I have become more convinced than ever our global economy is confronting a growing obstacle in the form of human-obsolescence on the producer side. Sure we need consumers to buy goods and services, but our demand for workers to supply them languishes without signs of a turnaround. (Which also explains the lack of consumers, duh.)
It is hard to look at technology and not see the the reason. The recession has had the odd consequence of promoting technical upgrades to lower production costs, lowering even further the need for people.
The question for me is not when where will the consumers come from, but what will they do to earn a living?
FEAR of displacement from one's job by a superefficient machine is as old as modern economic growth (which is to say, about two centuries old). It is somewhat surprising that there has not been more made of the possibility of technological unemployment during the recent recession and lacklustre recovery. Technological unemployment was widely cited as a problem in the 1920s and 1930s, a time during which productivity was soaring, inequality and unemployment were high, and instability was the norm.The standard answer is education, but there are signs that solution isn't working like it used to as well. Demand for college graduates is slow, salaries are dropping, and meanwhile education costs spiral upwards.
The argument that rapid technological change may be generating labour market problems is given a lift in an interesting new ebook by Erik Brynjolfsson and Andrew McAfee, entitled Race against the machine. The opening chapter attempts to cast the book as a means to understand present high unemployment, which is a little unfortunate; most of current labour market weakness can be explained by weak growth, and weak growth is well explained by weak demand. It is, however, a useful contribution to the discussion of what has gone wrong in the American economy in recent decades.
The stylised facts of that poor performance are increasingly well known. Real median income has stagnated, especially over the last decade. Inequality has risen dramatically, driven by huge increases in top incomes. Employment growth has disappointed. At least some of the blame for all of this, the authors argue, can be laid at the foot of new technology. It's an interesting twist on the themes developed by Tyler Cowen in his ebook The great stagnation. Mr Cowen argues that a major slowdown in innovation is constraining potential growth, while new progress in information technology isn't providing benefits to most workers. Mssrs Brynjolfsson and McAfee tweak the argument, writing that innovation has been gathering pace and having an increasing impact on labour markets. In a nutshell, new technologies are displacing workers faster than the economy can find new uses for them. [More worth reading]
Adding more graduates to this scenario seems like pouring fuel on the fire to me. What is often ignored is technology is replacing all kinds of workers - not just those on assembly lines. In fact, the very lowest level jobs may be the most secure: hotel maids, garbage collectors, nurses aides, janitorial workers, etc.
Stanley Aronowitz and William DiFazio wrote a pretty gloomy book in 1994 with the striking title, The Jobless Future. Here is a Harvard Educational Review discussion of the book (link). What is most discomforting in reading the book today is the degree to which the factors they identify seem to be today's headlines. What does jobless mean here? In a word, it means that the US and other OECD countries will never recover the number and quality of jobs they need in order to regain the middle class affluence they had in the 1950s and 1960s. The future will involve work -- but not enough jobs to ensure a low unemployment rate. Here is their assessment in 1994:I cannot see why our profession will be exempt. In fact, only land ownership seems to be a guarantee against displacement: when your buy a farm, you buy the right to name the farmer.
For there is no doubt that we have yet to feel the long-term effects on American living standards that will result from the elimination of well-paid professional, technical, and production jobs. At the same time, nearly everyone admits that many of these jobs are gone forever. (xi)The central structural factors they identified in 1994 are still key parts of our economic environment today: technology innovation replacing labor, rising productivity producing persistently flat labor demand, shifts in the structure of the economy towards finance and service sectors, and internationalization of production. [More gloomy pondering]
We are currently in the process of attracting many young and youngish farmer aspirants back to rural America. More than a few I suspect are doing so because of lack of alternatives such as mentioned above. Like professions such as law, medicine, administration, management, etc. demand for workers in our industry - regardless of how highly trained - will be limited.
We know what happens when labor demand falters. It can be seen in history books in examples as diverse as Middle Age economies (guilds) to the USSR (an economy based on who you knew). Jobs will be THE commodity of the future, I'm afraid. And the social and economic gaps between those who do and do not have one will widen and worsen.