The role of employment and jobs in creating our future

November 6, 2014

|

By Charles Brass

Introduction

The successful operation of a modern economy is based on a significant majority of adult citizens earning the income they need to survive through the work they do.  It is those in the labour force who produce the goods and services which comprise the modern economy.  These workers also generate the majority of taxation income that allows Governments to play their economic role, including providing income to many of those who don’t work.

 The importance of jobs to a successful modern economy can be seen in the lengths all Governments go to secure and protect them, and the promises politicians make that, if elected, they will implement policies which will create more (and better) jobs.

 Since the early 1990s many commentators[1] [2] have speculated on whether this economic system can continue indefinitely, and recently yet more have begun to argue that it can’t and won’t[3] [4].

Since so much of our past and present economic success has been based on this jobs economy, such thinking represents a serious threat to our future.  Even those who don’t believe the current economic system can continue struggle to generate viable alternative economic models[5].

This paper is in two parts.  First it examines the arguments suggesting that the current economic model is failing, and it concludes that these arguments are very probably correct, and even if they aren’t they deserve more attention than they currently receive.  Second it examines some proposed solutions to this dilemma, finds that many of them fall short, but concludes that viable alternatives do exist.

 Part 1 – Is there a future for jobs?

Arguments that developing physical and social technologies were destroying society have a long history.  Beginning in the early years of the industrial revolution[6], they have emerged regularly ever since[7].

 In some ways these doomsayers were correct.  At the start of the twentieth century 25% of Australian workers grew, manufactured or distributed food.  A hundred years later this was less than 3%[8].  By the same token, the percentage of employees in manufacturing industry is now about the same as it was in 1900 (having gone through a hump in the 1950s), but vastly more people are now employed in service industries.

 Such examples have led many to believe that, whatever short-term job loss might be caused by new technologies, these same technologies inevitably create more new and different jobs.  As one recent economics journalist put it: “The jobs will come, just as they always do”[9].

 I believe there are substantial reasons to believe that, however accurate it may have been in the past, this view is now simply wrong.  For most of human history the only way to get things done was through human labour.  The industrial revolution discovered powerful new ways to augment human labour, but the bulk of work still needed to be done by real people.

The infotronics revolution[10] has discovered many new ways to get things done which simulate human behaviour but do not require any people.

 A generic term for such technology might be robots, but that word covers a broad spectrum from machines which install car components to algorithms which read x-rays and diagnose disease[11].  The potential uses of such robots are expanding rapidly, and for good reason.

 The real drivers of economic wealth are believed to be business builders who create structures which turn their ideas into profitable reality.  The key driver of success for such business builders is their level of profitability, and we expect them to take any (legal) actions which will increase their profits.

As the scope of robot activity has increased and their cost has decreased, such actions have included replacing humans with robots.  Researchers from Oxford University recently concluded that 47% of employment in the USA was highly susceptible to being replaced by robots[12].  From the perspective of the business builder it makes sense to invest in continuing this trend.  Robots don’t get sick and they never go on strike.  They can comfortably operate in conditions which humans would never accept, and, increasingly, they can be reprogrammed as circumstances change.

From the perspective of broader society such a trend, however, is problematic.  If people aren’t employed from where will they get the income they need to personally survive and to keep the broader economic machine humming along?

 The key questions, therefore, are: to what extent is this trend to replace human with non-human labour a threat to our economic wellbeing?  Are things in the twenty-first century really any different to the way they were 100 years ago?  Will technology continue to create at least as many jobs as it replaces?

 The dominant modern answer to this last question is yes.  Pundits confidently predict the emergence of new and humanly-engaging jobs well into the future.

 Along with the growing minority dissenting chorus (see previous footnotes) I ask the question: what incentive is there for individual business builders to cut back on their replacement of humans with robots?  Consistent research highlights an increasing concentration of wealth in the hands of an elite few, most of whom are what I am calling business builders.  This is the same elite which has been criticised for constantly moving their operations to countries with lower labour costs.  If robots of all kinds offer the lowest cost, why wouldn’t they be used?  In fact, it is arguable under current Corporations Law that business builders who do not pursue the lowest cost options are guilty of an offence.

