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Thursday, January 5, 2012

The Unemployment Inferno:

Occasionally, mainstream publications repeat what I say here on this blog, minus one central point that lets them change their conclusion from my own.

Needless to say, this 'central point' that allows them to deviate is based on a lie, the lie of human equality. Subtract that lie and, lo and behold, mainstream publications are repeating, word for word, my own opinions and validating, word for word, my policy proscriptions.

This article is splendid and should be read in full, but needs one tiny edit -- the idea that 'education' will save us is a lie. Therefore, I'll just copy and paste this article, then subtract the education nonsense that is humanly impossible for the vast majority of mankind, and see where we end up.

The United States faces a protracted unemployment crisis: 6.3 million fewer Americans have jobs than was true at the end of 2007. And yet the country's economic output is higher today than it was before the financial crisis. Where did the jobs go? Several factors, including outsourcing, help explain the state of the labor market, but fast-advancing, IT-driven automation might be playing the biggest role.

Since the beginning of the Industrial Revolution, people have feared that new technologies would permanently erode employment. Over and over again, these dislocations of labor have been temporary: technologies that made some jobs obsolete eventually led to new kinds of work, raising productivity and prosperity with no overall negative effect on employment.

There's nothing to suggest that this dynamic no longer operates, but new research is showing that advances in workplace automation are being deployed at a faster pace than ever, making it more difficult for workers to adapt and wreaking havoc on the middle class: the clerks, accountants, and production-line workers whose tasks can increasingly be mastered by software and robots. "Do I think we will have permanently high unemployment as a consequence of technology? No," says Peter Diamond, the MIT economist who won a 2010 Nobel Prize for his work on market imperfections, including those that affect employment. "What's different now is that the nature of jobs going away has changed. Communication and computer abilities mean that the type of jobs affected have moved up the income distribution."

Erik Brynjolfsson and Andrew McAfee study information-­supercharged workplaces and the innovations and productivity advances they continually create. Now they have turned their sights to how these IT-driven improvements affect employment. In their new book, ­Brynjolfsson, director of the Center for Digital Business at MIT's Sloan School of Management, and McAfee, its principal research scientist, see a paradox in the first decade of the 2000s. Even before the economic downturn caused U.S. unemployment to rise from 4.4 percent in May 2007 to 10.1 percent in October 2009, a disturbing trend was visible. From 2000 to 2007, GDP and productivity rose faster than they had in any decade since the 1960s, but employment growth was comparatively tepid.

Brynjolfsson and McAfee posit that more work was being done by, or with help from, machines. For example, reduced the need for retail staffers; computerized kiosks in hotels and airports replaced clerks; voice-recognition and speech systems replaced customer support staff and operators; and businesses of all kinds took advantage of tools such as enterprise resource planning software. "A classically trained economist would say: 'This just means there's a big adjustment taking place until we find the new equilibrium—the new stuff for people to do,' " says McAfee.

We've certainly made such adjustments before. But whereas agricultural advances played out over a century and electrification and factory automation rolled out over decades, the power of some information technologies is essentially doubling every two years or so as a consequence of Moore's Law. It took some time for IT to fully replace the paper-driven workflows in cubicles, management suites, and retail stores. (In the 1980s and early 1990s productivity grew slowly, and then it took off after 1996; some economists explained that IT was finally being used effectively.) But now, Brynjolfsson and McAfee argue, the efficiencies and automation opportunities made possible by IT are advancing too fast for the labor market to keep up.

More evidence that technology has reduced the number of good jobs can be found in a working paper by David Autor, an economist at MIT, and David Dorn, an economist at the Center for Monetary and Financial Studies in Madrid. They too point to the crucial years of 2000–2005. Job growth happened mainly at the ends of the spectrum: in lower-paying positions, in areas such as personal care, cleaning services, and security, and in higher-end professional positions for technicians, managers, and the like. For laborers, administrative assistants, production workers, and sales representatives, the job market didn't grow as fast—or even shrank. Subsequent research showed that things got worse after 2007. During the recession, nearly all the nation's job losses were in those middle categories—the positions easiest to replace, fully or in part, by technology.

