starve. Now like 1% of our population is farmers. It's progress.

Read: 'The Choice' by Russell Roberts

Read: 'Economic Facts and Fallacies' by Thomas Sowell

Read: 'Economics in One Lesson' by Henry Hazlitt

I agree it's a long-term improvement, but if "some workers could never find a job again" happens to the majority all at once, they aren't going to quietly starve.

Anyone who is willing and able to transition to another way of earning a living, will. The majority of workers being replaced are not unwilling to find a new way earn a living, it's only the very old and the very stubborn that will have a difficult time finding their career 2.0

But earning a living doing what? I think that's why we're all having this conversation. If I got laid off today because someone finally wrote the ultimate software development AI, I have no idea what I would do instead. This seems to be one of the only career paths left with substantial unmet demand momentarily sheltering me from the Iron Law of Wages, and I lucked out in being obsessed with it.

Is this a bug or a feature? Shouldn't we be figuring out how to embrace this? Isn't this an symptom that the abundent future is arriving, but not evenly distributed? Is it not time to start figuring out how to create the vocabulary and institutions of modulating abundance instead of maintaining 19th Century institutions whose main purpose was to modulate scarcity?

The fact that "Finance" is now over 30% of the US GDP shows a major bug in the current set of institutions. That is where abundance is being dampened into wasted wealth for 0.1% of the population who are using it to maintain artificial scarcity. It needs to flow to help fund creativity, R&D, experiments that will blow the doors off of scarcity and allow abundance to be well, abundant.

And most people don't want JOBS, they want to live. But most of us have forgotten that and thus we keep trying for 100% employment when we should be working towards 100% UNemployment aka Living Life.

Fixing the economy will require more than entrepreneurs. I think it will ultimately require major socio-economic reform, possibly a conversion to Technocracy. Technology isn't just eliminating jobs, it's eliminating trade altogether.

I can replace my watch with a smartphone app. That means the watchmaker, supply chain, retail store, and clocksmith are all out of business. And 3D printers could be the next mega-disruptive technology. What happens to manufacturing of all kinds when we have Star Trek style repicators in our basements?

I'm just not convinced that entrepreneurship alone can combat the major macroeconomic changes that are coming.

Swiss watchmakers have reported record sales since 2008. The guys who own the smartphone factories in China really like luxury automatic watches.


"I can replace my watch with a smartphone app. That means the watchmaker, supply chain, retail store, and clocksmith are all out of business."

I work as an iOS app developer, a role which didn't exist just three years ago. There are millions of developers out there on the various smartphone platforms, a market that Apple spawned after seeing what hackers could do by jailbreaking iDevices and loading apps on the iPhone without "permission".

I wouldn't have a job now if I weren't for the iPhone (I live over 5000 miles from Cupertino) and there are many like me all around the world. Meanwhile, I can't think of a single watchmaker that has gone out of business.

> I work as an iOS app developer, a role which didn't exist just three years ago.

I respectably counter your statement with the idea that the job category existed, just not the platform specialization.

> I wouldn't have a job now if I weren't for the iPhone

You could have been able to find a job. What was your background before iOS development? (or was iOS development your first job)

I'm not trying to disprove the fact that your source of income is iOS specialization. If you are indeed making the majority of your revenue from your own apps, big congratulations! My point is even though Apple created a tremendous ecosystem for independent developers, it may be a less than net zero gain (e.g. jobs in Visual Basic programming were lost and either there are much less new jobs in the new ecosystem and/or previously gainfully employed developers are unable to develop iOS competency and proficiency (no mean feat).

Well ok, technically the job category (smartphone app developer) existed, but it was insignificant compared to how important the role has become. Apple basically showed everyone else how to do it[1]. I've read that trying to launch an app on a platform like Symbian in the "old" days was an utter nightmare. You would have to deal with carriers and try to convince them to approve your app in some cases.

iPhone development was my first "proper" job after finishing a masters degree. I'm not currently making money from iOS apps, although I hope to once I gain a better understanding of iOS development. The company I work for is doing some pretty cool stuff with apps, I hope to be able to talk about a project we've going on here on HN in a few months.

I hear what you're saying about net zero gain from a few technology displacing old jobs. I think that's just a short-term phenomenon. If apps displace some jobs in more traditional industries (e.g. the apps in my company aim to replace paper-based product catalogs with iOS/Android apps that do the same thing, except faster, better, cheaper) then I think:

a) more jobs will be created in the app development space

b) the productivity gains, cost savings and perhaps new market opportunities offered by apps will allow the beneficiary company to become more profitable, leading to job growth in that company. This has a knock-on effect also for those who deal with the beneficiary company (e.g. suppliers getting more business, customers getting better prices, better service etc.)

