Can Anyone Really Create Jobs?

http://www.nytimes.com/2011/11/06/magazine/job-creation-campaign-promises.html?_r=1&hp

by mdariani • 15 years ago

60 86 15 years ago

swombat• 15 years ago

I didn't read the second page, because the first page seemed to miss the point so badly.

The most popular types of jobs programs involve state tax breaks or subsidies that seek to seduce a company from one state to another. While this can mean good news for “business-friendly” states like Texas, such policies don’t add to overall employment so much as they just shuffle jobs around.

Such subsidies can also seduce people from one country to another. And in that sense, they would indeed create jobs.

The same argument applies to the industry-specific legislation he mentions later.

Finally, he doesn't mention, on the first page, the very straightforward way that politicians can create jobs: by spending money on big infrastructure projects. Those certainly do create jobs, and they have been a common method to do so in a recession.

To top it off, lumping politicians in with "everybody else" seems unfair. As argued above, even politicians can and do "create jobs", but it is ludicrous to argue that the founders of Google or eBay or Paypal didn't create jobs. They created tens of millions of jobs that people live off of, in the US and in other parts of the world.

DasIch3• 15 years ago

Big infrastructure projects have the problem that they cost a lot of money and time. Another disadvantage is the inherent problem all Keynesian ideas have, they very much depend on timing. If you start such a project too late you severely harm a recovering economy, start it too early and it won't help at all or even have a negative impact.

skylan_q9• 15 years ago

Also, there is no way to show whether a government project is profitable or not. This means we can't tell whether the project actually helped or hurt the economy.

FD3SA2• 15 years ago

Interesting that none of these articles ever address the root causes of structural unemployment. Globalization combined with rapidly advancing technology are allowing an ever shrinking pool of extremely talented people to satisfy the world's demand for products. This is a reality that can no longer be ignored. It is not just the majority of Americans that are unemployable, but the majority of the world's population.

Technology's leveraging power has become so severe that a company like Apple can reasonably expect to supply the entire world market with smart phones. Another example is SpaceX, which is pioneering the future of space flight with a team of only 1300 employees.

Globalization depresses wages for traditional labor, while technology facilitates an extreme leverage for talent. These two forces are enough to obviate the vast majority of the domestic work force. As long as this reality is ignored, the discussion of potential solutions is futile.

Further reading: http://www.thelightsinthetunnel.com/

DevX101• 15 years ago

You're absolutely right. And I think the reason people don't talk directly about the issue enough, is because we really don't know what to do about it.

There are many jobs that are now obsolete, or will be due to technological progress. Not only are many 'labor' jobs being rendered obsolete, but so are many 'mundane' white collar jobs.

Toll-booth operators are obsolete (or will be)

Bookkeepers are obsolete (or will be)

Many back-office support-services can be automated or re-located

All cashiers could potentially be made obsolete

Many retail sales could be made obsolete (as people shop online)

Where do all these people go? During the last technological revolution, there was a relatively smooth transition from farming to manufacturing. But I honestly don't see how large swathes of the population that don't have specialized skills will fit in in the new economy.

Most of the people reading this comment will do just fine. But we face the really tough questions when dealing with the increasingly large number of people who don't have skills that are in the demand. And even if they all got the skills, employers simply wouldn't need all of them as labor becomes increasingly leveraged.

A couple professors fro MIT just wrote an e-book called 'Race Against the Machine' discussing this phenomena.

http://www.amazon.com/Race-Against-Machine-Accelerating-eboo...

mseebach6• 15 years ago

> During the last technological revolution, there was a relatively smooth transition from farming to manufacturing.

Relative to what, exactly? That transition was only smooth in retrospective. It took many decades and (among other things) spawned a major political ideology and a superpower based on it dominating a century.

WildUtah• 15 years ago

Most of the manufacturing jobs are already gone -- even as manufacturing production rises -- and yet just a few years ago in the developed world nearly everyone who wanted to work could find a job.

In fact, developed nations in Europe and the Americas are importing vast numbers of low wage workers to do low value per hour jobs where humans are still better than machines. It continues in the face of a prolonged severe recession.

