Guest Post: Peak Employment

Tyler Durden's picture

Submitted by GoJam of The Needle Blog,

Peak Employment

What is ‘Peak Employment’ ?

Peak employment is the theory that due to factors such as efficiency, driven by technological innovation, and demand, developed economies may have already passed beyond the highest point of employment and that from this point onwards employment will continue to fall and unemployment inexorably rise causing increased social tension. There is plenty of evidence to support this theory but before looking at the situation now it would be wise to look first at a similar period of dramatic technological change two hundred years ago, and try and understand why the Luddites, who opposed industrial progess were wrong and take it as a small warning against making similar mistakes.

It is almost exactly two hundred years since the Luddites were founded (1811) as a reaction to the Industrial Revolution sweeping Great Britain. Today they are thought of simply as technophobes but their concerns were genuine, even if their methods were shortsighted and ultimately futile. The Luddites were originally highly skilled, and relatively high paid, textile workers who were being supplanted by low skill and low wage labour  who were needed to operate the new mechanized looms. Their solution was to smash up the looms.

The Industrial Revolution initiated profound social change in Great Britain. There was a huge migration from the countryside to the new industrial centres, creating a surplus of labour and driving wages downwards in these growing cities, and the new technology, being more efficient needed far less labour to produce far greater product.

The Luddites certainly saw that their standard of living was threatened but they might have been forgiven if they thought they foresaw ‘Peak Employment’. Afterall, if fewer workers were needed to produce the same quantity of product unemployment must inevitably rise, right ?

They were, as we all know, wrong. There were two main reasons why, the first was that Great Britain had a huge captive market in it’s growing empire, the second was that the Industrial revolution needed huge ‘support’ industries, like mining and steel production, and spawned newer technologies which created new markets and drove important infrastructure  development, like the railways and shipping.

But if the Industrial Revolution did not precipitate ‘Peak Employment’ could it be said to have stoked social unrest ?

“The concept of “Skill Biased Technological Change” (SBTC) posits that technology contributes to the de-skilling of routine, manual tasks.A changing world and new technologies are usually to blame for the world’s worries.”

Was the invention of the printing press responsible for the Reformation and the religious unrest that followed ? Was the invention of the combustion engine, mechanisation, and the production line responsible for the early 20th century conflicts ? Or did atomic power shape the late 20th century conflicts ? These questions I’ll leave to you, as I think I’m already wandering away from the subject of this article, which is ‘Peak Employment’.

So, it’s time to now look at the most recent technological innovations which are shaping our world today, the internet and computerisation. I’m going to look at the UK but I’m sure the findings can be extrapolated for all developed western economies.

Clark’s Sector Model (1950)

Industry, and thus employment, can be divided in to 5 broad sectors.

“Primary: This involves the extraction of resources directly from the Earth, this includes farming, mining and logging. They do not process the products at all. They send it off to factories to make a profit.

 

Secondary: This group is involved in the processing products from primary industries. This includes all factories—those that refine metals, produce furniture, or pack farm products such as meat.

 

Tertiary: This group is involved in the provision of services. They include teachers, managers and other service providers.

 

Quaternary: This group is involved in the research of science and technology. They include scientists.

 

Quinary: Some consider there to be a branch of the quaternary sector called the quinary sector, which includes the highest levels of decision making in a society or economy. This sector would include the top executives or officials in such fields as government, science, universities, nonprofit, healthcare, culture, and the media.”

As you can see Clark’s Sector Model has been shown to be broadly correct in the 60 years since it was developed. Primary and Secondary sectors have decreased, Tertiary and Quaternary sectors have increased, the sub- branch, Quinary sector which Clark’s Sector Model does not address has also increased.

There is an alternative way of looking at sectors of employment and that is to look at those that are used to evaluate GDP. They are:

  1. Agriculture, hunting, forestry, and fishing
  2. Construction
  3. Production industries, Electricity, gas and water supply, Manufacturing, Mining and quarrying.
  4. Service industries, Creative industries, Education, health and social work, Financial and business services, Hotels and restaurants, Other social and personal services, Public administration and defence, Real estate and renting activities, Tourism, Transport, storage and communication, Wholesale and retail trade.

The first employment sector has become more efficient due to mechanisation but, for now, it is now kept relatively stable thanks to EU subsidy.