Brynjolfsson says the trends are "troubling." And they are global; some of the jobs that IT threatens, for example, are at electronics factories in China and transcription services in India. "This is not about replacing all work, but rather about tectonic shifts that have left millions much worse off and others much better off," he says. While he doesn't believe the problem is permanent, that's of little solace to the millions out of work now, and they may not be paid at their old rates even when they do find new jobs. "Over the longer term, they will develop new skills, or entrepreneurs will figure out ways of making use of their skills, or wages will drop, or all three of those things will happen," he says. "But in the short run, your old set of skills that created a lot of value are not useful anymore."

This means there's a risk, unless the economy generates new high-quality jobs, that the people in the middle will face the prospect of menial jobs—whose wages will actually decline as more people compete for them. "Theory says the labor market will 'clear.' There are always things for people to do," Autor says. "But it doesn't say at what price." And even as it gets crowded and potentially even less rewarding at the bottom, employees at the top are getting paid more, thanks to the multiplier effects of technology. Some 60 percent of the income growth in the United States between 2002 and 2007 went to the top 1 percent of Americans—the bulk of whom are executives whose companies are getting richer by using IT to become more efficient, Brynjolfsson and McAfee point out.

Dramatic shifts have happened before. In 1800, 90 percent of Americans were employed in agriculture. The figure was down to 41 percent by 1900 and stands at 2 percent today. People work, instead, in new industries that were unimaginable in the early 19th century. Such a transformation could happen again. Today's information technologies, even as they may do short-term harm to some kinds of employees, are clearly a boon to entrepreneurs, who now have cheaper and more powerful tools at their disposal than at any other time in history. As jobs are lost, Brynjolfsson says, "we will be running an experiment on the economy to see if entrepreneurs invent new ways to be productive equally quickly." As examples, he points to eBay and Amazon Marketplace, which together allow hundreds of thousands of people to make their living hawking items to customers around the world.

The problem, he says, is that not enough people are sufficiently educated or technologically savvy to exploit such rapid advances and develop as-yet-unimagined entrepreneurial niches. He and McAfee conclude their book by arguing that the same technologies now making industry far more productive should be applied to updating and improving the educational system. (In one promising example they cite, 58,000 people went online to take an artificial-intelligence class offered by Stanford University.)

IT-based entrepreneurship isn't the only potential technological driver of new jobs. Revitalizing manufacturing (see "Can We Build Tomorrow's Breakthroughs?") could also help. But automation has made manufacturing far less labor intensive, so even a manufacturing revival is not likely to mean a great many new jobs on balance. Likewise, anyone whose hopes are pinned on "green jobs" may be disappointed. Though jobs will be created in the switch to cleaner energy sources, jobs tied to traditional energy will be lost in the same process. Many economists are not certain what the net effect will be. And in any case, these days manufacturing and energy account for small slices of the U.S. economy, which is now driven much more by the service sector. That's why fast-advancing information technologies, with their pervasive reach and their potential to create new services and satisfy new niche markets, may be a better bet for job creation—though the tumult IT is causing in the labor market isn't necessarily going to resolve itself quickly.

Peter Diamond says that one of the most important things the government can do for employment is to take care of basics, like infrastructure and education. "As long as we have so many idle resources, this is the time when it's advantageous—and socially less expensive—to engage in public investment," he says. Eventually, he believes, the economy will adapt and things will work out, once again. "Jobs have been changing and moving around—within the country, out of the country—for a very long time," he says. "There will be other kinds of jobs that still require people."

First, let's see how far technology review correctly diagnosed the situation. 6 million jobs lost since 2007. The largest cause is automation (the rise of the machines.) The middle class is taking the most damage, because machines have not yet become cheaper/more efficient than human hands, legs, and eyes at menial tasks, nor are they outsmarting our CEO's, but even this is only a matter of time. Machines have replaced workforces before, but never so quickly, and never with the extensive artificial intelligence capabilities they now have in the present -- this wave isn't like the others. Even though GDP and productivity has been rising for decades, income and employment has not. It's the greatest disconnect ever seen.

