Guest Post: Global Reality - Surplus Of Labor, Scarcity Of Paid Work

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Global Reality: Surplus Of Labor, Scarcity Of Paid Work

The industries that are increasing productivity do so by eliminating entire industries and entire job categories.

The global economy is facing a structural surplus of labor and a scarcity of paid work. Here is the critical backdrop for the global recession that is unfolding and the stated desire of central banks and states everywhere for "economic growth": most of the so-called "growth" since the 2008 global financial meltdown was funded by sovereign debt and "free money" spun by central banks, not organic growth based on rising earned incomes.

Take away the speculation dependent on "free money" and the global stimulus dependent on massive quantities of fresh debt, and how much "growth" would be left?

What policy makers and pundits dare not admit is that the global economy is entering the "end of paid work" foreseen by Jeremy Rifkin. I have covered this topic in depth many times, starting with End of Work, End of Affluence (December 5, 2008).

The industries that are rapidly increasing productivity and profits are doing so by eliminating jobs and the need for labor. The Web is chewing up industry after industry, wiping out entire sectors that once supported hundreds of thousands of jobs while creating a few thousand new jobs that require high-level skills and mobility.

Robotics are replacing factory labor throughout the world--yes, even in "low-wage" China. When I first toured a variety of factories in China in 2000, many were little more than simple warehouses filled with long tables where workers assembled and packaged cheap light fixtures, etc. by hand. Others had robotic machines stamping out circuit boards that were then hand-assembled into monitors, etc.

The defect rate was high in these settings. Machines are increasingly replacing hand labor in China. Much is made of "labor shortages" in certain southern cities, but what that actually means is a shortage of young workers (overwhelmingly preferred over older workers by manufacturers) willing to work for low wages.

Machines don't go on strike, their wages don't rise by government mandate, they don't call in sick, and they don't need supervision. In effect, workers are replaced by capital invested in robotics and software.

China is already built out. Airports, railway stations, rail lines, subways, highways, stadiums, giant malls, tens of millions of flats--they're already over-built. Nobody dare admit it, but China is already to the point that new construction is either "bridges to nowhere" i.e. redundant or marginal and only funded as a jobs program, or replacement of buildings that are often less than 25 years old, or speculative buildings that are mostly empty and will stay that way.

The Internet has enabled enormous reductions of labor input. A mere 15 years ago when I first learned HTML (1997), you had to code your own site or learn some fairly sophisticated website creation/management software packages, and you needed to set up a server or pay a host. Now anyone can set up a Blogspot or equivalent blog for free in a few minutes with few (if any) technical skills, and the site is free.

A staggering range of complex business services are available for low cost, enabling one person to perform work that a mere 15 years ago required a half-dozen people. Everyone talks about offshoring as the primary cause of jobs being scarce in the U.S., but the much larger force is technology in the form of Web-enabled software.

A mere decade ago publishing a book was a time-consuming, costly venture that required substantial capital and labor inputs. Now it takes less than an hour to publish a book on Kindle and the cost is zero other than the hour of labor. Not only that, but the cost of distributing that book is also near-zero, and the cost to the consumer is a fraction of the cost of print books a decade ago.

That is simply one example of many. Here's another: a tax preparation program that costs $60 can (for the common conventional tax situations) typically replace an accountant that charged $500 or more.

The other trend is the cost of labor in the developed West is rising as systemic friction adds cost without adding productivity. Workers in the U.S. only see their wages stagnate, but their employers see total labor costs rising as healthcare costs rise year after year. In effect, the U.S. pays an 8% VAT tax to support a bloated, paperwork-pushing, inefficient and fraud-laced healthcare system that costs twice as much as a percentage of GDP as other advanced democracies.

A worker making $60,000 a year costs the employer $90,000 a year. No wonder employers are shifting to contract labor (no exposure to skyrocketing healthcare) and part-time flex-labor. No wonder many entrepreneurs are selling their high-overhead businesses and becoming flexible, low-cost one-person enterprises.

When it costs a lot to hire someone, the risk of hiring them rises, too. That is the unspoken context of high-cost economies. The productivity increases enabled by web-based software and services eliminate entire swaths of labor--not for this season or this business cycle, but forever.

If we train 30 million software engineers, will that create 30 million paid positions for these skills? No, it won't. The dynamics of creating jobs is not the same as that of training people to do a job.

I will write more about these trends in the coming days.

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buzzsaw99's picture


Richard Chesler's picture

the U.S. pays an 8% VAT tax to support a bloated, paperwork-pushing, inefficient and fraud-laced healthcare system


Pure awesomeness of Obamacare!

TBT or not TBT's picture

We could knock this cost back, the degenerative diseases of civilisation, by taxing the hell out of all sugar and refined flour, and stopping entirely the vilification of "saturated fat" and promotion of "low fat" diets.   