 I also offer the following evidence from Australian Labour Statistics.

 In 1964 93% of all Australians who had a job worked full-time.  By 1984 this was 75% and in 2014 it is 67%.  Many commentators applaud such a trend.  They point out, correctly, that part-time jobs provide greater access to employment for those with other responsibilities or interests.  Certainly, the number of women in the workforce has profoundly increased due, in part, to the increased availability of part-time jobs.

 In two person households the availability of part-time jobs has allowed greater access to the workforce and maintained (and possibly increased) family income.  For one person households (which now comprise one-quarter of all households[13]), part-time work is more of a burden.  Only rarely does a part-time job provide a living wage, and evidence of increased economic fragility as a result of only marginal attachment to the labour force abounds[14].

 Then there are all those who have no attachment at all to the labour force.  In 2014 this is 34% of the adult population (or 6.3 million people) of whom over 2 million say they would like to work but can’t find a job[15].

 Much more could be (and regularly is) said about the current state of employment and unemployment.  My point is that the long-term trend does not suggest much optimism that new technology is creating full-time jobs, or that the wages paid for working part-time will be sufficient to allow workers to thrive let alone survive.

 If this is true, there seem to be two alternatives.  Either the current economic system needs to be tweaked in some way to create meaningful employment for all who want it, or we need to devise and implement another system.

 Contemporary Governments clearly focus on the former strategy.  Within the limits of an increasingly deregulated global marketplace they offer incentives to those who say they will create jobs.  They encourage citizens to continually acquire new skills, arguing that it is skill shortages that cause unemployment to rise.

 There is also a globally active shorter working time movement[16] which argues that if all current employment was more equally distributed (ie some people work less and some work more) a viable economy could be maintained. In the aftermath of the Global Financial Crisis the German Government implemented a policy of Kurzarbeit (shorter work) through which they subsidised the salaries of workers who whose working hours were reduced rather than being sacked[17].  Some want to tweak the tax system to discourage the explosion in executive salaries (decrease the percentage of large salaries which can accepted as a tax deduction, perhaps even provide an incentive by allowing a greater than 100% deduction for lower wages[18]).

 Even if these approaches could work, and I don’t believe they can, prudent foresight practice suggests at least some resources should be applied to thinking about the consequences if our current approach to economics isn’t viable.

Part 2 – What if there is no future for jobs?

Jobs in our modern world provide two key benefits for their holders – something to do which makes a meaningful contribution to the world, and income with which to live the rest of their lives.

 These two are inextricably linked.  In the modern economy, as those who are unemployed or disabled are only too aware, it is hard to make a meaningful contribution to yourself or the world if you don’t have any money.

 The question of how those without jobs might fill their time is for another article.  Here I want to focus on how those who don’t have jobs might gain access to income.

 One option is already clear.  In Australia 5 million adults rely on Government provided income (of whom 2 million are on the aged pension)[19].  Recognising that not all adults are able to get a job, the Government distributes some of its taxation income to provide them with some money.

 Having just witnessed the most recent Federal Budget in which the Treasurer made clear that:  “the age of entitlement was over”, the extent to which such Government largesse provides a living income, or can be extended to more of the population, is clearly limited.

However, whenever a business builder reduces costs by displacing human labour the money saved doesn’t disappear.  Currently most of it flows to the business builder as increased profit, but part of it could be captured in increased taxation and hence be available for increased distribution.  This is part of the solution proposed by some commentators[20].  Some have extended this thinking, noting that many countries have created sovereign wealth funds as repositories of windfall profits and some of these distribute an annual dividend to all citizens[21].

 Some go even further, advocating that Governments structure their budgets so that they provide a guaranteed minimum income for all citizens, allowing them to supplement this income with whatever employment they can find[22].  Others advocate greater public ownership of corporations with the dividends flowing through the government to all citizens[23].

