jobs Archives

Green Jobs to Save The World

By now everyone has heard about the Green New Deal; from the Sunrise Movement protesting on Capitol Hill, to the many threads discussing it on social media, the “GND” is a policy the world is eager to talk about. However, it has not always been like this. About two and a half years ago I wrote a piece trying to introduce the general public to the Job Guarantee (JG). Back then, the topic seemed restricted to the circles of lefty publications, Keynesian economists, and a handful of Economic Departments across the world. Now, however, the Job Guarantee has been catapulted into mainstream discourse, thanks to increased popular interest on the GND and MMT.

Nevertheless, even two years ago, there was some precautionary excitement about the Job Guarantee among some advocates of Keynesian spending and proponents of Modern Money Theory (MMT), who have been working on this concept for a long time. Their perspective is amicable to this idea because they are unafraid of a government deficit, and in favor of direct job creation. They understand that deficit-spending is not inherently bad and that the US government will never have to default on its debt. When the economy is not at full employment, increasing the deficit would actually be helpful, not harmful.

However, financial feasibility should not be the only concern when implementing the Job Guarantee. One of the most important dichotomies in Economics lies between growth and environmental sustainability. It is believed that economic growth is damaging to the planet but eco-friendly policies are bound to stun the economy. This, however, is not necessarily the case. It is possible to have both economic flourishing and care for the planet – if we implement a Green Job Guarantee. If we’re going to be at full employment, we have to do it in a way the planet can handle it.

A fiscal stimulus aimed at reducing unemployment is timely and necessary. Despite the confidence expressed by the Fed about the latest employment numbers, the situation for those who are jobless is not looking good. One of the reasons for the latest rate hike by the Fed was their positive outlook on unemployment numbers. Chairman Yellen had gone as far as saying that at 4.6% unemployment rate we were close to full employment and fiscal stimulus is not necessary to reach that goal. However, the US economy keeps adding thousands of jobs every month despite official unemployment dipping below 4%.

The low official joblessness rate hides the fact that an increasing number of Americans have left the labor force altogether. For example, there are currently over 5 million Americans who are not in the labor force but have reported that they want a job. This is where a Job Guarantee program could come in handy. In short, the government would act as an Employer of Last Resort, effectively guaranteeing a job to all of those willing and able to work.

The current structure of the economy relies too heavily on fossil fuels, wasteful production methods and non-renewable resources. Unless we change this, sustaining full-employment would result in increasing production, consumption, and waste. This reminds me of my favorite Keynes’ quote, “In the long run we are all dead.” If we’re talking about a long run of increasing pollution, he would surely be right. As we know, too much of a good thing can be a bad thing. This applies to jobs too. Unless the jobs created are green jobs, too much employment will bring us to environmental destruction.

How do we do it?

The issue of the environmental sustainability of a Job Guarantee program has been on my mind since I first heard of the revolutionary employment policy. Mathew Forstater’s Green Jobs proposal has been inspirational to my work. In my Master’s thesis, I tweaked its existing framework to target environmentally sustainable outcomes. I find that we can transform the Job Guarantee program to ensure its sustainability without increasing its cost. Here’s how:

I set up the program in a way that promotes social enterprise and community development, following the work of Pavlina Tcherneva and colleagues. With the help of social entrepreneurs, NGOs, and Nonprofit Organizations, local communities should decide what projects will be undertaken. For example, communities along the Hudson River could support a program where workers dealt with invasive species such as the zebra mussel and water chestnut. Other localities could handle neighborhood farming, recycling centers, flood containment structures, bike paths, etc. It’s been found that if the community is involved in determining what projects are taken on, participation levels are higher.

A more detailed account of my proposal and calculations is available upon request, but this is the gist of it: I used an Input-Output model to establish what would be the cost of employing the official U-3 unemployed population into “green” Job Guarantee jobs. That framework accounts for indirect job creation related to the proposal, but not induced employment. What I find is that the US government can, under conservative assumptions, employ all of those who are officially unemployed for around 1.1% of GDP while paying them a $15hr wage. That is about 17% of the annual military budget. The Green Job Guarantee program is projected to cost just under 200 billion dollars per year in order to ensure employment for 7.8 million people.

As the world economy quickly transitions into a more sustainable state, a shift in the productive structure will occur, rendering some current occupations useless. Workers who are employed in areas like fossil fuel energy generation (the fabled coal workers of the American Midwest for example) will be left without a job and unlikely to find a new one right away. There is no way to predict how quickly this transition will occur: it could be a gradual–albeit fast–process if led by government initiative, a slower and insufficient movement if guided by profit motives, or even a sudden transition caused by a widespread popular response to natural disasters.

Given current trends, I don’t believe it’s too optimistic to think the transition to a renewable energy generation and a sustainable economy will occur before the fossil reserves are depleted. As such, fossil fuel workers (and those who depend on their consumption) are at risk of losing their jobs in the near future. A Job Guarantee program would allow those workers to not only find employment readily but also to acquire on-the-job skills that will allow them an easier transition into the Green economy.

As we continue to criticize and investigate the policy ideas being put out there, let’s look beyond the government deficit, and consider the planet too. Whether you’re afraid of government debt or not, you should be concerned with the destruction of the earth. If we are going to have a public program that aims at generating new jobs and bringing people back into the workforce, then that program should be a Job Guarantee. But, if we’re going to guarantee jobs, they will have to be green. And we have all the tools we need to make that happen.*

*Interested in some good work on how to build a sustainable economy? Check out the publications from PERI and the Binzagr Institute for Sustainable Prosperity. Interested in a non-profit that is already doing some great things in that area? Visit GreenWave‘s website and get involved!

