As first world economies shift from production to services, governments struggle with unemployment and increasingly underemployment noting a job is defined as working one hour a week for the purposes of employment statistics.
What are your thoughts on protecting, not protecting, and paying the increasing number of new service fees we face day to day if they address real jobs that pay the bills?
I think a service economy is a dangerous road. You become reliant on a system that in effect produces labour as the driving force behind GDP growth. The fight over being that labour component drives wages down in a population as it grows if the services do not also grow. Unemployment can as a stat be relatively low but under employment will I surmise grow apace.
We need industries that cover all bases ie primary, secondary and tertiary to ensure we vertically integrate our economies. If we cut a leg out the table that is our economy it becomes unstable and only needs one other leg to falter for the system to collapse. If we eventually need to pay a social wage how do we fund it with a decreased tax base, low employment hours, fewer jobs and large increases in day to day costs.
Then we have so called âFree Tradeâ which when really deciphered means no free trade but rather protection of large and many times multinational businesses at the expense of a national economy. Free trade deals often are lop sided in the outcomes with the larger more powerful, developed, and integrated economy getting the best outcome while the least powerful becomes a âslaveâ source of cheap primary goods and labour.
If service fees reflect value, in that I actually receive a service that I want, then I have no problem. The way that the fee structure works is not of great importance provided it isnât used to disguise the fact that I am being charged for nothing or for given no choice about what services I get.
A much bigger issue is in your first para about the changing nature of work.
Once a large proportion of workers were actively engaged in food production, that was mechanised and conglomerated and now is being automated, so very few produce our food and less will be engaged in future. Then manufacturing took over and provided jobs for the masses. Now that is being automated and despite many pious hopes (and lies) those industries are never going back to being big employers.
Boosters of automation tell us that such changes are not a worry but an opportunity. They point out that ostlers may have gone but car mechanics took their place etc. But they forget to say that once there was a job as a bowser-maid (who put petrol in your car, cleaned the windows etc) and now there isnât. Not everybody can re-train as a software developer or robot repair mechanic. To hint at that is deceitful. The reasons are obvious.
Firstly in the numbers, (simplistically) if 10 assembly line workers are replaced by one robot and 10 robots only need one mechanic, 100 jobs have just been replaced by one.
The second is in capability. I worked on the Mini chain line at Leylands. Most of those workers were there because they had poor language skills, poor education or were not too bright, or some combination of the three. It is convenient during this argument to forget that some people are limited to simple repetitive tasks. Sheltered workshops provide just that kind of work. 70% of chain line workers were never going to retrain in a technical or service industry.
Farming and manufacturing were labour intensive. Now they are capital intensive. What does that do to the nature of our society?
Service industries are now put forward as the big hope for employment. At the moment that is happening, service provision is a large proportion of workers and IIRC still rising. There is a limit how far that trend can go. Whether efforts to automate some of that work will ever succeed remains to be seen.
From WW2 to the 1970s unemployment in Oz was typically small, about 1 1/2 %, we said we had âfull employmentâ. Since then there was a big jump in 1975 and a number of peaks and troughs, from a high of some 10% in the mid 90s, to the current rate that has been dodging around 5% for 20 years. I canât find any series that covers the last 50 years. Governments of all flavours seem to accept that we are never going back to full employment. Yet those who take benefits are belittled and castigated. That overall figure hides the fact that in some regions the rate is much higher and in some cultures families have been on benefits for generations. Until you seen it you cannot imagine how destructive those situations are. If you take away the opportunity to work people lose much more than their income.
What is going to happen when service industries become saturated or when services (like pumping petrol) are no longer required? When more repetitive tasks are automated?
The permanently unemployed underclass will grow. They are already unhappy. If they are kept in poverty and told how inferior they are as the numbers grow they will become angry. If governments and owners continue to hold out the promise that the great dream of success can be theirs for hard work, sooner or later they will work out that this is a lie. Then they will become very angry. If you think voting is becoming chaotic you ainât seen nothing yet.
Iâd prefer to keep the services. In the olden days when every town had a bank/s there were likely many branches of a business that individually would never stand alone. The enterprise distributed the overheads across all branches, which over time built a greater customer base. Convenience and national reach had itâs own benefits. Then something changed and it became user pays. In theory we all won. But in reality some of us lost to the benefit of others. It is an age old problem.
The impact on employment opportunities seems more complex.
