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One answer, and I don't know if this is the right answer, is that unlike in previous revolutions, a new class of jobs has not been created to (fully) replace th
by msluyter 15y ago
One answer, and I don't know if this is the right answer, is that unlike in previous revolutions, a new class of jobs has not been created to (fully) replace the jobs that are being displaced. In the industrial revolution, farmers could move to the city and get a job in the factory. In the (first) information revolution, factory workers could become telephone operators. But as Tyler Cowen notes in "The Great Stagnation," jobs in the software industry are relatively few compared to the number of jobs that are being eliminated in other fields. It's unclear what new class of jobs would fully compensate for the loss of, say, many unskilled labor jobs to automation.
A second answer might be that we're only now fully realizing the effects of globalization -- outsourcing, moving factories to China, call centers to India, etc... due to the advances in telecommunications and whatnot. Perhaps there was an underlying structural shift as early as the 90's, but we were coasting on the housing boom. I recognize that that's a rather hand-wavey argument. IANAE.
- achompas 15y agoIAAE, so I'll address this: jobs are not being "displaced" or permanently "eliminated" right now. There's a simple, plausible explanation for all of this: 1. Businesses are hesitant to invest in capital. 2. The housing market is terrible right now--especially housing starts. 3. Jobs related to #2 and #3 generally go to lower-skilled workers. They're the ones who are struggling right now (with something like 16% unemployment for men without a HS diploma). This isn't the end of the American economy, people. Demand is low for goods produced by low-skilled, American-based labor. Things will improve with time.
- sachinag 15y agoIt would improve faster if your bosses would engage in QE3 and started to inflate the economy. [Edit: that's an attack on the Board of Governors, certainly not you.]
- achompas 15y agoWell, they're not my bosses anymore. I'm moving into software and applied stats now. :) I'm torn about QE3. There's little evidence that businesses are waiting on it specifically to make capital expenditure decisions; it seems, from reading the Beige Book and other anecdotes that companies might be waiting for the other shoe to drop. QE3 would just adjust the shoe on the foot a bit.
- sachinag 15y agoWell, we could start charging the banks for carrying excess capital. I know, I know, everyone will start screaming about crappy balance sheets and all, but they're just sitting on boatloads of cash.
- steins 15y agoThe problem isn't cash, its capital goods, and flooding the system with cash will just cause damage to companies who are to small to move fast enough to acquire large amounts of the flood.
- achompas 15y agoElaborate? You're being vague, and from what I've seen we have no problems with the capital we produce.
- Estragon 15y agoWhatever its actual economic merit it seems obvious that there will be another QE3 as soon as the derivatives and bad loans still in play cause another liquidity crisis. My personal investment strategy is exactly in line with what you describe businesses doing: stay out of the market until there's another crunch which looks severe enough that the USG will feel forced to intervene. (And stay out of USD in the meantime.)
- entangld 15y agoIsn't a very large proportion of American labor unskilled? Real unemployment is always worse than the figure they give (when you account for people who stopped looking).
- achompas 15y agoI can't say how many workers have less than a HS degree. A trip to bls.gov would help, but I'm on an iPhone. I imagine the majority of American workers have a HS degree, at least.
- btilly 15y agoIn the industrial revolution, farmers could move to the city and get a job in the factory. Not true. The Industrial Revolution was preceded (in England) by an Agricultural Revolution that displaced peasants in large numbers to cities where they didn't have nearly enough work. (Many emigrated to the New World.) Thus the later economic boom was preceded by economic hard times.
- bulletsvshumans 15y agoSo maybe one significant difference is that this time, there isn't a new frontier for people in developed countries to immigrate to.
- mkr-hn 15y agoI wrote about this earlier: http://bitoftech.mkronline.com/2011/08/05/the-information-ages-mid-life-crisis/ http://bitoftech.mkronline.com/2011/08/05/the-information-ag... (HN submission: http://news.ycombinator.com/item?id=2850520 http://news.ycombinator.com/item?id=2850520)
- ippisl 15y agoAs a support for your claim that new classes of jobs are not created , see pages 67-68 in http://www.thelightsinthetunnel.com/LIGHTSTUNNEL.PDF http://www.thelightsinthetunnel.com/LIGHTSTUNNEL.PDF There's a table called "U.S. Occupations with at least one million workers (2006)". Every type of job there has existed since 1948. There are no new job categories created with over a million workers.
- SoftwareMaven 15y agoBut that isn't too surprising. Seventy-five years ago, we had "factory worker", "foreman", and "manager". Compare that to any large company today and see the variety of jobs being done. Jobs, and therefore people, have specialized more, that's all.
- hadronzoo 15y agoIt's difficult for me to buy Tyler Cowen's thesis that all of the huge gains in marginal productivity have been tapped. If you're a developer, you tend to see incomprehensible inefficiency everywhere, especially if you consult for larger organizations or work on applications that involve human collaboration. I think a more probable explanation for "The Great Stagflation" is the unprecedented level of market intervention and regulation that did not exist during the industrial revolution.
- stretchwithme 15y agoCertainly, that is true. Unemployment would drop a great deal if the price of low wage labor were allowed to decline to where demand would equal supply. But that's illegal. And its not just wage that must be considered. There are hidden costs of hiring and possibly having to fire an employee, all of which have gone up in recent decades. People imagine that employers can be made to do all kinds of costly things without effect on employment. Or take home pay. And in good times, it may seem like there are no such effects. But its in the bad times that consequences are felt, long after the legislation has been passed. If an employer cannot make money hiring a particular worker at the minimum legal wage, the worker isn't going to be hired (legally, anyway). This has nothing to do with technology adoption.