Jobless recovery

A jobless recovery or jobless growth is a phrase used by economists, especially in the United States, to describe the recovery from a recession which does not produce strong growth in employment. The first documented use of the term was in the New York Times in the 1930s.

Prior to the 1990s, most economic recoveries led to employment increases relatively rapidly. However, in the early 1990s recession, early 2000s recession, and late-2000s recession the employment recoveries have lagged increases in gross domestic product (GDP).

Causes and cures

Economists are still divided about the causes and cures of a jobless recovery: some argue that increased productivity through automation and robotics has allowed economic growth without reducing unemployment. Other economists suggest that jobless recoveries stem from structural change in the labor market, leading to unemployment as workers change jobs or industries.

Automation and productivity increases

In the 1960s, The Triple Revolution memorandum suggested that machines would continue to reduce the number of manual laborers needed, while increasing the skill needed to work, thereby producing greater unemployment. The group recommended a basic income and other solutions. More recently, Marshall Brain has suggested in his Robotic Nation essay that a jobless recovery is due to automation and robots eliminating human jobs. He recommended in the long term (in which he theorizes most humans will be permanently unemployed) restructuring the economy by giving away money to all humans, again as a form of basic income.

These views stand in contrast to mainstream economic thought, which views productivity increases in general as a net benefit to workers in the economy. When creative destruction eliminates jobs in a certain sector due to innovation, the resulting available labor is put back to work in new jobs in a different sector. This may require education or re-training of workers. A jobless recovery may result in the short term due to the delays caused waiting for innovation and expansion in growth industries and retraining of workers. In the long term, this process is considered to raise real incomes or at least the standard of living for all workers, or alternatively leave more time for leisure.

For example, the workforce of the United States at the time of its founding was almost entirely employed in subsistence agriculture. After more than two centuries of technological advances, in 2007, only 0.6% of the workforce was employed in "farming, forestry, and fishing". Instead of becoming employed, these workers moved into manufacturing jobs created by the Industrial Revolution. As manufacturing has moved to other countries due to globalization, instead of becoming unemployed, workers have moved to the service sector, which accounted for 78.5% of the U.S. economy in 2008. The increase in productivity has made it possible for consumers to have access to a wide variety of consumer goods and services that would have been unavailable or extremely expensive if over 90% of the workforce was busy with agriculture, and has drastically reduced the percentage of worker income spent on food.

But, even with a shift to mainly services, to maintain full employment, an economy has to create new jobs to replace the ones that have been automated, but Marshall Brain and others like Hans Moravec and Ray Kurzweil suggest robots, AI, and other automation can more and more easily fill many of the new jobs that get created, a trend that will only accelerate as robotics and artificial intelligence continue to improve. Also, a rise in free works developed by professional amateurs also displaces paid work. An economy with rising productivity also has to have rising demand per capita to balance the increased production, but for many things like housing or energy use demand may be limited per capita or may grow more slowly than exponentially rising productivity (driven in part by Moore's law and falling prices for computers and automation).

Psychologists have refined ideas like Maslow's hierarchy of needs that suggest increasing material abundance only increases happiness up to a point. So, if productivity rises faster than demand, then one would expect falling prices and increasing unemployment. But without continual innovation, including increasing automation to lower production costs, profits in a market-driven economy will fall to zero through competition, and the profit-driven market place would freeze up. So this problem may be inherent to real economies (as opposed to theoretical ones with infinite demand), with a jobless recovery reflecting essentially a divide by zero error in mainstream economic thinking, with costs trending to zero as productivity greatly exceeds demand. Moving beyond this divide-by-zero error might require some sort of post-scarcity economy.

Possible Cures

Here is a summary list of possible ways to deal with joblessness. This list is intended to be complete in order to help in understanding the interaction between social changes and job creation; not all possibilities are desirable by most societies.

