Life after Peak Employment

When I were a lad, people were saying that the challenge of future decades would be what to do with all our leisure time. Working weeks in the advanced economies had fallen and continued to fall. New technology, automation and robots, it was said, would mean that we could improve productivity yet still work less. Books like “The Leisure Shock” were fashionable. The emerging micro-technologies would, we were told, liberate us all from a life of drudgery.

They were still banging on about it when I got to university. I remember one of my lecturers talking about the 32-cubed working life – we would all work 32 hours a week for 32 weeks of the year for 32 years of our lives. That, he assured us, would be enough to keep us comfortably off. The challenge would be working out what to do with the rest of the time. It sounded pretty good to me.

Imagine my surprise, then, when I arrived in the corporate world and found that working way over your contractual hours was the norm. Furthermore, it was expected. Anyone just doing their standard hours was regarded as a shirker. “Bloody hell, I’ve been done,” I thought. “What happened to the Leisure Shock?”

Hours of work continued to rise in the eighties, peaked in the early 1990s, then fell slightly over the next two decades. Even so, no-one was talking about machines creating the leisured society any more.

The idea that technology would reduce the need for human work didn’t go away though. It has reappeared in the form of the Peak Employment theory – the idea that the advanced economies are reaching the limit of their ability to create jobs. In the 2010s, though, the Zeitgeist is less optimistic than it was in the 1970s. This time, automation promises not leisured affluence but increasingly casualised and precarious employment. This post on Zero Hedge explains:

Peak employment is the theory that due to factors such as efficiency, driven by technological innovation, and demand, developed economies may have already passed beyond the highest point of employment and that from this point onwards employment will continue to fall and unemployment inexorably rise.

Australian economist Shane Granger has been on the case too. Given Australia’s projected population increase, he argues, the country will reach the upper limit of its ability to employ more people sometime in the next decade. He notes that the use of part-time and contingent labour was increasing in Australia even before the recession and concludes:

As shown in the data there is an undeniable trend over the past two and a half decades in terms to utilise part-time labour solutions rather than traditional full-time employment. In fact in 1978 the ratio of PTE to FTE jobs was 1:5.6but this has decreased to just 1:2.4. It would only take another recessionary period to decrease this ratio further as demonstrated in the loss of FTE during previous downturns.

With an increasing working age population and a growing gap between jobs available the future is looking anything but certain, especially with the rise of labour augmentation and robotics replacing jobs quicker than they can be created.

Shane also links to this piece from ABC’s Michael Janda who argues that job creation cannot keep pace with Australia’s rising population and that therefore labour force participation is falling.

He then looked at the UK and drew similar conclusions, noting, as in Australia, an increase in the proportion of part-time workers:

In conclusion looking at the UK ‘employment type’ data is further confirmation of a global trend toward greater reliance on part-time employment, which on one hand is increasing employment to record levels while at the same time decreasing the amount of work available.

Has the UK reached peak employment yet? I’m not convinced it has but the more I look at the global data the more I am convinced we are reaching that point in the next decade.

Now, of course, none of this is very orthodox. That the ‘Lump of Labour’ is a fallacy seems to be received wisdom among economists. The idea that there is a fixed amount of work to go round is poo-pooed by most of them. More people create more demand and therefore more jobs, they argue. How, therefore, could rising populations outstrip the supply of work?

Last time I discussed this, Dave linked to this paper from Tom Walker which criticises the mainstream view of the Lump Of Labour. The author summed his point in this comment:

Although the amount of work is not “fixed,” neither is it instantly and infinitely elastic. It is also a fallacy that an increased supply of labor “automatically” creates an increased demand for it.

In other words, just because it is wrong to claim that the amount of work is fixed, it doesn’t mean that economies have an infinite capacity to create jobs. Or, as Antony Mason puts it:

[C]urrently the British economy is expanding at a snail’s pace, if at all. Youth unemployment (for 18–24 year olds) stands at over 20% and rising. To a large extent, this is the outcome of the failure of the labour market to adapt to a post-industrial, highly mechanised and automated world, where many of the traditional low-skill, entry-level jobs have vanished.

It would seem that, where an economy is expanding, it may be appropriate to debunk the nay-sayers by citing the lump of labour fallacy. But where an economy is shrinking or static, the job market starts to look decidedly lumpy, and letting more people into the job market is unlikely, per se, to be a catalyst for growth.

And, says, says Juliet Schor, this is a global problem:

Right now we’re experiencing glutted labour markets, in OECD countries as well as globally. Labour economist Richard Freeman estimates that over the last decade, the effective global labour supply has about doubled, from 1.46 to 2.93 billion. If people offer more hours to the market, wages fall and unemployment rises. Excess supply of labour also undermines investment and innovation, which accelerate when labour is scarce relative to capital.