However, technology review must have some fig leaf to cover the meaning of their article up with some camouflage. Enter the 'silly, magical thinking' that saves us from what would be our natural conclusions:

"Over the longer term, they will develop new skills, or entrepreneurs will figure out ways of making use of their skills, or wages will drop, or all three of those things will happen,"

First off, people don't develop new skills. This relies on magical thinking. Reality dictates that people with below 100 IQ cannot learn anything relevant to the economy. They can never outsmart a machine, or, more properly speaking, a more intelligent person overlooking and cooperating with multiple machines. The labor contribution to a product is minimal, maybe 20% of the price of production. A businessman isn't interested in hiring tons of people, he's interested in hiring the right person, who can make the most of the remaining 80% of his investment -- the price of his capital, land, taxes, maintenance, etc. He isn't going to trust a bumbling moron with ten million dollar machinery just to raise employment, and certainly not for slightly lower wages.

Skilled workers is just a euphemism for intelligent workers. It's been shown through numerous studies that a worker from say, Harvard, and another from the University of Iowa, after two years on the job their IQ, not their college degree, is a better determiner of their workplace productivity. Give an intelligent person a chance to learn the job and they will do so. Give dumb people that same chance and they won't figure it out in a million years. They are a hopeless group that education cannot change.

Time and again Technology Review predicts that education will ride in on a white horse and save the day. They do not, however, point to a single example of education working. This is amazing. A scientific website, without any evidence, without even a single real-life example, keeps citing the magical education fairy as the answer to our woes.

Where is the school that mass-manufactures brilliant new entrepreneurs off an assembly line? There isn't even such a thing as an Entrepreneurship major. Where is the high school, or junior college, that can guarantee employment for anyone who graduates from their ranks? Where is the statistical evidence that education is helping anyone find a job? A recent survey of college graduates discovered that only 57% of these graduates said their degree had helped them find a job, which is amazing when you realize businesses are required to hire people on the basis of college degrees and not IQ tests. College was found to be much better at helping children 'find themselves' or 'self-actualize' or some other new age hippy crap. Basically, college is an extended vacation for rich people. It used to be a place to find a marriage partner, but nowadays marriage is so delayed that even college is too early to find anyone during. There is only a tiny correlation between the education people receive in college and the jobs they receive afterwards, and that tiny correlation only exists due to government coercion.

The last option is that wages will drop. The problem with this is that wages would have to drop by 50% every two years just to keep up with Moor's law. It's a ridiculously temporary solution. Let's grant that menial labor could live off of half as much as they're being paid today. We'll slash the minimum wage in half and pay people only $3 an hour. In doing so, let's say this out-competes machine vacuum cleaners or whatever and puts people back in the assembly plants. How long before somebody somewhere invents a ten nanometer chip and computers leapfrog the workers once again with another doubling of productivity? Two years? Five? Ten?

Let's say it's now ten years later and the only solution for workers is to work for $1.50 an hour. If they put in a good day's work, we'll say 10 hours of hard physical labor, they'll get $15 dollars. Unfortunately, since they worked so hard and long, they'll be needing a lot of food, so let's subtract $5 off the top. Now they have $10 to pay all of their bills, electricity, gas for the car, debt payments for the car, insurance payments for the car (a car is a necessity to get to work and back for most Americans), rent for the apartment, phone bill (phones, likewise, are a necessity for work). . . But let's say they manage it all. They share a car between ten friends, a phone between ten friends, an apartment between ten friends, and so on, and their $10 manages to pay for it all. Then they get sick and, too bad, they don't have health insurance because America still doesn't have public health care, because we're the only rich country on Earth that hates its poor people with a passion and denies the poor even the most basic goods in life. Or even better -- then they die of old age and guess what, they're $10 a day couldn't both pay for themselves and a family.

Supposing menial labor could compete with machines by just lowering wages again and again, it's still a hopeless endeavor because the minimum wage isn't just that which is necessary to sustain life, but also enough to provide for at least two children who will take the worker's place when they die. I do not believe it is physically possible to support 4 people on $15 dollars a day in America. Our money simply can't buy enough basic goods necessary for survival for that to happen. The idea that there are infinite jobs once we allow 'prices to drop' is, therefore, a myth and a lie.