10 years after the financial crisis and its lasting effects on Americans

By Breshay Moore.

This year marks the 10th anniversary of the 2008 financial crisis. Although the crisis is remembered for foreclosures, bank failures and bailouts, many American citizens are still unaware of what caused it. Understanding this is important to prevent future crises and think about what kind of financial system we want to have: one that serves people and invests in communities, or one that enriches a handful of wealthy bankers and money managers while making our economy less fair and safe for the rest of us.

In simple terms, the financial crisis was a result of deregulation of the financial sector, and reckless and predatory practices by greedy financial players all across the board, from mortgage lenders to Wall Street traders to the largest credit rating agencies.

In the lead-up to the crisis, mortgage lenders were engaging in fraudulent and deceptive sales practices to make toxic mortgage loans to home buyers, which they knew the borrowers could not afford. Predatory lenders particularly targeted people of color, especially women of color, for these higher-rate loans. Meanwhile, these risky mortgages were packaged and sold to investors around the world, becoming implanted throughout the financial system. The economy went into a recession in late 2007, defaults on mortgage payments increased and housing prices plummeted, resulting in billions of dollars in mortgage losses. This had a chain reaction in the financial system because of the number of financial institutions that had stakes in the housing market. These string of events shook the entire economy, fueling the worst recession in the US since the Great Depression.

Millions of families lost their homes or jobs. Median wealth among households fell tremendously: From 2005 to 2009, median wealth among Hispanic households fell by 66 percent, by 53 percent among Black households, by 31 percent among Asian households, and by 16 percent among white households. Millions of people also suffered major drops in income, property values, retirement savings, and general economic well-being. The crisis produced lasting effects. Families are still struggling economically, especially in communities of color.

After all the damage was done, no one was held accountable. Financial players made billions of dollars in bonuses and profits. Instead of helping the communities that were most affected, Congress and The Federal Reserve began bailing out big banks with public money. We recently learned that 30 percent of the lawmakers and 40 percent of the top staffers involved in the congressional response to the crisis have since gone to work for Wall Street.

In 2010 President Barack Obama introduced legislation containing important reform measures in response to the crisis. The Dodd–Frank Wall Street Reform and Consumer Protection Act created rules to protect consumers and regulate the financial industry. This law created the Consumer Financial Protection Bureau (CFPB) to promote transparency and fairness in the consumer-finance industry, and to holding financial institutions accountable for engaging in predatory and discriminatory practices. This independent agency has done a lot for consumers, and has returned more than $12 billion in relief to more than 29 million cheated consumers.

In return for all the money that Wall Street has poured into political campaigns and lobbying, President Trump and Congress have been working hard to undo rules that regulate the financial sector. Countless bills have been introduced and passed in Congress to deregulate banks and lenders. One of these bills, S. 2155, which became law in May, not only increases the risk of future financial disasters and bank bailouts, but makes it easier for mortgage lenders to discriminate on the basis of race, ethnicity and gender. Sixteen Democrats and an Independent supported the GOP in pushing this deregulatory bill. The vote did not go unnoticed and public sentiment is not on their side. In fact, 88 percent of all likely voters — across party lines — support holding financial companies accountable if they discriminate against people because of their race or ethnicity. And 64 percent of voters think big banks and finance companies continue to require tough oversight to avoid another financial crisis.

The lack of restrictions on banks and other financial institutions put consumers and the economy at risk. The 10th anniversary of the financial crisis should encourage us to redouble our efforts to push for changes to our financial system so that it works for us not just for Wall Street.

Breshay Moore is a Senior at Towson University, studying Advertising and Public Relations. She was recently a Communications and Campaign intern for Americans for Financial Reform.

For Bold Solutions We Ought To Include MMT in Economic Discourse

By Justin R. Harbour, ALM

In a recent Financial Times article, Martin Sandbu identifies three major economic failures of competitive capitalism in the West: growing inequality; the disproportionate effects of The Great Recession on young people; and the threat of displacement in labor markets brought by improving technology and the presumed ubiquity of artificial intelligence. Sandbu connects these failures to recent victories of populist “extremist” parties in the EU, UK, and US, and asserts that if liberalism and competitive capitalism are to remain a viable and persuasive platform for the next generations a bolder thinking from the Western political economy is now more necessary than ever.

This need to revamp Western capitalism has brought renewed attention to Modern Monetary Theory (MMT), a school of thought that offers an important and bold perspective on economics and policy solutions. A universal basic income (UBI), universal basic services (UBS), and a job guarantee by the State are most commonly cited as a bold fix to current problems. So, it is worth asking, what are the merits of these aforementioned proposals, through the lens of MMT?

