JOBS; UNEMPLOYMENT; PRODUCTIVITY…what is the real problem?

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In a society as technologically advanced as ours, the problem of “unemployment” and the problem of “how do we maximize productivity” are intimately related—coupled in an inverse functional relationship. By that I mean, as a rule, steps taken to improve one—will screw up the other proportionally.

Here is an example of what I mean:

There are many jobs that machines (robots and computers) can do more efficiently, faster, and cheaper than can humans. So we can significantly improve productivity in certain areas by getting rid of humans and replace them with machines.

As you can see, productivity could skyrocket; but at a cost to employment. Maximizing productivity is a relatively easy problem to solve…so long as you do not care about the impact of the improvement on employment.

Or we can look at that situation from its flip side:

Obviously there are robots and computers that can do most production and clerical work more efficiently, faster, and cheaper than humans, but let’s keep machines out of the picture and require that production and clerical duties be done by humans. They need the jobs.

Here we see employment being created or increased, but at a significant cost to productivity (and incidentally, profit). Unemployment is a relatively easy problem to deal with if you do not care about the huge negative impact on productivity and profit.

So it is obvious that you can easily improve the condition of either of those supposed problems (unemployment or less than maximum productivity and profit)—one at the expense of the other; but because of the inverse functional dynamics, it appears you cannot improve both at the same time.

In a sense, this means that the original two problems are not significant problems at all, but that a third, very significant problem, DOES exist. Although the original two problems are each easily cured, the things you do to improve the condition of one causes the other to get worse—and THAT is a huge problem. Factor in the impact on profits…and the condition is like an inoperable cancer. (Or so it seems!)

(Obviously I have much more to say about this—and would like to suggest a way to have this supposed dilemma become a significant advantage for society, but I’d like to see any reaction to this so far. Do you agree with the premises…or do you significantly disagree with them.)

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@Frank Apisa,

Well it kinda depends on the jobs being replaced by machines.

I do data analysis. It's a job that really can't exist without computers. It gets bigger and badder every year, as more and more data sloshes around the Internet, company databases, etc. No specific, one machine can do this work. They help with and facilitate it - and the work could never be done timely without them. But they can't do it on their own.

I'm a highly skilled person. I am also looking for work.

Adding computers creates, really, the only productivity that is even possible in this area. Taking them away means the job doesn't and cannot exist.

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@Frank Apisa,

There are two other problems - separate but related.

One is that employers cannot find workers with the right skills.

The other is that skilled, would - be employees cannot find work.

Here's what seems to be happening. Here's what I think is happening; companies hire personnel managers who write job descriptions. Their jobs depend on not hiring unqualified people, so the job descriptions they write have no chance of matching anyone's skill set, except possibly the last person to hold the job. It's good job security - for the personnel department.

Of course, you wanted to talk about productivity. Technology simply can't be stopped in the name of full employment, and any country that tries it is going to fall so far behind the curve it will never recover. Developing countries can always move forward, but none can afford to move backwards.

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@Frank Apisa,

Good post, from my view, Frank.

I'm not sans thoughts on all this, but my thoughts are relative to start ups in a lot of areas and those take initiative at a time when morale is down. I'll be listening for a while.

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@roger,

That too.

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Thanks everyone so far. I hope more people come...and offer ideas for consideration. I will consider what has been said...and comment at some point tomorrow.

Nancy and I are going to dinner in a bit...so I am off the air for a while.

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@Frank Apisa,

Frank Apisa wrote:

In a society as technologically advanced as ours, the problem of “unemployment” and the problem of “how do we maximize productivity” are intimately related—coupled in an inverse functional relationship. By that I mean, as a rule, steps taken to improve one—will screw up the other proportionally.

This is true only when total output is limited by demand, which it was maybe 12 of the last 100 years, including the last four. But normally it isn't. Normally, the Fed can increase demand by printing more money, and the economy is isn't limited by demand.

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Nancy and I are going down the shore right now. I'll comment more later today or tomorrow.

I do have a question for Thomas, however, to see if I am understanding his comment correctly.

