db@cstvax.ed.ac.uk (09/24/86)
this is an article from the latest issue of the Edinburgh Computing &
Soical Responsibility newsletter. ECSR is roughly a Scottish
equivalent of CPSR. I'm submitting this to mod.politics because it
seems relevant to the current discussion on libertarianism, advocates
of which seem to assume that someone will always be able to get a job
elsewhere if denied one at their first attempt. It's also of general
interest.
I'm submitting this in a purely personal capacity. The contents of
the article, and my comments here, are not necessarily the opinions of
other ECSR members.
Note I am not the original author of this article.
New Technology and Employment
Notes of the ECSR meeting of Wednesday 19 March 1985.
by Frank van Harmelen
The main topic of the evening was a talk given by Howard Wagstaff. He
is an economist, and currently lectures agricultural economics at the
Department of Agriculture of the University of Edinburgh.
The title of his talk was ``Future Employment and Technological
Change'', which is also the title of a recently published book of
which Howard Wagstaff is a co-author. The talk consisted of an
overview of some of the main points made in the book.
The talk can be summarised as follows:
- An overview of main current beliefs about unemployment issues.
- The identification of the myth of New Technology.
- What do we need to make New Technology more Tractable.
One of the most common assumptions about our economy is that the main
cure for the current unemployment situation is a sufficiently high
level of economic growth. However, the current situation of high
unemployment can only be partially explained from the low levels of
economic growths since 1980. The past 5 years since 1980 are to be
regarded as one of the regular local ``hiccups'' of our economic
cycles, and are not sufficient to explain the current levels of
unemployment. If we look at the period before 1980, say from 1960 to
1979, we also see a period with a rising trend of unemployment. This
was particularly so in the UK. However, over this period, our economy
grew with something like 2% a year. This is a fairly high growth
level, if you consider that this implies doubling the volume of the
economy during one generation! Even in countries with still higher
growth rates during that period, such as Japan or Germany (4%), there
was a rising level of unemployment.
The unemployment level was not evenly spread across all sectors of the
economy: the unemployment problem was by far the worst in the so
called production industry, even to the extent that the industries
with growing output rates did not have rising employment levels.
Again, this is not only true for the UK, but across a wide range of
industrial countries.
This fall in employment from the production industry was largely
compensated by a rise of employment in the service industry. (However,
since the size of the work force itself grew as well, this was not
enough to provide full employment). This would lead to the belief
that making the service industry grow will make employment fall. It is
along these lines of reasoning that the future of the service industry
becomes the straw that many classical economists clutch on.
However, this ``Myth of the Service Industry'' needs to be tackled:
The shift from a ``goods economy'' to a ``service economy'', means
that demand will shift from goods to services. While we're getting
richer, we spend our extra money on services, since the spending on
goods has reached a saturation point. Thus, it is often believed that
this ``shift by consumer demand'' will lead the change to a service
economy. However, this is wrong. Services are getting relatively more
expensive as compared to goods. This is due to two facts: Firstly, the
goods industry profits from rises in productivity, while the
human-activity dependent service industry doesn't, and secondly, the
service industry suffers much more from the rising costs of labour. As
a result of this, the labour-extensive goods industry will push parts
of the service industry out of work. Think of the following examples:
- Cinemas close due to people buying video-recorders.
- House servants disappear due to electric domestic appliances.
- Public transport disappears because people use their own cars.
The question now arises: How then has the service industry managed to
be responsible for an increasing number of jobs, and which section of
the service industry in particular? We can see this if we divide the
service industry into three sections, according to who the main
customers of each section are:
- The business section: Those services industries that deliver
mainly to other businesses.
- The household section: Those services that cater mostly for
the needs of the consumer markets.
- The public section: Those services that are mainly paid for by
public money.
It turns out that the public section is responsible for most of the
extra jobs in the service industry (mainly education and health
service). Until 1975 the business section also increased, but this has
levelled of. The number of jobs in the household section actually
declined. From this we see that the myth of the consumer demand
leading the shift to the service industry is false. This can be
explained by the fact that the consumer section is very much moving
towards a self service economy, as opposed to a service economy. A
good example of this are the large DIY furniture shops, where a
relatively low number of jobs offer a large number of services,
because of the self-service character of the shops.
The question is now: why do common theories not see these points, and
actually deny them? The main reason for this is that all mayor
economical schools seem to think that the current crisis of the 80's
is very much the same as the crisis of the 30's. However, the above
seems to indicate that we actually have a new problem on our hand,
what we could call technological unemployment.
Each of the three main economic schools of thought (neo-classicism,
which claims that the self regulating market mechanism will solve the
problems on the employment-market, Keynesian, which claims that
increased demand will solve the unemployment problem, and Marxist,
claiming that more economic planning will solve the problems) assume
the need for steady economic growth. It is clear why they do this,
because it helps them in avoiding the difficult redistribution
problem: If the cake is growing, then they can solve the problems by
handing out the extra slices, and they don't have to worry about
redistributing the cake. However, when more goods don't produce more
jobs (as seems to be the case) what do we do?
What are the options for future employment? The key seems to lie in
the redistribution of the gains we make because of the higher
efficiency. This redistribution can be done in 4 ways:
- Letting market forces do it.
- Using public investment.
- Reducing the size of the active population.
- Shorter working times.
The first option does not work (as described above). The second option
seems to involve redistribution through taxation, and using the tax to
create jobs. However, even the most extensive of the Labour Parties
shopping lists does not reach over 3/4 of a million jobs, while we're
looking for something like 3-4 million. Reducing the size of the
active population seems to involve morally unacceptable actions like
sending foreign labour home, or not letting women enter the labour
market.
The last option seems to be the most promising. But it does introduce
the conflict between the employed and the unemployed. Some short term
solutions for this problem could be
- a personal benefit for every person, working or non-working.
- an employment allowance for companies, based on the number of
employees (and not on their labour costs).
In the longer term, the solution seems to be to try and organize our
economy on a different ground than the profit-optimization which is
the main basis for our current economic system.
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Future Employment and Technological Change, H. Wagstaff and
D. Leach, Kogan Page, 1986.
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