Analysis of Employment and Unemployment
This chapter examines and analyzes the causes of unemployment. It also exposes issues in our current employment systems. The purpose of this discussion is to enable the formulation of the approach to tackle the problem of unemployment. We need to analyze the issue before we can solve it.
The section, "Mechanization and Automation", discusses the benefits and problems of mechanization and automation. The main problem is that it leads to increased levels of unemployment.
The section, "Consumption Limits", discusses that we humans have an upper limit on how much we can consume with minimal wastage. Consumption limit combined with rising levels of mechanization and automation is a factor in unemployment.
The section, "Private Benefit and Social Cost", discusses the idea that mechanization and automation provide significant benefits to their creators, but it has a social cost in terms of greater unemployment.
The section, "False Logic of Laziness", presents the reasons to exclude laziness of the unemployed as the cause of their unemployment.
The section, "Free Volunteer Work", highlights the situation that there are people who do useful work for others, and yet they don't get paid for it. This is a problem with our current model of employment.
The section, "Knowledge and Skills", points out that it is getting harder and harder for an average human to gain all the knowledge and skills needed to create and maintain the mechanization and automation that we so heavily rely on. That kind of work is also getting automated. This leads to even these kinds of employment opportunities facing diminished need for humans.
The section, "Imports and Unemployment", merely points out that some imports can contribute to the unemployment problems in a society.
The section, "Production Consumption Balance", discusses the idea that in a for-profit economy, there is a natural balance between production capabilities and demand for consumption. The ideas of mechanization, automation and consumption limit collectively put an upper limit on the employment opportunities within all the for-profit organizations combined.
The section, "Workaholics", discusses the idea that workaholics contribute to the unemployment problem and degrade the quality of the work environment.
The section, "Overworked Employees", discusses the idea that there are many ways in which employees could be forced into working longer hours than they desire. This is primarily an employment problem, but it contributes to the unemployment problem.
The section, "Protected Employment", discusses several problems associated with employment protections for employees.
The section, "Wage Slavery", discusses the idea that some employees are in situations that they have no choice but to work for a terrible and abusive employer.
As we can see from the list of sections, this chapter presents numerous problems related to employment and unemployment. Any solution that we may think about needs to consider and address all these issues.
Mechanization and Automation
It would be unfair if we directly dived into discussing problems of mechanization and automation. We need to discuss the benefits first. We should not lose sight of the benefits when we are trying to eliminate the problems associated with it.
Technological advances enhance human capabilities; as users of technology, we can do more with it than we could without it. Using technology, we can do the same things more efficiently than we could without it. Finally, there are some things that we can do only because of mechanization and automation; these things are impossible to do manually.
We could cite many examples, but that is quite unnecessary. All of us already know the multitude of things that are possible because of mechanization and automation. What is important is to keep in mind the above-mentioned benefit categories.
As technology has been progressing over time and there has been a continuously increasing level of mechanization, and more recently we have introduced automation. This means that we will require less human labor to produce the same amount of products and services. If consumption remains the same, then this would lead to higher levels of unemployment. This is the most basic problem of mechanization and automation; it has been known for several decades.
There have been counterarguments that question the validity of the statement that mechanization and automation leads to unemployment.
The first counterargument to this most basic problem is as follows: if mechanization takes away one kind of job, people can learn some other skill and will still have work to do. A suitable example that supports this counterargument is as follows: When internal combustion engine cars became prevalent, the drivers of horse-drawn carriages simply had to learn the skills to drive a car, and they could still be employed. In fact, in this particular case of cars replacing horse-drawn carriages, humans became more capable and at a lower cost and at lower inconvenience because they do not have to depend on the idiosyncrasies of animals (in this case horses).
The second counterargument to this most basic problem is as follows: When mechanization takes away one kind of job, it frees human creativity to produce different kinds of things or provide new services. Humans can base their employment on these new products and services. A suitable example that supports this counterargument is as follows: When farming started getting mechanized, the effort to do traditional farming reduced. Those who lost their earlier means of employment could take up farming of the herbs, vegetables and other kinds of produce that was not yet mechanized. This increased the variety available to the consumers. This increase in variety can be said to be an increase in the quality of life, and we can credit the mechanization of traditional farming for this expansion in the kinds of produce.
The third kind of counterargument to this most basic problem is as follows: mechanization should not be looked at from the perspective that it takes away jobs. It should be looked at from the perspective that it expands our capabilities. Thus, when farming was not mechanized, a single person could potentially farm only one acre. After the introduction of mechanization, the same person can farm say ten acres. Thus, mechanization introduces plenty, and that plenty reduces the cost and hence makes the produce affordable to more people. While all that is true, it is just stating the benefits of mechanization and automation; it is not really a counterargument; the previous two counterarguments are actually good examples.
