Why 10 percent unemployment and worse is our future, unless we rethink our economy

Updated with more perspective on the job-crashing Internet here and more from Vox Media here. Also, though some think there is a mighty economic transition happening, many readers and friends have pointed that I didn’t properly address the ‘lump labor fallacy‘ here, in which I incorrectly assume there is a static number of jobs that are going away. I still think there is perspective worth sharing below. More comments welcome.

In the next 20 years, the United States and the broader global economy will either dramatically rethink its employment structure or a history-altering societal change will take place.

Of course, unemployment numbers are gamed by those who give up on looking for jobs, but the idea here is that it’s hard to understand why anyone seems to think that the overall unemployment numbers for our country will trend anywhere but upward.

Let me be clear, this is armchair commentary from someone with absolutely no background in economics or geopolitical, socioeconomic trends, so I am writing this hoping for outside insight because I can’t figure this out.

Below, I (a) outline the problem as I see it, (b) look at big economic drivers that seem to be chances for more problems, (c) list all the opportunities I understand that could reverse somewhat this trend and then (d) highlight some of the transformational changes that could lie in wait for the next generation, before offering some more reading and then waiting to get yelled at in the comments.

A. THE PROBLEM

First, some figures floating around in my head recently:

• The U.S. had fewer overall jobs in 2010 than in 2000, some 134 million* — the first decade loss in net employment in recorded U.S. history, which, admittedly, starts just in 1940. A lot of factors go into this total, not the least of which is comparing seasonal and degrees of part-time, but even the most optimistic accounts suggest that if the 2000s saw even seven million new jobs, that was far behind the projected 22 million.
• The longterm unemployed and so-called ‘Lost Generation’ are creating a new underclass — The pipeline of our country’s future leaders are rethinking their options: from entrepreneurship to job-hopping. But many other young people are now chronically underemployed and in debt. (Though entrepreneurship is still seen as a major future of jobs)
• Higher structural unemployment is here to stay — Where economists once pegged 5 percent as the figure, some analysts are suggesting 6-7 percent could be a more attainable goal and others say we could see 10 percent again and learn to accept it [Watch below], particularly considering how employment numbers can be spun. We have a very large, diverse population, but it’s worth noting that there are exceptions with far lower unemployment rates (and better education systems).
• Innovation and businesses of today seem to be more adept at efficiencies that reduce overall jobs — I struggled to find a more comprehensive look at web-driven job growth in the last 20 years, but I’d guess that the big drivers of IT jobs of today have erased more jobs than they’ve created (have firms like Google, Amazon and their peers made other industries less relevant because of their services?) And, yes, even if the manufacturing businesses in the U.S. aren’t leaving at the same rate as recent, more painful decades, they are becoming more and more efficient (meaning, they need fewer employees to do more work).
• Meaningful U.S. innovation has all but stalled — Meaning new technologies and the job growth that follows has slowed, which means white-collar technology jobs could leave the country, just like low-paying manufacturing jobs have.
• Income inequality is growing — As you might expect when economic growth is stalled and technologies create fewer, better-paying jobs and opportunities at wealth creation.
• Competition for job growth is murkier in a more globalized world — As the international market continues to develop its interconnectedness, the idea of one city (Philadelphia), or one state (Pennsylvania), or one country (the United States) or even one part of the world (developed countries) luring jobs from elsewhere or fast out-pacing other places in opportunities looks less a success than in generations passed.
• More and more, the jobs we do create don’t actually matter — We aren’t solving problems (policemen, firemen and doctors, who keep us safe, or machinists and construction workers, who build things), but creating an increasingly ethereal world. If humanity is wiped out and the electricity shuts down all of our servers, where will our legacy be?
• Humans are living longer (at least educated ones) and efficiencies are reducing the number of jobs — If there’s more of us, living longer and fewer (if better-paying, more skilled) overall jobs, doesn’t that centrally look like a scarce place for micro financial security?

Let me say again: I have no education in this space, so I am seeking clarification for how this all doesn’t result in an overall trend of unemployment rising. Help me in the comments and tell me what I’m missing — as I continue to suss things out below.

Expedited by the financial crisis, a portion of the developed world seems to be facing a scary reality. What if this economic shock isn’t just a recession, it’s a warning sign.

Though few developed countries are as hard hit as 25 percent unemployment in Greece, it seems to me that the biggest reason why we don’t talk more openly about this madness (and why both presidential nominees talk like they can actually solve this problem, and boast about it) is because BRIC nations are still driving through something of their jobs-heavy industrialization.