The Failures of Competitive Capitalism

To answer this question, we first look at the failures of the competitive capitalism. Growing inequality is nearly universal. According to the Organization for Economic and Cooperative Development (OECD), the growth in inequality between the incomes of the top 10% of earners and the bottom 10% has not stopped since 1985:

The Great Recession accelerated this trend and brought into stark relief the confounding need of the West to rescue and protect the Recession’s primary contributors (i.e., “too big to fail” banks). This approach made the resulting trends in unemployment all the harder to take, especially for the West’s younger workers. A 2012 report on the employment effects of The Great Recession by Stanford University found that those groups hit hardest were found those 25-54 years of age (i.e., the “prime working age” range, and hence a significant variable in overall economic growth). The report also found that minority groups found themselves bearing more of the burden than their racial-majority peers. A similar report from the Federal Reserve bank of St. Louis found that the recovery rates from unemployment after The Great Recession were lowest amongst younger prime-age workers and older workers. In Europe the young have fared even worse, according to a recent report from Eurostat:

The story for wealth creation and asset acquisition for younger citizens homeownership is similarly alarming. Since World War II, homeownership has been considered to be the financial outcome indicative of a successful economy due to its positive value as a long-term asset. The decline in home ownership thus includes a worrying picture, ceteris paribus. As shown in the graph below, declining home ownership in the United States accelerated during the Recession, and remains at a rate not experienced since the economic boom of the nineties:

Though homeownership is less likely to be understood as a sign of economic success and health in Europe, research suggests a similar trend in declining home ownership in the aftermath of the Great Recession was also seen in the EU. Taken together, these trends make a generation’s economic skepticism of the ability of our current economy to deliver prosperity more of a logical first principle than not.

Three bold proposals to address this skepticism have become nearly commonplace in such reform-minded discourse: a UBI, a UBS, and a job guarantee. What does each propose, and which is best suited to address the issues identified above?

Three Bold Proposals

A UBI offers all citizens a basic level of income. UBI’s proponents commonly claim that this income is necessary for a variety of reasons. The fear of artificial intelligence taking over traditional labor tasks is commonly cited in defense of UBI. Some UBI proponents also argue that such an income would enhance human freedom by providing an option free from coercive and freedom-reducing labor arrangements. A UBI could also streamline social entitlement spending to be more efficient and less bureaucratic. A UBS does not offer income, but a variety of services deemed essential to maximize freedom and economic potential. Though the services offered differ between advocates, they often include improved and free public transportation, access to the internet, and job training, among others. A job guarantee is just as it sounds: anyone needing or wanting work but currently out of work would be offered a job by the local government to provide labor and/or services toward local projects that a community needs.

Each of these proposals includes explicit costs that must be heavily weighed. For example, the literal cost of providing a UBI substantial enough to achieve its purpose is very high. Some have suggested that its cost could range in the 30-40 trillion-dollar range in the United States. Cost-of-living variations also diminish the streamlining argument for a UBI since adjusting it for regional purchasing parity may make it even more complex bureaucratically than the current system. Explicit costs also represent an issue for UBS, though ostensibly less so than a UBI. Though the job guarantee does face some cost concerns, important work has recently demonstrated that the opportunity costs of such a program are well worth the explicit costs it may incur.

Though each proposal is bold in its promises and its trade-offs, the more important question here is which offers a better redress of the concerns raised by the Great Recession. It appears that the job guarantee is the better situated to address all those concerns on both explicit and implicit cost fronts. The job guarantee addresses the unemployment problem and wages problem directly. The job guarantee has the additional appeal of making it more likely that the newly employed will accumulate enough wealth to make home ownership an attractive option, and thus satisfy the third concern. Conversely, a UBI only deals with the wage issue directly and therefore the unemployment problem indirectly, while a UBS program does not address any of the problems directly. There are several other variables at play that strengthen the argument for job guarantee over the others. Most importantly, the job guarantee is the only one that signals the value of work – an implication necessary for future growth if an economy hopes to move beyond its current frontier. In doing so, it is more likely to find traction in our polarized political paradigm by avoiding the typical debates associated with strengthening social safety nets.

The Rise of Modern Monetary Theory

The economic school most strongly advocating for the affordability of a job guarantee program – Modern Monetary Theory (MMT) – has been experiencing a surge of public interest and acceptance as of late. This is not to say it is brand new or has not been trying to advocate for the policies its theory substantiates for a long time. But its appeal since the experience of the Great Recession is obvious once one digs into it. MMT is a theory of sovereign monetary policy that asserts that sovereign nations that issue debt in its own fiat currency cannot ever run out of money. Any restraint by a nation on their spending for any reason, including to stimulate demand or provide needed relief is, therefore, a purely political decision, and only restrained by the availability of real resources. MMT’s advocates thus model how under MMT’s reorientation of fiscal perspective, a nation’s fiscal and monetary policy options are much broader than under older and perhaps more dominant paradigms. The implication is that there are bolder and further reaching policy options always available to state to provide relief for distressed citizens during downturns if they can move beyond the unnecessary concerns for debt and deficits during such times.

The most notable of MMT’s more active contemporary economists include L. Randall Wray, Warren Mosler, and Stephanie Kelton. There are several websites dedicated to the defense of its theory by these authors and others: one by another of its theorists Bill Mitchell; and The Minskys, so named to honor one of the more prominent economists to set the foundations of MMT, Hyman Minsky. Of additional note would be Ms. Kelton’s work with the campaign of Bernie Sanders in 2016 and her recent inclusion into Bloomberg View’s stable of writers – an inclusion suggesting that MMT’s theories are gaining traction. There have also been recent news items such as a history of MMT in Vice News and a review of its contemporary appeal in The Nation. Finally, there has been the consistent work and advocacy of the Levy Economics Institute of Bard College. MMT, in other words, appears here to stay.

Important work has been produced recently by MMT economists as well. In the United States, the Levy Institute recently published a report on the macroeconomic effects of canceling all student debt. The report finds that effects of such a policy would have a greater economic stimulus on employment and GDP than its costs can reasonably argue against. So too did the Levy Institute publish a report on the feasibility of the guaranteed job program discussed above. The job guarantee has helpfully garnered bipartisan support from the political right, left, and center.

