We seem to have returned to the question of technological unemployment, judging by what’s going on in the comments section. As I’ve said before, I believe that technological unemployment is a factor in our present situation but it’s not the most significant factor.
While remaining convinceable, I’m also unconvinced. Why is Singapore’s unemployment so low? Heck, why is Germany’s unemployment rate lower than ours? Don’t they have technology there? If your answer is that they have better policies than we do, something with which I’m in broad agreement, then you’re not complaining that technological unemployment is our main problem but rather bad policies.
I would think that if technological employment were the most significant problem we’d see rising unemployment everywhere and stable unemployment nowhere. We don’t.
As I’ve said any number of times while I think that technological unemployment is a real issue it’s not the most important factor now. I think that our main problems are a combination of predatory mercantilist policies on the part of so many other of the world’s major economies and deadweight loss.
Here’s a good article I stumbled across on technological unemployment. It presents ten different views on technological unemployment.
For those of you who believe that our primary problem is technological unemployment and the way to solve it is a guaranteed minimum income, I have a few observations. First, you need to recognize that technological unemployment is a structural problem rather than a cyclical one and, consequently, if you’re right Keynesian deficit spending will not produce economic growth. Second, there are only two ways to finance such a program: extension of credit and increased taxation.
Again assuming that you’re right financing a guaranteed minimum income via extension of credit (“borrowing”, “printing money”, etc.) will actually reduce economic growth which sounds like a perverse outcome to me.
Running the numbers is a really useful exercise in clarifying the mind on a subject like this. The total number of unemployed is about 10 million. Unemployed plus underemployed something like 20 million. The number of long-term unemployed plus discouraged workers is about 6 million. Let’s use that last figure as a sort of floor.
Paying each of those six million a guaranteed income of $20,000 a year will cost $120 billion a year. Given the assumption extending credit at that level annually forever is a lot of credit.
If you prefer to tax, $120 billion is about 20% of the gross incomes of the top .1% of income earners. How, exactly, will you accomplish that? The present effective tax rate of those ultra-rich is typically about 15%. You want it to be much, much higher than that. Since you’re talking about 20% of gross, you’re talking about an effective tax rate of significantly more than 35%, probably something more like 60 to 70%. We’ve never accomplished an effective tax rate that high in this country.
$120 billion is about 5% of the gross incomes of the top 1% of income earners. That group presently has an an effective tax rate in the low 20s. You want to increase that to around 30%, once again higher than we’ve had to date. How are you going to do it?
$120 billion a year? No way! This program will need to be ADMINISTERED. We’re going to lead a lot of new federal government employees to handle this. Lots of G-14s and G-15s, lots of Tsars to be appointed, and all their minions. We’ll need new subcommittees on the Hill, along with new staffers. We’ll need PR people (spokescritters and such). Administering the thing is going to cost at LEAST another forty or fifty billion each year. And that’s not including an supplemental set of hires for the IRS to audit the thing, to make certain no non-Democrats get benefits.
$120 billion WAY underestimates the spend, even discounting all the people that already make less than $20,000 a year who will need to be made whole.
I don’t think it’s the only or even necessarily the largest present tense issue. But I think it’s incorrect to suppose we’d see equal effects everywhere at once. The effects of revolutions are never equally distributed.
Your 120 billion dollar figure does not account for the fact that the theoretical 20,000 income replaces welfare, food stamps, extended unemployment payments and a host of other often duplicating and overlapping programs that already cost money. What’s the actual number? Certainly lower than 120 billion, which means the draconian taxation would be quite a bit less draconian. And as to Ice’s point about administration, you’d of course be replacing existing programs and thus likely cutting administrative overhead.
And I don’t see why we’d only tax the top .1%. What about the top 1%? Or 5%?
So, with a number significantly lower than 120 billion, with savings in administrative overhead, and with logical extensions of any additional taxation to a more reasonable sample of the taxpayer base, I think this dire scenario is simply wrong.