• temporary measures like unemployment insurance and retraining funds, and when those fail, letting people live with relatives who still have jobs or be homeless
• government public works like in the 1930s (infrastructure, arts, research, medicine, etc.)
• a "basic income" for everyone (essentially Social Security and Medicaid for all with no means testing)
• improved local subsistence like with 3D printing and organic gardening
• a peer-to-peer gift economy (like Wikipedia and Debian GNU/Linux)
• a shorter work week (like tried in France)
• rethinking work to be more fun so it is done as play as suggested by Bob Black and Charles Fourier
• alternative currencies or other forms of exchange like barter or more formal rationing
• the opening of new frontiers (creates jobs dealing with new resources and new processes, whether they are newly discovered vacant lands, new seasteads in the ocean, new habitats in space, or new frontiers in cyberspace or innerspace or something else)
• lowering the minimum wage to encourage employment (a minimum wage would no longer be needed to assure a living wage if there was a basic income that already supplied a guaranteed minimum income, and so any minimum wage laws might be removed entirely, possibly along with some other employment protections like in the USA the Family and Medical Leave Act of 1993, affirmative action laws, and/or the Occupational Safety and Health Act, that would no longer be as important if people had more choices through a basic income, including the choice not to work or to start their own business, and so had more power to negotiate good terms or walk away from bad ones; without a basic income, reducing or removing the minimum wage may just lead to a race to the bottom in wages and working conditions as workers fight over fewer and fewer remaining jobs if the alternative economic explanations like by Marshall Brain are correct)
• introducing social benefits like health insurance in countries where they are otherwise provided by as fringe benefits of employment (so there will not be an extra economic incentive to get more out of fewer workers given otherwise fixed fringe benefits cost per employee, and thus the extra management costs of more employees working less hours will more easily be outweighed by the increased productivity of workers who have more leisure time; in general, countries in Western Europe have taken more of this approach as part of their choice of welfare state model than in the USA where social benefits are more needs based)
• increasing advertising to entice people into more debt (one cause of the current economic crisis as the debt bubble burst)
• intentionally producing shoddy merchandise or things with planned obsolescence, perhaps encouraged by promoting faddism in the culture
• more prisons and even tougher laws on common activities (employs guards and keeps people out of the labor pool)
• more schooling (employs guards/teachers and keeps people out of the labor pool, while suppressing true education that might lead to greater productivity according to John Taylor Gatto)
• more war (employs guards/soldiers, blows up and wastes abundance, and kills or disables workers to keep them out of the labor pool)
• internment and genocide of those deemed unpersons or non-persons (similar to war, genocide against a minority employs guards/soldiers, kills or disables workers to keep them out of the labor pool, and it also creates a spoils of conquest that can be used to reward soldiers and other workers with land and goods; the genocide against the Native Americans, the genocide against the Jews during WWII, and the internment of Japanese-American US citizens during WWII are all examples of this process; all had employment benefits to the rest of the country as unpersons needed to be guarded or otherwise processed and killed, and those deemed unpersons are also then not part of official unemployment statistics; Marshall Brain also develops a theme related to this in Manna, with the unemployed interned in Terrafoam dorms and eventually speculating about being executed);
• more bureaucracy as well as more excessive regulation (employs guards/bureaucrats, creates endless paperwork and make-work between bureaucrats that wastes abundance; the US health insurance industry is one example here, with one of every three health care dollars being wasted, but creating a lot of jobs in the process);
• reducing the informal volunteer sector (many things that can be done by volunteers, including raising young children, caring for the sick or dying, or engaging in civic duties, would take a lot more time if done formally as part of a for-profit enterprise; when formalized, these volunteer tasks may also be done at a lower quality of care which creates jobs related to other spawned dysfunctions, like more psychologists to deal with increased child unhappiness; this is one reason the well-meant movement of women into the workforce may actually have been a net negative as far as societal well being, even ignoring the general decrease in women’s happiness as women transitioned from hard-working volunteer roles with a lot of autonomy to paid labor in authoritarian settings and our society fell into what Harvard Law Professor Elizabeth Warren call's "The Two Income Trap" — for every woman into the formal workforce, a man could have come out and gone into the informal volunteer workforce including child-care and unpaid civic responsibilities like watching streets to keep them safe, but that did not happen, and thus the net result may have been more total paid work that needed to be done in society, and thus more jobs)
• increased disability and ill health from pollution, advertising, harmful products, or plague (creates jobs for medical workers, and keeps disabled people out of the labor pool; increasing obesity, diabetes, cancer, and autism connected to something like nutritional deficiencies from processed food or lack of outdoor activity in the sun getting vitamin D may contribute to this unintentionally, but whether this gets researched or talked about in depth is intentional; in general the time of the Black Plague was a huge time of opportunity for the survivors)
• an aging population resulting from anti-family social policies (creates jobs for medical workers, social workers, and other assistants to fill roles previously filled informally by children; social policies in relation to encouraging large families come into play with a dialog between those who fear overpopulation versus those who feel people can reduce their ecological footprint voluntary or through better technology or can expand long-term resource availability through seasteading or space habitats)
• social unrest including luddism, machine breaking, vandalism, and rioting (employs guards, police, lawyers, judges, social workers, and others, and keeps convicted troublemakers out of the labor pool, while destroying abundance)