So the emerging problem of no available work to do does not seem to be materializing. In fact, it's hard to imagine. Does every public park and private garden in your city look as clean, inviting, and pretty as it could possibly be? Is every street paved smooth without cracks and potholes? Does a bumper crop of fruit never go bad for lack of harvesters? Is every home clean and freshly scrubbed all the time and is a freshly cooked meal always waiting? Does every corner have a crossing guard during school hours?

There's a lot of intellectually undemanding work to be done in a utopia if we want to pay for it.

Right now, we import foreign workers to do cheap labor but we could take unemployed citizens and subsidize their wages to have our own do those jobs instead. The unemployed citizens are living on private or public welfare and social insurance today but they could be working. We could kick in public money to make it possible to pay a legal wage with benefits for the jobs undocumented workers do and the employers would prefer to stay legal by hiring citizens. We could even document the undocumented and add enough subsidies to employ them too.

Economic change driving social change is disruptive. But let's remember that technological productivity is a positive change that makes us wealthier.

Unemployment that follows from energy shortages or global climate change, if those ever get serious, would be a much bigger worry.

ianhawes• 15 years ago

That is an economic fallacy.

http://www.fee.org/library/books/economics-in-one-lesson/#0....

Please read that. It is a 40's era book that disputes several economic fallacys, specifically the "Curse of the Machine".

FD3SA2• 15 years ago

Indeed. I am quite familiar with the Luddite fallacy. Unfortunately, it is predicated upon two assumptions:(1) humans are infinitely capable and re-trainable, and (2) technology creates more jobs than it automates.

Both of these assumptions are quite untenable given our understanding of human biology and technological progress.

exit2• 15 years ago

being a 40's era book is not a selling point

cabalamat• 15 years ago

Maybe some things that were true in the 1940s aren't true now. The world is a qualitatively different place now than it was then, because:

1. computers replace people's minds, not their muscles

2. the machinery discussed in the article was physical machinery, which takes time and effort to manufacture and trnasport around the world. But software isn't a physical object, and it costs nothing to replicate a useful program a billion times and put it on every computer; therefore the extent to which software can concentrate wealth is a lot greater than machinery could.

mseebach6• 15 years ago

So we've passed "peak jobs"?

Did you see that thing the other day where some people decided to make an entire music video in stop motion using Jelly Beans[1]? It took 30 persons 22 months. That is possible because "globalization combined with rapidly advancing technology" can drastically lower the amount of economic output each person needs to produce to sustain him or herself.

This also means that a person who is capable of filling an entire day with production of economic output has a drastically higher amount of wealth to spend on things not specifically "necessary" - such as feeding people making stop motion Jelly Beans films.

1: http://news.ycombinator.com/item?id=3193914

sunsu• 15 years ago

I understand your point, but the documentary video said that most of the 30 people were volunteers.

lukifer• 15 years ago

We all know that money is only an abstraction for real wealth (goods and services). I hardly think a jelly-bean video (though impressive) is an example of high economic output. The best case scenario you're describing is a world in which a small fraction of the populace creates actual wealth (food, plumbing, servers, etc), and everyone else rides their coat-tails by creating frivolities like fashion accessories and entertainment. (Come to think of it, we've been trending this way for decades.)

While I acknowledge how far capitalism has taken us in wealth creation, it has a blind spot: some forms of wealth are invisible, and either hard to measure, or hard to capture. Every person making a living with YouTube videos is a person who is not teaching in an inner-city school, or rehabilitating the homeless, or building a power grid in Somalia, or a thousand other useful things which don't dangle a direct profit motive (or enough of one to meet a threshold for action).

I'm as loathe as anyone to see a top-down "government" approach to these problems; setting aside the issues of corruption and perverse incentives, even the most well-meaning social programs tend to suffer from insane bloat with no metrics or feedback loops, and therefore mixed efficacy at best.

The only way I see to create this invisible wealth is to supplement markets with new bottom-up community-oriented economies, whether based on money, gift economy, reputation, or something entirely new. We have some precedent for these kinds of distributed institutions (Wikipedia, Linux, Anonymous), but when you compare these to the scale of Microsoft or the U.S. Army, you can see how far we have to go in giving people useful work that also lets them pay their bills.

