Part 1: The crisis beyond the horizon
*

By William C. Shelton

(The opinions and views expressed in the commentaries and letters to the Editor of The Somerville Times belong solely to the authors and do not reflect the views or opinions of The Somerville Times, its staff or publishers)

There will come a time in this Century when our political economy cannot provide what we think of as a “job” to half or more working-age people. By then, that system may no longer exist as we would recognize it.

What takes its place can make life much more, or much less, enjoyable for most of humanity. The political choices that we make today will heavily influence that outcome.

The least popular new president in modern history, and the most popular politician in America agree that we have lost millions of jobs to trade agreements that favor the wealthiest of us.

Establishment politicians in both their parties hasten to counter that technological displacement has eliminated even more jobs. They are mute, however, in advocating the kind of policies that enable other post-industrial nations to manage this while protecting workers.

Germany, for example, prepares young people for emerging well-paying jobs that don’t require college, effectively retrains older workers, provides firms with incentives to reduce all workers’ hours rather than laying some off, and pursues industrial policies that promote growth industries like alternative energy while supporting them with infrastructure and research investments.

Similar policies could have prevented, and still could prevent, much suffering among American workers. But all such policies will eventually be insufficient to prevent displacement by digital technology and robotic devices from denying a critical portion of the population the opportunity to earn a living through paid work.

People have been predicting something like this ever since early 19^th Century Luddites smashed the weaving machines they feared would replace them. But ever since then, developed economies have found ways to prove them wrong. Until now.

Randall Collins is a world-class historical sociologist. In his essay, “The End of Middle Class Work: No More Escapes,” he outlines the ways that capitalism escaped this crisis in the past:

• New technologies created new jobs and whole new job sectors.
• Markets and products spread to new geographical regions.
• Expansion of government and its investments created new jobs.
• Speculative financial meta-markets borrowed against the future, funding current economic activity.
• Increasing credential requirements created educational jobs while delaying students’ entry into the workforce, thereby slowing increases in demand for jobs.

Collins then shows why each of these “escape routes” is leading to a dead end. He estimates that we could reach 50% structural unemployment by 2040.

Despite low official U.S. unemployment—currently hovering around 5%—we can already identify elements of this trend in our nation’s stark slide toward greater economic inequality.

For three decades after World War II, increases in workers’ earnings tracked directly with increases in the economy’s productivity gains. That is, workers’ incomes increased proportionately to increases in the amount of goods and services produced by the same amount of their labor.

Since 1980, those who own and finance companies have taken almost all the wealth produced by productivity gains. And labor’s share of economic output now stands near its lowest level since the government began recording it. Two University of Chicago economists estimate that displacement of workers by digital technology accounts for half of that decline.

Our low official unemployment rate obscures the reality that one in six prime-age (25-to-54) men are unemployed or have dropped out of the workforce. And the proportion of those absent workers has increased as much during the current recovery as it did during the Great Recession itself.

Meanwhile, as anticipated in Randall Collins’s last “escape route,” employers are demanding higher educational credentials. More young people are in school, but recent college graduates’ compensation has declined by 7.7% since 2000.

In a widely noted study, two Oxford economists examined the potential for computerization’s eliminating 702 different occupations. Consistent with Collins’s forecast, they estimated that 47% of total U.S. employment was at risk of elimination within the next 20 years.

A team at MacKinsey and Company’s Global Institute challenges that forecast. Somewhat.

Their report estimates that 49% of time spent on work activities could be automated with “currently demonstrated technology.” But the speed of that technology’s adoption will be moderated by economics, labor markets, regulation, and social attitudes. They estimate that half of all work activity could be automated by 2055, give or take 20 years.

A more optimistic view, put forth in works like Ruchir Sharma’s The Rise and Fall of Nations, argues that, in the medium term at least, robots will be our economic salvation rather than our doom. A global population that is already aging results in a shrinking segment of working-age people supporting a growing segment of those who have aged out of the workforce. So, “the economic answer to aging will be all hands on deck, no matter what [those hands] are made of.”

But by the crisis point that Collins, MacKinsey, and the Oxford scholars forecast, we should be largely past the age bulge that Sharma’s concerns anticipate. And robots’ ability to perform the work does not mean that those who own them, and the governments that their owners influence, will commit them to providing goods and services for people who are no longer economically productive—either as a result of aging or of technological displacement.

Moreover, consumer products and services, which once accounted for a third of our economy, already now account for two thirds. Henry Ford II is reported to have asked United Auto Workers leader Walther Reuther, “How are you going to get these robots to pay union dues?” Reuther reportedly replied, “How are you going to get them to buy your cars?” Indeed, who can buy consumer goods when half or more of the workforce is no longer employed and most of the rest have reduced incomes?

Questions like these have profound implications for our institutions, our culture, and how we will live our lives. I’ll examine those questions in my next column.