Likely we will see a mix of all those in the future, and in fact, a mix of all those is what we have now. Many of these items like advertising, faddism, schooling, prison, war, internment/genocide, bureaucracy, formalization, ill-health, aging, and rioting are usually considered undesirable, even as societies have used these ideas intentionally or not in the past to destroy abundance and create guarding jobs and other types of jobs related to social dysfunction. It is important to distinguish between creating jobs of various sorts and the overall affect on societal happiness (see the “Broken window fallacy“). That is why, even though all these things increase a country's GDP, it is important to have other measures of societal health like a Genuine Progress Indicator.

For example, to elaborate on “The Parable of the Broken Window”, and consider how these "cures" come into play, consider a riot about unemployment and hunger where rioters break windows and are arrested for that. Normally, a free market capitalist society might not do anything to create jobs or deal with hunger directly, but faced with this obvious problem as a threat to the public order and the market, such a society needs to act. First, the rioters are taken off the unemployment roles, because they are now prisoners. This reduces official unemployment. Beyond repairing the broken window, all sorts of jobs have been created here, many funded by fiat dollars that now can be justified to be taxed, printed, or borrowed — for police on overtime to respond to the riot, for bureaucrats to institute new security checks, for lawyers and judges to prosecute, defend, and judge the rioters, for prison construction to house the rioters, for guards to guard the rioters, for social workers and psychologists to talk to the imprisoned rioters as well as the ones they harmed, for the media to report on all this, and so on. The GDP soars, and official unemployment goes down a lot. Everyone might have been happier with more free time resulting from abundance that they could spend being good neighbors and good parents given society really did have the resources to provide incomes and food to all these people (even the prisoners now get regular meals), but the only way to make the system work according to its current mythological rules is to justify the spending based on the management of scarcity and violence along the lines of Keynesian economics.

For another example, shutting down the primarily volunteer Wikipedia effort would create more formal jobs in the proprietary encyclopedia industry, but overall, society might be much worse off in the opinion of many people (especially Wikipedians).

So, sometimes the "cure" for unemployment is worse than the disease, depending on societal values.

For another example, consider a world where more and more people contributed to the Wikipedia project and similar free and open source content efforts to the point where everyone who wanted to could quickly know enough to print whatever they wanted locally using a 3D printer given to them by a friend. At that point, not having a job might not matter much as long as a jobless person had access to some land or seawater to mine resources for the printer (using robotic extraction tools that were printed out) and also had a place to put down solar panels (also printed). At that point, the jobless person no longer would have much need for the formal economy. Still, access to land would remains a social issue, and issues of land reform might come into play even if people could produce most of what they needed or trade informally for the rest.

The important thing to remember is that joblessness is not necessarily a bad thing. It means people have more time for family, friends, hobbies, and volunteerism. What is bad about formal unemployment is mainly not having a right to draw from the fruits of our technosphere and biosphere because much of it is now privatized or otherwise under enclosure. Otherwise, given a basic income, with the internet, there are endless ways to connect directly to other people to do worthwhile projects, and raising children well is something that by itself can absorb about as much energy as the community can put in to that. Some of these "cures" are aligned with a change to a society of abundance; some of these are aligned with creating artificial scarcity. Depending on the mix of "cures" to a jobless recovery, different people pay different costs or getting different benefits from a cost-benefit perspective. The choice of mix of cures thus becomes a matter of politics, not economics.