Current receipts from individual and corporate taxes are something like 1.6 trillion dollars. Even if we accepted the inflated 120 billion figure, we’re looking at about a 7.5% overall increase in tax receipts. More likely the number is quite a bit lower, so we’d be more likely looking at a need to raise overall tax receipts by 5% or so.
This money would be drained from the pockets of the wealthy where it quite often just sits, into the pockets of less wealthy people who could be relied on to immediately push it right back out into consumption.
One other point on the $20,000 figure. That represents round numbers a $10 an hour job. I have no problem with that number. However not all unemployed people are in single-earner families. If you’re unemployed and your spouse makes 100k a year, I would not propose giving you 20k. Likewise, if you’re a two-earner household with both spouses unemployed but you have substantial assets. Then the 20k subsidy might be reduced or even eliminated.
Could the difference in population growth account for some of the reason that Germany and Singapore are having different reactions to technological advances? That we’re still breeding and importing like a country that needs people for jobs and they are not?
I mentioned the top 1% in the body of the post.
If the guaranteed minimum income replaces all other forms of assistance, it would need to be considerably higher than $20,000. I’ll need to look it up but IIRC assistance actually boosts the incomes of individuals earning $20,000 effectively over $30,000.
Michael, I think you really need to stop hiding behind vague generalities, stop sniping when anybody else produces a plan, and produce a detailed, thought-out, substantiated plan of your own. That’s when I think you’ll realize that the sums involved really are vast, the plan would have serious economic implications, and it would be politically impossible.
It’s why I think that a federal jobs program is actually more practical than a guaranteed minimum income.
Actually, Germany has a pretty high proportion of immigrants. I haven’t run the numbers but I think that we’re pretty close to the same when you consider birth rate and immigration together.
Trumwill:
I don’t think much useful comes from using Singapore as a point of comparison. It’s a city, not even a country. One might compare Singapore to San Francisco, not to the United States.
Which leaves Germany as the only point of reference on offer. How about Canada which has a rate almost identical to ours at 7.2%? Or the UK with 7.5%? Or France 11%? In fact pretty much every industrialized nation aside from Germany.
You mean like Japan’s stable unemployment rate of 4%? South Korea’s unemployment rate of 3%? Brazil or Mexico’s unemployment rates under 5%?
And I think you’re almost 180° wrong on this
The Internet, the portability of capital, and modern transportation technology mean that technology goes everywhere practically instantaneously. The iPhone 5s was released everywhere in the world over the period of a couple of months. New technology is available in China at roughly the same time it’s available here. The differences among major economies are policy not technology.
Dave:
But you usually claim a federal make-work program is pointless. And why would we go on paying extended unemployment benefits on top of a 20k income? Or food stamps? A single individual can live on 20k. Not well, but not in abject misery, either. In fact it’s about what people make in the bottom quarter of income distributions.
Look, I’m not suggesting that I have an answer for what I think is a huge and revolutionary change in the way the economy runs. I’m not saying it would be easy or painless or even feasible over the long term. I don’t think anyone, looking at the first steam-powered loom could have predicted the path of the industrial revolution, or laid out a series of robust measures to cope with the massive disruptions that followed from it.
Change happens. Had you suggested 200 years ago that farms would be almost devoid of human workers and that we would produce gigantic food surpluses using just 2% of our work force in actual farming, people would call you mad.
If we can produce all the food we need to make ourselves obese and sufficient surplus to make a large part of the rest of the world fat with 2% (15% if you include processing, retailing, etc…) then why on earth should we assume that we can’t do the same with industrial production? Is it somehow impossible that we could produce an industrial surplus with, say, 5% of our work force? I don’t see why.
You’ve agreed that technology has cut into retail employment. I assume you’d agree that it’s done the same with food production. (Tractors, combines, automated watering and fertilization.) Well, the only thing stopping it from happening in any number of fields is the fact that we employ people for less than 1) it costs to keep them alive, and 2) it costs to replace them with machines. Raise pay to a living wage and you make automation more likely. Fail to raise pay to a living wage and you have the bizarre and unsustainable societal disaster of working people commuting to work from the cardboard box they inhabit in the company’s parking lot.