Nobody's willing to work for the wages of death. If they're going to receive less money than it takes to live anyway, they'd rather not work at all. That is the true minimum wage, and it's a hell of a lot higher than $1.50.

There are other alternatives, but they are equally disgusting. "There are infinite jobs if workers accept bad enough working conditions." Right, so, let's move their pay back up to $10 an hour, but now they have to risk their life among dangerous machines or shark fishing or coal mining miles underground with shoddy equipment. After enough deaths and maimings or lung disease plus our wonderful lack of American public health care, I think these workers would quickly despair and quit too. Or let's imagine the workers are women and they all take up strip dancing, lap dancing and prostitution. What a wonderful future we've made for ourselves. Infinite jobs for all our daughters, they can be forced to suck stranger's cocks by the thousands for a living or die of starvation on the streets. It's a libertarian paradise.

There are not infinite jobs worth DOING. That is the point technology review misses. There's this thing called utility, it measures benefits and costs. When you include the cost of employment, the benefits can easily be outweighed. At such a point as any possible new job carries with it higher costs than benefits, that is when you have reached maximum employment. That threshold is much sooner than the threshold of 'there's nothing left doing of any worth on this planet.'

If education can't make everyone into Steve Jobs, and we can't actually afford to lower our work safety laws, our child labor laws, our drug and prostitution laws, our minimum wage laws, and so on, then Technology Review's solutions are bunk.

It's true that we've always adjusted to machine workforce displacement before. But that was then and this is now. This time, things are different. This time the machines are so smart and so ubiquitous that there's simply nothing the lower half (and soon the upper half) of mankind can do. Nor is it true that we got off 'painlessly' from the industrial revolutions of the past. The most important statistic you will ever hear in your life is the one given by Peter Drucker in 'The New Realities': In it, he states that from 1900-1990, the average human's work hours over the course of a year decreased by 1/2. It's not that we 'adjusted' to machine disruptions in the past and found full employment again. We kept the same number of nominal jobs, but everyone was working half as hard. In fact, we had already been displaced by machines, without even knowing it. Now we are finding that even this shell game of pretending to have jobs has come to an end, and now workers, even working a few hours a week, are no longer needed for any useful end.

There are only three true solutions to automation: Fake, government jobs for everyone, destroying our machines and reverting to a Mennonite past, or the citizen's dividend.

The libertarian dystopia of infinite jobs at infinitely low wages is worthless, as is the pipe dream of liberals that everyone can 'do anything they want' so long as they get an education first.

The real solution being implemented, stealthily, in the world today is makework in, you guessed it, the worthless 'education' sector to give everyone fake jobs. There are other worthless sectors of the government, like the 'defense' department which does nothing to defend us but still costs 1 trillion dollars a year, or the health care sector which spends 50%+ of its money extending old people's lifespans by a single year. All told, government makework has been the only sector for job growth throughout most of Europe for decades, and is now the sole source of jobs in America as well. Even this is coming to an end due to the crippling cost in taxes creating these jobs takes. As governments find they can no longer employ people at $100,000 a year doing absolutely nothing of worth while still balancing their budgets, they are slashing public payrolls and unemployment is swelling up again. The game could be extended a little longer via hyperinflation, paying government workers in monopoly money by the gazillions and stealing the savings of the whole world to pay for it, but even that would come to a grinding halt eventually in total national ruin.

It should be obvious why going backwards isn't the solution. Without artificial intelligence and sophisticated machinery, we can never escape this planet, which is doomed to die from the sun going Red Giant, or from losing all it's carbon, or being drowned in comet water, etc. The Earth won't last forever, that's certain, and therefore we must leave while we still can.

