Rise Of The Machines
Finding a job gets harder when businesses discover they don't need to hire as many people as they used to.
The nation’s unemployment problem may be harder to fix than people realize thanks to the increasing use of machines to do things that humans used to do:
A faltering economy explains much of the job shortage in America, but advancing technology has sharply magnified the effect, more so than is generally understood, according to two researchers at the Massachusetts Institute of Technology.
The automation of more and more work once done by humans is the central theme of “Race Against the Machine,” an e-book to be published on Monday.
“Many workers, in short, are losing the race against the machine,” the authors write.
Erik Brynjolfsson, an economist and director of the M.I.T. Center for Digital Business, and Andrew P. McAfee, associate director and principal research scientist at the center, are two of the nation’s leading experts on technology and productivity. The tone of alarm in their book is a departure for the pair, whose previous research has focused mainly on the benefits of advancing technology.
Indeed, they were originally going to write a book titled, “The Digital Frontier,” about the “cornucopia of innovation that is going on,” Mr. McAfee said. Yet as the employment picture failed to brighten in the last two years, the two changed course to examine technology’s role in the jobless recovery.
The authors are not the only ones recently to point to the job fallout from technology. In the current issue of the McKinsey Quarterly, W. Brian Arthur, an external professor at the Santa Fe Institute, warns that technology is quickly taking over service jobs, following the waves of automation of farm and factory work. “This last repository of jobs is shrinking — fewer of us in the future may have white-collar business process jobs — and we have a problem,” Mr. Arthur writes.
The M.I.T. authors’ claim that automation is accelerating is not shared by some economists. Prominent among them are Robert J. Gordon of Northwestern and Tyler Cowen of George Mason University, who contend that productivity improvement owing to technological innovation rose from 1995 to 2004, but has trailed off since. Mr. Cowen emphasized that point in an e-book, “The Great Stagnation,” published this year.
Technology has always displaced some work and jobs. Over the years, many experts have warned — mistakenly — that machines were gaining the upper hand. In 1930, the economist John Maynard Keynes warned of a “new disease” that he termed “technological unemployment,” the inability of the economy to create new jobs faster than jobs were lost to automation.
But Mr. Brynjolfsson and Mr. McAfee argue that the pace of automation has picked up in recent years because of a combination of technologies including robotics, numerically controlled machines, computerized inventory control, voice recognition and online commerce.
Faster, cheaper computers and increasingly clever software, the authors say, are giving machines capabilities that were once thought to be distinctively human, like understanding speech, translating from one language to another and recognizing patterns. So automation is rapidly moving beyond factories to jobs in call centers, marketing and sales — parts of the services sector, which provides most jobs in the economy.
During the last recession, the authors write, one in 12 people in sales lost their jobs, for example. And the downturn prompted many businesses to look harder at substituting technology for people, if possible. Since the end of the recession in June 2009, they note, corporate spending on equipment and software has increased by 26 percent, while payrolls have been flat.
In short, the more advanced computers and robotic equipment become, the few humans are need to perform the same tasks, and the less new hiring a business needs to do even when the economy does turnaround. This has been an issue ever since the first machine replaced the first human, of course, and the natural response of some will be to blame the machines for the loss of jobs in much the same way people blame immigrants for the loss of jobs. Technological progress is inevitable, the only alternative is stagnation, so blaming machines is kind of misplaced. We all benefit from advancing computer technology in one way or another. Our cars are safer and more fuel efficient in part because of the fact that machines and computers have taken over many of the tasks that human auto workers used to perform. And automation that allows companies to make goods at lower cost, and in less time, benefits the economy as a whole. Trying to resist any of this is both foolish and counterproductive.