For a closed economy with a regulated and balanced import export environment (Australia for much of the first half of the 20th century), there might be one answer.
In an open economy the answer might depend on how much new production comes from within the national economy, how much is imported/exported, and importantly who owns and benefits from the enterprises that derive their wealth from within the national economy.
The examples of Alaska and certain Middle Eastern Nations come to mind. There is no assurance of equity between residents in either instance, despite significant differences in political structures?
It seems likely the solution lies elsewhere.
I do not argue against retaining services, I in fact support the wider dissemination of them to the public. What I argue against is that we become only a service society. If we truly were one world economy and we shared the riches of that worldwide it wouldnât matter where you lived, you would all benefit and contribute what was needed. But we have a system that is not that one world, rather it is vested national interest, vested multinational business interest, and a token world economy view. The current system leads to power blocs, disparity in services and wealth, radicalisation of views eg the immigration debate in Australia, the US and border protection and violence.
A simple example:
4 and 5 are ânew servicesâ and create jobs but also take more money from the customersâ pockets indirectly and increasingly directly.
Also think of it as an infinite outsourcing where the outsourcing companies then outsource ad infinitum.
How does that affect employment (security, wages, total costs of the underlying product, aggregated costs of the multi-levels of service, efficiencies of an increasing number of outsourced services)?
How does that affect a society?
Iâve recently read Polanyiâs Great Transformation, which set me thinking about how we got into this mess, how the mess is likely to develop and what we might do to mitigate the harm. Our problem boils down to an excess of Capitalism.
Capitalism is a tool set. The set does not necessarily hold the best tool for every job. Sadly, too many people in positions of influence treat it as a belief system. We end up trying to use hammers to mend watches (figuratively speaking).
The only solutions Iâve come up with involve a great deal of government intervention. Neither of the major political parties seems up to the challenge.
Weâre in the insane position of having high unemployment, while there are jobs that obviously need doing. Recycling is one. Crying need and lots of jobs, but nobodyâs doing it.
What else? Telecommunications, perhaps? For the mess thatâs been made, we should be lynching politicians. Getting to work fixing the mess might be a better option.
Next, an extract from an old post:
All of which requires training and education of the workforce. More jobs!
Of course, first we need leaders worthy of the title. The Lomborg school will whine about the cost, but doing nothing is costing us more - just not in short-term dollars.
Ultra-low unemployment is in our grasp. How Philip Lowe became the governor who lifted our ambition
Some comments:
The definition of full employment used is âthe rate below which unemployment couldnât stay without stoking inflationâ, previously thought to be 5%. According to the ABS this is the current trend rate. It is easy to normalise this sort of statistic so that we can ignore the people behind it. Especially when the definition of employment is working more than 1 hour per week.
The Governor of the Reserve bank now says the true figure for full employment is lower (maybe 4.5%) and he is prepared to take action to achieve it. This would employ an additional 69,000 people. I am sure the other 600,000 are pleased their sacrifice oils the wheels of the economy and keeps the rest of us happy.
The Board âis prepared to adjust interest rates again if needed to get us closer to full employment and achieve the inflation target in a way that supports the collective welfare of all Australiansâ
Considering the interest rate has just reached a record low of 1% what level will they drop to? Will it significantly reduce unemployment? Even if inflation does not take off will it have other unwanted consequences such as setting off the property market again?
They say infrastructure spending has now increased (I think the assertion is that lower interest rates have done this). Typically infrastructure spending has been not to increase the workforce but rather to implement technical improvements to an already aging tech. This is these days means normally more automation to remove the burden of paying for labour.
Lower interest rates will increase spending on RE and that will increase demand for new properties and that will improve small business outcomes UNTIL those interest rates inevitably rise which will cause untold misery to those who purchased in the expectation that rates never rise.
Depends on the definition of employment.
When I said:
I was thinking of under employment. To view someone as employed when they arenât earning enough for a decent life is obscene. (Yes, I know, that runs into complications when we consider people who are working for supplementary income, not expecting to live on their wages) So should we stop talking about the number putatively employed and instead judge the health of the economy on number of hours worked?
In some countries, central bank interest rates are below zero. At that rate, I presume people are paying banks to hold on to their money (I havenât been able to find figures on the lowest deposit interest rates - everyone seems to be concerned only about loan rates). At what point do people start hiding their cash under the mattress (to save on bank account fees)? Wouldnât that starve financial institutions of funds?