Many counterarguments have been valid in the past. They all rely on the assumption that there is something else to do.
Up to several decades ago, there was just mechanization. Now we also have automation. Can there be something else to do for humans when we are continuously reducing the need for human labor by mechanization and automation?
Consumption Limits
We humans have needs and wants, and in order to satisfy them, we consume products and services. However, our consumption has limits. Even when we make more and rapid technological progress and even when more things become cheap, our consumption cannot continue to grow forever.
For example, suppose an average human requires 2000 calories of nutrition per day, then no matter how much the mechanization and automation has progressed, the daily requirement stays the same. In fact, on a per-person basis, it has gone down because we have significantly reduced our manual labor.
In the food and nutrition industry, the number of people required to produce the food and nutrition for humans is continuously reducing. A few centuries ago, most of the human population was engaged in the production of food. Now the percentage is small. Thus, there has been an increase in unemployment in the food and nutrition industry over the centuries. The number of people required to produce all the food and nutrition that is required by humans has reduced considerably.
During this time, technology was progressing and producing new products and services like electricity, radio, telephone, cars, television, computers, smartphones, movies, radio entertainment, television entertainment, etc. Thus, the employment lost in food and nutrition was balanced by the gain in employment in these other industries.
We started consuming the new products and services. But even this kind of consumption has limits. There is a limit on the number of hours per day that a person can play video games, watch movies, television shows, sports and internet videos. While this person spends his or her time playing video games or watching something, he or she cannot actively consume other things like play golf on a golf course, go to a gymnasium, read a book, etc. This puts a limit on how much total consumption is possible within a day by a single person.
Humans also have a desire to not waste their own money. People usually try to minimize waste in their consumption. This desire of not wasting also places limits on consumption.
The combined effect of these factors is that there is an increasing level of unemployment. We will eventually reach a point where we cannot increase the total quantity of consumption any more. We could produce many more kinds of products and services, but in order to consume them, we will need to stop consuming something else. Consumption cannot continue growing. Perhaps we are already at that point where consumption cannot be increased. After this point, in the presence of mechanization and automation, increasing unemployment is inevitable.
The only way those people who become unemployed as a result of increasing mechanization and automation can be employed is when some of the mechanization and automation seems more expensive than using human labor.
Private Benefit and Social Cost
We all have freedom to pursue our passions, talents and self-interest.
When painters use their passions, talents and do whatever interests them, they create works of art that are admired for centuries. When music composers do what they do best, we get solos and symphonies that other people continue playing for centuries. When gifted writers write novels, these are read by generations to follow. These artists are merely doing what they want to do, what interests them, what benefits them. Considering that we have consumption limits, all these great creations by past artists raise the bar for new creations for future generations, making it harder for current artists to compete with the best of the artists of the past several generations. So, for a moderately talented artist in current times, following one's passion hardly remains a source of earning one's living.
When technocrats develop or enhance technology, they create mechanization and automation, and it gets used and further enhanced for decades and even perhaps centuries. The benefit of this is in the reduction of human labor. But when every one of us has to earn one's living by doing work, then it causes unemployment.
Specific individuals or specific technologies are not the cause of unemployment. Individuals are merely following their passions, using their unique talents to do something that interests them and create something out of it. They are merely exercising their freedoms. Each one of these individuals contributes to some specific technology. It is the combination of a multitude of individuals and technologies that collectively make it harder and harder for individuals in successive generations to find employment.
People derive benefit from the work that they do. This eventually reduces other people's ability to work to earn their living.
When thinking about mechanization, automation and unemployment, it appears that freedoms have private benefits and social costs. The private benefits accrue to those who have something special that enables them to use that something special to their great benefit and some benefit of others. But there are adverse consequences for others.
Usually, freedoms do not cost society anything. It is a good thing to have freedoms. However, the freedom to mechanize and automate does have social costs. First, we need to acknowledge that there are "private benefits and social costs" of mechanization and automation, and we need to acknowledge that the social costs are in terms of unemployment.
So far, our society has not put the well-being of all citizens as its first priority. When we make the well-being of every citizen a priority, we will recognize that unemployment is undesirable. It is then that we will seriously explore solutions to the problem. It is only then that we will see that unemployment is not inevitable.
By the way, the "private benefit and social cost" realization does not mean that we embark on imposing restrictions on mechanization and automation. It is not the Utopian way. The next chapter presents the solution.
False Logic of Laziness
There is a line of thought that goes as follows: "People are unemployed and cannot support their own needs and wants because they are lazy. They do not want to work, they just want the benefits of other people's work."