That leaves the citizen's dividend. Paying people the bounty of our machine labor which has displaced their own labor, without having to work for it. It's just that simple. In the past we lived off of the work of plants and animals -- we expropriated their horsepower and photosynthesis to serve our own needs, and we thought that was just fine. Even though the crops grew themselves, we ate them and no one called said farmers 'worthless parasites.' Now we need to realize the same thing about machines -- machines are our servants, not our masters. We aren't parasites for living off the labor of machinery, just as we weren't parasites for living off the labor of animals and plants. This is our right as intelligent beings, we aren't parasites, we're masters of the universe and this is our tribute given to us by our inferiors.

The small number of human workers still needed to keep our machine economy going will still be paid handsomely. The citizen's dividend can be funded with current, or lower tax rates than we pay today. Government spending can pay out a citizen's dividend without any increase by just cutting all the unnecessary parts we exercise today. There is no excuse for why the citizen's dividend is unacceptable unless the current world is also unacceptable, which paradoxically means that no solution is acceptable and suicide is the only answer. I can't very well debate with nihilists who think the proper response to automation is going (mostly or totally) extinct. For everyone else, logic and facts dictate the citizen's dividend. There's no other way. Technology review likes to pretend there are other ways, but it relies on ignorance of the genetic, unchangeable nature of IQ, which is simply ostrich-like head-in-the-sand thinking in this day and age. Libertarians like to pretend there are answers, but when you hear what their real solutions are: Give people starvation wages, with no workplace safety, employ kids, legalize drugs and prostitution (including child prostitution, since after all, child labor laws are wrong. . .), trash the environment beyond all repair, and so on, you realize that libertarians are just misanthropes who desire to bathe this world in suffering and death. The nihilist solution of killing off everyone who's unemployed or about to be unemployed, in contrast, is a thousand times more humane, even if it reduces the human population to just 1% of what it is today.

We have entered jobs hell. There is no going back. Hell is permanent. We are in the first or second ring of the Inferno, but there's only lower circles from here. Unemployment isn't some sort of aberration, it is now the permanent norm. We can accept that and adjust our lifestyle to it (by passing the citizen's dividend), or descend in to ever worse circles of hell as we fruitlessly attempt to achieve the impossible with one mad scheme after another of full employment.

If we still have souls, we can't endorse sadistic libertarians or nihilist exterminationists. If we still have brains, we can't accept magical thinking liberals that think government debt can be extended into infinity, money can be inflated endlessly, or education can turn everyone into a super-genius.

If we are still sane, good people, if we are to ever be sane, good people again, we will pass the citizen's dividend.


Anonymous said...

"Reality dictates that people with below 100 IQ cannot learn anything relevant to the economy."

The average American's IQ is 98....

Diamed said...

Indeed. And guess what the bottom 80% of Americans earn as a percentage of total income per year?

Bottom 80%: 38.6%

What's their total percentage of wealth, ie, savings, including the value of their homes, in America?

Bottom 80%: 7%.

As you can see, they're totally irrelevant to the economy, and the free market says so in blazing red numbers.

Diamed said...

Correction, the bottom 80%, including the value of their homes, has 15% of the wealth.

But here's some more disturbing statistics from that article:

"It's a number I haven't even mentioned so far, and it's shocking: the lowest two quintiles [ie, 0-40%] hold just 0.3% of the wealth in the United States."

"Although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979."

"Most amazing of all, the top 0.1% -- that's one-tenth of one percent -- had more combined pre-tax income than the poorest 120 million people (Johnston, 2006)."

Surely you'll admit that those 120 million people, which roughly correlates to everyone with 98 IQ or below, by failing to make as much money as the top .1% of Americans alone, are completely irrelevant to the economy. Even worse, the trend, since 1979, is that they are becoming even worse paid and more irrelevant every year. Since my article is addressing what machines will do to us in the long term, my prognosis just becomes more correct with each passing minute.

Anonymous said...

I wasn't arguing with you, just pointing out that we yanks aren't exactly the cream of the crop when it comes to intelligence. No wonder Jews and East Asians took over so easily.

And the worse part is that the black-white IQ gap here in America is getting smaller each generation, which means one one of two things. Blacks are getting smarter, or whites are getting dumber. Either way it has to stop. Whites are in danger of becoming bottom feeders.