Do I have a solution? No. Of course not. No more than Ugg and Flork knew what they were getting into when they first decided to plant a seed rather than chase a wildebeest. No one has ever in history had a solution to a massive paradigm shift. These things evolve as the revolution unfolds.
Dave, Germany accepts immigrants at high rates, but their birth rate is extremely low. Their population growth last year was .1% compared to our .7% and our growth rate has been consistently higher than theirs since the 60’s.
Do I? I’ve been cautiously advocating a WPA-style jobs program since 2008. What I’m skeptical about is infrastructure spending managed under the same qualified vendor, Davis-Bacon wage rules we’ve had in place for decades.
What I hear when you say “it’s technology” is “let’s correct for the least influential and possibly non-existent problem that’s impossible to solve rather than any of the 10,000 dumb policies that are easy to solve except for the small constituency that will defend it to the death”.
There are still people starving in China and India—more people than in all of the rest of the world put together. And those countries run trade surpluses with us and are sitting on wads of cash. China should be importing food from us. Instead they’ve got quotas. We should be producing more food and feeding more people. Instead we’ve got unemployment.
The same is true here of mining, oil production, lumber, and so on.
Dave:
There’s a huge difference between iPhones spreading everywhere and the economics of automation. Obviously in a country with a 1$ an hour wage people aren’t going to be investing in million dollar machines to replace them. The domestication of horses spread everywhere and yet some people used them to plow oats, and others used them to attack people who plowed oats.
As for Japan, the unemployment rate stays low because the Japanese prioritize social stability over efficiency. Walk through a Japanese department store some time. Look at the masses of clerks. Then look at the prices of goods. You want to keep people working even when they’re doing nothing at all and pass the cost along to consumers? That’s one solution, certainly.
And as you point out, that’s a stable unemployment rate in a population that is actually declining, not robust growth in a country with a growing population, which is what we’d all like to see in the US. And it’s those high prices in goods and real estate that help depress Japanese population growth to begin with, creating a downward spiral. Which is probably why the Japanese are working so hard to do what? To build robots. Because it’s cheaper to find new machine workers than it is to grow biological ones from scratch.
You’re kidding, right? China invests more in high technology factories than the next three largest investor countries put together.
That’s your definition of technology? That’s my definition of policy. And the Japanese have actually backed off from industrial robots a bit by comparison with twenty years ago.
We’re choosing not to make, mine, pump, grow, etc. things here. That’s not technology. That’s policy.
By the way, I have no issue at all with a federal make-work program. I’ve suggested we could hire a whole lot of un-trained, un-skilled, unemployed people to start cleaning up abandoned buildings and decrepit parks. We could do it tomorrow. But how is that any different economically? We still have to pay those people, and it’s still coming from tax revenues, and the benefits may be psychic or spiritual, but it’s still money out of my pocket and into theirs with very little return economically.
Germany’s employment numbers are goosed by “mini jobs” (google it) which make up about 1/5th of all employment. Germany also is worse when it comes to income inequality before taxes and transfers are taken into account. So Germany has papered-over it’s problems with a part-time labor scheme and an extensive income transfers.
What’s an open question is why Germany is this way and whether technology has anything to do with it.
As for federal “make work” programs I support them in theory, but am very skeptical they can work in practice given the existing government structures and bureaucracy. In the best case, the feds could provide money to the states who would run their own WPA-style programs. Not sure how that gets through Congress though. We don’t have a crisis on the scale of the Great Depression to remake the political landscape.
@Andy
I’d bypass the states entirely and move a national jobs program to the community level. The feds just fund it while localities create the work in a hyper-decentralized approach.
@Dave
In terms of employment productivity, capital is simply too efficient. The U.S. had growing mass unemployment through the end of the 19th and early 20th centuries, which was “corrected” by greater public spending to stimulate demand. The problem is this is a never-ending game where investment inevitably overcomes the spending multiplier and so more spending is needed. In my opinion we’re now seeing the fruits of indirect job creation in the growth of totally parasitic sectors of our economy.
