Thinking About 47% Unemployment
Thus for the first time since his creation man will be faced with his real, his permanent problem-how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest have won for him, to live wisely and agreeably and well. Economic Possibilities for Our Grandchildren, John Maynard Keynes
In 1930, just as the Depression was taking hold in the industrialized world, John Maynard Keynes wrote the above, most likely to buck up the spirits of his fellow Brits. He makes a number of cogent points as well as curious digressions. He forecast a gradual but meaningful compounding of 2% annual advances in the standard of living that would result in an abundance of wealth per household. He further projected “technological unemployment” – technology would be created that would meet all of our needs with a mere quarter of the labor required at that time.
He also wrote that to satisfy humanity’s need to work that the remaining labor could be spread thinly into 3 hour shifts or a 15 hour work week. And to still live wisely and agreeably and well!
This projection resonates today, particularly because other voices are forecasting the loss of up to 47% of jobs over the next two decades. The authors of this blog are concerned for our own grandchildren and are working to validate these projections as well as to suggest strategies to blunt negative effects. We would also like to invite our readers to join the discussion with whatever commentary you wish to provide. To prompt this, we have these questions:
- Is the 47% projection real?
- Are we realizing gains from the massive investment in “labor saving” technology over the last 50 years?
- How do we cope with wide scale technology driven unemployment?
Q1: Is the 47% projection real?
To share some initial thoughts based on our own investigation, we believe that the 47% projection has merit but needs careful analysis and tracking. Carl Benedikt Frey and Michael Osborne made this projection in 2013 after reviewing over 700 occupations in the US using Bureau of Labor (BLS) data. A number of other studies have been done that approach a similar level of job displacement.
A careful review of BLS data for the last 5 years suggests that the high risk occupations in Frey and Osborne’s study are beginning to experience job losses at a much greater rate than lower risk occupations. In mid-2018, a study will be released that will assess the impact of multiple factors, including automation, on employment in the US.
The authors of this blog have had long careers in information technology and have seen displacement in many occupations. It is not difficult to anticipate an even more rapid displacement based on the speed which technologies such as Artificial Intelligence and Robotics are advancing.
Since 2013, which was in the midst of a long slow climb from the Great Recession, a worldwide recovery may mask the steady gains that technology has made in displacing human labor in a number of fields. We will try to discern the impact of economic and population growth from the impact of technological unemployment as well as the off-shoring of jobs.
Q2: Have we realized the benefits from past technology investments?
In regard to the second question, what is the ROI from the massive investment in technology over the last fifty years? We haven’t progressed to the lifestyle of the Jetsons with flying cars and robotic maids, although both have been invented. Wages appear to be stagnant in the United States with only small gains in the standard of living since the 1980’s.
The gains may be seen elsewhere, in the spectacular rise from poverty in Asia and other parts of the world such as Mexico and Eastern Europe. World Bank data shows that China, India and South Korea have experienced growth in GDP from 1990 to 2017 of 19x, 9x and 5x respectively, compared to a 3x growth in the US. Extreme poverty levels in Asia have declined from 80% in 1981 to 4% in 2013.
The technologies which contributed to this growth began with supply chain management systems that permitted manufacturing to be moved anywhere on the planet where the most favorable terms for doing business existed. Other technologies include eCommerce provided by AliBaba, making it easier and faster to do business in China, and on a scale far larger than Amazon. Robots are being used very effectively in South Korea as it creates high quality cars, smartphones and washer/dryers. Koreans deploy 4 times the number of robots per 1000 workers as the US.
The 2016 election can be seen as an attempt to recapture some of the economic momentum that shifted to Asia in the last two decades.
Thoughtful economists have asserted that more jobs have already been lost to technology than to off-shoring, a trend that is just beginning.
Q3: How Do We Cope with Wide Scale Technology Driven Unemployment?
In his essay, Keynes sees the 15 hour work week as a necessity largely to fulfill our innate drive to work. Until this drive goes away, available work would be spread “thinly” across the population. German union members have just won the right to a 28 hour work week at companies such as Daimler Benz, but this has not yet appeared in the US.
What may be occurring is that large swaths of the population are becoming functionally obsolete. In a knowledge driven economy, Artificial Intelligence can remove the more mundane, repetitive tasks leaving knotty exceptions to a handful of experts and a few apprentices. Robots are becoming more and more cost effective and therefore able to present employers with average hourly wages of $4.75 today, a sharp comparison to a minimum last seen in 1996.
Unemployment rates in the US reached 20% during the Great Depression and resulted in the rapid increase of domestic Fascist and Communist movements, although small in comparison to Europe. What happens at 30% and 40% levels?
To those with a strong work ethic, how do they see the populace coping with little or no work and doing whatever they please with their leisure? Assuming a social safety net that enables such leisure.
How do we protect the average worker in a future economy that may devolve into a series of temp jobs with little or no benefits? The “Gig economy” sounds great on the surface but may be seen as a perpetual treadmill of doing one short term task while straining to land the next one. This will be made particularly difficult when half the population may be in the same circumstance.
We are inviting you to participate in a discussion of what may shape the most important challenge we face as a country and planet. Please respond with your comments and questions. Thoughts of all types are welcome, including the most contrarian.