Right now the government is in the tank for makers of the white death, sugar and its metabolically identical evil twin "high fructose corn syrup", and THAT is causing a lot of degenerative disease, which correlates with the obesity epidemic.

Popo's picture



1)  Surplus of labor.  

2)  Shortage of paid work.

Go ahead and try to spin an inflation story out of those two facts.



LawsofPhysics's picture

Easy, break a few supply lines and watch how expensive things will get.  Yeah we have that (fill in the blank), we just can't deliver it.


Popo's picture

Touche ... semantics of course.   (I modded you up)

Yes, you are completely right.  *Price inflation* can (and will) occur even in a deflation as total money and credit contract.  Supply chain disruptions did cause massive price spikes in the 30's.

Deflation is often defined as a surplus in productive capacity, which was my point above.  But you're correct:  Price spikes in certain areas will almost certainly occur as productive capacity is taken offline.

Bicycle Repairman's picture

The inflationary increases are not going to labor.

11b40's picture

Hey, little Richard!  You have any idea how stupid and wrong that remark is?  I didn't think so.

The article did not say we WOULD be paying in essence an 8% VAT in the future.  We are paying it now, and we have been paying it all along.  The reasons are simple, and the solutions are likely to drive you even more apeshit than you probably already are.  That 8% is the profit margin extracted from the system by our privatized healthcare providers.

Approximately 17% of our healthcare cost is spend on 'administering' the programs.  In most of the first world, it is 8-9%.  Medicare, with fraud and all, delivers healthcare for about 4%, and the VA even less.  No marketing, no fat commissions, no bloated bonuses, and no dividends to shareholders.  Those are the facts.  Obamacare may or may not reduce the overall costs of healthcare, but it will assuredly cut the rate of increase in the rise of admin costs.  If we want to get to real effenciency, the only true route is a single-payer system.  That may or may not be the desire of the majority, but it is the truth.....but you won't hear it on TV.  The healthcare and insurance lobbies are far too powerful for politicians to tell it, and provide far too many advertising $'s for the media to tell it.  It just gets tossed around like a hot potato as, year by year, the costs spiral out of control and the public pays -- with more cut-backs in employer programs, rising costs for employers, almost impossible to find and afford prices for independents, and loss of competitiveness (loss of jobs) for almost all businesses because of dramatically higher helthcare costs than competing countries face.

So, what do you propose?  Romneycare, maybe?

roadhazard's picture

Mrs. Roadhazard just got a bill from the local hospital for $227.00 That was the charge just for an "interview" with a new doctor. I threw it in the fucking trash.

maximin thrax's picture

How about catastrophic insurance, say for everything above $10,000? Like INSURANCE should actually pay for - unforseen, crippling expenses? Anything less is purchase directly by the patient from savings or by borrowing and the associated administrative costs are gone. Why I want to pay somebody to buy my medicine (an insurance company) I still haven't figured out yet. I'd die without food but that doesn't incentivise me to pay somebody to go grocery shopping for me. 

How about a dual public-private system? Just as we have people paying taxes for public education yet send their kids to private schools, we can build a public medical system for everyone with tax money and then allow those who want better service to pay for care at private facilities out of pocket and/or with private insurance. Governments at all levels can only pay so much for healthcare, so if we can accept living within a budget then government can control medical costs by simply limiting spending to money in hand. The level of service delivered by the public hospital will be inferior to what we have today, so we'll have to get over the idea that everybody can have the same standard of care regardless of anyone's ability to pay.

11b40's picture

That is cetainly part of the solution, and is the only way I have been able to contiue to afford to cover myself and employees.  Over the past couple of decades, we have had HMO's, MSA's, now PPO combined w/HSA.  We raised deductibles from $200 to $500, then to $1,000, and now $2500.

Let's not forget in this little discussion that healthcare cost is the #1 cause of bankruptcy in the US, too.

SeattleBruce's picture

"Obamacare may or may not reduce the overall costs of healthcare, but it will assuredly cut the rate of increase in the rise of admin costs."

For a massively complex topic, this is a massive assumption.  The private system may not be the most efficient delivery system to a fairly populous, diverse country like the US, but it has driven medical innovation worldwide you can't deny - and what of that?  That said, I agree with other comments here that suggest reforming the system short of socializing the whole shabang.

"The healthcare and insurance lobbies are far too powerful for politicians to tell it, and provide far too many advertising $'s for the media to tell it."

This isn't the only place where the politician crony capitalist equation if failing society - what on God's green earth makes you think that the politicians/technocrats in charge of such a single payer system would/could make it work in the way you dream, and what would replace the medical innovation engine in the world?

I think the real problem is the total capture of politics and crony capitalists by debt based, non-accountable money. 