Ultimately, a jobless recovery might be something to rejoice in, as long as the issue of social equity and human rights in relation to the industrial commons are addressed. But those may require social change.

Globalization

Free trade has also been suggested as a possible driver of structural changes contributing to a jobless recovery. In this view, during lean times companies in developed countries are more likely to move factories and lower-skill jobs offshore, given the higher pressure to cut costs and lower likelihood remaining employees will leave the company. This results in the need for the workforce to shift to different manufacturing and service jobs (often higher-skill), but it takes time for these new jobs to be created (sometimes requiring the creation of new companies or the scaling up of startups) and for workers to be retrained or credentialed.

Analysis

The Current Population Survey aggregate data examines the United States long term employment creation by decade.

Decade	Employment Growth (EG)	Population Growth (PG)	EG/PG	Notes
1950's	7,215,000	11,516,000	62.65%
1960's	13,862,000	19,449,000	71.27%
1970's	21,224,000	30,811,000	68.88%
1980's	17,685,000	20,865,000	84.76%
1990's	16,998,000	21,667,000	78.45%
2000's	5,137,000	26,254,000	19.57%	to Mar. 2009

These figures indicate that job growth in the USA has greatly slowed in the most recent decade 2000-2009, even as the population and workforce productivity has continued to increase. The gains in productivity have mostly not gone to the workers since real wages for most workers in the USA have been stagnant for the past three decades, and even dropped slightly in the past decade, in part as a result of economic policies reflecting Neoliberalism. This point is made in detail by Economics Professor Richard D. Wolff in his movie on the economic meltdown called "Capitalism Hits The Fan" as well as an earlier related public lecture with a similar name. The trends seem to indicate that the mainstream macroeconomic conventional wisdom about employment and wages naturally increasing in parallel with economic growth is fundamentally flawed as far as the USA is concerned, even if there was truth to it up to a few decades after WWII (while the USA had the only major intact economy and was able to export excess production on favorable terms, and before automation and better design and global competition had become increasingly widespread).

Note that much of the recent job growth in the USA has also been in lower wage service industry jobs with limited to no benefits and little job security, so, even when jobs have increased, they have not been of the same economic quality as in past decades (even as the work may often be less demanding in terms of physical strength). These trends call into question the positive aspect of the Three-sector hypothesis, that shifts of an economy away from extraction and manufacturing to service industries are in general permanently good for workers. In practice we see, as implied by the numbers above, a relative erosion in the need for domestic labor compared to population growth, as the need for many service jobs are eliminated, just like extractive and manufacturing jobs before them were eliminated. So, many service jobs also eventually become deskilled, automated, amplified (more output per worker), designed out of existence (for example, old style telephone operators were replaced in part by direct dialing), or just no longer wanted (given limited demand or also a downward spiral of unemployment and declining wages).

Offshoring also effects these numbers for the past decade; although in theory, as national currencies and wages reach an equilibrium, offshoring by itself should not permanently effect employment (ignoring any temporary problems or deindustrialization). Still, offshoring is making the particular US jobs situation worse right now. By the time that offshoring situation changes, increasing automation and better design will, following Marshall Brain's arguments, make it more likely most new jobs are filled by robots and other automation than by people, even if the jobs come back to the USA. If Marshall Brain is right, it is quite possible job growth in the 2010-2019 decade in the USA may be virtually non-existent or even negative, where some new jobs like in green energy are more than offset by job losses in other areas.

One can look at any list of robot videos to see the state of the art in robotics circa 2009. Taken together, the videos like in the referenced list show robots doing things like throwing and catching a cellphone, driving across rural countryside and in urban settings, doing domestic duties like laundry, walking around moving obstacles on the floor, cleaning floors, performing military duties, assisting in police duties, walking across rugged terrain, pruning grape vines, milking cows, cleaning barn floors, assisting with surgery, laying undersea cable, exploring Mars, building cars in factories, mowing a lawn, printing 3D parts, and even performing autopsies. That state of the art suggests Marshall Brain may be right about robotic trends, given even just the current robotic capabilities which are not yet in widespread use. A broad interpretation of Moore's law, along the lines of Raymond Kurzweil or Hans Moravec, in the context of continued economic and military competition, suggests that in ten to twenty years, robots will be capable of ever more amazing feats at ever lower costs. Apparently, even just the robots we currently have now could remake big parts of the employment landscape without much further improvements. But, the table above shows jobs are already not keeping up with population growth. If these trends continue, without some form of a basic income or other structural changes, our current economic system may completely collapse, as Marshall Brain predicts.