(Side note: there is a case to be made that pure libertarianism would result in more wealth for everyone, meaning more people could afford voluntary charity and community spending. Bluntly, I don't have that much faith in human nature. At minimum, I could only see that working when coupled with the right sociocultural value system, which emphasized a balance between selfishness and community, rather than an adulation of greed.)

madamepsychosis• 15 years ago

Maybe there's another cause: a huge mismatch between the skills needed and the skills provided by schools. Schools were designed for the industrial era, not the post-industrial era etc. etc. etc....

rudiger• 15 years ago

Literally millions of Chinese workers at Foxconn and other companies are supplying the world with iPhones. It's not just Apple with its thousands of employees making and selling these phones.

DasIch3• 15 years ago

This example would be much more convincing if Foxconn wouldn't work on replacing millions of Chinese workers with robots.

rayiner2• 15 years ago

I'm skeptical of that argument. Historically when technology has advanced, it has created new roles for people whose jobs were obsoleted. Why is now the time when the majority of the population becomes too dumb to cut it in the "new economy?" Especially when technology acts as a multiplying effect for what someone without specialized education can do? Generally, depressed wages (i.e.: decreased price of labor) should drive up demand. If that doesn't happen, that means there is a bottleneck somewhere else.

I think a key observation missing in all of these analyses is the most obvious one: that bottleneck is energy. What's different between 1995 and today? Well a barrel of oil cost about $25 2010 dollars back then, and costs almost $100 dollars now. We have an economy that is entirely driven by oil. When the cost of that goes up, because we've run out of the easy-to-reach stuff and have moved to expensive and difficult methods, then it's no surprise that the economic equilibrium shifts to a point with lower activity.

streptomycin• 15 years ago

> Why is now the time when the majority of the population becomes too dumb to cut it in the "new economy?"

http://blogs.law.harvard.edu/philg/2010/08/08/unemployed-21s...

Cushman5• 15 years ago

The price of oil is not determined by the cost of extracting oil. Prices are going up because of speculation.

ap222133• 15 years ago

It may be because a lot of 'the rich' don't really need anything other than what they already have. There's not much to buy that's important to a lot of people with the money to buy it. Frankly, there really aren't that many truly useful or interesting products or services.

It was illustrative to me while reading the other HN articles on wealth. Some of those who have already sold their companies for millions haven't changed their life style much. They still buy the same things, still live pretty much the same way. Maybe travel more. Otherwise, the extra capital just goes into more investments that help to further inflate the established capital markets.

philwelch• 15 years ago

Not quite. We are seeing massive shortages of workers at global extremes, but an oversupply in the middle. We have too few engineers, but not enough unemployed Americans are retrainable, numerate, and intelligent enough to fill that gap. We also have too few apple pickers, but not enough unemployed Americans are willing and able to perform that kind of manual labor. It's the comfortable but not intellectually difficult jobs that are in short supply.

danmaz74• 15 years ago

What are you talking about? Do you think that Apple's iphones are produced by Apple's 50k employees? Apple isn't really a manufacturing company anymore, it is an engineering/design/marketing/retail company. But to manufacture Apple iphones, Apple Asian suppliers employ hundreds of thousands of people.

What you describe is much more an effect on the developed work of the migration of manufacturing jobs to emergent economies than that of technology, which, on the contrary, helps the developed world itself to slow down the loss of manufacturing jobs through higher worked hour productivity.

lkrubner• 15 years ago

You are in danger of making the Lump Of Labor Fallacy:

http://en.wikipedia.org/wiki/Lump_of_labour_fallacy

You are looking backwards. That is your first mistake. If you only look at what jobs exist now, then you are forced to look backwards and everything looks dark. Try to imagine what the future might actually be like.