Change that, and you bring accountability to society, where hardly any exists today.

blunderdog's picture

Always good to remember this: 

but it has driven medical innovation worldwide you can't deny - and what of that?

There IS a return from the "massive malinvestment" that results from misguided political effort.  Hard to figure the best way to quantify that return, though.  I do really like aluminum foil.

For sure, there are some people who derive far greater return than others--if you're lucky enough to have your own personal disorder defeated and you're incredibly wealthy, you've pulled in the maximum benefit for the same relative cost borne by others, the vast majority of whom never see the benefit.

It's almost like you're getting the reward for services you never agreed to pay for. 

SeattleBruce's picture

And what about getting a needed surgery in a month - vs. 2 years in some countries - these issues are complex.  I'm not saying the system doesn't need massive overhaul.  Just not in the direction of socialism.  Just like the financial system needs massive overhaul - just not in the direction of socialism...

blunderdog's picture

If you prefer fascism to socialism, you should be delighted with Obamacare.  That's the whole point. 

The government created laws which force individual citizens to pay private for-profit businesses.

Socialism is what paid for the research and all, though.  Medicare/Medicaid/etc is socialism.

sunaJ's picture

Is this not a symptom of a world coming to grips with the undermining of what goodwill remains in fiat?  People are going to find other ways to survive, since we live in a world where dollars are necessary for survival.  As fewer people use the manipulated fiat currencies to get increasingly less return, people will find alternative ways to trade goods - ways that probably mean less revenue for central planning.  It will be a matter of survival as computers chase increasingly irrelevant red and green graph lines.  An algo cannot take into consideration how hungry or angry people are.  Is it not mass distrust of the currency that leads to hyperinflation? 

Waffen's picture

indeed.. hyperinflation is not a result of over printing, its a result of a loss of confidence

cranky-old-geezer's picture



Hyperinflation is, by definition, expanding the money supply far beyond the general economy.  Over-printing is what does it.

Loss of confidence in the currency is a result of the massive over-printing.

So yes, loss of confidence is a direct result of hyperinflation.

LawsofPhysics's picture

Through in a few supply-line breaks and things get real interesting.  Watch how expensive things can get when nothing can be delivered.

Waffen's picture

nope..  loss of confidence and increase in velocity comes first.

hyperinflation is a result of this not a cause. it becomes a positive feedback loop, but loss of confidence must come first

I would cite FOFOA's long treatise on Hyperinflation to explain this to the most finite of detail.

cranky-old-geezer's picture



nope..  loss of confidence and increase in velocity comes first.

Flat out wrong. 

You don't have a clue about basic monetary theory ...and neither does FOFOA.

margaris's picture

its a bit of a hen and egg problem?

tmosley's picture

Sort of.  Both conditions cohabitate.  There is no currency debasement without loss of faith (over a multi-decade timescale--longest fiat currency regime in history only lasted some 60 years), and no loss of faith without currency debasement and/or abandonment of said currency (and return to hard currency).

Popo's picture

Close, but backwards Waffen.  

A loss of confidence is the result of overprinting.  

Waffen's picture


I am not sure how I am wrong. Hyperinflation is a result of lack of confidence and thuse the increase in the velocity of money.

Now a lack of confidence can result from overprinting, but overprinting does not directly cause hyperinflation, it simply creates medium to high inflation.

Without an increase in velocity there will be no hyperinflation.  It is thus a lack of confidence that is the key.


See Japan, they damn well could print to sextillion.

gwiss's picture

Good to see that some are aware of how it works.  Central banks don't push a population into hyperinflation, but rather are sucked over the edge of the hyperinflation waterfall whether they want to go or not.  They initially create the conditions that create loss of confidence by printing too much, but once confidence is lost, velocity takes off as everyone tries to abandon money for real goods.  Banks don't have enough currency to handle this demand, thus requiring bank holidays while extra money is printed and distributed.  The bank holiday, of course, simply stokes the panic, such that once the holiday is over, the banks are immediately emptied once again.


One thing I have not figured out yet, however -- how does this all work with electronic currency?  It would seem that the sparcity of physical currency compared to demand as velocity increases exponentially is what drives the hyperinflation part.  With electronic currency, you are not limited by the demands of printing and distribution.  So, is hyperinflation possible in a system that functions mostly with electronic currency?


Or, does the government enact their typical "precisely the completely wrong answer" solution such as tracking electronic payments for some tax purposes, thus flushing commerce out of the electronic system and into the cash system where the mismatch between currency demand and supply can allow hyperinflation?

sunaJ's picture

I think the latter, because revenue is the blood of the beast, it will choose to attack cash, just like Spain is right now.