Ben, the labor situation was also corrected by severely limiting immigration.
And I’ll note that if we’re truly worried about technology creating mass unemployment, importing tens of millions mote workers is as stupid an employment policy as imaginable. And yet, importing tens of millions of low skill low education peasants is the one thing all liberals want, and call everyone who disagrees with this a hater which means that liberals do not want improvement in either the unemployment situation or the income inequality situation. It’s all bullshit.
Sorry for that run on sentence.
Ice:
This liberal does not support opening the borders. We have a perfect right as a country to decide who should and who should not get in. On this I agree with Dave that we should get back to something like the bracero program to deal with the need for agricultural labor since that is so seasonal.
I do generally support the idea of open borders, but like so much else it’s a concept that’s been perverted to benefit a few at the expense of the many. A temporary halt to legal immigration categories to stabilize wages makes sense.
Speaking of driving down wages:
In early 2005, as demand for Silicon Valley engineers began booming, Apple’s Steve Jobs sealed a secret and illegal pact with Google’s Eric Schmidt to artificially push their workers wages lower by agreeing not to recruit each other’s employees, sharing wage scale information, and punishing violators. On February 27, 2005, Bill Campbell, a member of Apple’s board of directors and senior advisor to Google, emailed Jobs to confirm that Eric Schmidt “got directly involved and firmly stopped all efforts to recruit anyone from Apple.â€
Later that year, Schmidt instructed his Sr VP for Business Operation Shona Brown to keep the pact a secret and only share information “verbally, since I don’t want to create a paper trail over which we can be sued later?â€
These secret conversations and agreements between some of the biggest names in Silicon Valley were first exposed in a Department of Justice antitrust investigation launched by the Obama Administration in 2010. That DOJ suit became the basis of a class action lawsuit filed on behalf of over 100,000 tech employees whose wages were artificially lowered — an estimated $9 billion effectively stolen by the high-flying companies from their workers to pad company earnings — in the second half of the 2000s. Last week, the 9th Circuit Court of Appeals denied attempts by Apple, Google, Intel, and Adobe to have the lawsuit tossed, and gave final approval for the class action suit to go forward. A jury trial date has been set for May 27 in San Jose, before US District Court judge Lucy Koh, who presided over the Samsung-Apple patent suit.
http://pando.com/2014/01/23/the-techtopus-how-silicon-valleys-most-celebrated-ceos-conspired-to-drive-down-100000-tech-engineers-wages/
Reynolds, when was the last time you didn’t vote for the candidate in favor of open borders? Nineteen-never? You always vote straight ticket Democrat, and there isn’t a Democrat in the country that doesn’t want this to be Mexico. You can claim whatever you want, but you strongly support open borders by your actions, particularly the bit where you claim the only reason anyone ever opposes anything Democratic is because they’re racist.
You support open borders, crushing wages and turning this into a country of Third World peasants + the wealthy few. Those are YOUR ACTIONS. Own it.
I’ll also note that increasingly the Democrats are going after anyone who dissents. Someone vaguely important speaks up in public, and the IRS, DOJ and every other bit of the Federal government crawls up their ass and makes camp. I’m sure President Obama, who has received tens of millions of dollars of questionable campaign donors form overseas from such noted Americans as Anonymous Anonymous Anonymous Anonymous (the best fictional American name since Major Major Major Major) is just SO committed to campaign honesty.
…
But a little closer to the subject at hand.
According to the stats, somewhere north of 45 million people receive food stamps. That indicates a much LARGER number of people needing assistance that Schuler’s rather low number, as he said above.
Noodling around a little a find a stat (claiming to be from the Census Bureau) that 8.7 million HOUSEHOLDS make less than ten thousand dollars a year. Assume for the sake of ease of calculation that these households —
Wait right there a second. I’ll come back to the rest in a minute. WHO gets $20,000 a year? Every adult between the age of 18 and 67 (SS retirement age at the moment, I believe, for most people)? Or every household? If it is every person, that’s WAY fucking more people than six million, as something like 90 million Americans aren’t working now.