I believe a and b will lead to net jobs gain in the longer term, rather than jobs lost overall by the printing company and related companies.

[1] They stumbled on the model of an app store by accident. Steve Jobs thought that all iPhone apps would be web-based rather than native apps when the iPhone launched in 2007. Luckily, Apple was smart enough to recognise the opportunity, creating a river of cash for Apple.

If government wants to create jobs, they need to encourage businesses to create new value (by paying them to create that value). Employers will then hire people to create the value (and pay them (after skimming enough profit off the top to make it worth the effort)). The problem is, of course this requires the government to spend more (not less) which seems strongly against the current momentum.

I'd suggest the modern version of the Depression era work programs and/or the 60s space race. Perhaps something launching a major technological leap in robotics (which ironically would exacerbate our job "problem").

Well, it's against the momentum because to okay such expenses, a culture must be created which okays many, many other expenses, and right now they are a bit of a threat to our being able to maintain current value-encouragement programs, let alone add new ones.

I don't think that centralizing the value creation incentive engine was good anyway, but now it's barely possible.

I am an optimist. It helps that I have seen this cycle before in the late seventies. People spoke then of the new normal and that's a phrase that is trending once again.

I spent my early youth in the newsroom and the tools I used everyday have become a trip back in a time machine for todays students: http://journoterrorist.com/2011/08/02/paperball2/

Technology and entrepreneurs will bail us out once again. Lots of fortunes have been wagered and lost betting against America.

Warren Buffett knows a thing or two about the outlook for jobs. Here's what he said on July 8, 2011: “We will come back big time on employment when residential construction comes back...it's not going to be 5 years from now...you will be surprised in my view how fast employment changes when that happens...I think in a few years we'll see unemployment at 6%"

Full interview here: http://www.bloomberg.com/video/72140684/

Three things stand out in my mind as to what's making job recovery so challenging in the wake of the 2008 crisis:

1. Unlike e.g. the tech crash of 2000, 2008 was a crisis of credit, the lifeblood of all other industries. Their cautiousness in beginning to lend again will make recovery and therefore jobs growth extra long.

2. The 2008 crisis forced companies to find new efficiencies. Whole layers of middle management were eliminated in many cases without any downside and remaining employees were fine working harder to keep their jobs. Those 'unnecessary' excess positions take a long time to come back. It will require companies to feel flush and to get lax on this again.

3. I think most importantly, our economy largely comes down to consumer spending and the housing bubble didn't just drive inflated housing prices; it also enabled home equity lines of credit to buy boats, etc. Coupled with loose credit card lending standards, our economy was built upon unsustainable growth in consumer credit. I don't know when such a consumer credit environment will come back, but again, it will have to be preceded by a sort of boom in the economy.

I agree that 'technology efficiency' etc. are not helping, but the heart of it are 1, 2 & 3 above.

The middle class is going away. And not coming back. All of those factory and middle management jobs are being replaced by cheaper labor in the one case (offshore or robotics) or by technological and communication efficiencies on the other.

A prediction: Twenty years from now, there will only be two types of jobs in the United States: Creatives and those in the Service Industry.

Creatives - anyone who creates things with their mind. Artists, yes, but also programmers, designers (graphic/web/product), musicians, directors, etc. The US won't necessarily have a monopoly in this department, but there's enough cultural barriers in many of these fields that it's likely we'll still have a very healthy presence there, at least for selling to the Western world.

Everyone else will be in the service industry - and I'm referring to service jobs that cannot be outsourced, because they require someone local. Waiters, barbers, chefs, trainers, couriers. Nurses and caregivers. And lots of service jobs that don't exist today. Need someone to help assemble the product you just downloaded and 3d printed?

The only jobs that will remain are the ones that we can't outsource to robots or cheap labor.

The US imports a lot of its creatives, and a majority of its creatives when it comes to math and science. If capital moves somewhere else, creatives will move somewhere else.

The OP's post could use some context.

Ricardo’s concept of comparative advantage was forged in a world where labor and capital were essentially fixed. England could weave cloth more efficiently than Spain, but Spain could make wine more efficiently than England. Therefore, they would both benefit from trade given that each of these countries had a comparative benefit or efficiency to offer. The assumption under comparative advantage is, while the composition of employment would change under trade (more weavers employed in England and more wine makers in Spain), the level of employment would stay virtually the same. Meanwhile the citizens of England would get cheaper wine and the Spanish cheaper cloth.