At the same time, though, news like this does raise concerns for the economic recovery. With technology now playing an increasing roles in places like call centers, marketing, and sales, the question becomes where will the new jobs come from? Both sides of the political divide seem to think they have the answer to that question. On the left, people like President Obama think that “Green Jobs” will be the wave of the future, although cases like Solyndra call that hypothesis in the question. On the right, people like Rick Perry argue that expanding energy exploration will create jobs. Even if they’re both right, though, not all of us can build solar panels or be oil rig roughnecks. Those sales and marketing jobs are the type of jobs that many new college graduates were filling a decade ago, now they’re finding that they’re not needed as much because of technological improvements. Where they’re going to go is the unanswered question we now face.
Obviously if an economy can grow without providing jobs, then jobs become less effective a means to distribute benefits of that expanding economy.
… I was somewhat surprised how widely “robot socialism” is distributed on the web. Even if that is not the end-point it, it illustrates the zeitgeist (such a wonderful word).
[update: previous link was NSFW, amazingly]
(And obviously OWS is part of the same job-fear zeitgeist.)
“Even if they’re both right, though, not all of us can build solar panels or be oil rig roughnecks.”
I think this gets to the heart of things. Bear in mind I’m speaking from a British perspective, so things might be different where you are (though I suspect not). Over the past year, the big oil companies have announced two major recruiting drives, with thousands of jobs each, to staff new work taking place in the North Sea. In the case of the first tranche of jobs, 90% of them ended up going to foreign workers. Why? Because the companies couldn’t find qualified British workers to fill the places. A couple of weeks back, BP announced another major round of job openings, but I don’t see any reason why the result won’t be the same.
The fact is that if you have qualifications in computing, engineering or the hard sciences, there are plenty of jobs out there (at least in Britain). If you’ve got a not-brilliant degree in English Literature or Media Studies from a mid-ranking university, not so much. We have a vast number of the latter, worryingly few of the former. Major Chemistry departments at British universities have closed their teaching arms because they couldn’t get enough students to fill available places. It should be possible to turn the situation around, but not quickly (and even now there is vigorous resistance within the educational establishment against steering pupils towards maths and science based subjects). For many people it’s already too late.
“where will the new jobs come from?”
That’s what I’ve been wondering about. I also think we need to consider there may be a difference between technology that increase productivity (allowing you to do more) and technology that increases efficiency (allowing you to do the same with less). The internal combustion engine increased productivity. E-commerce? Not so much.
Mike
Makes me think a good career for the future is one in which you create, maintain or repair the machines.
@Anthony:
This was a big week for STEM jobs in the US as well. But you know, there is only some consolation in being the last against the wall when the revolution comes.
BTW, you say that “green jobs” are Obama’s answer, but I don’t think they figure much at all in his jobs bill.
In this summary “green” is only mentioned in the context of modernizing schools. There the ROI would be in reduced energy costs, of course.
Maybe I should start a wooden shoe business.
Apparently Obama will unveil a new student loan plan on Wednesday. It will be interesting to see how that plan intersects jobs and OWS concerns.
Agreed that Energy, under any heading, will not be enough. That being said, there exists an untapped manufacturing and service industry in Los Angeles dedicated to white-washing roofs and installing solar panels and water heaters that would provide ongoing service employment.
The pathway with the most head-way leads through school. If you are 40-ish or older, much of what you knew as a kid has been replaced by computers. Whither Kodak? Mimeographs? The Infinite Universe? And so on. School is really not an option, and the rate of change assures some low-level enrollment for life thereafter, esp. since it seems we are going to be living longer without the severe disability to go with it.
My own work has shifted from serving companies to serving myself. I learned some cutting edge tools, and I am now a budding 3d modeler. It turns out people will pay for pre-fab models, and so my PayPal jar tinkles with increasing frequency. It is but one revenue stream I have created for myself. It all began with one commitment: do what I do best, and love the most.
There are opportunities out there, and they look nothing like the past, and they will require ongoing learning. Depending on the rich to give you a job is a sucker’s bet.
And this doesn’t even address the radical acceleration of AI. My wife got her iPhone 4S last week and is just amazed with how useful Siri is. Presumably, that sort of technology will be incredibly more useful and widely applied in business settings 5 years from now.
Saw a t-shirt that said, “If you aren’t part of the solution, you are part of the precipitate” It appears the non-STEM are no longer part of the solution.
