Structural Unemployment in the U.S.

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


4 Responses to “Structural Unemployment in the U.S.”

  1. Tony Says:

    US education has been & is designed to groom the youth to be part of the workforce. Is this approach increasingly futile since an ever decreasing number will be employed?

  2. sofistic Says:

    Yes, Tony, I believe you are correct. Federico Pistono is on the right track, I believe.

  3. Steve Says:

    I have a question about some of the hypotheses mentioned above:

    1) it seems like most of them are targeting the manufacturing sector where labor can have more of an effect on productivity, e.g., you can work people harder, faster, or smarter to improve efficiency and productivity, which is very sensitive to automation. We know, however, the the US, in particular, is becoming more service oriented while manufacturing is declining. Service industries have very little control of productivity and are not easily automated. How does that figure into this analysis?

    2) One of the hypotheses states that neither the rich or poor are immune to these changes. I disagree, because the very wealthy are essentially disconnected from the rest of society and will benefit regardless of upturns or downturns since they can weather all economic storms, and are really not part of the work force.


    • sofistic Says:

      Hi Steve: I have a bunch of stuff in the queue to illustrate some of the hypotheses but don’t have them prepped yet.

      First, the automation trend will in fact affect the manufacturing sector first, but the service sector will be next. Not all of it, but much of it, like automated telephone service with voice recognition, as we have all experienced.

      You can see automation climbing up the service sector for decades. There used to be secretaries, now there are none. There used to be telephone operators, now there are none. There used to be tons of programmers, now recursive adaptive code is modifying itself, so fewer programmers are needed.

      The few sectors that will become immune to this are people like personal services workers: waiters, psychologists, nurses and so on, as well as artisans who make specialized — personalized things.

      In the hypothesis section that says neither the rich nor the poor are immune to this, I looked at the velocity of the money supply and what money really means, which is just a bunch of symbols and signals moving around. At this point you could posit either an utopian or dystopian outcome. In one case, the rich could buy their goods and services from other rich people who owned the factories or services. Wealth isn’t static; it’s always in motion. Even with a pile of gold like Scrooge McDuck, the value would drop as the value of goods and services dropped, and if gold is plentiful. So a better substitute would have to be available that is more scarce.

      In classical economics, a thing or service gains value as it’s availability becomes more scarce. For example, it used to be that tribes in the Sahara valued salt because it was scarce. Now, in classical economics, salt is seen as one the most inelastic commodities because it is everywhere.

      So, wealth is not really holdings of any kind, but PERCEIVED scarcity, and status. The only things that can’t follow this rule are those that are necessary for life: air, water, food and protection from the weather. As for status, the connection between wealth and status in the traditional European and Asian models is that the more stuff and power over people you have, the more wealthy you are. Yet the one violation that I know of is the Potlatch, where giving stuff away increased your prestige.

      There will be more on this in later posts as I gain momentum again. Thanks for reading this, and please read the online book the young man is writing: “Robots will Steal your Job, but that’s OK.”


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