Will unemployment levels really get THIS high?

The news is full of scary stories and dire warnings. Some scientists claim that carbon dioxide emissions will turn the earth into a Venus-like inferno. There is evidence of comets and asteroids hitting the earth in the past, and every once in a while you read about another one getting really close. News articles warn that sooner or later a super-volcano like Yellowstone or Campi Flegrei will erupt, or a massive earthquake will hit one or more of the big urban centers on the west coast of the United States.

How are you supposed to respond to a warning about a problem that will happen some time in the indefinite future, described in very general terms?

The answer is that you don’t do anything about problems you can’t do anything about, and you do what you can to mitigate risks that you can do something about. You have some emergency supplies, you strap book-cases and other heavy furnishings with a high center of gravity to the wall, and then you go about life again.

There are some problems that we know approximately when they will strike, but nobody does anything about them, because they’re in the future, and a little too abstract for most people to be able to run an accurate simulation of what s likely to happen.

I wrote this article as a chapter in a book about a problem I anticipated decades ago, because I was part of the bleeding edge of the trend. Unfortunately at the time, I failed to come up with a good counterstrategy, because I was distracted by more immediate needs. Since then, the problem has transformed from a hypothetical risk to a clear and present danger, so lately I’ve been giving it more of my attention and problem-solving skill.

The mainstream media has been covering up some of the evidence, like rising real unemployment rates. Instead they report the official BLS unemployment statistics, which stop counting unemployed people as “unemployed” once they’ve been unemployed long enough, based on the rationale that they’ve “left the workforce”.

Presumably some of those people want to work; the most common problem is probably that they don’t have marketable skill sets, and don’t know where to get them or can’t afford the training. If someone wants to work, and can’t find a job, that’s a problem worth knowing about. Even worse is that the number of people who can’t find jobs is accumulating and has been for a long time. You can see it in the “Labor Force Participation Rate”, which is more-or-less the inverse of the unemployment rate, or in other words, the employment rate is trending DOWN:

Headlines from news specifically covering economic trends and forecasting shows that the rising unemployment rate is concentrated among young adults. They’re either not finding jobs at all, or are relatively under-employed compared to their potential. They’re not getting experience that will help them get or stay employed.

News headlines:

7 Out Of 10 Millennials Are “Disengaged” From Meaningful Employment
posted by “Tyler Durden”, Aug 31, 2016 6:35 PM, at Zero Hedge

Millennial College Graduates: Young, Educated, Jobless
“This spring, an estimated 2.8 million university graduates will enter the U.S. workforce with bachelor’s, master’s and doctoral degrees just as America’s unemployment rate hits its lowest level in nearly seven years. Cause for celebration, right? Not so fast.

The millennial generation is still lagging in the workplace, just as it did last year. It makes up about 40 percent of the unemployed in the U.S., says Anthony Carnevale, a director and research professor for Georgetown University’s Center on Education and the Workforce.”
By Leah McGrath Goodman On 5/27/15 at 6:22 AM

“Now hiring class of 2016.”
Sign in front of a strip club in Harrison, Michigan

Americans have a tendency to maintain an optimistic sense of what is “normal”. If things go wrong, they expect things to eventually “get back to normal”. This is analogous to the situation of people sitting around the tables at a nightclub, sipping their drinks, while the room is filling up with smoke, because they have unreasonable expectations that their experiences should always be “normal”. This is a failure to notice or adapt to change. That’s how species end up going extinct.

To put this into perspective, unemployment is not the employer’s problem. No employer has a self-interested motive in hiring people because they need jobs; employers only hire when they can make enough additional profit from someone else’s labor to offset the cost. In fact, any relatively compassionate employer would go bankrupt trying to compete without making an effort to trim labor costs as much as the competition.

So employers are always trying to CUT labor costs, or in other words, they’re always looking for ways to REDUCE their hiring, even if they’re hiring at the moment.

Potential employers currrently have at least two alternatives to hiring you:

Labor costs tend to be cheaper in countries whose national currency is not a major global trading currency. The reasons are complicated to explain, so I’ll skip them, but you can empirically derive that it’s true just by noticing the differences in pay-scales between India and the USA. The bottom line is that your employer wants to fire you and replace you with someone in India, China, or wherever else they can find a cheaper replacement for you.

Another option your employer has is to fire you and hire a machine in your place. Computing systems and robotics are replacing humans for many tasks. The conventional wisdom is that “new technology creates more jobs in the long run”. There might be some truth to that, but I wouldn’t count on it being an invariate law of economics. The only thing that’s consistent is change! The problem at the moment is that technology is accumulating faster than people can be retrained for new jobs. They can’t even predict where the new jobs will be or how long they will last accurately enough to avoid jumping out of the frying pan and into the fire.

The government is even less of a friend than a private employer. The government’s goal is to maximize tax receipts. Some people assume that if more people have jobs, then the government’s take of taxes is greater, because more people would be paying income tax.

It’s true that most of the US federal government’s income comes from taxes related to wages, but in most comparable economies, income tax is a smaller percentage of total tax revenues. The US federal government could easily shift the tax burden.