In today’s world, labor and capital are not fixed. Capital flows wherever the input costs are the cheapest, such as labor and materials. Companies can set up operations in many places around the world. For instance, an American multinational no longer has to produce in the country where it sells, given existing trade treaties that lower tariffs. They can shift production to China or Mexico where the labor costs are a fraction of what it is in the U.S. and not be penalized by tariffs or quotas. In effect workers get fired in the U.S.; this leads to a loss of income for the working and middle classes. The workers in Mexico and China benefit because they have jobs, albeit at low wage rates and substandard conditions in many cases. Contrary to received wisdom, prices for some products might be lower, but not significantly so. The difference in wages (from those in the developed world versus the developing world) goes to investors, or more accurately these days, management. This is trade by absolute advantage, not comparative advantage.

For a while GDP growth seems to be fine. But with production set up abroad, the U.S. runs trade deficits and Americans by definition incur more debt to buy these goods. NAFTA encourages this. As a member of the WTO, China benefits from this trade agreement in that its goods are levied with lower tariffs than would otherwise be the case. Moreover, China manipulates its currency to keep it artificially low. Under a reciprocal trade regimen, the currency of a country that exports more than it imports should rise. A rising currency would act as a braking system to bring trade flows back into equilibrium. But the U.S. and China do not want that. China needs to keep selling goods to the world to continue growing fast enough to generate enough jobs. Despite its protests from time to time, the U.S. government does not want this because it is captured by the multinationals, which make much more money not employing Americans (or Europeans for that matter). So when media pundits and approved economists say they are puzzled by the lack of employment growth, it is theatre, a necessary piece of kabuki to keep their jobs as propagandists.

Free trade under a truly Ricardian model of comparative advantage is theoretically beneficial to the world because at its heart lies the assumption of full employment. Instead what is touted as free trade is not Ricardian; it is a model of absolute advantage that ensures that the wages of labor are depressed, thereby enabling the rise in income for the top 1%.

The problem for the elites is that these are not sustainable political or economic policies because eventually unemployment will reach unacceptable levels and the right leader will come along and tell the real story to the American people.

As long as the political power of the middle and working classes has been undermined and blunted, U.S. multinationals will not hire Americans if they can offshore production. Therefore, people need to be organized to buy goods and services from small businesses whose interests are more aligned with that of the nation. Also, Wall Street should be boycotted. Do not do business with big banks. (I belong to a credit union.) Invest in regional financial institutions. Wall Street, because of its power over Washington, has been able to push through unfair trade bills in exchange for the right to set up shop in those foreign countries that benefit from access to American markets. But it is a one-sided deal in practice. U.S. access to foreign markets translates to this: multinationals offshore production and export to the U.S. at low or nonexistent tariffs.

If you want access to Chinese markets you must manufacture and hire people in China. Also, you must share your intellectual property with local firms. Multinationals accept this as the cost of doing business in China, although the real cost is being borne by the working and middle classes in this country.

Unless there is a substantial reversal in these policies, expect many years of sub par economic growth and high unemployment in the U.S. So why should anyone be surprised when the U.S. GDP growth rate for the second quarter is dismal? Unless of course, they are paid to be surprised.

You don't understand comparative advantage. As long as there is scarcity, comparative advantage matters. There were 24 hours in a day when Ricardo was around and there still are today.

There are theoretical cases under which trade can make a country worse off, but they are rare situations and cannot be simplified down to "inputs flow around today but didn't during Ricardo's days". That doesn't even make sense.

But what bugs me most about your post is your belief that we should work to keep wages high for overpaid middle class American by prohibiting poor Chinese and Indians from having access to world markets where they might actually earn their marginal product. People are all for drinking fair trade coffee and supporting AID's programs in Africa. But when it comes to having to compete on a level playing field with foreign workers all that altruism goes out the window.

> But what bugs me most about your post is your belief that we should work to keep wages high for overpaid middle class American by prohibiting poor Chinese and Indians from having access to world markets where they might actually earn their marginal product.

Rather than ascribe sinister motives to a person (a desire to oppress Chinese/Indian workers in order to keep American salaries high), maybe you could consider the structural problems that make it difficult for American workers to compete with foreign ones. OSHA regulations, Social Security, Medicare, health insurance, unions, and many other factors go into the cost of an American worker. I don't know much about China or India but I doubt they have any of these things. So, are they important? If they are, why are we ok with importing goods made by people without the same protections, in order to save a few bucks? If they're not important, maybe we should eliminate them, so we can compete in the global marketplace.