 These proposals envisage a greater role for governments, an argument which is not popular in most of the modern world.  Other commentators look in other directions for solutions.

 Some advocate an increased role for individual ownership of the means of production.  This can take many forms.  Increasing self-reliance through community gardens and local manufacture (encouraged by the growth in affordable 3D printing) is one trend.  Employee ownership of business operations (such as the Mondragon Cooperatives[24] [25]) has been shown to be more sensitive to broader community needs and less quick to sack workers or reduce wages[26].

 Some believe that the rise of the so-called ‘sharing economy’ through organisations like Task Rabbit, Airbnb and Uber will facilitate the generation of income in non traditional ways.

 Some suggest that if robots are going to do all the work in the future, then all citizens should be given their own robot and receive their share of the wealth it creates[27]. A more sophisticated version of this proposal is provided by Brynjolfsson and McAfee[28] who notice that humans in collaboration with machines do much better than either humans or machines alone (they call it the Indy 500 effect) – and they make a number of suggestions for ways in which more humans might collaborate with “machines” (defined very broadly) to earn income.

 Some even argue that if robots can make anything we want, then no-one needs to work at all.  We just collect whatever we want and return it when we are finished, and let the robots do the rest[29].

 One internet guru, at least, has noticed that there are many ways in which information about, or created by, citizens are profitably used in the modern world without any income flowing to those whose information forms its base.  Jaron Lanier advocates a system of micro payments through which citizens would benefit every time something they were, did or said was used by someone else[30].

 There may be merit to some or all of these proposals, either individually or in conjunction, and I for one would like to see a much wider debate about their merits.  In fact, I believe that without such a debate most of us face a much bleaker future.

 However, I would like to conclude this section by looking more closely at something which all of them (except the last – that we don’t’ need an economy, that everything we need will just be provided) take for granted – money and how it is created and distributed.

 The role of money

Money is critical to this analysis because it is the lubricant which facilitates our economic model.  Too little money in circulation means viable projects are not undertaken (and jobs are not created) and too much money means prices for goods increase (and the resulting inflation erodes the value of wages and salaries).

 Most of us have no idea how money is created, who decides how much money there actually is, or how money actually circulates in the economy.

 Before addressing these issues, it is worth a brief digression to remind ourselves just how our understanding of money has evolved.  We don’t exactly know when human beings began trading with each other, but it was a long time ago.  Many of the cuneiform tablets recovered from 5,000 year old civilizations contain accounting records[31], and pharaohs and kings have long relied on administrators to keep tabs on who owed what and to whom.

 Transferable counters, what we would now call coins, emerged later[32] and proliferated into the wide range of artefacts we now know as money.  All these artefacts (from shells and cows to promissory notes and cheques) were created to facilitate transactions between people, in particular to make it easier for exchanges to take place between many people and at different times (one transaction converted a commodity into money and a second converted the money into another commodity).

 In the twenty-first century money has become so central to our lives that we simply take it for granted.  About the only time we think about money is when we don’t have enough (and even then, there’s always the credit card to call on).

 Most people believe that governments create money and that banks facilitate its distribution by accepting deposits from some people and lending to others.  In fact, governments decide what forms of money are acceptable as legal tender and they physically print banknotes and mint coins, but the amount of money in circulation at any time is vastly greater than the number of banknotes, and considerably more than is actually deposited in all the banks.

 For over six hundred years the world has operated on a system known as ‘fractional reserve banking’ through which banks can lend much more money than they have on deposit.  Banks effectively create new money every time they grant a loan and it is their willingness to create loans which determines how much money is in circulation.  What we have come to call the global financial crisis arose because all sorts of loans that could not be repaid were created and hence banks were not able to operate profitably.  Billions (possibly trillions) of dollars which were apparently circulating in the economy vanished virtually overnight.