Let's take a hypothetical example of some future industry:

It is well know that by the year 2050, the urrgh industry was central to the USA economy. Conceptually, the idea of urrghs was developed by Lisa Simon Beckworth of MIT, late in 2014. Michael Ardossa of Stanford developed the first working urrgh in the summer of 2016. However, urrghs remained an academic toy until 2019, when Herbert Boink of Cambridge developed a technique for mass production. Early in the 2020s it seemed like a number of old names from the tech industry were also going to dominate the urrgh industry: Sony, Samsung, IBM, Lenovo. However, it soon became clear that the old tech companies had the wrong kind of management structures for pioneering the new industry. A host of newer companies sprang up. The public only gradually became aware of urgghs. Many people point to 2026 as a turning point. If you measure the number of articles being written about urrghs in the popular press, there is a 10x jump between 2025 and 2027. By 2028 there were young people confidently describing themselves as "urrgh professionals", the implication being that they were going to make their whole careers in the new industry. The early 2030s saw explosive growth in the industry. After the recession of 2038, economists pointed out that the urrgh industry had been the leading cause of economic growth during the last business cycle, and would likely play a major role in the next business cycle. On the eve of the next recession, in 2046, the urrgh industry was employing 1 million people in the USA.

We all know at some point in the future there will be some new industry that sweeps the world and generates a lot of economic growth. The only question is how much any one given nation will dominate that industry. But that raises a different issue, an issue about national competitiveness, which should not be confused with issues of one nations unemployment, unless you want to make the explicit argument that some nation is stealing jobs from some other nation. Which can be true in some circumstances, but those circumstances need to be made explicit, for the conversation to have any meaning.

The thing is, it's hard to know what the next big thing is. Generally, those countries that have the fastest growth in productivity also have the lowest unemployment rates. That might seem counter-intuitive, until you think about what productivity allows: it means you can produce more, at the same or higher quality, than you did before. If your productivity goes up at 10% a year, and your competitor only goes up at 5% a year, then pretty soon you can make more of whatever you make, at higher quality and lower cost, than your competitor. This applies to nations as well as companies. Back when Japan had 7% productivity gains every year, and the USA had 2% productivity gains every year, Japan had close to 0% unemployment. But if you believe, as you suggest, that rapidly rising productivity increases unemployment, rather than reducing it, then you would assume that Japan would have higher unemployment than the USA, back when its productivity was higher. But we know the opposite was true.

Even worse, if you took your own argument seriously, then you would have to argue that falling productivity is a good thing since it would mean more jobs for everyone. But I assume you are smart enough to avoid doing that.

vannevar• 15 years ago

I don't know what an urrgh will be, but looking forward rather than backward as you suggest, I think it's likely that a small group of people will leverage increasing automation to meet worldwide demand, and that every new urrgh will be cheaper and cheaper (as it must be to be affordable to an increasingly low-wage population) and will be made by more and more automation and fewer and fewer people.

The economy is a complex adaptive system that is not well-understood; are you so sure that there is no such thing as too much efficiency? After all, life itself is inefficient---if we want to get to our ultimate destination faster, it would be most efficient to kill ourselves. But I assume you are smart enough to avoid doing that.

calibraxis• 15 years ago

I think one bizarreness needs to be pointed out, lest it seems too strange for some people who are used to a slightly more rational universe — all this talk of "job creation" is a lunatic side-effect of our economic system. One might think that millions of homeless and unemployed people represent a huge untapped demand for goods and services; they're humans like any other. But of course, our system doesn't work that way.

The notion of systematic unemployment is bizarre. (No matter what justifications were invented to paper over its absurdity with.) It represents idle hands which have nothing to do. The US could have enormous productive output. The infrastructure and know-how is there; it's not like someone dropped bombs all over the place and reduced it to a 3rd world nation. But as a society, we choose not to use these resources, nor do we allocate much of our output to the "lower classes" of people.

yummyfajitas10• 15 years ago

"As a society", we choose nothing. If you believe their output is useful, why don't you hire some of them?

Structural theories of unemployment are merely theories which claim that you have no idea what job they can profitably perform, and they have no idea what jobs to bother applying to. Or, alternately, there are barriers preventing them from taking such a match (e.g., some people may consider unemployment benefits + leisure superior to a marginally higher paying job).

bjelkeman-again• 15 years ago

As swombat says [a] “straightforward way that politicians can create jobs: by spending money on big infrastructure projects.”