Even the “Green” jobs and the oil patch jobs require real skills along the math, science and engineering path and aren’t really an answer for the job-deficient liberal artist. Without a degree, i’d bet your average non-entry level oil workers has better skills in math and engineering than your Ph.Ds in English and political science. Doing real things in the real world requires real skills.
That you, Sarah Palin?
Come back, we miss you!
@john personna:
No, because the jobs bill isn’t really about jobs. It is, as I said in September, about politics.
@Doug Mataconis:
That’s pretty silly. Going from “jobs content 0%” right out to “jobs content 100%” you are going with zero.
It seems much more reasonable to think that the jobs bill was some combination of what Obama wanted to do, and what he wanted to be seen trying.
That’s a lot more reasonable than pulling “Obama is all green jobs” out of your butt.
Doug is more about quantity than quality.
@Doug Mataconis: “No, because the jobs bill isn’t really about jobs. It is, as I said in September, about politics.”
It is only about politics because the GOP refuses to do anything about jobs. With the party that controls the House and insists on filibustering everything in the Senate unwilling to do something about job creation, what else is a President supposed to do? Doug, what could the President have proposed that would have both addressed the need for short term economic stimulus and gotten Republican support?
Mike
MBunge,
If Obama was serious about “doing something about job” he would not have put forward a unilateral bill created without consultation with any member of the opposition and filled with another round of the same nonsense we saw in Stimul-Pork. The entire intention of the AJA was to give the President something to campaign on, that’s all. The only jobs it created are at Obama 2012 headquarters.
Obama just broke off a bill that would specifically help teachers and fist responders stay employed, Doug.
The Republicans, as usual, humped the legs of the rich:
http://tpmdc.talkingpointsmemo.com/2011/10/mcconnell-not-my-job-to-prevent-firefighter-police-layoffs.php
@de stijl:
I would hate to see an excellent witticism go unremarked.
It would have covered just one year of employment ponce, and would have done nothing to fix the underlying fiscal issues at the state and local levels that made those layoffs necessary.
@Doug Mataconis:
Sounds like something Herman Cain would say. Kinda nonessential. A President might introduce a bill “personally” and then of course it faces a bilateral or even multilateral vote.
I guess it’s a semantic tautology. Either a President never introduces a “unilateral bill” or he always does. It has no meaning.
(Though, you’d think when a Democrat stuffs a proposal with former Republican positions it is least possible to call the thing “unilateral” … even in that tautological sense.)
Yes, the robots are coming. And yes, it renders invalid the libertarian ideologies.
When we can produce not only all we need, but all we want, with automation, we will have no rational alternative but a version of socialism. I like the phrase ‘robot socialism.’ It’s here. It’s only going to expand.
The jobs are almost certainly not coming back. We’re going to go through a long (not long by historical standards, but in lives lived) period of adjustment. The 9% will become 15%, eventually probably half of adults will have no real job to do. If we were logical we would be looking at a sort of adaptive socialism. And we’d be thinking about how to change our philosophies and world views.
The one sure thing is that laissez-fair capitalism and libertarian objectivism are dead: relics of the past.
@Doug Mataconis:
You are breaking out the “Teacher rehiring and first responders” section there? At $35B it is less than 8% of the whole $447B proposal.
And of course it would help aggregate demand to that small ($35B) amount. It’s hard to expect too from so little though.
Overregulation is far more of an impediment to job creation than technology. The academe wouldn’t be able to discern that because, well, it’s the academe. Talk to any small business owner. Then check out the Labor Dept. stats. Productivity has been stagnant for several consecutive quarters and yet job creation still has been pitiful.
From generational and demographic standpoints, the disintegration of public schooling is far more of a problem than technology. Minority kids are graduating inner city high schools without being able to read or write. You could get rid of all the machines and those kids still would have no job prospects. White kids are graduating college with useless liberal arts degrees. Again, the machines are not the problem. If Generation Y was a stock I’d short sell it.