Sinister motives are not necessary to produce a negative outcome and making a decision to save these worker protections for Americans also amounts to making a decision to deprive workers from poorer nations of access to markets that will allow their standard of living to rise.

There is no level playing field with foreign workers, because they and we are not free to travel where wages are best or prices are lowest. Capital is free in the modern economy, but labor is not. Exploiting the poverty of trapped foreign workers is not altruism, it's lowering costs to maximize profits, which is what businesses are supposed to do.

And trade deficits accumulate as public and private debt (or rather negative savings.) This is not theoretical, this is an identity.

The one part of his post that had some substance is that we're not participating in free trade on a level playing field because the Chinese won't freely float their currency and instead have it pegged.

"substandard conditions"

this needs to stop. you compare the working conditions of the laborer in china with the laborer in the US and bemoan the conditions. instead compare the laborer in china with the country field worker in china.

you can't magic a billion people into the middle class lifestyle that you find the minimum tolerable. the 2000-2010 has been the greatest decade in all of human history in terms of the overall raise in the quality of life for humanity as a whole.

you can't magic a billion people into the middle class lifestyle, but you can use a gun to keep them away from it.

i have no doubt those field workers in China would prefer the wages available to field workers in America, and if they could move to take advantage of that, they would.

We only have to look at Mexican field workers crossing into the US to see this is true. Though the New York Times reported that the number of Mexicans entering the US illegally for the first time has fallen from 525,000 in 2000 to fewer than 100,000 in 2010. The ROI for working in the US is lower, given the US's economical and political environment and Mexico's improving work opportunities.


I am curious. How does Germany do it? It has high labor cost yet it maintains its manufacture leadership and has export surplus. China and Germany become manufacture powerhouses yet have vast difference in labor cost structure.

Germany and Japan pursue their own national industrial policies--unlike the United States, which doesn't really have one. The industrial policy of Germany and Japan is to compete in high-value, highly specialized niches, where there are few competitors. This way they maintain high profit margins to support middle class wages at home.

Germany's exporters get rebates on the VAT taxes of the goods they export. The United States has a big disadvantage compared with Germany in this respect. German manufacturers receive government subsidies, and there are investment incentives. In the US, the tax incentives encourage offshoring production. Labor unions sit on the board of directors of German manufacturing firms. Unlike the US, labor has a voice at the table in Germany.

Japan also has an industrial policy, with significant government subsidies to support targeted niches. Japan's Ministry of Finance engages in vigorous exchange rate intervention to keep the Yen undervalued (read: mercantilism, similar to China's currency policy). China has extensive subsidies: cheap land, tax holidays and cheap government financing. It does have environmental regulations--but China doesn't enforce them. Multinationals can pollute with abandon in China--and the subsidy that they receive is someone else's negative externality. This is hardly the level playing field that underlies any reasonable interpretation of free-trade policy.

These realities stand in stark contrast to Ricardo's classical notion of comparative advantage, the heart of which involves full employment. A true reckoning of comparative advantage should include the impact of negative externalities.

Can you find references for these German government subsidies for exporters and their percentage value per exported unit?

The US also runs a very complex series of industrial subsidies too, but it seems to be somewhat ad-hoc and therefore difficult (outside of WTO complaints such as Boeing-Airbus) to explore.

VAT is a sales tax, so it is not charged on exports outside the EU. It might technically be a rebate but it is not a subsidy.

Not sure about the extent of real subsidies.

The key to being a net exporter (which is not quite the same as being a "manufacturing powerhouse", but _is_ what China and Germany have in common) is government policies repressing domestic consumption and productivity that is high given the wage structure. As long as your population is forced to consume less than it can produce, chances are you will be able to export the surplus somewhere.

Both Germany and China have such policies, in fact. It means that in both cases consumption (aka "the standard of living" as it's typically measured, for better or for worse) is lower in both than it could be if workers' spending power were allowed to match labor productivity.

http://www.financialsense.com/node/5580 is a good read about some of the issues.

High value goods mostly, the same thing the US builds. China is a powerhouse of simpler things (though improving); Germany does the complex stuff (automobiles, machine tools, bullet trains, etc.)

On a related note, US is also a manufacturing powerhouse still. Its manufacturing GDP per capita is only about 20% below Germany - and absolutely it is the largest in the world by far (using nominal conversion rates). It though is producing far higher value per employee than Germany, and astronomically higher than China.