And a bit of whimsy to add to my earlier effort:
Jobs, jobs and more jobs. 
An intriguing development (thatâs apparently been going on for some time). Polanyi attributed ills of Capitalism to separation of the economy from its social foundations. The democratic economy puts social above commercial goals.
In the original post, a link considered the added services provided through third party booking web sites/business.
In one aspect it is suggested the added costs are also adding to the economy and providing more employment.
Iâm sceptical if this is the ultimate end point. Many of the business models of these third part providers have very low labour components, and a single although perhaps more professional web developer. There is also the potential to offload some of the content sourcing to those they service. At the same time the clients face the choice of maintaining and promoting their own enterprises, web presence etc, or dropping it all together. Perhaps the clients drop all store front existence and operate from the back yard shed. Much lower overheads.
In theory this should lead to a lower overall cost to the the consumer as the client retailer saves significant overheads by going off the street front, and a national web store front is a shared and should be lower cost. Of course the consumer looses the option for a physical in store purchase. Except where perhaps the physical stores hang in there, at a premium cost to the consumer.
For the clients with no retail store presence, do they also suffer by competing against each other invisibly trying to keep favoured status and market share for their patch. The third party selling their product may come to dominate, perhaps sharing the limelight with only one other. Hence market dominance equals control.
As for their clients how visible will their circumstances be to the ACCC and how difficult would it be to establish any cartel like activity within?
Without knowing how any of this might evolve, the notion that these types of added services bring additional employment seems doubtful.
Equally uncertain is that consumers stand to benefit.
And likely those at the core of delivering and providing the products, will be typically working as self employed or on contract conditions for subsistence incomes.
On trend today. There are all the elements of a business offering a third party connection to existing store fronts, and a fight for survival. Whoâs winning?
Iâd also call this a SCAM, although others might suggest consumers are just not smart enough to see past the third item of a google search result. I go to the yellow pages as well as the web and seek verification of a physical address before phoning the order through. 90% reliable?
The future economy may not have the âfull employmentâ that is currently the alleged desire of governments. (I say alleged, because those in power know that full employment gives power to workers and reduces that of the owners of capital.) Instead, we need to think about what âworkâ might actually be in 50 or 100 years.
Yes, for the foreseeable future we will have a need for certain people with certain skills - whether they be surgeons or pearl divers. Eventually, though, even these kinds of roles can be mechanised - and what happens to âworkâ then?
The first steps towards such a future are already taking place, with a range of countries experimenting with universal basic income. That is, you get enough money to live on regardless of your capacity or ability to âworkâ. This goes to everyone - it is not means-tested, and there is no âjudgingâ of people based upon whether they receive/need it.
Then you have to ask what people will do when jobs are automated. Well, what do people do for the 40% of their lives they spend in retirement now? They look after grandchildren, they participate in communities, they create art, they write down ideas about the future economy⊠in short, there are plenty of things to be done post-industrial-age âworkâ.
There is one problem with this utopian ideal: capitalism, and the current controllers of capital, will lose a large proportion of the power that is currently held in this tiny group. Thus countries like the US and Australia continue to look to the past for jobs rather than embracing a future, less competitive economic model.
Why? Mechanisation, computerisation and whatever the next step is (robotisation maybe) are all capital intensive and use little labour. We already see organised workforces losing power through a variety of mechanisms. At present there are minimum wages and conditions in Oz (losing ground in the USA) but you donât need to negotiate with robots at all and since they donât vote pollies donât need to support them. Under this scenario only the minority of highly skilled workers will have a voice, the rest will be dependent on largesse unless attitudes change a great deal. I can see capitalism and the concentration of wealth being strengthened not weakened.
Not only is there a risk that destination will be unacceptable to the majority but the pathway towards it might be chaotic. Look at the ârust beltâ of the USA lashing out in all directions and accepting impossible promises for a return to the old days. What happens if a large proportion of clerical-administrative and service jobs go the way of manufacturing? What happens if the current attitude to âdole bludgersâ applies to 25% instead of 5%?
I was looking at rosters of 19th century immigrants the other day that showed station or occupation for all the passengers. The saloon (ie first class) who numbered a few dozen all had specifics such as, consul, banker, merchant, etc. Steerage who numbered a couple of hundred were all lumped into âlabourers and servantsâ. A few name changes and you have a prophecy.