According to the Tax Foundation, about 45% of adult Americans don’t pay income tax per se (but many of those do pay social security tax and medicare tax). And, because of progressive tax rates, high wage earners end up paying a disproportionate share of income tax–over half.

As a result, the federal government’s tax haul from low wage-earners is relatively negligible. Profits retained by keeping headcount low, particularly for low-wage earners, can generate more corporate tax receipts. The federal government therefor has no incentive to protect lower-paying jobs; instead, it has a perverse incentive to encourage more automation and offshoring.

In fact, it’s quite likely that the US government is INTENTIONALLY pursuing policies that increase unemployment, because they have incentives to do so:

  • Profits retained by companies are likely to end up as taxable corporate income.
  • The standard of living of unemployed people goes DOWN, thereby reducing the rate of resource depletion.
  • Dependent people have an incentive to obey their governments

Now to put the problem into a historical perspective: until the Industrial Revolution, most people in Europe worked for members of the nobility as peasants or servants, or for the church, or were skilled laborers who worked for themselves. More to the point, nobody worked for private corporations until such things existed.

There was a time before the concept of private corporate employment. Given pace at which the economy is changing, it’s reasonable to conjecture that private corporate employment will dwindle down to a relatively minor source of employment opportunities.

We may very well be on the cusp of a post-employment economy.

I’m not the only one who thinks so.

Headline news:

The End of Employees
By Lauren Weber, Wall Street Jounal
…Never before have American companies tried so hard to employ so few people. The outsourcing wave that moved apparel-making jobs to China and call-center operations to India is now just as likely to happen inside companies across the U.S. and in almost every industry.

Bill Gates: Yes, robots really are about to take your jobs
Brad Reed @bwreedbgr posted March 14th, 2014 at 2:04 PM on BGR tech and entertainment news

Elon Musk: Robots will take your jobs, government will have to pay your wage
Catherine Clifford posted Friday, 4 Nov 2016 | 2:19 PM ET on CNBC

I wouldn’t count on collecting. And it’s not really “wages” if you’re not working. That’s a euphemism for a government welfare program.

Robot Economy Could Cause Up To 75 Percent Unemployment
Max Nisen posted Jan. 28, 2013, 10:42 AM, Business Insider

We are entering a new phase in history – one characterized by the steady and inevitable decline of jobs. Just as the steam engine replaced slave labor in the 19th century, the new intelligent technologies of the IT, biotech, and nanotechnology revolutions are fast replacing mass wage labor in the 21st century. Worldwide unemployment is now at the highest level since the Great Depression of the 1930s. The number of people underemployed or without work is rising sharply as millions of new entrants into the workforce find themselves marginalized by an extraordinary high-technology revolution. Sophisticated computers, robotics, telecommunications, and other cutting-edge technologies are fast replacing human beings in virtually every sector and industry. In the past seven years alone, 14% of all the manufacturing jobs in the world have disappeared, as more and more human labor has been replaced with intelligent, automated technology. Similar technology displacement is occurring in the white collar and service industries.

Many jobs are never coming back. Blue collar workers, secretaries, receptionists, clerical workers, sales clerks, bank tellers, telephone operators, librarians, wholesalers, and middle managers are just a few of the many occupations destined for virtual extinction. While some new jobs are being created, they are, for the most part, either highly conceptual, knowledge-based and boutique, or low paying, and generally temporary in duration. The world is fast polarizing into two potentially irreconcilable forces: on one side, an information elite that controls and manages the high-tech global economy; and on the other, the growing numbers of underemployed or permanently displaced workers, who have few prospects and little hope for meaningful employment in an increasingly automated world.
Jeremy Rifkin, author of The End of Work

Notice Mr. Rifkin’s comment about “boutique” jobs. My guess is that he means they are in specialized niches. That means there won’t be many of them, and they won’t last long. Notice what he didn’t say. He’s not trying to reassure you that all your kids need is to go to college, and they’ll be able to live the “American dream”. That advice was never good, and now it’s obsolete.

Regardless of whether robots, offshoring, and onshoring make it hard for your kids to find jobs after they grow up, the global economy is changing faster than most people will be able to adapt to it.

For one thing, it’s shrinking. We’re running out of natural resources. And, on top of that, as of this writing, the financial system that allocated resources is broken beyond repair. Even if your job weren’t offshored, onshored, or automated, it might cease to exist anyway when your employer goes bankrupt. If the “pie” is shrinking, then most people’s share decreases, and some people don’t get a piece at all.

One way or another, the future is going to be harsh and brutally-competitive.

The problems are all related. One reason for rushing to automate more and more jobs out of existence is to reduce the number of people needed to keep the economy running. My guess is that your descendants are less likely to be targeted for culling if they continue to be indispensable despite the possibly intentional effort to render them superfluous.

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Namaste! The Divine within me honors the Divine within you. I tell stories about lessons I've learned the hard way. Follow @KalkinTrivedi on Twitter.

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