Unless and until we radically restructure the public money education systems, and engage in sweeping regulatory reforms too, there will continue to be intractable labor market problems. Of course the irony with all that, politically speaking, is the “Party of the People” will fight tooth and nail against any such reforms.
@ Doug…
You are right – the only jobs it created were at campaign headquarters – but that’s because Republicans consistently vote against stuff they like based purely on politics. You seem to think this is a problem of the Presidents making. Obama should have consulted with the opposition? Why? We’ve seen that movie a bunch of times over the last three years.
The very first stand-alone bill from the AJA that every single Senate Republican voted against was specifically targeted at jobs. It would have provided states with $30B to hire hundreds of thousands of teachers and another $5B to help pay the salaries of first responders.
Your ideology is just not jiving with the facts in evidence.
@michael reynolds:
I’m not totally sure that consumption can be maintained. If you write a robot socialism YA novel, I’d suggest a lot of people meditating, and doing yoga, waiting for their stipend to arrive. Think India.
Two really fascinating trends are robot socialism and world peace.
Wars have gotten smaller and less frequent and are now barely a feature of European, North or South American or Asian life. (Yes, I know we’re ‘at war’ ourselves, but perspective, please. We’re not doing the Civil War or WW1 or WW2 or even Korea or Vietnam.) War is mostly now limited to Africa and Africa-adjacent.
We’ve essentially eliminated true poverty (starvation, lack of plumbing, etc…) in Europe and North America, and it’s being pushed back in Asia. The deepest poverty, like the bloodiest war, is now in large part an African phenomenon.
A very interesting time.
@michael reynolds: @john personna: It would certainly require a major rejiggering of things. I don’t think the Gene Roddenberry vision of this sort of future is likely, either, in that a relative handful of people are cut out for lives of selfless service out of altruism and self-actualization. But I don’t know what it is you do with large numbers of people with modest intelligence and lack of other exceptional talents in an era where repetitious tasks and manual labor are done by machines.
@john personna:
Or a lot of sports. Not my thing, but people do love playing with their balls.
Tsar is out with the over-regulation myth…at least there’s something to say for consistency…even if it’s consistently BS.
Go to this link
http://www.treasury.gov/connect/blog/Pages/Is-Regulatory-Uncertainty-a-Major-Impediment-to-Job-Growth.aspx
and scroll down to the chart labelled:
Stock Market Volatility in the United States and Germany
It’s funny…different countries with different politics and different regulations…and yet virtually identical economic conditions.
Enough with the over-regulation meme already.
@Tsar Nicholas:
William Black makes the case that jobs fell with deregulation, rather than the other way around. It is kind of a clunky essay, but I think the data are there.
The Anti-Regulators are the “Job Killers”
I guess the short answer is that a deregulated industry grows, as long as it does not explode.
@James Joyner:
That’s it in a nutshell. After a million years of scratching for survival, then tens of thousands of years working for a slight surplus, then mere decades of surpluses so large as to produce widespread obesity, what the hell does homo sapiens do with himself when even surplus requires no effort?
@michael reynolds: Robots are increasingly fighting our wars, too. Which is good from the perspective of American soldiers not getting killed or maimed. Not so good from a standpoint of avoiding wars or dealing and the killing of lots of people around the world in countries we otherwise wouldn’t care enough to go to war over.
@michael reynolds:
Basketball in the projects? Now there is a sad take on “the future is here, just not evenly distributed.”
@James Joyner: @michael reynolds:
I hope you both have seen this:
A cultural thought experiment
By Charlie Stross. Definitely related.
@JKB:
There is a dearth of common sense driven people out there. No matter what educational level or degrees a person has achieved in their lifetime, so many lack the capability to successfully apply what they have learned with minims of wisdom derived from being out in the real world.
The standard wingnut “This bill doesn’t fix the entire problem so we shouldn’t do it!” trope, Doug?
Does it get any lazier than that?
@ponce:
No, it’s if 8% of the bill doesn’t fix the whole problem 😉
@ponce: Obama just broke off a bill that would specifically help teachers and fist responders stay employed, Doug.