They cannot possibly print enough dollars, so maybe they will try to keep up by handing you a mandatory EFT/SNAPS card.


jazze's picture

"China is built out"


Have you ever been to China's countryside?

GMadScientist's picture

Have you ever been to China's empty malls?


Quinvarius's picture

Have you ever been to China and had your picture taken by a local because they had never seen a white person before?

TBT or not TBT's picture

Is that what they told you?    In what language?

akak's picture

They probably just wanted your photo so that they could use it on their US Citizenism dart board.

TheFourthStooge-ing's picture

Confusius say: "Round eye make good bullseye."


akak's picture

And Anonucius say:

"Brown eye make good Chinese citizenism troll".

dizzyfingers's picture



Yes. Department stores Beijing. Example of everyone having  a "rice-bowl" job, no one doing anything.

mickeyman's picture

There's lots of work--only a temporary mismatch in pricing of labour. Once we get expectations down to a few dollars a day in N Am we'll be back in business!

LawsofPhysics's picture

Good luck trying to catch that knife falling in a bottomless well.  How about the BRICS pay their labor more?  First the currency wars, then the trade wars, then...


We have all been here before and the is a very real cost for creating capital without adding any real value (which which everyone is doing).

Global Hunter's picture

Canada's Globe and Mail reports there are 300,000 temporary workers in Canada as we speak, and the Editorial dept is pushing for 400,000 new immigrants per year (our population is 33,500,000 approx).  A market for labour based on supply and demand has been irrevocably harmed in Canada and most other western nations by central planners, corporations and politicians.  You can't have any kind of price discovery in the market if the central planners just print more money/workers whenver they see fit.

robertocarlos's picture

And the Mop and Pail got monkeyhammered in the comments section by Canadians who have had it up to here with immigrants.

Bicycle Repairman's picture

The importation of technology workers has destroyed good paying jobs in the private sector.  These were jobs for which people trained for years and at great expense.  Now the ability of these people to pay taxes, pay mortgages and raise children has been destroyed.  Their children will not be gulled so easily.  And the blame lies squarely with the government.

oddjob's picture

They did wonders with Nortel.

DosZap's picture

Workers in the U.S. only see their wages stagnate, but their employers see total labor costs rising as healthcare costs rise year after year.

Yes, and thank you ObamaCare, as it raised mine & my spouses NET out of pocket rates for same coverage as past 5yrs, by a flat 15%,as I am sure it has most of the folks here(if they are employed).

That amount was enough to pay ALL my year end county,city, and school  taxes.

So, in light of that,I figure it was a 30% I now will have to come up with  it NET out of pocket when tax time for houses comes due.

Employer is HUGE, and still had to pass along the increases.And, its ( O Care) not even but partially been put into effect.........Imagine the beast that awaits us all if SCOTUS doesn't kill it all.

11b40's picture

Obama has not even been president for 4 years.  The relentless rise in healthcare costs has been going on for freaking ever.  I have been paying the healthcare cost for my employees for 30 years, and do know a little about it.  Some call it Obamacare & some call it Romneycare (the original model), but the facts are that it will cut the rise in overall admin costs, and it has little to do with what you have expericenced over the past 4 years.  In fact, the most dramatic increases I saw were earlier in the decade, and the new policy we just re-negotiated last month had the lowest increase (about 4%) we have had in years.

If you want to drive down healthcare costs, the best and fastest way to do it is go to single payer system like Medicare & the VA.  You can call that whatever you like, but our privte, for-profit, healthcare system is reason for the 8% VAT mentioned in the article.

Bicycle Repairman's picture

The health care system needs radical reform.  The whole system needs to be opened up to free market competition.  ObamaCare is a disastrous step in the wrong direction.

11b40's picture

Maybe, mabe not, but I agree that the whole thing is a freaking mess.  Obamacare, Romeycare, or the Affordable Care Act......nothing more than a compromise with the insurance/healthcare lobby, and it could conceiveably become even more expensive than now.  But it is hard to imagine how the overhead costs will grow much more than they are today.  Everyone in the healthcare system seems to think it's just fine to gouge at every turn, and that they are somehow entitiled to bloated income streams.

But I do agreee that opening up the system we have now to muchmore competition would do  lot to drive down costs.  Rally, why can't I buy my health insuance from any nationally rated company, instead of the handful available to me approved by my state?  Why is their an anti-truxt exemption for these maggots?


blunderdog's picture

Why do you want health insurance in the first place?

11b40's picture

Because I am not stupid.  Reason enough?

blunderdog's picture

If that's as far as you're able to piece it together, OK.  You tried, I'm sure.

Health insurance is just another anti-service taking a cut from an industry it has no interest in.  Do what you like with your money, but you should know by now it's not going to get you what you need if something horrible happens.


How do you suppose health-care worked in the '50s, when virtually NO ONE had medical insurance?