Though popular within certain corners of the public sphere and gaining traction, it is not without its legitimate faults and challenges. Nonetheless, an undergraduate or higher level secondary student is unlikely to be exposed to MMT during their introductory training. I am not here suggesting that the more traditional curriculum is not appropriate for introductory students, nor universally ambivalent about the inclusion of emerging theories. But I am saying that for some teachers and some curriculums, finding ways to include such exciting emerging work with profound implications on their economic thinking and potentially their communities are harder the more they are not engaged with by “mainstream” outlets. What’s more, some of the more ubiquitous and far-reaching introductory curriculums (Advanced Placement in America, for example, or the International Baccalaureate program) don’t consider it at all.

At a time when some are rightfully calling for economists to better communicate economic concepts, ignoring newer and bolder conceptions of economic pillars that have popular momentum and real-world applicability behind them – such as MMT – leaves a fruitful learning opportunity to advance economic thinking and communicating skills for the youngest of economists at the door. Mr. Sandbu is right; the experience of the Great Recession by Gen Xers, Millennials, and those closely on their heels demands bold reform to reanimate the economy’s perceived legitimacy. A generation of economists and their work will be informed by their experience with the Great Recession. Let us all hope that MMT and its similar promising competitors are taken as seriously as the older theories so that we can rethink and rebuild economics in a way that makes economic thinking and understanding economic theory a universal pillar to our civic discourse.

About the author

Justin Harbour is currently an Instructor for Advanced Placement Economics at La Salle College High School in Philadelphia, PA. Having studied history, government, and political economy at UMASS, Amherst and Harvard University, he has previously published book reviews on teaching and education for the Teacher’s College Record and essays in CLIO: Newsletter of Politics and History, The World History Bulletin, and Political Animal. Justin lives in Philadelphia with his wife and two children. Follow him on twitter @jrharbour1

The Automation Grift: From Flying Cars to Ordering Cat Food on the Internet – Part 2

It’s conventional wisdom among pundits that automation will cause mass unemployment in the near future, fundamentally changing work and the social relations that underpin it. Part 1 of this series contrasted this extreme rhetoric with the data that should support the inevitable robot apocalypse, and found that these predictions are likely motivated by politics or outlandish assessments of technology, not data. Part 2 assesses the technology behind these predictions, and follows a thread from the mid-20th century onwards. Subsequent parts will examine the political economy of automation in both general and specific ways, and will also discuss what the future should look like — with or without the robots.

The Automation Grift: From Flying Cars to Ordering Cat Food
on the Internet – Part 2
By Kevin Cashman

Part 1 of this article made a case that macroeconomic data does not suggest that there is rapid automation occurring broadly in the economy nor in large industries or sectors. Other indicators, like slack in the labor market, support that assertion. It pointed to periods of rapid automation in the past as well, and found these were times with generally low unemployment and healthy job growth.

Regardless of the data past or present, there are still claims that society is on a precipice, facing mass unemployment due to wide-scale automation. Many say that the technology in the near future is different than developments that occurred in the past, and that instead of slow or moderate change that the economy can adapt to, the rate of change will be so profound that suddenly millions will be out-of-work.

There are good reasons to be suspicious of this narrative. First, it is very difficult to predict how technology will develop and affect the world, and if it will be viable or even necessary in the first place. Second, adopting new technology — for example, automating a process and replacing workers — and more importantly, the threat of adopting new technology, gives power to employers and capital instead of workers. This weaponization of technology needs to be credible in order to be taken seriously; hence, it relies on the broader narrative that rapid automation is happening. The first point will be considered now; the second, in Part 3.

The (False) Promises of Technology

Predicting how technology affect the future is a difficult endeavor. The flying cars, spaceships, and moon bases that many were sure would arrive by the year 2000 never materialized. Anthropologist David Graeber posits that technological progress did not keep up with imaginations because capitalism “systematically prioritize[s] political imperatives over economic ones.” In a capitalist system like that in the U.S., if political threats do not align with technological advancement like they did during part of the Cold War, flying cars will stay in science fiction books, he says. As the perceived threat from the Soviet Union fell away, neoliberalism’s project shifted to cementing itself as the only viable political system, at the “end of history.”

More recent predictions have remained as bold as they were in the past, but reflect this change in focus. Audrey Watters, an education technology writer, details many in her excellent presentation, “The Best Way to Predict the Future is to Issue a Press Release.” She makes the case that narratives are spun about technology for mostly political reasons or for self-interest, rather than around higher, collective ideals. Bold predictions today are about the destruction and privatization of educational institutions, technology as consumption, or mass unemployment as human labor fades into obsolescence. Pointing to the dismal track record of those who analyze technological trends — based on methods that include opaque and ill-suited taxonomies and graphs, like the one-way hype cycle — she suggests that we are actually in a period of technological stagnation. “[T]he best way to resist this future,” she says, “is to recognize that, once you poke at the methodology and the ideology that underpins it, a press release is all that it is.”

Recent evidence from the dot-com bubble lends itself to these observations. Over-enthusiastic predictions of how the Internet would fundamentally change nature of shopping — not quite a lofty aspiration to begin with — led in large part to the bubble, which popped when it became clear that these companies’ business models did not work. (For example, individually shipping very heavy bags of pet food is expensive, a fact lost on the “innovative” owners of, and “savvy” investors in, Pets.com.) As neoliberalism was busy fashioning itself as the only ideology left standing, it served as the basis for allocating capital in unproductive ways. Whereas the ballooning of the finance sector over the last forty years is sustainable inasmuch as bankers are able to make money by creating and protecting the illusion of their usefulness, the dot-com era was a hard landing for companies that tried the same approach but ultimately could not drum up enough business to survive.