Why can’t we just call them union thugs? Why all the dissembling?
It’s a joke. I will acknowledge you meant “first”
@Doug Mataconis: “If Obama was serious about “doing something about job” he would not have put forward a unilateral bill created without consultation with any member of the opposition”
Doug, do you honestly think there’s ANY amount of consultation that the President could have done that would have made a damn bit of difference? Have you been paying attention to the way the GOP has reacted to situation where the President did consult with them and even included their ideas in his proposals?
Doug, when you usually want to bitch about Obama, I can at least understand what the bitchiness is based on. I have no clue why you’re being a bitch about the jobs bill.
Mike
@michael reynolds: “what the hell does homo sapiens do with himself when even surplus requires no effort?”
Peak Oil, bitches!
Mike
@jan:
So true. In the not to distant past, the college freshman would have had a wealth of practical experience on the farm or “summer employment”. Now, they enter having never swept a floor much less mowed a lawn or painted a house.
It would be interesting to see if the over-leveraged in student loans has any correlation with those without prior real world work experience. Perhaps 22 or 25 is just to old for that first bitter taste of having to meet your monthly bills with your meager paycheck. So many of today’s college students have not ever said, “Who is FICA and why are they taking my money.” In the past, that moment of libertarian stirrings happened at 16.
@JKB: “In the past, that moment of libertarian stirrings happened at 16.”
And usually died shortly after that along with other adolescent pretensions.
Mike
@MBunge:
Apparently the frac’ is changing everything.
It is working for North Dakota, anyway.
@john personna:
BTW, remember that for the next “Obama won’t let us drill” bleat.
@john personna: ““The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d),”
The latest figure I could find with a quick search was in February of this year and it put U.S. oil consumption at 18.8 million barrels a day. And that’s during a weak economy with lessened energy demands.
In all seriousness, I’m sure oil will be subject to the same market forces that have foiled other predictions of resource depletion. But as both the air and water of the modern world, the challenge of reducing or replacing oil is exponentially more difficult and the nature of its use makes it harder to recycle. And by the time we really need another energy source, will we have the economic and financial capacity to develop and exploit it. Without some scientific break through, we’ll have to use nuclear as an oil substitute to some extent. How many trillions is that going to cost and where is that money coming from?
Mike
@Tsar Nicholas:
More nonsense from TN.
“McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.
Their response was surprising.
None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.”
Read more: http://www.mcclatchydc.com/2011/09/01/122865/regulations-taxes-arent-killing.html#ixzz1biqcAaMR
Also related:
Tyler Cowen: “The Great Stagnation”
He mentions a split between jobs “haves and haves-not,” and that it will be his next book.
He also commiserates with another academic that STEM is disregarded on-campus
@MBunge:
Energy transitions take decades. IMO the possibility of near-decade catastrophe has faded, and far-decades transitions are beyond our ken.
@JKB: ” In the past, that moment of libertarian stirrings happened at 16. ”
About the same time a boy gets seriously interested in masturbation. Or maybe that’s redundant…
I counted over a dozen electric Nissan Leafs on the road during my 10 minute commute this morning.
Think I’m gonna buy me one once they get the exterior design worked out.
@Tsar Nicholas:
For why that claim is inaccurate, at least for corporations, see Is Regulatory Uncertainty a Major Impediment to Job Growth?:
And so on. Read the whole thing. As for small business, what regulations are you referring to? And how in particular are these regulations impeding the business?
From what I’ve been able to see, folks just aren’t spending the money.
@MBunge: @WR:
No, what happens is you learn about being a contributing member of society rather than sitting around in a park beating on drums.
But as we saw in the reaction to the Tea Party, some don’t like it when the taxpayers take time to gather together to make a statement.
Judging by the demographics of the Tea Party, as a group, they are probably a net drain on the federal government’s coffers.
@JKB: “No, what happens is you learn about being a contributing member of society rather than sitting around in a park beating on drums.”