Which brought to mind one of Ron Cobbâs cartoons:
Thatâs exactly what I mean. I suspect there will be violent struggle between the âhavesâ and the âhave notsâ before we manage to find a situation in which we can all live decent, dignified lives. At the moment Australia is following the US lead down the capitalist drain, and we need leaders who have the vision to see an alternative.
OK but how does that reduce the power of capital? It all looks like increasing it to me. You have to connect the dots for me.
I feel like Iâm about to accidentally quote Marx. Effectively, a world in which power and resources are in the hands of the very few is inherently unstable. Those few have to spend their lives guarding against the many who are trying to survive. Worse, the average person is more educated than at any point in history - and so has a better idea of how life could actually be different.
Additionally, capitalism itself will have an end point at which no further profits can be wrung out. The US is already well down the path of having people who cannot afford to be consumers, and we are blindly following. While we are doing a great job of destroying the planet, how long can we keep going the way we are without change, and at what point do companies cannibalise themselves in the name of greater short-term profits? People working in the US cannot afford to buy the products they sell, and need welfare to survive! Thatâs crazy, but itâs where our economic and social incentives currently lead.
At some point in the next fifty to one hundred years, we are likely to face a world of people who are highly educated but have no hope of living a decent life. That suggests that those few with power really need to do some long term planning, because they will be enormously outnumbered. Alternatively, if society does not choose to adequately distribute resources then people will ultimately get violent. At a city, country or international level. I donât know that we will see unions rise again in their old fashion, but we may see something completely new to take their place and fill the current power imbalance. Uber drivers have already started organising strikes, so participants in the ânew economyâ are beginning to realise how badly they are being screwed.
My hope is to be dead before we go too far down the current path, but the future has two obvious options and at least one of them will be horrific.
If we say that âinherently unstableâ means not stable without constant correction and stabilisation mediated by controlling forces then you are right. That problem applies to many economic systems though not just capitalism. Feudal kings and lords did it by suppressing the peasants by force, the clever kings realised that by passing some wealth back down the hierarchy less force was required. Too many were not that clever, like Czar Nicholas. The Chinese oligarchy is maintained by social coercion and control and force where necessary. Democratic capitalism does it by sharing some power through having elected representatives and sharing some wealth through wages, and the vision held out of rags to riches.
If we look at the era of the growth of capitalism (and its fossil fuel use) the living standard of the masses has grown considerably but the wealth of the owning class has grown, is growing, even more. Despite that inequality stability can still be maintained with care provided that the rate and direction of change is not too high. At present we are seeing convulsions where globalisation is transfering jobs from wealthy countries to poorer ones. The system is not coping too well with the instability that produces. The masses are being offered their jobs back and are voting accordingly. In a while they will realise the offer is an illusion.
What happens when the living standards of those countries now doing our manufacturing (mainly in Asia) rise to the point where they become too expensive to employ? What about when robots become capable of building robots and their progeny become cheaper than any human labour? If we stick to the current system then massive unemployment will break it.
The primary risk is robotisation will break the consumer spending loop that capitalism relies on. No job => no pay => no purchasing power => no demand => no sales. So what are the robots making all those goods for?
The second risk is that continued growth in the power of capital and concentration of wealth and power will destroy itself by allowing instability to run wild beyond any known control mechanism. As we have seen with the response to climate change the tendency is to say that whatever has served well for three centuries will continue to serve and no change is required.
The behaviour of the Chinese government is tolerated by the people to a degree because of growing wealth. What happens when the growth stops or goes backwards? Cracking down on dissent even harder is not a stable choice, through history oppressive regimes that become extreme cause revolution.
In the west bread and circuses and empty promises will suffice to stabilise for a while but not long. The long term unemployed donât buy much and become despondent and unruly. Prime targets for demagogy, quick fixes and grand promises. Now where could we find some of that?
This is the problem already in the US, with people not earning a wage they can live on. Australia is at risk of following that trend, with stagnating wages and increasing employment instability.
Some of the current crop of âleadersâ are showing exactly the tendencies that will lead to major societal changes - and not in a good way. Once people realise that they are being lied to, they will turn upon those leaders - and everyone else who is perceived as a threat. At the moment leaders are convincing large proportions of the population that the âotherâ is the threat; this can only work for so long, and so far itâs been over 60 years of various âothersâ.