If it is every HOUSEHOLD, how do you determine a household? A couple? How do you determine which people are couples? My wife and I are married. My idiot neighbor with the pitbulls that are trying to kill us are NOT. As it turns out, the Missus and I have a child, but that didn’t have to come to pass. It could easily be that we were married and childless (as are Schuler and his wife, as we were four years ago) while our neighbor has four children, three with his girlfriend. Will all four of us get a guarantee of $20,000 a year? Will it only be the heads of household? In that case, my neighbor will simple claim to be living somewhere else and they’ll both collect while only one of us does. (They already claim to live somewhere else so as to send their children to better schools.) hardly fair. These details need to be worked out ahead of time. I’ll just start a new comment where I left off.
Actually, I’m not sure there is any point in discussing minimum income until we decide who gets it. Reynolds say $20,000 is enough to get by on, and he’s correct, as long as the person getting the $20,000 only has to support themselves. It starts getting tighter when you’ve got to support other people.
And is this supposed to replace ALL other federal welfare programs for people between the ages of 18 and 67? (Excluding healthcare benefits, I assume, as it is a moral imperative for someone else to pay for everyone’s medical benefits.) All other state programs? Are adjustments to be made so that some people can get the $20,000 and still get benefits? Will this impact things like the EITC?
There’s not much point in discussing the cost in anything other than the vague terms that Schuler has used above until those other questions (at the very least) have been answered.
But Schuler is correct that there are a millions of us that want jobs that are no longer available. And a great many of us are NOT getting squat from the federal government in terms of general welfare benefits, as we have working spouses. That will be a big chunk of change right there. And if we did it by household only I’m getting a number that is at least $130 billion a year. (And that is making very generous assumptions on household income for 20,000,000 households.) That number is doable on the HOUSEHOLD basis, if you assume everyone is honest and IF you cut a lot of other benefits. Are you going to cut the food stamps for people like my neighbors? Are you going to stop giving them subsidized school lunches and breakfasts for their children? That’ll be interesting, politically, as I’m sure all the Democrats in the country will support such benefit cuts in return for something else. I’m certain they won’t demand a new benefit simply on top of the old one. Positively certain.
And many of you all think I am over the top bringing in Goti, money laundering, Ponzi schemes, breaking legs, shake downs, street hustlers, ets.
The real crooks wear suits and ties. The real crooks are the darlings of one political faction or the other. Are these guys hard working businessman, or are they social justice liberals?
And if this idea is so brilliant, why haven’t the Dems been all over it before? After all, I’m told that Obama is the most brilliant President ever, and that this is the Age of Competence. So what gives? I remember first reading of this idea in one of Nixon’s books. How is it no one came up with this idea before?
Eat the rich, TB, before the rich eat you. That’s what I’m telling people these days.
And note that Zuckerburg is heavily funding both a Democratic and Republican effort to open up the borders even more. These Silicon Valley guys don’t even have the decency of the oil barons of Texas (and North Dakota).
@Icepick: These details need to be worked out ahead of time.
@Nancy Pelosi: … we have to pass the bill so that you can find out what is in it …
That’s an interesting link, Ben. If proven, that would be collusion and it’s illegal.
IMO not much will come of it. A fine that looks large but when compared to how much the companies have saved by their illegal activities is paltry will be levied. Again, if proven and if I were king, Mr. Schmidt and the present CEO of Apple would do time and I’d consider a RICO suit.
@Icepick
I really do not have anything against the rich. I just want to be left alone, and I want them to stop fucking over the less well off while claiming to be helping them. They can also keep their hands out of my pocket, and stop telling me how smart they are.
Here is another one you should understand. Remember Y2K brought to us by the smartest people in the whole wide world? The world was going to end because computers would have an overflow problem. Add 1 + 99 as a computer does, and you will see we may have a 2027 problem.
Dot com, Y2K, Enron, housing bubble, financial crisis, stimulus bust, pending student loan crisis, government spending bubble, etc. all brought to us by the same people. I would appreciate it if they would stop lying, and admit they are taking what they can.