Do you mean like those “contributing members of society” on Wall Street who nearly destroyed the global economy and needed a massive government bailout? I think if those folks had never done anything but form drum circles, we’d all be a lot better off.
Mike
@Hey Norm:
So Jan…in order…
You think we should race to the bottom…and Americans should be happy with substandard wages and terrible working conditions.
We should continue the 30 year long war on the middle class by eliminating the right to collectively bargain. Inequality today is higher than it has been since just before the Depression…but you think more inequality would be better.
And in a era of record corporate profits…you think we should bend over, grab our ankles, and allow corporations to what they want and how they want so that they can earn even more.
Your image of America is in stark contrast to mine. I think of “We the People”. You clearly think “We the Corporations”.
@jan:
In China I’m sure you write a quick bribe and start building. Is that what you want?
I want to listen to Jobs, but talk about a race to the bottom.
@Hey Norm:
Unlike you I’m not going to even try to understand your image of America. But, “We the People,” it clearly is not!
However, if we had the same bureaucratic hurdles, red tape and complexity back when Jobs was getting his business act together, it’s dubious that Jobs would have been able to be so successful in the R & D of his products, bringing them to market as he has done.
How many business dreams are sunk before they are even able to emerge because of the growing walls of regulation being built into our laws daily? No one will ever know, because many are DOA in the anti- free market sentiments of social progressive governance
@john personna:
I find it ironic that the man many of you look at as an icon, a visionary, don’t also at least pause and reflect upon his business model and ‘wisdom,’ in how they might relate to our own problems of job stagnation. Although Jobs was an Obama supporter, he was at least honest enough to criticize Obama’s methods in approaching job creation, saying he would be a one-term president if he didn’t change his paradigm and thinking in these matters.
@MBunge:
Yes, that is what happened. Long ago, young future Wall Streeters looked at their first paycheck and learned the lesson of payroll and income taxes. It was then that they decided that no matter how long it took, someday they would comply with government regulations to give loans to bad risk borrowers, to comply with Barney Frank and Chris Dodd’s bully pulpit to loan without taking proper diligence and to rely on the implicit and never denied taxpayer guarantee of Fannie Mae and Freddie Mac even as Democrat crony board members and executives took those organizations to terrible risks?
But we did miss the opportunity to offer them a new lesson and that is the lesson of capitalism, that you pay for your own mistakes but we didn’t do that because the failed banks would be traced back to Congress and specifically, the Democrats who stopped Bush’s efforts to rein in the excesses.
Jan….
Were creating private sector jobs and have been almost monthly. The stagnation you talk about is the public sector shrinking…which is what you far-right wingnuts claim you want…so what’s the problem???
Computers and robots are getting better and better. More jobs are being done by software, often incorporating artificial intelligence or machine learning. There was a recent piece in the NYT about teams of lawyers being replaced by e-Discovery software.
This is going to ACCELERATE in the future. A company called Heartland Robotics is working on a $5000 robot; that means an employer can buy a robot for the price of a couple of months wages.
As jobs at all levels, from McDonalds to college-educated knowledge-workers, are increasingly automated, there will be more unemployment, more downward pressure on wages, and especially even more income inequality as the owners of capital realize even more gains. Ultimately, this will undercut consumer spending because there simply won’t be enough average people with discretionary money to spend on goods and services. In fact, we already see evidence of that.
For a great overview of this, see this book:
“The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future”
http://www.amazon.com/gp/product/1448659817
A free PDF is also available here: http://www.thelightsinthetunnel.com/
Also see the author’s blog at http://econfuture.wordpress.com/.
I think the issues raised in this book are among the most important that we will have to confront as a society. I encourage everyone to read it…
@Steve T:
I personally don’t like a society where robots function as workers of the world. It reminds me of the movie, ‘2001,’ with a computerized Hal in charge, who eventually went off his programing.