Here is some rough math from someone else: “The US is currently reporting about 12 million people as unemployed.  Now consider only a 10% further population growth (need another 14 million jobs at a 45% participation rate) combined with a hypothetical 10% contraction in the “other” category (lose 12 million jobs).  That wold open a gap of another 26 million jobs, thus tripling the number of unemployed!  Even at a steady population, a 10% contraction in the “other” category would result in a doubling of the number of unemployed.” (And a follow up here)

How could we entirely rethink our economy — job-sharing, fewer hours or service banking, as listed below — when our ‘competition’ for economic hegemony is surging up the traditional understood pathway?

It’s like environmental concerns in China, where the developed world (which already went through industrialization) wants the country to be more green-conscious, but China doesn’t want to miss out on the shortcuts the West got. Their industrialization will keep Apple manufacturing jobs from ever coming back to U.S. soil, but whatever happens to our workforce here in coming years will follow to Asia, so China, too, is surely interested (China, for example, is also trying to look more like an American consumer-focused culture).

Whatever the case, for at least the next two years, we will likely see economic and jobs growth that will simply be bringing us back to where we might be if the Great Recession hadn’t frightened the world into hiding.

B. CULTURAL CHALLENGES

So, in a down economy, with unemployment still high in the United States, we are on the hunt for what can grow job opportunities, but I’m fearful. Here are some possible economic game-changers that, in the end, might seemingly result in fewer net jobs (the common theme being that they, as the market wants to do, created efficiencies in labor):

• World Wide Web — History’s most powerful communications platform has fueled new industries, but if someone could more broadly envision the impact of this remarkable tool of efficiency, it’s hard to understand a net gain, or at least as large a one as we sometimes suggest. As early as 2009, we were touting that the Internet had directly created 1.2 million U.S. jobs, helped stimulate at least double that number and fueled some $175 billion in new spending or maybe it’s $300 billion. As I read some of these studies and the coverage of them, consistently the reference to this possibility is through efficiency, which, among other things, certainly means the reduction of redundant or otherwise unnecessary jobs. So, I read those numbers to be a transfer of wealth (i.e. Google makes money in more efficient online advertising, which knocks out more profitable print advertising). The argument here may be that the Internet has created so much access to opportunity, that globally it will be seen as a growth engine. Still, it’s something I find unsettling.
• Travel and transport — In his compelling indictment of the failure of our country’s innovation pipeline, Peter Thiel points out that we have stopped moving faster: from trains to cars to planes, but now a stalled high-speed rail network. (He also contrasts progress like our first black president with progress like new industries, like cheap solar technology.) There is innovation to be had there, but might efficiencies follow and hurt in other, unforeseen ways?
• Consumer culture — Any big movement our country has in employment is in service-sector retail jobs, but that’s slowing. And, still, I think about how little of that process is automated — grocery store self-checkout, inventory management and the push to ecommerce and online shopping — I fear that that’s a segment of the economy that will have its own slashing in the near future.
• Military and prison industrial complexes — U.S. military spending is getting trimmed by billions of dollars (though there is political disagreement there), which is meaning fewer jobs, and there is regular shock at the spiraling size of the American incarceration system ($74 billion in annual spending and 800,000 jobs). These are enormous corners of employment there that are due for longterm cutbacks.
• New urbanism is shrinking sprawl — Instead of the growth of suburbs that dominated the 20th century in the U.S., people are trending back to the cities now and leaving those suburbs. And while U.S. cities can still be a place of new construction (which accounts for GDP, unlike selling existing homes), I am still stunned by how integral construction and new homes-building is to our economy, considering the backlog of housing stock.

The concept that we have seen the End of Average for hiring is a compelling one, something that I might take further by expecting to see played out by bringing entrepreneurship into the fold as a natural progression for young people. You finish college or a graduate degree, and then go into business by yourself, doing whatever it is you want to do — accounting, blogging, video production, robotics — before being hired by way of acquisition. It is the ultimate job interview.

Which is fine, but, unless we’re suggesting that there will be real losers in that option (if you aren’t the best at creating the job you want, you fall through the cracks) then we still need job growth for these people to eventually take on.

C. SMATTERING OF SOLUTIONS

What are some possible sources of buoyancy for the U.S. economy?