For this line of thought to hold partially true, we need to give every person exactly the same start as every other person. For this line of thought to hold true, every person should have started their work life with the average wealth of the nation. It is only after that can we judge people on their laziness.
If we were to give every person, at a certain age, all the wealth that represents their share of the privately held wealth of the nation, then after that what they do with that wealth, how they use their share of the wealth of the nation to support their needs and wants, could be partially considered their responsibility. Obviously, we do not do that. Then, how can we blame those who find themselves unable to support their own needs and wants?
Besides, giving every person the average wealth of the nation at a single point in time is not useful. Going from some random amount of wealth to getting an additional average amount of wealth at a single point in one's lifetime does not suddenly make the person capable of using that additional amount of wealth to support their own needs and wants. There is more to independence and self-sufficiency than just wealth.
Between unemployment or laziness, what occurs first?. It is quite possible that laziness is just a symptom of the hopelessness of finding employment. It is possible that faulty education is the root cause. There could be many other things that ultimately manifest in unemployment, but laziness gets the blame quickly.
Finally, in case of some specific individuals, it is possible that laziness is indeed the root cause of their unemployment ... so what? Saying that it is their own fault and then doing nothing about it is not the Utopian way to deal with the problem.
Free Volunteer Work
In our society there are some needs and in order to satisfy these needs people request other people to volunteer their time to satisfy these specific needs.
Some examples of specific needs are: volunteer firefighters, volunteer medical community, volunteers for senior care, volunteer traffic controllers near schools, etc.
Other examples of general voluntary contributions are: creation of a global encyclopedia, open source software, open and freely available designs of tools and machines, free learning resources, etc.
While the work that these volunteers do is valuable and desirable, it seems that society is unwilling to pay for it. We, as a society, appreciate such volunteer work, we even praise it. But appreciation and praise cannot satisfy people's needs and wants.
Society has evolved and has made it harder for people to do useful work and get paid for it. People can still do useful work, people actually do useful work, they just don't get paid for it.
Knowledge and Skills
Technology has been improving for several millennia. It started from stone and bone age, then progressed onto the age of plants, wood and basic agriculture, then onto the Bronze Age followed by the Iron Age which transitioned into the industrial revolution and progressed further onto the electrical, electronic and computer age that we currently live in.
Initially, this technological progress was slow. As technology progresses, it builds on its previous accomplishments and continues to progress at a higher pace. That is, the progress of technology accelerates.
As technology progresses, it discards earlier forms of technology and replaces them with advanced technology. For instance, we have transitioned from plows to tractors, combines and harvesters. For instance, we have transitioned from walking to pulling loads on carts to animal drawn carriages to cars running on internal combustion engines to now cars running on stored electricity.
To create the initial technology, one requires rudimentary knowledge, to build on that technology one requires more than just the rudimentary knowledge. As technological progress continues, the amount of knowledge required to continue that progress increases.
Compared to other life forms on earth, we seem to have a very large intellectual capacity. We are curious, adventurous and problem solvers. We seek to know how nature works and how best to use it to make our lives better, more comfortable, more fun.
Humans have limits to their intellectual capacity. For example, we can only hold about 5 to 7 items in our short term memory. With good techniques and practice, we can reduce our limitations and enhance our abilities, but it requires plenty of interest, motivation and effort. There are limits to this kind of practiced enhancement of our abilities.
There are a few humans who naturally have a much larger intellectual capability than the rest of us. We know these people as world renowned mathematicians, scientists, artists, musicians, inventors, etc.
We are born without knowledge. Gaining knowledge requires schooling, basic education, higher education, and further specialized education. Even the best of us require a long time to gain all that knowledge to add to the preexisting technological progress. Currently, higher education may not be affordable to all. This problem is addressed by classifying higher education as "essential need" and it can be paid using the Utopian Payment Model, thereby making it affordable to those who have very little wealth. This only makes education affordable, but how many of us would be interested in having it? How many of us would be capable of learning the super advanced topics necessary to implement the next level of technology?
Thus, the number of people who can contribute to technological progress diminishes as technology progresses. To counter that, we have already developed mechanization and automation.
Increasing levels of mechanization and automation requires more knowledge and skills. As technological progress continues, the knowledge and skills required to create and maintain such technologies is higher and fewer people possess it.
We have now entered an era where progress in technology not only requires human intelligence, but also requires mechanization and automation. More recently, some of us have been working on machine learning and artificial intelligence to take over some aspects of our human intelligence to assist us in continuing this technological progress.