The main jobless recovery issue would then become more and more what the Triple Revolution memorandum suggested was happening in 1964, but which has been slower to play out than they expected:

The fundamental problem posed by the cybernation revolution in the U.S. is that it invalidates the general mechanism so far employed to undergird people’s rights as consumers. Up to this time economic resources have been distributed on the basis of contributions to production, with machines and men competing for employment on somewhat equal terms. In the developing cybernated system, potentially unlimited output can be achieved by systems of machines which will require little cooperation from human beings. As machines take over production from men, they absorb an increasing proportion of resources while the men who are displaced become dependent on minimal and unrelated government measures—unemployment insurance, social security, welfare payments. These measures are less and less able to disguise a historic paradox: That a substantial proportion of the population is subsisting on minimal incomes, often below the poverty line, at a time when sufficient productive potential is available to supply the needs of everyone in the U.S. The existence of this paradox is denied or ignored by conventional economic analysis. The general economic approach argues that potential demand, which if filled would raise the number of jobs and provide incomes to those holding them, is underestimated. Most contemporary economic analysis states that all of the available labor force and industrial capacity is required to meet the needs of consumers and industry and to provide adequate public services: schools, parks, roads, homes, decent cities, and clean water and air. It is further argued that demand could be increased, by a variety of standard techniques, to any desired extent by providing money and machines to improve the conditions of the billions of impoverished people elsewhere in the world, who need food and shelter, clothes and machinery and everything else the industrial nations take for granted. There is no question that cybernation does increase the potential for the provision of funds to neglected public sectors. Nor is there any question that cybernation would make possible the abolition of poverty at home and abroad. But the industrial system does not possess any adequate mechanisms to permit these potentials to become realities. The industrial system was designed to produce an ever-increasing quantity of goods as efficiently as possible, and it was assumed that the distribution of the power to purchase these goods would occur almost automatically. The continuance of the income-through-jobs link as the only major mechanism for distributing effective demand—for granting the right to consume—now acts as the main brake on the almost unlimited capacity of a cybernated productive system.

One may ask why the Triple Revolution memorandum was off in its predictions by several decades. There are a several possible interacting explanations:

