Tuesday, February 24, 2015

Larry Summers Tells It Like It Is

From the unedited transcript, "Future of Work in the Machine Age" policy forum:
Third, when I was an undergraduate at MIT in the 1960s there as a whole round of concern about this -- will automation displace all the employment? And what I was taught as an undergraduate was that basically the people who thought it would were a bunch of idiot Luddites and that obviously there would eventually be enough demand and it would all sort of work itself out, and if people got more productive they'd be richer and they'd spend and maybe we needed some transition assistance, but that it was all basically going to be okay. That was what I was taught. That's what Bob Solow thought; he was a hero and the other people were all a bunch of a goofballs was kind of what I learned. (Laughter)
I actually believed that for many years and actually repeated it often. It has occurred to me that when I was being taught that about six percent of the men in the United States between the age of 25 and 54 were not working. And that today 16 percent of the men in the United States between the age of 25 and 54 are not working, and it won't be very different even when the economy is at full employment by any definition. And so something very serious has happened with respect to the general availability of quality jobs in our society and we can debate whether it's due to technology or whether it is not due to technology. 
We can debate whether it's the cause of dependence or whether it is caused by policies that promote dependence. But I think it is very hard to believe that a society in which the fraction of people in -- choose whatever your most prime demographic group is that should be working, whatever that group is, a society in which the fraction of them who are not working is doubling in a generation and seems to be on an upward trend is going to be a society that is going to function well, or at least function well without major social innovations.

And I would want to leave you with that concern as there whether you think it's due to technology or whether you think it's due to globalization, or whether you think it's due to the maldistribution of political power, something very serious is happening in our society.

7 comments:

Bruce Wilder said...

Finance

Summers' job 1 is always to omit finance.

Sandwichman said...

Nobody's perfect.

Myrtle Blackwood said...

Re: "I would want to leave you with that concern as there whether you think it's due to technology or whether you think it's due to globalization, or whether you think it's due to the maldistribution of political power, something very serious is happening in our society...."

The Reverend Thomas Malthus noted that there was a surplus of available labour in England in 1798. He wrote this at a time when a very large section of the population had inadequate sanitation, housing and food.

Malthus could write about similar observations were he alive today. There's no shortage of work, just the variety that is paid for.

Now that we know that Malthus' fears were unjustified, in terms of the geometric increase in population, a redistribution of land and monetary wealth (including abolition of taxes on those who receive no income) would logically make a huge contribution towards this so-called shortage of work.

Sandwichman said...

There is no shortage of work. There is, however, a limit to the amount of work that can be paid for in accordance with the requirements of capital accumulation.

Hayley said...

He specifically says "men". Does this mean joblessness has doubled for men only? Because perhaps there are just more women working now (and there are) and the difference is offset by gains in female employment. If by men he means people - another story.

Sandwichman said...

Yes, Hayley, he is specifically referring to employment of males.

RickRussellTX said...

@Hayley

Practically, I think we must ask -- why unemployment now, rather than in the 1970s and 80s when women were entering the workforce in full? Female labor participation has been mostly stable since the early 90s, it actually peaked in 2000 at 59.9% of eligible women employed and it's been going down slightly since then.

Some of that is just age demographics and early retirement, but the cynic might wonder if there's been a fundamental structural change in the way people are employed. We have illegal immigrants living off the books, technology squeezing people in to low-end service jobs, income inequality and capital concentration putting the means of production into the hands of a vanishingly small sliver of society, a squeeze on natural resources with increased extraction cost and inflated prices across the system.

If the economy was capable of absorbing new laborers and consistently creating new avenues of production and consumption, then presumably that would be happening and worker consumption would be strongly tied to worker productivity. But that's not happening; wages are not keeping up with per capita productivity gains. So we're producing more but the value of our labor contribution is languishing.

The question comes down to: If a large class of people cannot create enough value through their labor to purchase the goods and services they need to be comfortable, what will be our reaction?