Thus, even in the areas of creating and maintaining advanced technologies, mechanization and automation, people with lower levels of knowledge and skills in their own peer group eventually get unemployed. So, if people who already have higher levels of knowledge and skills have challenges to compete, what about those who totally lack them?
Thus increasing technological progress, mechanization and automation will also lead to unemployment in the jobs that require higher levels of human intelligence, knowledge and skills.
It is hard to compete with machines. But not impossible. In fact, all this technological progress is possible because society exists, society accepts the progress and society permits the progress. We are the owners of the society, and we are the lawmakers, and we are in charge of this implicit acceptance, explicit permissions and explicit bans.
It is tempting to take the easy way out and start banning specific kinds of technologies; ban the mechanization and automation that seems to increase unemployment. But, such an urge should be resisted. We need to come up with a general solution to the unemployment problem. Banning some kinds of technologies should be related to the harmful effects of such technologies on humanity and life. Banning some technology because it causes unemployment should be considered only as a last resort.
Knowledge and Skills Mismatch
Many people do not have the knowledge and skills to do the work that they may desire. Obtaining this knowledge and these skills usually requires higher education. We have discussed the Utopian Payment Model, and we have already classified higher education as an "essential" and hence any expense on higher education gets paid with the help of the Utopian Payment Model. This enables motivated citizens to acquire the knowledge and skills to find work that requires that kind of knowledge and skills. This enables citizens to reduce the skills mismatch between what is required for work and what they possess.
There are people who have skills but cannot find employment in their chosen area of skills; such people may find employment in something else. There are people who do not have skills and yet may be employed to do some work, and there might be other people out there who are better suited to do the work than those currently employed. This is clearly an indication that whatever matching system is used to match potential employees to work is faulty. This is a problem, but not an indication that something is fundamentally wrong with the matching system. It can be solved, but this book will not deal with it.
Imports and Unemployment
Importing manufactured products and services benefits the exporting nations and hurts the importing nations with unemployment problems. If we have unemployment problems, and we are seeking an ideal society, then any justification for such imports is secondary to the need to solve the unemployment problem.
The chapter on foreign trade presents a system that mitigates the effects of an imbalance between exports and imports and naturally steers the monetary value of imports and exports towards balance. From a foreign trade perspective, a balanced trade is desirable. However, foreign trade policy cannot fully tackle the unemployment problems that exist within a nation.
Unemployment rises to the extent that such imports takes away the local employment opportunities. This is in a way similar to the problem of unemployment caused due to mechanization and automation.
Production Consumption Balance
At any time, the consumption and production of for-profit products and services is more or less balanced.
When consumption reduces, demand reduces, which could lead to producers either reducing prices or reducing the quantity produced. This will lead to lower levels of profit. To maintain profitability and to the extent that such production is dependent on human labor, producers will reduce employees. Thus, as consumption reduces, unemployment increases.
When consumption increases, demand increases, which could lead producers either to increasing prices or increasing quantity produced. This will lead to higher levels of profit. To increase production and to the extent that such production is dependent on human labor, producers will increase employees. Thus, as consumption increases, unemployment decreases.
Consumption can increase if people have excess money, and we have already seen that there are limits to consumption. For obvious reasons, unemployed people cannot induce an increase in consumption.
Thus, depending on the amount of mechanization and automation, there is a natural level of employment within the for-profit enterprises. The rest cannot be employed by for-profit enterprises. Insisting otherwise is a flawed approach. Forcing employment by for-profit organizations is an improper use of our authority as law-makers. However, we could enable employment, and that too, we can do it fairly for all citizens and enterprises.
There is nothing wrong in pursuing profit as long as that pursuit does not violate any laws and regulations. Of course, we need to ensure that our laws and regulations are good.
Workaholics
It seems that our current society takes the attitude that "we live to work" rather than the more desirable attitude that "we work to enable us to have a good life".
Most countries have long work hours. While they are not as long as they used to be at the dawn of the industrial revolution, they are still long. Some people may be spending close to 12 hours in employment related matters after considering commute, official work hours and the extra time they put in.
If an unfortunate employee has a workaholic boss, this employee's life can get forced into workaholism.
This "live to work" attitude results in people being overworked and having no time to enjoy, while others remain unemployed and have no wealth to enjoy.
This "live to work" attitude results in some people working towards having a wealthy retirement and having dreams of "relaxing and doing nothing" when they are retired, but ignoring to enjoy their younger days.
To the extent that workaholics work long hours, it deprives others from having employment and all its adverse consequences.
Overworked Employees
Overworked employees contribute to the unemployment problems to the extent that they are overworked. There are many ways in which employees are overworked.
Currently, some people work for long hours. If these people are doing work that many other people can do, then to the extent that they work more than the norm, they are contributing to the unemployment problems.