However, I think the sometimes overpowering mandates of regulations plus unionized workforces, are causing employers to look elsewhere for employees who are non-human, not requiring contractual benefits and perks set in stone that are usurping the profitability of their companies. This financial strain on companies is being reflected in states like Rhode Island as well, where benefits and pension plans are creating an unavoidable economic crisis.
Consequently, those of you who only bemoan the inflexibility of conservatives, in their refusal to entertain tax hikes, IMO, are just as intransigent in your views in not considering over-the-top benefits, pensions, salaries, affirmative action and cronyism pay raises and promotions versus ones based on merit, etc, as part of the problem too, in seeking solutions out of this mess.
@Hey Norm:
And, how many private sector jobs are being created every month, norm, versus how many are needed to be created to move us forward off the UE problem? I’ve heard figures of anywhere from 250,000 to 400,000 jobs per month need to come on board, holding steady for a couple of years, to get us back into better UE numbers.
As for the public sector losing jobs, these jobs are maintained by tax-payers, as they do not generate any revenue themselves. Cash-strapped cities and communities (mainly in this position because of bloated pension and health benefits), across the country, have no choice but to let people go.
There is no magical money out there! Even extracting money from the so-called ‘rich’ isn’t going to fill the hole that has been dug by too big of a deficit and too much spending, mostly in the entitlement areas of our budget.
@jan:
Government sector jobs do, in fact, create revenue. You may have noticed that in nations embracing austerity, (Ireland, Greece, Portugal) deficits worsened as public sector jobs were eliminated. Observation doesn’t match up with your claim.
@jan:
Yes, employees are getting paid too much. Even Foxconn, in China, says they will replace their employees (cheap labor) with 1 million robots. And other companies in China are going to Vietnam for cheaper labor. And those employees in Croatia with shipbuilding going to China must be getting paid too much.
WHAT WE HAD WAS A MIDDLE CLASS.
Jan…
You mean the million or so government employees didn’t spend their income?
If they hadn’t been laid off the UE rate would be closer to 8%…and they would be spending their money…which would create DEMAND. We have a demand crisis…not a regulation crisis and not a debt crisis. If you read anything but right wing nuts you would understand that.
You rant about taxes and regulations…well we’ve had a decade of historically low taxes and 30 years of de-regulation and yet here we are. What has to happen for you to realize the facts aren’t lining up with you ideology????
@Ben Wolf:
Government sector jobs cost money, but do not create them or put money back into the system. Now, maybe, with great swaths of public sector employees being laid off, there may be collateral financial deficits occurring because of industries servicing these employees no longer receiving their business (food places, parking etc.).
I’ve also read that the austerity programs are not causing much recovery for the countries imposing them because they were put into place too late. That’s why there is a call from conservatives to address our own deficits before they get so unmanageable there will be little recourse left.
@Gerry W.:
Yes, some wages are too much. But, the main problem facing employers, in both the public and private sector, are the pensions and healthcare plans which were contractually made in good times, and now are draining these sectors in our current bad times. Circumstances have changed, but the pay-outs to these people can’t be retrofitted to the reflect these times.
@jan:
Yes, we understand of course, Bush had good policies. Send our jobs overseas, deficits and debt, stay the course, spend on war, neglect the infrastructure, neglect of globalization, and neglect the future. And now, that middle class has to pay that price. Notice that the politicians have moved the goalposts. If they talk about jobs, they are not talking about the 6 million + jobs lost over a decade. They are talking about jobs for today on. But they are not talking about jobs, they are using the debates as a bully pulpit for tax cuts or tax reform.
Overall, Bush had his roaring 20’s and we see the results today. Now, the republicans come out and have all the answers with more of their ideology.
@jan:
You just ignored in what is going on in the world, I did not know that there was elaborate healthcare and pension plans in China or in Croatia.
Yeah Jan…Austerity isn’t creating growth because it was started too late…not because austerity is, by definition anti-growth. You should buy a dog, name it Clue, then you would have one.
@jan:
You must not have read my Jobs comments too carefully. FWIW, I plan on saying what good things about Jobs I can in 2011. I’ll save any reservations I have for conversations in 2012. I have that much patience, and it seems proper.