I sympathize with your post. But if it's a reasonable approximation of reality, I have a problem with this:

"The problem for the elites is that these are not sustainable political or economic policies because eventually unemployment will reach unacceptable levels and the right leader will come along and tell the real story to the American people."

How are the American people supposed to recognize this unique truth and distinguish it from the "truth" that all current and former leaders and politicians have been telling to date?

If the American people are the lawn, how do we know when to trust the lawnmower when it says "this time it will be different?"

The argument, then, is that our ability to produce will outstrip our desire to consume, and so a fraction of people will be able to produce enough things for everyone to consume, which will lead to the rest not having jobs.

The problem with the argument is that it does not really appear to me that our ability to produce has outstripped our desire to consume. The buying of things is currently rather high, and product shortages are not entirely uncommon. Rather, people cannot get paid a first-world living wage to produce the things we desire to consume, or they do not have the skills required to produce those things, etc.

Somewhat related: are most other countries currently suffering high unemployment, or just America? If the answer is 'no', that seems to contradict the thesis of the article.

The US is somewhat of an outlier; it moved from 'top of class' to 'comparable to the EU as a whole' in a few years (http://epp.eurostat.ec.europa.eu/statistics_explained/index...., figure 3)

Australia has record low unemployment, and consistent growth since the GFC. (Largely due to the resources boom driven by china)

N.B Australia's whole economy is worth about the same as the U.S's debt.

Yes, why? because NOBODY has enough money anymore.

Think about the Ford Mustang, as my understanding it was the first sports car and is relatively new. What does it mean? it means before the mustang it did not matter how much money you had, you drive the same car as everybody else.

Warren Buffet partner, dont recall his name now, has it right:"People will do a lot of things to be loved but will do Anything so other envy them"

In other words marketing has achieved a society that is on an envy war, when everybody is looking for ways to save money, so they can spend it in more shinny things, that means jobs are going to be just enough to produce whatever is going to be sold.

I live in Mexico, and from here what I see is that the USA is becoming Mexico, when I was hoping for the other way around.

I think you guys are missing the point. The point is not that people are jobless, the point is that what they would get paid if they worked is just too low for a decent life.

At the correct price (even 1 cent per hr), everybody gets a job fast.

Given that, the real problem is for the jobless to learn something of more value to the economy or accept lower salaries, it is not technology. If there was no technology development, things will be more expensive and the poor would be even more poor.

Technology is essential to economic growth. When you accomplish a task with fewer resources and less labor, you have extra resources.

You can take those extra resources and spend it on something else or lend it to someone else to spend on something else. There is no loss of jobs over all. The jobs have just moved.

This is a process that has been going on forever. And its responsible for the high standard of living enjoyed by industrialized societies.

Its only because of technology and the capital it has created that enable workers to get high wages. If wages didn't rise, workers would have a strong incentive to compete with their employers. They can borrow money and buy the same technology. This is exactly what goes on in Silicon Valley. And everywhere else in the world.

The current dearth of jobs in many fields is the result of the collapse of the housing bubble and government policies that impair recovery, not being able to do more with less.

I've noticed this trend, and it's greatly concerning. There are plenty of downsides to wage slavery, but overall there has been a historical improvement to human dignity and quality of life due to people being useful as units of production.

As technology diminishes this and there are fewer roles that need to be fulfilled by actual humans, people will be forced to viciously compete over fewer and fewer jobs to stay out of abject poverty. So-called "knowledge work" isn't safe either, as these jobs gradually get gobbled up by software and specialized AI algorithms.

Maybe the unemployed will be able to invent new jobs for themselves to create more wealth; maybe technology advances will make a welfare state trivially cheap to maintain. But I think the prospects for mass poverty are very real.

I can't help but wonder what our unemployment numbers would look like without housing crisis and the two wars. Would we be investing in things like energy, healthcare, and tech? People are sitting on cash because of uncertainties in the markets, not because tech killed all the jobs.

Although the world population has more than doubled from the middle of the twentieth century, technology has doubled many times more, and continues to at a much faster rate than our rate of consumption and reproduction. This exponential increase means that is only a matter of time until the efficiency of technology overtakes the amount of jobs that a society needs to produce more than it needs.

Technology will net kill jobs someday if it isn't already. It remains to be seen whether that is happening now, or if this unemployment is just the symptom of a country that has borrowed too much.

Are inmates counted as unemployed?