That is indeed a way that the society you live in choose to spend money to create jobs. Other ways of spending money to create jobs are, for example to increase the size of the military, which may or may not be as useful for a nations economy as creating infrastructure, depending on the state of your infrastructure and the size of your military.

skylan_q9• 15 years ago

"Structural theories of unemployment are merely theories which claim that you have no idea what job they can profitably perform"

It's not that they have no idea which jobs they could profitable perform, but that there are no jobs which they could profitably perform. This is because their marginal rate of productivity is too low for any position. The way around this is to reduce income taxes, corporate taxes and sales taxes. This reduces the cost for employment and production, which brings the "you need to be this productive to be profitable for us" bar lower. This helps to make more room for on-the-job training as well.

The mismatch between skills and demand for skills is real. This is mostly a result of government intervention and the business cycle causing unsustainable booms in industries.

yummyfajitas10• 15 years ago

This article makes a very strange factual error: ...permanent cuts in taxes and regulation. These policies may (or may not) make the economy healthier in 5 years or 10, but the immediate impact would require firing a large number of America’s roughly 23 million government workers.

This is not true. You could cut taxes and reduce compensation for 23 million government workers.

gahahaha• 15 years ago

It would probably be an even worse idea to cut government wages than to cut government jobs (also a very bad idea). It is true that people are unhappy if their wage increases don't keep up with the rate of inflation--if inflation is 4% and you get an only 1% wage increase, you're unhappy. But people are furious if your boss cuts your wages--if inflation is 1% and they cut your wages by 2%, you're not just unhappy, you're enraged. There's something about cutting the number of dollars that you're going to be paid for doing the same work in the American psyche that gets people really angry, and makes them really unwilling to put in the effort to be good workers.

And so, because each company know that cutting people's wages is a way to guarantee that they'll do a lousy job, businesses are overwhelmingly unwilling to cut people's wages at all. They would rather fire more people.

yummyfajitas10• 15 years ago

Businesses tend to fire people because cutting wages is likely to cause adverse selection - the good people (with options) quit, the bad people (no options) stay. This is why during the recession, jobs were cut, but comp (per worker) actually increased.

http://research.stlouisfed.org/fred2/series/ECICOM

Regardless, the government could cut overall comp without cutting any individual's comp and therefore never making anyone mad. They could simply freeze wages (rather than raising them, which they did during the recession) and apply the lower pay scales only for new hires/promotions.

I.e., a current G6 makes $30577 (ignoring COLA). When he upgrades to G7 under the current pay scale, he gets $33979. If all pay scales were lowered by $2500, the individual would continue making $30577 for as long as he is a G6. When he transitions to G7, his pay would only go up to $31479. No individual's pay is ever cut, but compensation for government workers as a whole is reduced.

http://www.fedjobs.com/pay/pay.html

skylan_q9• 15 years ago

Yes, but are we really worried that government employees will no longer be super-productive? ;) I think there's a bit of a presumption in your post!

ck24• 15 years ago

Why doesn't the USA charge full rate taxes on individuals and corporations with extremely high incomes - and THEN deduct based on the number of new domestic hires they've done that have stayed for at least a year.

Seems super simple enough and then the REAL job creators get the credits they are demanding. The fakes then have no excuses.

steins3• 15 years ago

Every tax creates distortions. If the tax break was high enough it would encourage people and corporations with extremely high incomes to hire people for 366 days and then fire them and hire another domestic replacement.

ck24• 15 years ago

Then just subtract terminations. It's not complicated - net jobs, period.

skylan_q9• 15 years ago

It was only about 10 years ago that we understood how to allow the economy to create jobs and operate properly: keeping a steady monetary base, cutting taxes, loosening regulation and ending wasteful gov't programs that crowd out private investment.

It's a shame that 1921 and the post-war boom have been buried under theories that tow the line for the managerial-state.

skylan_q9• 15 years ago

Just for clarification, this isn't trolling. It's true. In the last few years we've blamed the free market for these problems. I don't consider the federal reserve (a monopolist on money) to be a free-market institution. I don't consider government-guaranteed mortgages to be a free market program. I don't think forcing banks to give loans to people unworthy of credit is how a market should operate.