I have to confess, I’m not really sure what to make of all this and I would be interested to know what others think.

That said, if employment really is peaking and slow growth is to be the norm for the forseeable future, the question then is how the advantages and disadvantages are distributed. Will it be as the 1970s optimists hoped – where we share out the work and do shorter weeks, take more holiday and retire earlier? Or will it be something we are more familiar with in 2013, where ever-increasing numbers of people take part-time and casual work, endlessly competing for the few scraps they can find?

Or have we nothing to worry about as we will soon return to full employment and all this will be forgotten?

Answers, theories and musings in the usual place please.

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11 Responses to Life after Peak Employment

  1. Pingback: Life after Peak Employment - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Fat Jacques says:

    I think we are seeing a leisure shock, but all the leisure is being “enjoyed” by the under- and un-employed while others work full-time to support their families and pay taxes to support those with too much leisure.

    It is true in families too, households have to have two incomes to have a decent mortgage and a decent holiday, car etc.. If they are dependent on welfare they cannot have any jobs, for the benefit withdrawal rates for a one-worker family run close to 100%.

    If people reduced working hours so jobs were shared more and if mothers in working families could afford to stay at home to bring up their children; there would be a lot less enforced leisure for the poor to “enjoy”

    A serious re-jig of the tax, benefit and housing system is needed to change this though, and that ain’t gonna happen.

  3. Full employment has historically been a factor of external demand. In other words, comparative advantage with other nations has allowed the more developed to temporarily maximise employment. The other big factor has been war, which has boosted employment through reconstruction (and has in turn boosted innovation and thus extended comparative advantage). Full employment is historically atypical. As developing nations catch-up, and as the likelihood/impact of war diminishes, the degree of comparative advantage declines (shifting into high-skill service jobs is merely a temporary extension as developing nations will catch-up there too – see China’s swift move from primary industry to high-tech).

    In effect, the global economy moves towards an equilibrium. Relative comparative advantage still exists (Aussie iron ore, Scotch whisky), but labour migration smoothes out employment rates. At this point, technology (i.e. the growth of capital intensity) starts to reduce the aggregate demand for labour. The classic argument against the lump of labour fallacy (which is actually a strawman – i.e. nobody seriously makes the claim that is being imputed), is that labour displaced by technology finds new jobs as the falling prices due to automation swell aggregate demand (including exports). But this process is, by defintion, temporary. As more and more of GDP is the product of capital rather than labour, more and more of profits must go to capital (i.e. those who own the assets) rather than labour (this can be masked to an extent in that some profits to capital will be diverted to rents – e.g. bankers’ bonuses count as wages).

    Increases in productivity, due to capital intensity, could be remitted to labour in time. Of course, at this point the reality of power intervenes. Though it would obviously make sense to equitably divide the benefits of a declining need for labour, this is problematic because wealth (and thus power) in a developed economy depends on two things: income and property. You can therefore predict two trends.

    The first trend will be an inequitable division of work, in order to ensure a larger share of income. This will be seen both in terms of increasing wage inequality and increasing work-time inequality (income rich, time poor). At the top-end of the income scale, supernumerary jobs are created (i.e. unnecessary layers of management and rent-seeking professions – this is necessary to ensure sufficient electoral support). Though presenteeism is rife, social pressures cause a move towards flexible working and a blurring of the boundaries between work and leisure (i.e. leisure is masked as work: telecommuting, smartphones, the office as social club etc). At the bottom end of the income scale, jobs are fragmented (temporary, part-time, zero-hour) and wage growth depressed.

    The second trend will be an inequitable division of property. Assets (shares, houses) will be managed in such a way as to drive up prices (divert QE to shares, don’t build enough houses to meet demand), taxes will be shifted from wealth (land, capital gains, houses) to consumption (VAT), and the law will be used to guarantee future rents (patents, copyright, and the privatisation of state assets and natural monopolies).

    This process has been in train now since the late 1970s. The neoliberal turn can be interpreted as an attempt to limit the benefits of technological advance to a power elite (with support from a subaltern middle-class electoral bloc), following the end of the last growth wave (WW2 to 1970) that delivered full employment. The UK’s comparative advantages have been in decline since the mid-19th century. Short of another European war, it is hard to see where sufficient demand can come from to produce full employment. This is not to say that we are in “decline” – absolute wealth will continue to grow as will average living standards (due to technology) – but that relative social inequality (both in terms of income and property) will become ever more entrenched.