Thomas, are you saying that when output is not limited by demand…using more machines does not lead to less employment…and using less machines (using more humans) does not lead to less productivity???

That does not seem to compute. I do not see what one has to do with the other. Would you expand on your reasoning.

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@Frank Apisa,

There are lots of problems.

Here's an exploration of one of them:

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@Frank Apisa,

Frank Apisa wrote:

Thomas, are you saying that when output is not limited by demand…using more machines does not lead to less employment…

Yes to this part. When output is limited by supply rather than demand, using more machines still increases productivity. But increasing productivity no longer decreases employment; it rather increases the national income.

Frank Apisa wrote:

and using less machines (using more humans) does not lead to less productivity???

No to that part. Using fewer machines does decrease labor productivity. But when output is limited by supply rather than demand, decreasing productivity decreases the national income rather than increasing employment.

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@Thomas,

Quote:

Re: Frank Apisa (Post 5022494)
Frank Apisa wrote:
Thomas, are you saying that when output is not limited by demand…using more machines does not lead to less employment…

Quote:
Yes to this part. When output is limited by supply rather than demand, using more machines still increases productivity. But increasing productivity no longer decreases employment; it rather increases the national income.

Thomas, I am not sure if you are just kidding around here...and busting chops rather than being serious.

If the latter, please tell me so I can move on. If the former, I really want a fuller explanation. If I am off base on the premises...none of the follow up really matters--and quite honestly, I still have doubts about the premises myself (although from a completely different perspective than you are presenting.)

What possible difference is made on the decrease in employment by humans when machines are used...simply because output is limited by supply rather than demand? There seems to be no connection at all. If machines are used to do jobs that humans can do...there simply is less employment for humans available. How can supply/demand differentials possibly influence that?

Quote:

Frank Apisa wrote:
and using less machines (using more humans) does not lead to less productivity???

Quote:
No to that part. Using fewer machines does decrease labor productivity. But when output is limited by supply rather than demand, decreasing productivity decreases the national income rather than increasing employment.

What does this mean?

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@Frank Apisa,

No, I'm not playing around. Yes, your premises are false in part.

Let me start with a correct premise of yours. It is true that the use of machinery increases productivity. The next question is, what will society do with its extra productivity? One option is that it keep producing the same amount of goods and services with fewer workers. This choice leads to unemployment, just as you say.

But there's another choice: Society can also use the same amount of workers to produce more goods and services, and then consume them. In this case, national income increases, and employment needn't change at all. Your argument implicitly assumes that a society will always take the first option, reducing employment rather than increasing income. But although that has been true ever since the financial crisis of 2008, it isn't generally true. For most of its economic history, America has used its productivity growth to fuel growth in income and spending --- not for laying off workers.

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@Thomas,

Glad you are not screwing around...and are serious.

Gotta give your thoughts more thought, although my first impression is that you are incorrect in your reasoning. But like I said, I have to give the matter more thought. I hope others comment on your response. I may be able to appreciate it better if I hear other takes on it.

In any case, thanks for the input.

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@Frank Apisa,

Frank Apisa wrote:

Gotta give your thoughts more thought, although my first impression is that you are incorrect in your reasoning. But like I said, I have to give the matter more thought.

More thought is always a good idea. You might want to browse a macroeconomics textbook while you're doing it. J. Bradford deLong, a Berkeley economist, has a draft of his very readable textbook webbed here:

http://www.j-bradford-delong.net/Teaching_Folder/Econ_101b_f2001/Econ_101b_f2001.html

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@Thomas,

Although it is aged, as am I, I have a degree in economics, Thomas. I understand where you are coming from…but I am having difficulty in making the leap you are making.

Part of what I am having problems with is:

Increased growth in income resulting from increased productivity which comes from increased used of machines rather than humans as a factor of production…is not distributed the way increased income growth historically has been.

We’ve been seeing the “increased growth in income” (which already is here) accumulating to a smaller and smaller percentage of the population. The rich are indeed getting richer, but the 99% is getting poorer. There is no increase in “demand” that I see happening, because the increased demand of the 1% is not reflective of the increase growth of income.