I would rather the crooked Chicago or New Orleans politicians. At least you know where you stand with them. Same goes for the mobsters. They are only trying to help you to help themselves. Works for me.
I thought DOJ declined to prosecute, but released its evidence on the cabal. I’m not finding anything definitive, other than DOJ issuing a cease and desist order in 2010. The group keeps saying no damages have been proven, which I take it to mean that they think the damages are too diffused and unascertainable, which I doubt, but that is the kind of difficulty here government action is required.
I was correct, DOJ filed complaints in March and June of 2011, at the same time an agreed judgment was entered in which all of the companies agreed to stop the anti-poaching agreement without admission of any wrong-doing. Steve Jobs, the guy at the center, dies later that year, which I have to wonder was part of the consideration.
We have the most mature capitalist economy in the world. Perhaps we are just ahead of the curve compared with Germany, Japan, etc. Also, I think technological unemployment is a factor, I just dont know how much. Creative destruction does not imply that new jobs will show up immediately or in the same numbers to replace the ones that are dislodged by innovation. (Libertarians assiduously avoid the time issue. They may be correct that eventually, the market will find ways to add new jobs, but for those out of work in the short term that is not helpful.)
Are you sure about the CHinese factories? Had a talk with a visiting engineer prof from China recently. He suggested that many of their factories are really hybrids of tech and lots of low labor employees, so that their high tech factories employ many more than ours.
Steve
@PD Shaw
… The group keeps saying no damages have been proven, which I take it to mean that they think the damages are too diffused and unascertainable …
That is the mindset of these guys. Unless damages can be proven, no damage has been done, and no laws have been broken. Restated: They can do what they want until somebody can prove they have broken the law. Side-note: They can have the law rewritten to redefine their activities from illegal to legal.
I could go on and on, but what does it matter? Same old, same old.
Each generation recycles the previous generation’s talking points and change a few words. If you do not see it, you are too young, or you were a “low information” voter. Guess what? Today’s “low information” voter is tomorrow’s partisan.
tomorrow never happens, man. It’s all the same fucking day, man.
Janis Joplin
Your visiting engineer substantiated the point I was making rather than contradicting it. The Chinese use high tech factories and low-skill labor. Here’s the claim Michael made:
The claim is partially right and partially wrong. The Chinese aren’t investing in million dollar machines to replace low-wage labor. They’re investing in million dollar machines to complement low-wage labor.
Rock bottom wages are only one of the factors driving manufacturing to China. Others include low energy costs (why do you think they’re mining all that coal?), lower costs of compliance, and better manufacturing technology.
American workers tend to be much more productive than Chinese workers and you don’t have to lock them in their barracks at night. We could keep a lot of that manufacturing here or attract it here. We don’t because there are too many people who don’t want manufacturing here. Well and good. They need to propose a workable alternative. The alternative they’ve proposed to date are a formula for misery, crime, and corruption.
Maintain a level playing field. Stop erecting barriers to manufacturing here.
@Dave Schuler
January 24, 2014 at 11:53 am
I think you summed it up right there. Concise and Elegant.
My presidential votes have been Nixon 2, Anderson, Clinton 2 and Obama 1 and 2. I’ve been out of the country on others or otherwise occupied.
But you point to the obvious difficulties in a two-party system. It’s always a basket of policies – good, bad, stupid – for either party. My one effort at third party voting was pointless. But there have never been pure choices. I liked Reagan’s foreign policy toughness, couldn’t handle his social issues and economics. Couldn’t vote for him. It’s always a question of damage control.
I don’t vote in local elections because I’m never anywhere long enough to become informed or care. I honestly don’t recall state elections, though I voted Democratic on the last two go-rounds. I vote social issues and FP generally.
So you’re saying that the last time you didn’t vote for open borders was at least over 30 years ago, that otherwise you do always vote in favor of open borders, but that you are opposed to open borders despite the fact that you plan to continue voting for open borders until you’re dead. Got it.
Ice:
I assume you never vote. If you do vote then you’ve voted for a number of things with which you disagree.