A few days ago I tried to get a little brainstorming going on the subject of technology as the primary explanation for the too slow rate of job creation. Obviously, either I failed to pique anybody’s interest or none of my few readers can find any supporting evidence for the idea that I didn’t.
As a follow-up, I’ll present some of the reasons why I think it’s unlikely that automation is the most significant reason for slow job growth following the Great Recession:
- Very few significant new technologies have been deployed since 2007. The only technological developments I can think of since then are the growth of social media and smartphones gaining critical mass. Most of the decline in employment and/or decline in job growth as a result of automation had already taken place by 2007.
- It’s not happening everywhere. Germany’s unemployment has actually declined sharply since 2007.
- The actual decline is relatively small. Two or three percentage points. I can’t believe that automation and harnessing breakthrough technolgoies can only wring out that small a fraction of employment.
- The number of jobs is still growing. It’s just not growing fast enough to keep up with the increase in population or bring the people who lost their jobs from 2007 to 2009 back o work.
- There are plenty of explanations other than automation for slow job growth.
Now let’s try brainstorming the reasons that automation is not the main factor behind the too slow job growth of the last few years (or the last dozen years, for that matter).
Misdirected, for lack of a better word, or missing capital? While median wages have been flat or fallen, the mean has increased. That increase in wealth is not being turned into jobs, not for a long time. That suggests to me that those who might have created jobs in the past, especially start ups, have less access to capital, and/or what capital we have accumulated is going to investments that do not yield jobs.
That said, my gut feeling is that you are a bit wrong here, and that tech is more important than you think. Drew said several years ago that big corporate profits were illusory and would go away as they resulted from big job cuts that would provide only temporary profit increases. He was wrong (or I misunderstood him) as profits have remained high. Some combination of tech, better management (unlikely) or more productive workers (possible, especially with tech) has made that possible.
Steve
I’m not saying that it’s completely irrelevant. I’m saying that it’s unlikely as the chief explanation.
@steve
… Drew said several years ago that big corporate profits were illusory and would go away as they resulted from big job cuts that would provide only temporary profit increases. He was wrong (or I misunderstood him) as profits have remained high. …
I think he was right, but he underestimated the effect. A lot of companies are getting more out of workers but paying the same. A lot of people work uncompensated overtime. In this economy, few people are willing to tell the boss, “take this job and shove it.” They will be not working there anymore, but they will probably not work anywhere anymore.
As more jobs become available, this will change, and people will begin telling the boss, “go f*ck yourself.” At that point, businesses will be required to fully compensate employees, and “production” will drop.
Business will blame workers for the drop. A rude person would notice business wants “free stuff”, but what is a little socialism between friends.
GDP growth has been too weak to support the automation hypothesis.
So far Dave, every graph you have posted shows an “L-shaped” recession. That is, the negative impacts have been permanent. A downward shift in all trends with no rebound to return us to previous trend line. That would likely translate into lower employment levels for sometime unfortunately.
This isn’t terribly hard to see. It is one reason why I thought policies that gave a boost to investment would be wise vs. policy attempts to boost consumption spending.
“This isn’t terribly hard to see. It is one reason why I thought policies that gave a boost to investment would be wise vs. policy attempts to boost consumption spending.”
This is oh, so correct.
“I think he was right, but he underestimated the effect. A lot of companies are getting more out of workers but paying the same. A lot of people work uncompensated overtime.”
What I said, if poorly articulated, is that companies are resourceful, and if the cost to emply goes up, they will not sit idly by. Ignore it at your peril.
“As more jobs become available, this will change, and people will begin telling the boss, “go f*ck yourself.â€
This is one sided, and loaded with too much emotion. Employees don’t bat an eye to go down the street, or take the training they have received from company A and go down to company B. Its an equal opportunity tug of war, including if it goes employees way during periods.
And that’s OK. Its a market. And the market for employment will sort itself out if, as Steve V points out, the Paul Krugman’s of the world don’t bofo every last employee in the country is pursuit of his white whale.
And as a follow up to Tasty’s wage comment, remember total employment cost, not just wages. The majority here do. So does our, ahem, “illustrious” president.
That would be “do not.”