Plus, you seem to be assuming that even if there is a significant increase in demand (which I do not see happening the way things are going)…the increased demand will translate into jobs for humans…rather than simply increasing the machine workers output.

Talk to me a bit about that…and feel free to consult DeLong or any other economist in your research.

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@Thomas,

By the way, you seem to be the only one seeing this as an interesting discussion topic, so I have to keep coming back to you in the thread.

1 Reply

@Frank Apisa,

Frank Apisa wrote:

Although it is aged, as am I, I have a degree in economics, Thomas. I understand where you are coming from…but I am having difficulty in making the leap you are making.

It's not a leap. It's right there in the data. Browse the Statistical Abstract of the United States, look at the numbers on employment, hours worked, output, and so forth. Find out for yourself which story checks out and which doesn't.

Frank Apisa wrote:

We’ve been seeing the “increased growth in income” (which already is here) accumulating to a smaller and smaller percentage of the population.

What income distribution would you expect if textbook macroeconomics is correct?

Frank Apisa wrote:

The rich are indeed getting richer, but the 99% is getting poorer. There is no increase in “demand” that I see happening, because the increased demand of the 1% is not reflective of the increase growth of income.

But the 99% aren't getting poorer, their income is stagnating. (Well, more like the 80--90%, actually.) And if income growth at the very top is spent --- on mansions, yachts, escorts, or whatever --- there's no contradiction with standard macroeconomics. Macroeconomics is about aggregates: aggregate supply, aggregate demand, and so forth. It makes no claims about income distribution, be it among professions, or social classes, or factors of production.

Frank Apisa wrote:

Plus, you seem to be assuming that even if there is a significant increase in demand (which I do not see happening the way things are going)…the increased demand will translate into jobs for humans…rather than simply increasing the machine workers output.

Then you want to dust off your old macro textbook, check the index for Cobb-Douglas production function, and read the sections around those references. In short, businesses seek to satisfy their customers' demand in whatever mode of production works the most efficiently. And getting too lopsided between capital and labor makes for inefficient production.

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@Frank Apisa,

Frank Apisa wrote:

By the way, you seem to be the only one seeing this as an interesting discussion topic, so I have to keep coming back to you in the thread.

No problem, please do.

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@Thomas,

Thomas...I bow to your greater knowledge in this area.

I suspect we will, at some point, see if my intuition on the situation is closer to correct than your text book understanding.

My guess is that wages paid to human labor will continue to decrease...and that wages paid for human labor will continue to decrease.

Maybe you are correct that the models that have worked (sorta) for the last several hundreds of years will continue to work...and that the impact of machines on the need for human labor (especially for human labor that should be paid a decent wage) will be less than what I see happening. (I actually hope you are correct and that I am wrong.)

Perhaps, though, the old models should go into the wastebasket...and a new awareness should take hold with regard to what may happen in this economy...and how we will deal with it.

My further guess is that the value of human labor (even third world human labor) will continue on its downward spiral...and that even third world human labor will eventually become prohibitively expensive. In other words, it is my guess that it no longer makes sense to pay humans living wages for the kind of work most humans can do...and that some other means of distributing vastly more accessible resources and products has to be conceived and implemented.

We'll see...probably within the lifetime of people now alive.

Anyway, since there seems to be so little interest in this area of discussion...I'll save my follow up threads for a while...although I probably will post them at some point.

Thanks for you input...and if you have other thoughts, please share them.

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@Frank Apisa,

In my engineering class I've programmed robots, and it's very hard to execute an action.
It'll take some time before robots are going to take over all of the menial jobs (Amazon has automated it's warehouse and Lexus is replacing car painters with automtaed robotic painters with greater effeciency and more precision in it's layer deposits).
It's hard to tell when all this will come, but with Moore's law, it's pretty much within our reach.

If robots take people's menial jobs, I guess people will migrate to job positions where there is less supply and more demand in the field. This requires getting an education, higher or equivalent to a bachelors degree I suppose.

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JOBS; UNEMPLOYMENT; PRODUCTIVITY…what is the real problem?

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