But even if past predictions are incorrect and past technological advances were limited (or had an economic potential that was much less than anticipated), the technology that is developing today could still could be extraordinary and kick off a period of very rapid automation, right? Before going further it is important to define what sort of technological developments could lead to these sorts of changes in the labor market. Often general advances in technology, or things like Moore’s law or speculation about the singularity, are used as evidence that the conditions that underlie the economy are shifting today. Here it is worth quoting directly from Economic Policy Institute’s State of Working America:

“We are often told that the pace of change in the workplace is accelerating, and technological advances in communications, entertainment, Internet, and other technologies are widely visible. Thus it is not surprising that many people believe that technology is transforming the wage structure. But technological advances in consumer products do not in and of themselves change labor market outcomes. Rather, changes in the way goods and services are produced influence relative demand for different types of workers, and it is this that affects wage trends. Since many high-tech products are made with low-tech methods, there is no close correspondence between advanced consumer products and an increased need for skilled workers. Similarly, ordering a book online rather than at a bookstore may change the type of jobs in an industry — we might have fewer retail workers in bookselling and more truckers and warehouse workers — but it does not necessarily change the skill mix.”

The takeaway from this should be that some technological advances that seem significant are not necessarily things that threaten jobs, change their pay or working conditions, or point to a jobless future. Technology can create new consumer products — let’s say smartphones — that seem like they fundamentally change the foundation of the economy. But they actually only shift jobs to the companies making smartphones, and don’t mean that workers making consumer products are somehow unnecessary. More significant developments like the technology behind the car or airplane can make entire industries obsolete but also can create an entire ecosystem of industries that generate wealth. Still other advancements can reduce the costs of products to a large degree so that they are increasingly used as inputs in other industries, benefiting both supplier and buyer.

These sorts of technological development are usually conflated with each other, and with the kind that is supposed to lead to mass automation and job loss. That kind of development is when very expensive robots or software replace humans completely, without spawning new industries and jobs. Two commonly cited examples are self-driving cars and delivery services. Delivery robots and drones might capture imaginations (and make for good PR) but that doesn’t mean that the economics behind them lead to a situation where workers will be replaced anytime soon.¹ Self-driving car technology is massively hyped, but many think they won’t arrive in even a lifetime. Labor platforms, like TaskRabbit, a marketplace to find help with errands or odd jobs, or Uber, the taxi app, are other Silicon Valley “innovations” often lumped in with this discussion. But they don’t threaten to reduce the total number of jobs at all: they shift jobs to their platforms.

This doesn’t mean that more original uses for technology couldn’t significant impact specific sectors. However, it’s likely that, in general, technology that does affect jobs will complement those positions, replacing or changing the specific tasks that workers do, but not going as far as replacing them in all cases. For jobs that are replaced wholesale, it shouldn’t be assumed that they will disappear overnight. There still need to be decisions, investment, and planning involved in replacing workers with (usually expensive) alternatives, which are all things that take time. This has certainly been the case in manufacturing. One interesting table from the Bureau of Labor Statistics that supports this point details the fastest declining occupations. Even extrapolating out ten years, the BLS assumes that there will be significant employment in these occupations. And any changes will vary by specific industry and occupation. Even then, many “low-skill” or low-paying jobs, especially in the service sector, are not conducive to automation very much at all. (And the robots must have forgotten that those were their targets, since many of the fastest growing jobs require no formal education or only a high school degree.)

There’s really no definitive way to tell either way if the robot apocalypse is upon us. But the precedence for wildly inaccurate predictions; the history of technology companies being unable to deliver on extravagant promises; the fact that the technology that would threaten jobs today is more suited toward slow, incremental changes like in the past; and that the orientation of our political system is toward prioritizing political, rather than economic imperatives, strongly suggests that the robots are probably much farther off than is conventionally accepted.

Is the recent deluge of talk of disruptive technological change, ubiquitous automation, and mass unemployment a continuation of the trends and mistakes that Graeber and Watters have highlighted? It seems so, and might even be approaching the lunacy of the dot-com era. Venture capitalists pour billions of dollars into unprofitable companies with questionable business models, which are in turn valued at billions of dollars. Many of the most popular and “innovative” businesses are simply delivery services, transportation companies, or in the consumer goods industry. How many different delivery services does society need? How many different taxi apps does it need? Does anyone really need a $700 juicer, especially if it isn’t even necessary? How are these ways of doing business adding value to the economy, let alone the beginning of a jobless future? More ambitious technology has proven to been a bust, especially in biotechnology.² One also has to question the value of recent technological assessments and predictions when many of the economic and political commentators that are doing that prognosticating couldn’t see the dot-com bubble or even the massive housing bubble that preceded the Great Recession.

The reality is that companies that are seen as the forebearers of mass automation are often unoriginal, repackaging old ideas and existing technology and using political power, venture capital money, and a lot of press releases to survive. Like Graeber said, these “innovations” seem to be more in line with boosting the prevailing economic and political ideology. Old, obsolete ideas³ like flying cars have been resurrected; for example, as part of a public relations and investment strategy to distract from Uber’s myriad scandals and disastrous finances.