 From its beginning money has been all about trust.  We trust that the tokens we receive in exchange for our goods (or our labour) will be valued by those from whom we subsequently want to buy something.

 Many commentators question whether a system based on private banks creating our money supply only when they perceive the potential for a profit is ever sustainable[33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44].

 Some advocate a greater role for governments, arguing that publicly created money doesn’t need to be repaid with interest[45].  Others distrust central governments, noting that they have not been particularly responsible in the past when they did create the money supply[46] [47].  Some take this further, advocating for a democratising of the creation of money and a system of interlinked community currencies to sit alongside national currencies[48] [49] [50] [51].

 Something clearly needs to be done.  While there seems to be a virtually endless supply of money for some things (like ever more complex financial transactions and more and bigger weapons) there never seems to be enough to get some things done (like looking after the most vulnerable and restoring the environment).

 Having been personally involved in the creation of a community currency (see appendix), and witnessed the success of others around the world, this is a solution I believe needs greater attention.  In a world in which plastic cards can easily record multiple international currencies[52], and banks are becoming more community focused[53], it would seem feasible for organisations and communities at a sub-national level to create and distribute their own currencies, and in the process provide income for those excluded from mainstream economic systems.

 Conclusion

There is sufficient doubt that the necessary number of viable jobs can be created for all who want and need them.  It is time that alternatives are given greater attention – before a crisis mandates their introduction.

APPENDIX

Case study of the creation of a community currency

 The impetus for the creation of this currency was a direction from the State Education Department that Primary Schools needed to become more innovative in their fund-raising efforts in response to a reduction in their Government funding.

An analysis of school finances identified a $50,000 shortfall.  After much discussion, the following scheme was implemented.

The school raised its ‘voluntary’ parent levy by $100 per student (with an enrolment of 500 students this notionally increased income by $50,000).  It justified this increase by identifying the range of activities which would be funded by the increased income.

It then created $50,000 in notes of a currency called “Links”[54] and announced a variety of tasks at the school which would attract payment in Links (but not in Dollars)[55].  It also announced that it would accept payment of the parent levy in Links.

In its most simplistic form, this mechanism would have resulted in $50,000 worth of additional work done around the school at no cost to the school (in Dollars).  However, the outcome was rather more sophisticated.

In practice, a number of parents accepted the need for an increase in the levy, and paid the additional $100 in Dollars.  Other parents with more time and less Dollars provided work to the school in exchange for Links and used these to pay their increased levy.

In fact, some parents paid not only the increased portion of the levy in Links, but some of the core portion as well – freeing up some of their limited Dollar resources – without costing the school anything.

The initial scheme was so successful[56] that the school subsequently increased the levy by a further $100 per student, and created a further $50,000 in Links.

It then went to the local business community (primarily the nearly adjacent retail shopping strip) with the following proposition:  the school would not approach participating businesses with sponsorship or other fundraising requests.  Participating businesses would agree to accept Links in partial payment for their goods and services (with the percentage of Links accepted to be determined by the participating business).

Participating businesses could either donate any Links they received to the school (this would effectively be a donation, since the school had not been required to provide any services in exchange for Links received in this way) or they could spend them with other participating businesses.

Virtually all the traders agreed to participate.  This meant that parents with sufficient time could work at the school, receive payment in Links, meet their parent levy obligations and spend their excess earned Links in the local community.

In effect, $100,000 worth of useful work was monetised and exchanged throughout a local community, with the most disadvantaged (and the school) gaining the most benefit.

In time, local sporting clubs joined the scheme by creating Links and using these to pay their junior coaches.

The project virtually ceased after three years when a new principal, who did not support the scheme, arrived at the Primary School.  Within five years Links ceased to circulate.

Note: The promoters of this currency sought formal advice from the Australian Tax Office regarding the legal and tax implications of such a currency, and were advised that there was no impediment to its operation (though there were some consequences for businesses which became involved, and the subsequent introduction in Australia of the G.S.T. has probably again altered the legal landscape).