But with all that meddling causing the current crisis, we look for yet more government involvement to solve the problem. I look at history and theory and see that the injection of government involvement throughout the economy doesn't work. Ask the people who tried to hop over the Berlin wall!

xsmasher2• 15 years ago

It sounds like you're blaming the Community Reinvestment Act for the mortgage crisis. The downvoters probably consider that a GOP talking point with no basis in reality. I know I do, but I'll reply instead of downvoting.

DanielBMarkham• 15 years ago

I found it humorous that the writer announces his bias by identifying other biases and then doing the same thing himself.

The current economic downturn has been called a housing crisis, a financial crisis and a debt crisis, but the simplifying logic of the political season has settled on what is really more a result than a cause. We are now, according to nearly everyone running for office, in a jobs crisis.

Jobs are like money -- they are the end of the process. They are the socres on the scoreboard, but you don't play the game by watching the score. These are metrics of results, not causes. I don't open a business with a chair and a big sign that says "give me money," even though money might be the way I judge success. Likewise, and for exactly the same reasons, you don't sit around trying to "create jobs" Jobs are the result of somebody creating value, they are not a goal in themselves.

I hate to say it, but this was a really bad article. I had a premonition of this when I looked at the title "Can Anyone Really Create Jobs?" It's yet another in a long line of political commentary that takes whatever the current problem is and announces that it is insolvable. This reached ludicrous levels in 2008, with lots of articles asking "Is this the end of capitalism?" I don't know how many of these you have to consume before you finally figure out that no, whatever is happening right now, it's not the end of something that's been going on for thousands of years.

Americans need to start getting honest about their economic situation, no matter what their politics. If you drop hundreds of billions of dollars paying for government workers that the government cannot afford, you are not simulating anything. Money is just continuing to be spent in the same patterns as before. Likewise, if you cut taxes for the rich, and they continue to spend their money in the same way, you are also not doing anything except to run up the debt. If you are living a house you cannot afford, no matter how much we help you, you are probably still stuck in a house you cannot afford, and the rest of us are much poorer. Simply because an idea sounds good to your political party doesn't mean that it accomplishes anything but buying votes. These facts sound cruel, and I apologize, but some of this commentary is beginning to sound like dispatches from somebody's fantasy land. People are smarter than that.

ap222133• 15 years ago

Did you read the second page? Because, the author essentially says a similar thing. In fact, the last paragraph is pretty blunt. (but, I can't get to the text anymore, to verify)

kaybe• 15 years ago

Here's the last paragraph for you:

"When this crisis ends, we’ll also be faced with other deep problems. Our tax code is a complex mess; we need a more effective education system; it’s hard to picture a healthy United States in 2050 without some major change in health care. Unlike the short-term jobs crisis, these are areas where we can find compromise. Let’s not do what we usually do by spending the bad times arguing over things that won’t happen and the good times ignoring the things that should. "

guga31bb• 15 years ago

Like the other commented who replied to your post, I'm left with the feeling you didn't read the article (or at least, not very carefully). For instance, you write:

>If you drop hundreds of billions of dollars paying for government workers that the government cannot afford, you are not simulating anything [...] Likewise, if you cut taxes for the rich, and they continue to spend their money in the same way, you are also not doing anything except to run up the debt.

That is the exact point made in the article: that both the Keynesian (Dem) and Chicagoan (Rep) approaches are not going to help in creating jobs.

In addition, you claim the article

>takes whatever the current problem is and announces that it is insolvable

The article closes with noting "no economic theory offers [unemployed Americans] easy salvation" (which is certainly true) and suggests that having a more highly-skilled workforce would help the problem. Do you disagree with this point? Wouldn't it be easier to employ liberal arts majors if they developed a useful skill?

I'm a grad student in Economics, and usually I think the NY Times does an abysmal job reporting on economic issues, but this article did a decent job.

Can Anyone Really Create Jobs?

Related Stories