Two pointers from Reihan Salam.
America doesn’t have a jobless recovery; it has a hireless recovery. Don’t confuse them. After all, you first have to get hired to have a job. Organizations may be desperate to grow, but they overwhelmingly lack the desire to hire. Fewer people are working longer, harder and (presumably) smarter hours. So many firms have proven so productive even after several rounds of layoffs, that serious economists wonder if, in fact, large slices of the workforce actually offer ZMP — Zero Marginal Productivity — to their enterprise. In other words, the Great Recession reveals many employees not just to be worth less but economically worthless. Ouch.
For most organizations, people are a means and medium to an end. They’re not hiring employees, they’re hiring value creation.
One point I am starting to harp on is that many workers are not concurrently productive. That is, the work they do helps the firm be more productive in the future. That means that when firms think about hiring they have a lot of discretion (we can meet the demand for widgets today without adding new people) and they face a lot of uncertainty (will these social media marketers really deliver us new customers?).
Schrage again:
What’s structurally changed is not the job but why people get hired. In other words, is hiring someone really essential to getting the job done? Just as important, as we look at employment costs, risks and uncertainties over the next five years, is hiring someone the most cost-effective way to get the job done?
[in the year 2030] Firms also are not interested in paying for training, so most people now go through a 10-year unpaid internship while simultaneously attending school online and engaging other pursuits on a more or less random schedule.
Some workers aren’t hired to help the firm directly, but rather, to help the more experienced help. If maintained they will (just as you mention), most likely help the firm to be more productive in the future. In my experience, it was these people who were frequently let go during the recession. The expectation of management was that the experienced workers could and would pick up the slack, and the numbers even appeared to support their belief. But what really happened was that the experienced workers knew how to cut corners, and did. I suspect that much of what appears to be improvements in productivity are really just cut corners that weren’t really necessary in the first place, or for which the consequences have yet to play out.
I know it’s easy to bash “social media marketers”, but I can tell you there are many more employees getting paid more money that these guys, in jobs that are less metrics-driven and much cushier.
Internet marketers are some of the least sheltered professions out there, because they actually have to deal with metrics and performance, as opposed to the vast majority out there, whose “productivity” is whatever the boss thinks they’re doing.
The basic arrangement of employment adds business risk to any organization, and our society keeps adding to that risk over time. These risks were always assumed because there really was no way for an organization to grow without employing people.
In the last decade or so, we’ve seen the rise of labor virtualization. Firms can contract for almost any need. It is now possible for a small group of employees to focus on the secret sauce of the organization, and everything else can be outsourced. The old employer/employee relationship is just not as efficient, and it cannot compete against this new order.
To me at least, the emphasis in Schrage’s piece seemed to be on the hidden costs imposed on corporations by still-undetermined government regulation. Businesses are not hiring because they do not know the future costs of current hires. This has led to a broad hesitancy to hire people. Most people (even most economists, from what I read) seem to favor most regulations–each individual rule seems reasonable and aimed at a specific “problem.” But I suspect that the thousand regulatory cuts, even if they don’t kill the economy, will weaken it sufficiently that it can no longer act robustly. In this the US seems to be going the way of Europe–slower growth and higher structural unemployment. Richard Epstein has suggested that we might have reached a regulatory tipping point where the economy loses both vigor and efficiency. I fear he’s right.
The bit quoted from Schrage infers that what is being done now (current production, exchanges, distribution) is the dynamic and the changes in them is what matters to economic opportunity (including work).
Missing is attention to, or regard for, doing “new” things – innovation; not just doing the current things in new ways (though that is also dynamic).
But, innovation stems from imagination and entrepreneurship, both of which are functions of individuality.
Individuality is, and for many years has been, in recession through most of the “developed” economies. To varying degrees it has been repressed, or even suppressed, by social objectives and by the political processes applied to attain those objectives.
While the suggestions of Edmund Phelps for the use of governmental mechanisms to foment innovation may be open to debate, the conditions he has identified are not – they exist. Frankly, the need for *new* “structures” outside the existing mechanisms (governmental, social and political) is indicated (at least historically), rather than “corrections” or revised adaptations to existing structures.
There is reason to doubt that can occur in Western Civilization without the reversal of the recession of individuality; which will require the reduction and elimination of repressive and suppressive factors, for which reduction there does not seem to be much popular support or demand.
posted by error elsewhere
The problem isn’t the innovation, per se. It is the reality that innovation must deal with past innovation and it’s remnants. In 1950, that wasn’t that much of a problem, but now, that burden gets heavier by the day.
We invent the train and the car, and massive networks grow up around those innovations. Any new innovation in transportation must now propagate in the face of these networks. And these networks fight back whenever new innovation threatens their value.
Progress means ever increasing cooperation and coordination, not just new ideas. We now have a lot of cumulative innovation, and with that we also now have all of the resulting cooperation and coordination we’ve built up to make use of it. The challenge is to find a way to do this while leaving room for better ways to do things. Inventing new ideas is the easy part.
Quite right, Sir Thomas,
Entrepreneurship is required to bring together innovation and the means for its implementation (for starters).
Your focus on cooperation and coordination brings forth another factor in the recession of individuality. That is the reductions and changes in the interactions amongst individuals, directly, without administrative, regulatory, bureaucratic, or political involvement. Consider how many human interactions, once carried on directly, are now conducted vicariously through governmental functions. Cooperation now has to find it way in ever-increasing labyrinths, which impede (often defeat) coordination.
Productivity rises over time which means the same workforce can produce more without more workers. More workers are added only when demand rises faster than productivity, but without more workers, demand won’t rise faster than productivity. This limits growth to innovation without providing much incentive for it for innovation disrupts existing capital nearly as much as it produces new capital. Even when innovation occurs and is profitable, it won’t be profitable enough to grow as fast as it should under current conditions, not wanting to undercut itself, or not being able to due to patents and monopolies, any new entrant knowing they would be undercut by the incumbent.
Lord:
“More workers are added only when demand rises faster than productivity, but without more workers, demand won’t rise faster than productivity. This limits growth to innovation …“.
This statement/train-of-thought seems both wrong and wrong-headed, at least in economic terms.
1. Demand, by economics definition, exists completely irrespective of the means of satisfying that demand. That is the economic question – satisfaction of unlimited wants within the reality of scarcity.
2. Innovation, by definition, creates its own (new) demand. An innovation that does not create a new demand is not an innovation. Innovation does not require a low unemployment rate in order to be an innovation, or even a successful innovation.
One of the sad fallacies of the pseudo-Keynesian perspectives is the extraordinarily superficial emphasis on the “Aggregate Demand” side of the AS-AD conceptual framework – especially as “measured” or “extrapolated” from GDP.
Even with GDP, or any other accountancy-based metric, it is supposed, and only partial and poor, satisfaction of demand that is being measured, not demand. And GDP and like metrics do not come close to measuring actual satisfaction of demand in that they do not and cannot measure the magnitude of Consumer Surplus.