• A weaker U.S. dollar can be a boon for American manufacturing, in industries like automobiles and heavy machinery. That alone may only be enough to stem the loss, as the U.S. business of making things continues to be hurt.
• Surging consumerism in developing countries creates and distributes wealth — Right now, less than a third of the Chinese economy is built on spending, if that spendthrift society would more frequently spend out that money (in the U.S. that total is closer to 70 percent), might it flood the world with new job opportunities (making stuff that the Chinese want to buy, like web-based products that can be created here)?
• China and countries in the Middle East will develop reputations as hubs of immigration, as jobs draw people there. There is a loss of vulnerable, job-seekers from here, forcing a transformation of what the United States is. This includes a massive rethinking of immigration policy.
• Massive government-backed infrastructure spending — Trillions on the elusive high-speed rail, mass transit and urban housing, energy innovation and, though it might sensibly result in an even larger, older population, science and healthcare innovation.
• Green technology — If the world over begins to embrace cheap solar energy and new energy creation (in addition to a varied energy policy), thousands of jobs could be created, though we’ve struggled to capitalize on this promise before.
• Skills-based learning works itself out and we retain jobs here — As a country (and increasingly as a global community), we face the stark skills mismatch more systemically: finding pathways to, say, take people from an over-burdened construction industry and move them to healthcare. This is getting more and more challenging as our positions become more specialized. And we’re really bad at this, though we’re trying to rethink education reform.
• The U.S. maintains a strong hold of large business that further create efficiencies but employ many people — Yes, for all the political bluster about small businesses (while they do create a lot of jobs, they also destroy a lot of jobs by failing often), lots of academic studies show that the world’s strongest economies have the largest share of large employers, which create efficiencies and accelerate innovation. Instead, we should focus on making it easier and easier to create businesses and have them flourish, hoping they’ll grow to a scale and size that impacts employment.
• Legal drug economy: In the next 10 years, a serious, mainstream case for legalizing marijuana and/or related narcotics will be made an increasing number of states leading to a new growth sector for employment, and creating taxable income.
• Military industry complex: Though, as stated above, the federal government is shrinking its defense spending, another military build-up or greater weapons manufacturing could sustain some corners of employment. Though, World War III would probably end the world, the Cold War (and its end) was good for business.
• Exporting efficiency — As the rest of the world mechanizes, could the U.S. export its automated manufacturing base to the rest of the world?
• Someone smart comes along and save us — As I’ve written before, our surging population has always been a defense, out of which an innovative thinker comes along to, say, increase food production or create prosperity (and therefore consumers) out of previously impoverished communities. In the middle of the last century, there was fear that a population boom would mean mass starvation by today. Of course, advances in farming and science have kept the production of food mostly caught up with population — in fact, politics starves more people than overpopulation. So, the other side of this doomsday jobs conversation is that someone or something starting soon will shift this entire conversation.

Two researchers on 60 Minutes talked about what they called an uncontroversial solution to the technology-fueled jobless recovery: an updated education system, a focus on entrepreneurship and infrastructure spending.

There is some real promise in there, but what may be most frightening is that we are not done automating and creating efficiencies in the labor force. Not globally, and not in this country.

1. In just the last decade, a third of all remaining U.S. manufacturing jobs were replaced or lost abroad, according to a sprawling Planet Money podcast from December.
2. According to projections from the Bureau of Labor Statistics, in the next six years, we’ll see the creation of fewer than 400,000 net retail jobs — the attainable, working class jobs of a consumer economy that follows a manufacturing one (that followed an industrial one) — and I wonder if that fully takes into account all the automation that isn’t even fully in place. Considering that retail and service accounts for nearly one in five jobs in the United States, there should be some fear there.
3. Even white collar jobs are still being lost due to efficiencies and more are sure to follow.

To put that on a more local scale from the not-so-distant past, the riverwards section of Philadelphia alone lost more than 300,000 manufacturing jobs from the 1950s to 1980s, so while the technology business conversation locally is an interesting one, these small job-additions just cannot keep up.

D. DRAMATIC MAKEOVERS

If all else slows or fails, how could the economy dramatically shift (something I shared as a key for Philadelphia to remain innovative)?

• Job sharing — In which more of us share more, smaller ‘mini jobs,’ like here.
• Trading in services — The oldest of economies, the barter economy like here.
• Reduced work week — Trade unions once fought for 40-hour work weeks and for generations, thinkers have predicted the time of no or far reduced work weeks. Suppose we rolled back efficiencies, with the above two in mind.
• Focus on solving problems — Social entrepreneurship could infuse what we do with a patronage and support network, as the businesses we grow do the work of bringing everyone up, but that sounds a lot like it would need rethinking of how the entire world goes round.
• Mandatory retirement ages — And make them a lot younger, though a balance with government support would have to be better understood.
• Broadly rethinking capitalism — I’m not one of *those guys,* but there is an interesting argument that capitalism was a powerful tool but that its race for efficiencies eventually unravels its effectiveness. So it’s time to talk about what’s next.

A few big trend stories on this that are absolutely worth reading:

• The End of the Future in the National Review (Peter Thiel)
• The Busy Trap in the New York Times
• Making it in America in the Atlantic
• We are not all created Equal in Esquire
• Four Futures the Jacobin Mag

So how did I get this wrong? Why aren’t we doomed for increasingly unemployment?