If anything, the novelty of this new era of technology seems to come from the lessons business have learned from the survivors of the dot-com bubble, like eBay, Google, and Amazon:⁴ mainly, that business models don’t need to make sense as long as a company is able to take over a big slice of the market and change the terms of that market. In this way, vague ideas about technology and the usefulness of Silicon Valley — promoted by neoliberal icons like Elon Musk, Steve Jobs, and Mark Zuckerberg — are used as a smokescreen for anti-competitive and anti-worker practices that seek to change the economic landscape.

Part 3 will explore an underexamined consequence of this debate: how it affects the social relations between employers, workers, and the government that are a foundation of the economy.

About the Author
Kevin Cashman lives in Washington, DC, and researches issues related to domestic and international policy at the Center for Economic and Policy Research. Follow him on Twitter: @kevinmcashman.

The Automation Grift: Robots Are Hiding From The Data But Not From The Pundits –Part 1

It’s conventional wisdom among pundits that automation will cause mass unemployment in the near future, fundamentally changing work and the social relations that underpin it. But the data that should support these predictions do not. Part 1 of this article contrasts this extreme rhetoric and the data that should support the inevitable robot apocalypse, and finds that these predictions are likely motivated by politics or outlandish assessments of technology, not data. Part 2 assesses the technology behind these predictions, and follows a thread from the mid-20th century onwards. Subsequent parts will examine the political economy of automation in both general and specific ways, and will also discuss what the future should look like — with or without the robots.

The Automation Grift: The Robots Are Hiding From The Data But Not From The Pundits – Part 1

By Kevin Cashman

The Rhetoric

Few things are more breathlessly written about than automation and how it will affect society. In the mainstream discourse, technology writers, policy wonks, public relations hacks, self-stylized “futurists,” and others peddle their predictions and policy prescriptions, as if they are letting the rest of us in on a secret rather than following in a long history of over-enthusiastic predictions and misplaced priorities. Others view automation as a panacea for social problems. Either way, mass unemployment is usually at the center of this narrative and how workers, especially poorer workers, will become outmoded in the age of robots. In the waning days of the Obama administration, the White House joined the frenzy, publishing a report warning about the dangers automation posed to workers as well as the benefits of technology.

This report cited (and further legitimized) a 2013 report that boldly claimed that 47 percent of occupations were at risk from automation in the next two decades. Since its release, this study has been cited close to 900 times. Other predictions are just as bold. One is that the entire trucking industry will be automated in the next ten or so years. “Visionaries” like Bill Gates, Stephen Hawking, and Elon Musk use their stardom to add to the fears of these claims — and push for policies that don’t make much sense, like taxing robot workers or creating a basic income that is an excuse to eviscerate our other social programs and do other bad things. Still others blame automation for causing past problems, like the loss of manufacturing jobs in the U.S., when they are easily explained by political decisions, not economic realities.

With all this interest and all these forecasts, you’d think there would be evidence that automation is affecting the economy in a significant way. Indeed, economists have determined a measure for “automation”: productivity growth. As productivity growth expresses the relationship between inputs (e.g. robots, people, machines) and outputs (i.e. goods and services), it should be a decent and measurable proxy for automation. More automation and robots would result in greater outputs for fewer inputs, which would show up clearly in the data. This is because replacing humans with robots only makes economic sense if it saves money or increases output. In both of these scenarios, productivity would increase.

The Data

So what do the data points say? They show that productivity growth on an economy-wide scale has been very low for the past ten or so years, at a rate that is a bit over 1 percent annually. (In fact, multifactor productivity — productivity of all combined inputs — decreased 0.2 percent in 2016, the first decline since 2009.) The previous ten years — the mid-1990s to mid-2000s — was a period of moderate productivity growth, or just over 3 percent annual productivity growth. From the mid-1970s to mid-1990s, there was another period of slow growth. And before that, there was a sustained period of moderate growth post war until the mid-1970s: the so-called “Golden Age” of prosperity. These data points do not support the assertion that automation is happening on a large scale.

It is important to note that productivity growth and automation are constantly happening, and that automation can affect small industries or occupations in big ways. It can also replace individual tasks but not entire jobs themselves; for example, you may order your food on a computer at a restaurant rather than talk to a waiter, who would still deliver your food. These things may not show up in the data because they do not represent fundamental changes to the entire economy. In other words, automation on a small scale is not evidence that automation will cause a sea change in how work is done: it is normal.

Other macroeconomic indicators support the low rate of productivity growth seen today. The labor market has still not recovered to pre-recession levels, levels which were depressed compared to the highs of the late 1990s and early 2000s. Growth in wages and employment costs have also been relatively low. Since these indicate that there is still considerable slack in the labor market (i.e. in general it is easy to fill open positions, and there are many more applicants than open positions) there is less pressure to automate. After all, why would businesses en masse invest in automation on a significant scale if they can find desperate workers willing to be paid minimum wage?

History also provides useful data points. Technological change and its effects on the labor market have been consistently overstated in the past, which is acknowledged by even mainstream economists. If anything, this is evidence that automation is good for the economy because it creates jobs, in net, and it creates new sectors of the economy. It also can increase living standards by, for example, shortening work weeks or improving conditions of work (and together with organized labor, this happened in the “Golden Age,” which is how it got its moniker).

Supporters of the robots-are-taking-all-of-our-jobs myth usually ignore this evidence. They’ll say that productivity growth cannot take into account the changes that are happening and that automation will have catastrophic effects on the labor market either way. While there are legitimate debates to be had on how to measure automation, the reality is that despite all the spilled ink, the robot boosters do not have history or the data on their side. It is only their analysis of the technology that supports their assertions. They think that there is something extraordinary about the technological change that is happening now and it will be transformative, in contrast to the slow and steady automation that occurred in the past, where benefits were realized over a long horizon.