I think technology slowly obsoletes economy. Pushes it towards more and more superficial exchanges and dissassociates price and value.

Since society is built on economy it finds out clever ways to no longer valid equation work = wealth

Young black people are missing jobs? Criminalise the thing they do and put them in jail. They are no longrt missing jobs an a handful of people might be hired to build and upkeep facilties where they are held.

There are a lot of such mechanisms that suck excess of available human work.

In my opinion John Michael Greer's "The Long Descent" is the most realistic and most hopeful take on this vein of thinking and writing. It is also a well-written and easy to read book. The main takeaway is that our situation is not a problem with a solution, but rather a predicament or situation with various coping mechanisms.


However I should point out that JMG points to different root causes of "decline". His core thesis is that Peak Oil and net-energy / net-resource growth not meeting demand are the main determining factors in our shrinking economy. His hopeful response to this scenario is that although there will be far fewer jobs, there will be much more work.

"The Great Stagnation" from Tyler Cowen of Marginal Revolution, is a long essay that address this issues from an economist point of view. A wonderful read. http://marginalrevolution.com/marginalrevolution/2011/01/the...

It will be interesting to revisit this article in 5 years...let me get out my Google Calendar...

How Technology is Recreating the 21st-century Economy http://www.parc.com/event/1499/how-technology-is-recreating-...

The onus is on individuals to add value to society. Don't sit around and wait for a job. Create your own job. There is not a shortage of jobs there is a shortage of entrepreneurs and go-getters.

aw shucks

LoL Don't fill the potholes? Who the fuck fills them then!?

Downvoted because my post is snarky?

My point is factually valid.

Public works DO create jobs, it's an empirical fact. Just because the OP hates the idea doesn't mean public works don't create jobs. Maybe he thinks UPS should fill the potholes, but either way, the only way to fill them is to hire people to fill them, whether the government or private business does it doesn't change the fact that someone was hired to do it.

Downvoted because it's not the kind of humor we prefer here. We enjoy well-thought out intellectual debate. You final paragraph here is what you should have posted initially -- it has substance.

"Public works DO create jobs, it's an empirical fact."

No it's not. Sometimes it does, sometimes it doesn't. It's never that simple. Along with the obvious broken window fallacy problems, you have to look at how you are paying for that public work. Taxing a net two median-pay jobs out of existence to create a single public works median-pay job is destroying a job, not creating one.

The definition of "public works" is building things using State money. There is no way to build roads without hiring people. This is an empirical fact.

Unless you know of some way to maintain or build streets without hiring people?

Again, it is an empirical fact that public works create jobs. At least public works that require hiring people. It's not hard to understand. Work needing to be done creates jobs, whether that is financed by the government or private industry doesn't change the fact that the work needing to be done requires employment.

You can debate until the cows come home about whether specific public works are worth the money, but you can't debate whether or not they create jobs. Its a simple observational fact. Especially when the vast majority of public works require manual labor.

Sorry, I have this truly bizarre habit of trying to account for both the benefits and the costs of a given policy.

It's a fast way to Total Political Unpopularity, believe me! But alas, I'm an engineer at heart.

Creating jobs is trivial. It's not even remotely interesting. Creating net jobs is the interesting question. And you can't prove you've created net jobs until you look on both sides of the ledger. It's a bizarre, crazy, foreign idea, I know, but it also has the virtue of corresponding to reality much better.

If more politicians (and dare I say, even economists) did this more often we'd be in a lot less trouble right now.

And yes, you seem to have totally missed my point.

I agree, but the OP's point is a false dichotomy: That investment in entrepreneurship is a net benefit, but any investment in public works is a net loss.

Using roads as an example for public works not providing a net gain isn't very convincing... considering our entire society is now predicated on their existence.

You clearly missed the GP's point and the reference to the broken window fallacy: http://lmgtfy.com/?q=broken+window

No, I didn't. Maintaining infrastructure isn't breaking windows!

Public works is not the equivalent of a glass-maker breaking the baker's window. It's the equivalent of hiring people to maintain the roads that allow the glass maker to get to the baker, but instead of the glass-maker paying for the road the baker and glass-maker distribute the cost through taxation.

It's intellectually dishonest to even compare highway maintenance with breaking windows to create a job for yourself.

Public works also destroy jobs, since the wealth to fund them has to first be extracted from the public.

There is no evidence that lowering tax rates creates jobs.

Sure. That doesn't change the fact that they create them.

Self-driving dumptrucks.

So that's what the Ann Rand utopia looks like...

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