Written By: - Date published: 11:42 am, January 10th, 2016 - 46 comments
Categories: australian politics, business, capitalism, class war, debt / deficit, economy, Economy, employment, Globalisation, journalism - Tags: new matilda
I recently read this fascinating article in New Matilda which asked why are we still working? With the advent of technological advances our need to work had been predicted to reduce. Yet the reality for most of us is that it has increased. And even though it concentrates on Australian conditions the article neatly dovetails in part with my post from yesterday and how the local real estate market has caused much of the problem.
From the article:
As long ago as 1930, the economist John Maynard Keynes predicted that, by now, people in technologically advanced societies wouldn’t need to work much at all. When Keynes said this, advances in technology were yielding extraordinary increases in productivity. The implications seemed obvious. If it took less time to produce what we needed, surely we’d work less.
In Australia, by the new millennium, many full time employees were working more than their grandparents had.
The same result clearly applies to New Zealand. And even though technology increases were greater than had been anticipated why did the need for most people to work increase?
One theory was that as our desire for more and more material goods increased so did our need for money.
Gary Becker observed that our appetite for material goods has expanded along with our ability to produce them. Instead of working less hours, we opted for bigger houses with more gadgets, which we replace more often.
This process has been fuelled by a deluge of marketing, which persuades us to consume things we previously didn’t recognise a need for.
Another theory was that as productivity and automation increased in the well paying jobs the benefits were not distributed. Instead there was a vast proliferation of service industry jobs that only seemed to exist to provide work.
Consider this. Productivity growth has stalled in Australia. How can this be? Technology hasn’t stopped advancing. The time we should be winning back through productivity gains must be getting reabsorbed.
At the same time, unemployment has been trending up since 2008. Young people especially, are out of work. The number of underemployed people, who would work more if they could, is also high. More jobs are casual.
Increasing longevity has also played its part.
There’s another factor. Our lives are now longer relative to our working lives. We tend to start full-time work later, after years of study, and more of life is spent in retirement. Many jobless older people are struggling with the cost of living. Many would work more if they could.
Instead of everyone working less, what seems to be happening is that experienced workers, in professions which are still in demand, are working more, while the young, the old, and those with skills which no longer attract investment have difficulty finding work.
MIT academics Andrew McAfee and Erik Brynjolfsson refer to this as the great decoupling. For many years, real GDP per capita and median income rose in tandem. Since the 1970s, wages as a percentage of GDP have fallen dramatically, while corporate profits as a percentage of GDP are now at their highest level, despite recurring economic shocks.
To put it simply, labour isn’t as important to growth as it used to be.
And things are not going to get better. Both the Australian Government and the New Zealand government are not even talking about the issue. Jobs will continue to be replaced by technology. Of course the state could be doing something but that would involve it adopting a larger role that would have to be paid for by increased taxes.
The terrible irony in this situation is that there is so much that needs to be done.
Among the underemployed graduates I personally know of, there is a psychologist, a soil chemist and a biodiversity specialist. Have we run out of things to do in the areas of mental health, agriculture and the environment?
What we don’t have, apparently, is sufficient money to invest in making full use of the talent that is available to face these challenges.
Why? What failure of collective enterprise could result in this absurd incongruity?
The article then contains a call to collective action.
If a healthy society is something we want, we have to act collectively. Since few people are active major shareholders, for the time being that task tends to fall to governments.
Whether enacted via direct spending, or by creating incentives for private investment, government initiatives are funded from collective surplus – in other words, tax revenue or borrowing against future earnings increases. Despite political spin to the contrary, our tax is low compared to the OECD as a proportion of GDP.
The great decoupling has coincided with rising inequality. Those with money to invest get rich. Those with only labour to sell miss out. Capital doesn’t like to pay for labour, and it doesn’t like to pay tax either.
The article then comments on real estate investment.
Nevertheless, one group of people enriched themselves through property investment, pushing up the value of real estate around the country in the process. Another group of people became affluent with nothing more than a job that paid super and a home in a good location.
With commodity revenue pouring in from overseas, it was easy to believe we had discovered some kind of magic prosperity formula. But the surplus generated from commodities mostly wasn’t invested back into productive activity. Instead it was turned into tax cuts and other benefits. These had broad electoral appeal but favoured the wealthy, and encouraged further speculation.
The real estate boom didn’t make the country richer. Nor did it make housing more accessible. It simply transferred wealth from one group of people to another. In the process, it put a basic need out of reach of many, including young people, and diverted investment from the productive economy. It also lured a huge number of Australians into precarious debt.
The next passage deals with the future for the young and applies just as strongly to New Zealand as it does to Australia.
The current trend points to a time when a young graduate might start adult life with a HECS debt, go into credit card debt on a part-time job and a free internship, and eventually get into massive debt to own a flat her grandparents could have bought with ease.
She might even find a job in financial services, if they haven’t all been automated. It’s the sector that helps wealthy people turn their money into more money. It’s also where ordinary people go to borrow money for a house.
The basic problem is clearly identified as debt. Not government debt which in New Zealand even now is manageable despite 7 prolifigate years of National rule but private debt where each week many ordinary people pay the banks interest for the benefit of created loans.
Debt is profitable. Even during the great decoupling, as productive jobs disappear, and real wages fall, it’s proven possible to harness the aspirations of ordinary people for profit, without any of the effort or intelligence required for developing new productive capacity, by simply enticing a greater proportion of personal income into servicing debt.
Labour through its Future of Work Commission is leading a discussion of these issues. This Matilda article provides a neat snapshot of the problems and the potential solutions to this most difficult of issues.