Why isn't perpetual high unemployment inevitable?

[SamuelRSmith]

richardhutnik said:

SamuelRSmith said:
To quote (the guy playing) Hayek in that economic rap song:

"Jobs are a means, not an ends in themselves. People work to put food on their shelves"

Basically, there will be a point where the demand for employment will drop (we already have massive unemployment on a global scale - that's why 2 billion people live in poverty), instead of rise. As is stands, this is not yet the case - global unemployment is still falling at a rapid rate (I remember reading that a million people a week are pulled out of poverty in China alone). In fact, the long term trend still shows that for each job taken, a new job is created.

Unemployment doesn't have to equal bad. Remember that the average worker is now a lot less "unemployed" than he was centuries ago. People used to have to work 7 days a week toiling the fields, dawn to dusk - start work at ages such as 12, and not finish until you die. Now, most people work 5 days a week, 9-5, with breaks, holiday, entitlements (sick, maternity/paternity), most don't enter full time employment until their early 20s, and most retire between the ages of 60 and 70.

Why do you seem to fear that automation and increases in labour productivity = bad for everyone? Wouldn't it be better if people could continue to live better and better lives (that the cost reductions and better innovations of greater productivity allows), and also reduce the amount of time that they work? Wouldn't it be better for families, if they went back down to only having one parent work, and the other parent working significantly less? If, when people retire, they get 30 or 40 years, rather than 20. If, the education system wasn't just geared at producing workers, but also able to allow children to explore their true talents?

Now, this may seem pie-in-the-sky, but it's actually what the long-term trends show is likely to happen, as productivity increases.

You speak of retirement.  What happens if people can't afford to retire?  If you run a free market system, and no welfare safety net?  No one can ever afford to retire (retirement means to be financially independent), and social security in America shuts down?  People work until the day they die, and have to?  Retirement is catastrophic health insurance where you are physically unable to work, rather than you become financially independent.  The way the current debate is happening in Washington, look for retirement to be shortened, not increased.  In addition, no one is paying pensions any more, so that income is out.

The reality is that "true talents" in a free market economy are only worth anything if people are willing to give you goods and services in exchange for them.  And, unless there is some sort of concensus as to what society should preserve, don't expect any government funding for them.

On reduction of the number of hours needed to work, if there is a large pool of labor available, then the rate of pay for the work is low, and not enough to sustain people.  It would mean people would also need much longer hours, and if there is just in time labor, in the services market, where an employer expects people to be available on call within a few hours, then having multiple employers ends up an issue.  People will need to hold down 5 jobs just to survive and may not even get that.

And what you wrote about worked when you had unions and there was a shift from agriculture and manufacturing, people had pensions and lifetime employment.  Now it is increasingly short-term everything.

The idea is that, before we get to a period where the demand for employment starts declining on a terminal levels, the supply of labour would have already been long-declining. If the supply starts decreasing before the demand decreases, then the price of labour increases. Wages go up, as a result, people will choose to work fewer hours, anyway, further reducing the labour supply.

By this point in time, social security would be long dead, and, frankly, I expect that many, many people WILL be more financially independant. Most will still be able to retire at a fairly decent age, few won't. However, the net result will still be greater for society. If people are intelligent with their money, and practice good finances, anyone at just about any level of income can become financially stable. Those who fail to learn the skills of saving, investment, and cost-cutting will have to pay for it by having to work more years.

Unions exist, and will forever exist. Many are far more powerful today than they were during the shift from agriculture to manufacture, the problem isn't a decline in union action, or short-termism, the problem is that far too many people are lazy with their money, and would rather have somebody else do their savings and investments for them. If we don't give people those options, they'll be forced to do these things for themselves, and, generally, would be better off for it.