Part 2 assesses the technology behind these predictions.

A Green Job Program Will Help Workers, the Economy, and the Planet

There’s been much talk about Trump’s plan for jobs and infrastructure that entails over one trillion dollars in new spending (without tax increases) and promises to employ thousands of American workers. Because it looks like this would require significant deficit spending, it has drawn stiff criticism: even Trump’s the own conservative supporters have expressed concern.

Among advocates of Keynesian spending and Modern Money Theory (MMT), however, some precautionary excitement can be observed. Their perspective is different because they are unafraid of a government deficit, and in favor of direct job creation. They understand that deficit-spending is not inherently bad, and that the US government will never have to default on its debt. When the economy is not at full employment, increasing the deficit would actually be helpful, not harmful.

A fiscal stimulus aimed at reducing unemployment is timely and necessary. Despite the confidence expressed by the Fed about the latest employment numbers, the situation for those who are jobless is not looking good. One of the reasons for the latest rate hike by the Fed was their positive outlook on unemployment numbers. Chairman Yellen has gone as far as saying that (at 4.6% unemployment rate) we are close to full employment and fiscal stimulus is not necessary to reach that goal.

However, the low official joblessness rate hides the fact that an increasing number of Americans have left the labor force altogether; for example there are currently over 5 million Americans who are not in the labor force but have reported that they want a job. This is where a Job Guarantee program could come in handy. In short, the government would act as an Employer of Last Resort, effectively guaranteeing a job to all of those willing and able to work.

And if Trump uses the deficit-spending towards jobs in infrastructure, it might result in something that resembles the job guarantee policy that America needs**. I argue, however, that the financial feasibility should not be the only criterium for a successful implementation of the job-guarantee. It also has to be sustainable. If we’re going to be at full employment, we have to do it in a way the planet can handle.

The current structure of the economy relies too heavily on fossil fuels, wasteful production methods and non-renewable resources. Unless we change this, sustaining full-employment would result in increasing production, consumption, and waste. My favorite Keynes’ quote is that “In the long run we are all dead.” If we’re talking about a long run of increasing pollution, he will surely be right. As we know, too much of a good thing can be a bad thing. This applies to jobs too. Unless they are green jobs, too many jobs will be bring us environmental destruction.

The issue of the environmental sustainability of a Job Guarantee program has been on my mind since I first heard of the proposal. Mathew Forstater’s Green Jobs proposal was inspirational to my work. In my Master’s thesis, I tweak its existing framework to target environmentally sustainable outcomes. I find that we can transform the Job Guarantee program to ensure its sustainability without increasing its cost. Here’s how:

I set up the program in a way that promotes social enterprise and community development, following the work of Pavlina Tcherneva et al. With the help of social entrepreneurs, NGOs, and Nonprofit Organizations, local communities should decide what projects will be undertaken. For example, communities along the Hudson river could support a program where workers dealt with invasive species such as the zebra mussel and water chestnut. Other localities could handle neighborhood farming, recycling centers, flood containment structures, bike paths, etc.. It’s been found that if the community is involved in determining what projects are taken on, participation levels are higher.

A more detailed account of my proposal and calculations is available upon request, but this is the gist of it: I used an Input-Output model to establish what would be the cost of employing the official U-3 unemployed population into “green” Job Guarantee jobs. That framework accounts for indirect job creation related to the proposal, but not induced employment. What I find is that the US government can, under conservative assumptions, employ all of those who are officially unemployed for around 1.1% of GDP while paying them a $15hr wage. That is about 17% of the annual military budget. The Green Job Guarantee program is projected to cost just under 200 Billion dollars per year in order to ensure employment for 7.8 million people.

Given current trends it is safe to assume that the transition to a renewable energy generation and a sustainable economy will occur before the fossil reserves are depleted. Just as the stone age ended before we ran out of stone, the “oil-age” will end before we run out of oil. As such, fossil fuel workers (and those who depend on their consumption) are at risk of losing their jobs in the near future. A Job Guarantee program would allow those workers to not only find employment readily, but also to acquire the on-the-job skills that will allow them an easier transition into the Green economy.

So as we continue to criticize and investigate the means of job-creation proposed by the President-Elect, let’s look beyond the government deficit, and consider the planet, too. Whether you’re afraid of government debt or not, you should be concerned with the destruction of the earth. If we are going to have a public program that aims a generating new jobs and bringing people back into the workforce, then that program should be a Job Guarantee. But, if we’re going to guarantee jobs, the will have to be green. And we have all the tools we need to make that happen.
*Interested in some good work on how to build a sustainable economy? Check out the publications from PERI and the Binzagr Institute for Sustainable Prosperity. Interested in a non-profit that is already doing some great things in that area? Visit GreenWave‘s website and get involved!

** I must make clear that, although Trump’s infrastructure plan might very loosely look like a Job Guarantee program because of its intent, it differs significantly from it because of how it will will be implemented. The president elect’s plan is based on private spending and making concessions to big corporations; it is basically a big giveaway to developers and not a program to ensure full-employment and financial stability.