But on the China thing, really think about it. You don’t want to BE China. You don’t want that level of corruption or that level of pollution. You probably don’t want Americans working at $1.50/hr
So how real can it be when people say “business should be as easy as in China?”
@jan:
Please explain the mechanism by which timing affects how effective austerity measures are.
Every single government job puts money into the economy. If they didn’t then we wouldn’t see recessions becoming worse when the public sector spends less. For your argument to be true you’d also have to explain how Greece’s government revenues have declined after massive austerity measures. There is no logical argument for reducing government spending during a recession.
@jan:
But then, no one here really champions those things.
@jan:
You are wasting your time. They can’t conceive of the fact that all public employee pay comes from tax dollars which can only be recycled by those employees and always will be a net deficit to the treasury. If these employees are doing jobs that cannot be done cheaper by the private sector, then they are a benefit to the economy as a whole but if not, then they are a drain. Which, of course, is why the politicians always threaten to get rid intrinsic government jobs, like police (Biden’s rape gambit) instead of the hundreds of jobs the private sector could do cheaper.
Ben and the others can’t seem to comprehend the difference between real economic activity and just sloshing money around.
NOTE for those who keep citing the Mcclatchy story on business regulation. We now have a poll not some reporter who called some dude, that says it is regulation that is a concern to small business.
@JKB:
This explains why your economics is wrong:
The Laffer Curve and the Kimel Curve
@JKB: Your confusion is the result of your poor understanding of taxes and sectoral balances, both of which have repeatedly been explained to you.
If this were true then Greece’s economy would be improving as it eliminated jobs, wouldn’t it? Yet you have no explanation for why your model is failing and austerity is worsening recessions in every country in which it has been adopted.
@Jan & JKB:
Your understanding of why cutting spending during a recession is a Bad Idea would be improved by studying the basics of sectoral balances:
http://pragcap.com/sectoral-balances-and-the-united-states
@JKB: “Long ago, young future Wall Streeters looked at their first paycheck and learned the lesson of payroll and income taxes. It was then that they decided that no matter how long it took, someday they would comply with government regulations to give loans to bad risk borrowers, to comply with Barney Frank and Chris Dodd’s bully pulpit to loan without taking proper diligence and to rely on the implicit and never denied taxpayer guarantee of Fannie Mae and Freddie Mac even as Democrat crony board members and executives took those organizations to terrible risks?”
None of what you write is an accurate description of the financial crisis. Fannie and Freddie were NOT the main drivers in the sub-prime loan business and even if they were, the bad loans themselves were not the real problem. It was the willful packaging of those bad loans into mortgage backed securities. Did Frank and Dodd make Wall Street do that?
Conservatives like JKB present a weird paradox. On the one hand, their inability to recognize or accept any information that is contrary to their ideology guarantees that they’ll never stay in authority that long. On the other hand, because they’ll impose their ideology regardless of the circumstances or consequences, they can do such terrible damage while they have power.
Mike
@JKB: “Ben and the others can’t seem to comprehend the difference between real economic activity and just sloshing money around.”
A defender of Wall Street should know better than to talk about people who just slosh money around.
Mike
I see the usual wingnuts are here working up the courage to once again blame the global economic meltdown on a few colored American families getting government backed mortgages…any time now.
@MBunge:
That JKB posts this with absolutely no acknowledgement things aren’t working out that way is his manner of saying, “I don’t give a damn what’s actually happening. My ideology says the above quote is true and that’s exactly what I’m going to go on pretending.”
This has devolved to side issues. I’m sure Jan and JKB understand that regulation is a much smaller factor in jobs than low Chinese wages and increased automation. It’s just that regulation is something they feel more comfortable discussing.
And so they’ll turn the discussion from the big, uncomfortable, issues …
@jan:
Errant nonsense!
Wall Street banks are paying our much higher bonuses and pensions and salaries than ever before, and yet they are more profitable than ever!
Obviously, there is no harmful effect of high wages and pensions on corporate profits!