• Amara's law, suggest by Roy Amara and elaborated on by Ray Kurzweil in his Law of Accelerating Returns, suggests "We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run". So, while the people writing the memorandum saw the trends in automation, they did not realize that they were exponential, slow at the start, and the faster at the end.
• Increasing demand (up to a point). Demand for goods and services has increased in the USA. As Professor Juliet Schor points out in her 1993 book, "The Overworked American: The Unexpected Decline of Leisure", even then, Americans could have been formally working two hour days to achieve a 1940s lifestyle, but instead they were working ten hour days to have more stuff (bigger houses, more cars, more electronics, and so on), both because they wanted it and, unlike in Europe, there were not taxes and regulations to shift wealth from individual pursuits to community pursuits (like support for arts or mass transit or a social safety net) to prevent a social trap related to conspicuous consumption. As suggested above, this trend may have finally run its course for many healthy people in the USA, perhaps even beyond diminishing returns, to the point of negative returns (like big houses with big lawns create social distance that diminishes community). Suniya S. Luthar has written about this in "The Culture of Affluence: Psychological Costs of Material Wealth".
• While the USA had a lot of material abundance in the 1960s and later, the rest of the world did not. Increased global growth has provided many export opportunities in the USA, although that growth trend for the USA has reached its end, given the USA is now importing a lot of stuff and otherwise offshoring jobs now that the global economy has reached parity in many areas. However, continued global growth up to current US levels of consumption will still increase demand for jobs for a time in other countries, until those countries as well hit a law of diminishing returns. Hans Rosling has "Gap Minder" projections for the rest of the world reaching current US levels of consumption in a few decades, and shows how many have already surpassed 1960s levels of US consumption.
• The USA has engaged in numerous wars abroad since the 1960s (the general Cold War with the USSR, and also wars in Vietnam, Iraq, Afghanistan, and also numerous smaller interventions), each of which have served to burn up US abundance (as well as abundance in the other countries). While the Triple Revolution memorandum suggested wars were getting too horrible to fight given nuclear weapons, it seems that countries have, so far, found ways to fight non-nuclear wars at a continuing low level of intensity enough to remove a lot of prosperity and create military jobs. How long that trend to contained wars continues is hard to predict; the Bulletin of Atomic Scientists still keeps up their Doomsday Clock, currently at five minutes to midnight, compared to 12 minutes to midnight when the memorandum was written.
• Incarceration in the United States has increased enormously, to rates far higher that any other industrialized nation, thus creating a lot of jobs and taxing many people off the unemployment roles (at a great social cost); some of this has been driven by the drug war; some is linked to increasing social dysfunction from economic inequality.
• Increasing mental health issues like depression and autism, and increasing physical health issues like obesity and diabetes and cancer, all possibly linked to poor nutrition, stress, lack of exercise, lack of sunlight and other factors in an industrialized USA (including industrial pollution), have meant many new jobs have been created in the health care field. So, for example, coal plants don't just create jobs for coal miners, construction workers, and plant operators, they also create jobs for doctors treating the results of low-level mercury pollution poisoning people and from smog cutting down sunlight. Television not only creates jobs for media producers, but also for health care workers to treat obesity resulting from sedentary watching behavior (including not enough sunlight and vitamin D) or purchasing unhealthy products that are advertised.
• An aging Baby Boomer population in the USA has increased the need for other services.
• Unions and other groups (including some radical environmentalists) have fought against all forms of automation and other forms of advanced technology, rather than focusing on directing where the fruits of automation go or guiding what sorts of innovations are worked towards.
• The much slower pace of the civil rights movement to spread to other areas of society that expected.
• The movement of women into the work force increasing formal economic needs greatly as the volunteer sector of the economy diminished and other social dysfunctions (like teen pregnancies) increased given less time by individuals for community participation (essentially, women abandoned their unrecognized but essential social roles, but men did not take up the slack).
• Increased schooling expectations (for example jobs that once done by people without even a high school diploma like child care now may require a graduate degree as a qualification) have led to an increased number of jobs in teaching as well as kept young people out of the labor market. Professor David Goodstein in his "The Big Crunch" essay suggests an exponential growth trend in academia also continued into the 1970s, but has ended now, leading to an oversupply of people with PhDs and other advanced degrees relative to the needs of academia. This has lead to some of the inflation of academic requirements for various jobs given the oversupply of people with degrees, which in turn has lead to even more schooling to get a degree, as a form of academic certification arms race.

Aspects of how all these negative activities can create jobs were parodied in a scene with the character Zorg breaking a glass in the movie The Fifth Element. However, to build an alternative to the world of Zorg built around the Parable of the broken window requires thinking differently about economics than mainstream Keynesian economics given all these other trends toward abundance (especially automation).

Taken together, these and other factors help explain why the Triple Revolution memorandum was ahead of its time in predicting the falling employment trend we only now in the table above, decades later than predicted. It has taken decades because many of the trends in the predictions have only recently accelerated in the past decade or two in an exponential way (like improved robotics and improved internet-mediated communications). And it is taking decades for the trends holding back the predictions (like increasing incarceration or increasing health problems) to play out (and many of these negative trends, from increased incarceration, increased pollution, lack of vitamin D, obesity, and so on, are now being actively addressed by society, and so presumably will not continue to grow much, although new issues may arise). So, the reasoning behind the Triple Revolution memorandum about structural unemployment such as reflected in a jobless recovery may now be more relevant that ever, even if some of its specific suggestions for social reform and infrastructure reform may now be out of date.

See also

• Deindustrialization