Italy is Hungry for Expansionary Fiscal Policy

In a meeting with Angela Merkel and Francois Hollande on August 22, the Italian Prime Minister Matteo Renzi proudly announced that Italy has the lowest public deficit of the last 10 years, and will continue with structural reforms to reduce it further. Monti has long aimed to “restore credibility” by cutting the public deficit, and now the Finance Minister Pier Carlo Padoan enjoys praise on his achievement of a deficit as small as 2.4% of GDP. The FED (Financial and Economic Document) goes so far as say this makes Italy “among the most virtuous countries in the Eurozone.”

A closer look at Italy’s economy, however, shows this “virtuosity” has no basis in reality. In 2015, 1.5 million households lived in absolute poverty. Another 4.5 million individuals saw stagnant incomes. The situation has not been this bad since 2005. In addition, the Migrantes foundation informs us that there has been a boom of italians who go abroad, 107,000 in 2015 (+6,2%). Especially youth from 18 to 34 years old (36,7%).
Source: [Ansa.it “Rapporto fondazione Migrantes”]

The percentage of serious material deprivation index is 11,5% for total households members. Official unemployment rate is at 11,9% whereas the real unemployment rate is well above the 20%. The inactivity rate is at 36,0 % and the fixed capital investment ratio is stuck well below the pre-crises (2007-08) levels.
Source: [“Rapporto annuale Istat, 2016”]

It is clear that Italy is stuck in a deep depression. And it’s not alone. Many other euro countries are suffering the same fate. Cutting public spending cannot help them recover. We turn to Keynes to see why it cannot, and consult the work of Minsky and Wynne Godley to see what can.

Keynes and Aggregate Demand

In The General Theory, J.M. Keynes explains the challenges blocking achieving and maintaining full employment in a market economy. He argues that the booms and busts associated with capitalism make this state of equilibrium very difficult to reach. When a bust occurs, and businesses expect their profits to fall, there’s no reason to expect a magical market-force to step in and fix employment while costs are being cut.

This applies to Italy, too. After years of austerity and a Global Financial Crises, aggregate demand levels have declined sharply most people feel uncertain about the future. Additional demand for labor is close to zero and the private sector is pessimistic. Investment and spending is not sufficient to employ the unemployed. Cutting down government expenditure is not going to to help. It will simply make it worse.

Minsky and Fiscal Policy

A follower of Keynes, Hyman Minsky explained how any analysis of a monetary capitalist economy must start from the analysis of balance sheets and its relative financial interrelations ‘measured’ in of cash flows. If balance sheets and especially the relative financial relations are not taken into account within an analysis of an essentially financial and monetary economy, that analysis fails to reflect the full reality.

Minsky’s alternative analysis shows that in case of crisis, a nation needs a “Big Government” (The Treasury Department) and a “Big Bank” (The Central Bank) to step up. These institutions must focus on serving as an “Employer of Last Resort” and a “Lender of Last Resort”, respectively. This way, they can prevent wages and asset prices from dropping further, and tame the market economy. In the Euro-zone, this has not been realized. The Treasury Department is constrained, leaving them unable to reach full employment. Meanwhile, citizens continue suffer under austerity.

Wynne Godley and the Government Budget

Wynne Godley’s sectoral balance approach sheds more light on this Minskyian alternative. He shows the economy consists of two sectors: The government sector, and the private sector (all households and businesses).** The private sector can accumulate net financial assets only if the other sector, government, runs a budget deficit. That is, only if the flows of the government spends more than it receives in taxes. It is impossible for both sectors to run a surplus at the same time.

And as a simple matter of macro-accounting, for aggregate output to be sold, total spending must equal the total income generated in the production process. So given households’ decisions to consume and given firms’ decisions to invest, there will be involuntarily idle labour for sale with no buyers at current wages, if the government deficit spending is too small to accommodate the net desire to save of the private sector.

What Renzi and Padoan are Really Saying

We can now see what Renzi and Padoan are really congratulating themselves for. Having done nothing to lift a struggling private sector out of the recession, they patting themselves on the back for worsening it’s social and economic situation. Renzi may claim he will go to Brussels to “sbattere i pugni sul tavolo”, but his executives continue to respect the Stability and Growth pact regime, and decrease the deficit further.

From Wynne Godley, we know that further decreasing the government deficit corresponds to further deterioration the private sector surplus. So when the officials say they “need to put public accounts in order,” they are actually saying they will put households and business accounts in dis-order. So when they say that Italy has the lowest budget deficit of the last 10 years, they are actually stating that the government is draining more financial assets from the private sector than it has in a decade.

When they call Italy virtuous for keeping a smallest deficit, they assign virtue to the nation that most effectively perpetuates poverty and social disarray. When Renzi says that his non elected executive “will continue […] the reduction of the deficit for our children and grandchildren”, he is instead telling us that his government is going to reduce the net desire to save of the current population, to keep involuntary unemployment and part-time working levels high and to firmly deteriorate the (net) financial and real wealth of the future generations.

Unless Italy changes its approach and adopts expansionary fiscal policy, it will not serve the well-being of the society and its economy. The main goal of full employment will never be attained and maintained. Work will lack moral and economic dignity, public sector goods will fall short in quantity and quality, and basic human rights will be violated. Not only will policy goals fail to be achieved, they will be even farther out of reach. One thing is certain: either Renzi and his ministers don’t know what they’re doing, or they are doing it in bad faith. I am afraid of it may be both.

* To be as precise as possible, Italian public budget deficit has been systematically reduced from 1991, that is the year when the Treaty of Maastricht was ratified which, among other things, established the respect of the parameter of the 3% to the public deficit and 60% to the (flawed) public debt/gdp ratio.
** I do not take into account the foreign sector balance sheet, because the substance of my brief argument won’t be undermined.