Archive for September, 2013

Structural Unemployment in the U.S.

September 27, 2013

In the past, I have focused on unemployment rates and duration of unemployment.

This time I’m going to dig a little deeper and explore what appears to be an emerging structural unemployment based on three basic ideas:

1.  Employment population ratios over time.

2.  Productivity.

3.  The implications of automation.

First a picture showing the trend in employment population and productivity.

Here, I’m using the employment population ratio rather than the unemployment rates in all their permutations because it gives a more realistic picture of how many people are employed compared to the entire population.

Data are from the U.S. Bureau of Labor Statistics.

Employment population ratio vs output per hour-US-1948 to 2012The first thing you notice is that the crossover in the trends was around the year 2000.  The second thing is that these are long and persistent trends, so it appears that one cannot chalk the cause up to current political persuasions or cultural mood at any point in time.

Keep in mind this is U.S. data only, so it doesn’t show what is happening in any other country, and it doesn’t take into account any other sociopolitical structures or cultural mindsets of other developed nations.

Now, I’m going to switch gears and present a set of hypotheses.  These are not new ideas, but I think they are worth spelling out.

  • Political persuasions have little or no effect on the long-term trends.
  • Productivity is not strongly related to the number of people in the labor force as a proportion of the population.
  • Productivity is a function of increasing automation.
  • As the proportion of people in the labor force declines, purchasing power declines.
  • As automation increases, demand will decline (because there are fewer jobs)
  • As demand declines, the need for more output declines.
  • Neither neo-liberal nor Keynesian nor Marxian economic policy can alter the trends.
  • Unless there is some new way of distributing goods, income and wealth, the system will become self-limiting.
  • Neither the rich nor the poor will be immune to this trend.

Now, I want to introduce you to a remarkable book written by a young man (a Millennial) called Robots will Steal your Job, but that’s OK .  The book is online and he keeps adding material and you can get on his mailing list when he finishes each chapter.

Here is a snippet from the introduction:

You are about to become obsolete. You think you are special, unique, and that whatever it is that you are doing is impossible to replace. You are wrong. As we speak, millions of algorithms created by computer scientists are frantically running on servers all over the world, with one sole purpose: do whatever humans can do, but better. These algorithms are intelligent computer programs, permeating the substrate of our society. They make financial decisions, they predict the weather, they predict which countries will wage war next. Soon, there will be little left for us to do: machines will take over.

Start with this introduction, and the left sidebar will guide you through the contents chapter by chapter. The book is well-researched and well-written.

He also has a TEDx video if you are interested. Robots will Steal your Job