Sometimes, employees do not voluntarily work excessively long hours. Sometimes employers force employees to work long hours. They force by using a threat of finding someone else who would do the job. Whatever motivation and its justification such employers have, is quite irrelevant, what matters is that these kinds of employer actions contribute to the unemployment problems.
Sometimes, employees are denied time off from work when they need it. Not getting time off from work when the employee desires it, is just another case of overworked employees. When this happens, the employer forces work to take precedence over the personal life of its employees. This happens because in the current employment policy, this authority rests with the employer. No citizen should ever require permission from anyone to take time off to do whatever personal things the employee needs to do or wants to do. If employees need to ask for permission to take time off to do what is personally important to them, then it is not employment, it is servitude.
Another way employees are overworked is that they do not get any assured extended unpaid time off to take care of themselves or someone else. Usually, employees have to continue working and somehow manage to take care of themselves or someone they ought to take care of. For example, employees in most organizations cannot take extended leave of absence for a few months. For example, in many countries, parents cannot take extended leave of absence to take care of their newborn children. If an employee is willing to sacrifice his or her salary, there should be no reason for this employee to not have such an extended unpaid time off. With the presence of the Utopian Payment Model, even with no salary coming in, this employee would not have difficulty in paying for essentials. Not being able to take extended unpaid time off is an obvious sign of an overworked employee.
Protected Employment
Currently, our employment policy is too protective of those who are currently employed. These protections make it hard for employers to discontinue the employment of their employees. Perhaps in the past, such protections were the way to partially subdue unemployment.
The first problem of protected employment is when consumption reduces and a for-profit organization needs to reduce employees. If there are protections for employees, then employers tend to hire less employees and ask them to work more to avoid even getting to a state where they need to reduce the number of employees and cannot because of protected employment. Thus, we get overworked employees and also unemployment.
The second problem of protected employment is when a manager really wants to get rid of some employee, but cannot do so because of protected employment.
In the first case of the second problem, let's consider that the manager's judgment to fire the employee is right. When we take away the freedom of the manager to do his or her job, the frustration that results from that situation shows up in all other aspects of that manager and his or her interactions with the "protected employee" and other employees. If the manager is indeed right and the protected employee is unproductive, then the employee protections result in giving undue benefit to the unproductive employee and the slack needs to be picked up by other employees. Thus, we get overworked employees. Further, the manager could have fired the unproductive employee and hired a better suited employee and because of protected employment a better suited person could stay unemployed and an ill-suited person stays employed.
In the second case of the second problem, let's consider that the manager's judgment to fire the employee is wrong. Most probably, the legal tradition of protected employment started with many instances of this occurring. In the past, this may have been a problem with uneducated and incompetent managers. As we progress, managers get better management education and competence. So when in modern times a manager incorrectly thinks that he or she needs to fire someone, then we should let the manager naturally pay the price for firing the good person as the manager would lose a good person to work for him or her. This of course would cause unemployment for the one person that gets fired, but if we can tackle the unemployment problem, this no longer is a problem to that person. Further, it is better for the employee to not have to work with a manager who does not want the employee anyway. An especially bad manager may indeed fire many good employees, and then we have to wonder what is the manager's manager doing? Indeed, enterprises run by such bad managers should lose all the good employees and meet their ultimate fate of going out of business.
The third problem with employment protections is that it is not symmetrical in freedom. An employee has the freedom to resign. Similarly, the employer should have the freedom to discontinue the employment of any employee.
The fourth problem with employment protection is that while it protects the employment of someone who is already employed, it does nothing for those who are unemployed. If one thinks that protected employment is a good thing, then what about those who are unemployed? Don't they deserve employment?
The fifth problem with employment protection is that because of its existence, employers tend to hire "independent service providers" who do the work on short term contracts, never as a proper full-time employee. So the protections do not work when the employer can as well use "gig workers".
Currently, because we do not have a solution to tackle the problem of unemployment, we are using employment protection as a stop-gap solution. It is time to discard this stop-gap solution of protected employment for some and solve the unemployment problem for all.
Wage Slavery
Currently, for some employees, we have a situation of "wage slavery". Because we cannot tackle unemployment, employees cannot resign from working for bad employers, especially in areas where there are no other employers. In order for the employees to continue to earn their wages, they have to put up with bad employers. This forces them to continue whatever employment they have because the alternative is unemployment. Employees become slaves to earning their wages, which they need in order to satisfy their needs and wants.
Knowing that employees are slaves to their wages, empowers unethical employers to exploit the situation. The only way to end wage slavery is to tackle the unemployment problem.