  4. Juli says:

    Do you remember when you were young:
    When they sold us a future in which everyone
    Would have more time for leisure and
    Life’s simple pleasures?
    I do.
    I remember the ‘progress’ and shift
    Toward treasured Modernity’s time-saving gifts.
    I remember when ‘free time’ were not dirty words,
    But the envy of those who knew it was absurd
    To work hard for The Man, at the cost of your Soul;
    To neglect your own senses to fit in the mould;
    To conform to consensus and stick to the path
    Laid out in perpetuity – however daft…
    And yet,
    Where does the time go and how is it spent,
    But by serving The Man just to pay him more rent?
    And while faster goes quicker and more becomes less
    Of a joy than a measure of burden and stress,
    We regress to Draconia’s cold, hostile age
    As a new class of servants with masters who wage
    On us their aspirations for their private nation.
    Obnoxious concoctions and new imitations
    Of outdated thinking, consigned long ago
    To the scrapyard of ignorant, privileged foes.
    Resurrected prescribers and makers of woe
    Who would keep us distracted and chained by the nose
    To a grindstone which cripples and overly loads
    On our bodies and minds and the whole of our time
    Is spent rushing and pushing and fighting or fleeing
    To be the first one to the end of the line. :)

  5. christof74 says:

    A capitalist system can’t handle this situation. Unemployment will rise and inequality will widen. The only answer I can see working is state intervention in the form of further limits on working hours.
    The situation is partly masked at the moment by the proliferation of non-jobs (public & private) that nobody in the 60s would have even dreamed of (diversity coordinators, PPI telesales, etc).

  6. Greg vP says:

    One aspect of this that has received little discussion is the role of demand in developing economies. Michael Pettis has argued at length, and convincingly, that China has deliberately suppressed internal demand for decades. As a result, instead of running a large trade deficit with advanced economies as a country in its state of development theoretically should have, it ran a surplus. That is one locus of missing demand.

    Other developing countries may or may not have deliberate policies of internal demand suppression, but they definitely do have institutional weaknesses that have the same effect. More missing demand. So if Schor is correct that there is a global glut of labour, it is because labour in both developed and developing countries is supplying demand in developed countries only.

    When we add to those absences the deliberate suppression of demand in the Eurozone, first in Germany, and now in the periphery as well, the impression is gained that employment stagnation is an outcome of policy in some places and institutional failure in others.

    To be sure there are other momentous things happening–in particular the demographic changes that Edward Hugh has written so much about. But those ought to be causing labour shortages, because Shane’s robots aren’t here yet.

  7. Pingback: How sad globalisation will never be happy internationalism (or Labour, business and bollocks) »

  8. oblomovIII says:

    It’s an interesting debate – you managed to set me off thinking on it.
    At the heart of it, I reckon there’s just about enough work to go around most of the time, but the prevalence of short-termism and cost-savings forces more people to work longer for free, which is smart for the individual, but stupid at societal level.
    (My response in full here

  9. Juli says:

    My immediate thoughts on yours and @oblomovIII’s pieces…
    For me, it seems the only way to go is to recognise that constant “growth” is the policy mistake. Growth in what? Usually more stuff. Growth should be concentrated towards education, research & technology, the Arts and the space for people to consciously observe, participate , reflect and just Be. The rest – the business end, if you will, should exchange ‘growth’ for ethically, egalitarian sustainability. I would call that Progress. This means letting automation serve us where it’s good for us and most people working part-time whilst ensuring that the wage still covers a decent standard of living. Is it a big ask? I really don’t think it is… :-)

  10. Brian McNeil says:

    Even when the UK’s economy was Merchant-Capitalist, the system worked better for those at the top with a certain level of unemployment. Counter-intuitively, where the Luddites were attacking factories and smashing machines, industrialisation pushed capitalists with their money in factories instead of raw materials to keep more people working and make money out of their investment. Now, we’ve come full-circle and employment is, for far-too-many, a precarious situation.

    The Occupy movement seizing on “The 1%” partly explains what happened to your “Leisure Shock”. As a proportion of the population, that 1% has got smaller and smaller, ditto for the top 10%; This is just what Robert Tressell saw: “Money is the cause of poverty”, and capitalism is “The Great Money Trick” that acts as a ‘wealth concentrator’.

    There’s no need to treat human society as a vicious, fiscally Darwinian, competition; doing so keeps those at the top up there, and everyone below them competing. We’re supposed to be smarter than treating the Human Race as a competition to die with the most small, green, pieces of paper.

  11. sganda says:

    Reblogged this on SGandA.

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