The second employment sector is slumping but has potential for growth but you only have to look at Spain and Ireland to see examples of how an artificially stimulated construction sector can result in a bubble.

The third employment sector is more complicated. The utlities are private monopolies, infrastructure improvements could create employment but it’s difficult to see this happening without state intervention of some sort. Manufacturing has been moving east and shows no sign of returning any time soon. Mining has reduced significantly over the last 30 years, Quarrying remains controversial and is resisted locally.

The fourth employment sector, the service sector, is by far the largest making up 73% of UK GDP and it is perhaps hit the hardest by new technologies, specifically Retail and Financial business services where jobs are being regularly shed. And what is left in that sector ?

A large bulk of it is the Public Sector, most of the rest is take-aways, cinemas, and theme parks. OK, that is a simplification but these sectors, excepting overseas tourist related, just circulate money around the economy. And that is the only employment sector which remains relatively high, for now, but it is plainly unsustainable.

Employment is falling, unemployment is rising but hidden behind those headlines is the fact that part time Employment is rising.

Less people have full time jobs, more people have part time jobs, which means that the hours of work are being spread increasingly more thinly across the population.

Some might argue that it is only because of the economic slump that all of these things are happening and that it is only temporary.

But I think there is enough evidence to suggest that this is a long term trend that has just been disguised by the boom of the last ten years and is only now really becoming apparent.

I fear that we have already passed Peak Employment and the downward trend will continue, perhaps disguised by increasingly more part time employment.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Newsboy's picture

I'm Long subsistence farming.

MillionDollarBonus_'s picture

I think I've finally worked out why there are so many poor people in the world. It’s so simple that I kicked myself for not getting it earlier. The reason there are so many poor people is literally because the 1% are keeping all the money for themselves. When the rich make one dollar, that is a dollar that is in the hands of the rich and NOT the poor. Libertarians have always said that business is good for the poor and that it promotes upward mobility, and I had always thought there was something wrong with that. Now I realize I was right all along. Businesses and rich business owners actually HURT the poor by taking money away from them. If a capitalist MAKES a dollar, the poor LOSE a dollar. Everything is starting to make sense now.

ZerOhead's picture

What is ‘Peak Employment’ ?

It's the state that necessarily precedes 'Peak Social Unrest' which has something to do with 'Idle hands' and Molotov cocktails or Greece or something....

Oh and MDB?... a Bank 'creates' dollars and then lends them to 'Capitalists' to inflate asset prices and suck the 'juice' out of the real economy. The system is so efficient now that no 'poor people' are required in the process.

Aziz's picture

Hey MDB — let's be honest — what you're really trying to say is that LIBERTARIANS are the reason there are so many poor people, right?

MillionDollarBonus_'s picture

Libertarians ARE responsbile for the massive amount of poverty in the world. Not many people know this, but in third world countries like the Congo, Angola, India and Mexico there is absolutely no government welfare ... That's right - NONE. Is it any surprise that these countries are so poor when their governments are not even providing basic necessities? Liberianism has infected the minds of politicians across the third world, and as a result they refuse to provide even basic necessities for their people. People are literally DYING because of libertarians. 

ejmoosa's picture

Sure, blame giving individuals freedom.  That's what is wrong with the US.  Too much freedom.

sgt_doom's picture

Oh wow, dood, bullwinkle the ejmoosa, you're really freaking retarded!

I mean, all those preemptive arrests, reminding one of the Gestapo from Nazi-ville times, really suggests freedom, right?

I mean, all those whistleblowers who are being prosecuted under the Espionage Act by the latest fascist in the White House, Obama (as opposed to that other fascisti now running for the prez, Romney), really suggests freedom, right?

Yup, the Obama administration financially supporting the overthrow of the democratically-elected government of Honduras, really suggests freedom, right?

Yup, those banksters granted criminal immunity by fascisti Obama really suggests freedom, right?

You got me, dood, too much freedom, right?

Debtonation's picture

You think this is only a monetary and wealth distribution problem.  The only way a society can be successful is if it actually produces products and services that can be consumed.  Standards of living have risen dramatically in India.  As for Congo and Angola, they probably don't produce much anything of value and therefore are poor.  There's no reason Mexico couldn't achieve a higher living standard, they just don't have an educated workforce capable of producing.  If you think free markets are so bad, tell us all why Hong Kong be came the cross roads of Asia while communist China under Mao suffered famine, tens of millions in starvation and widespread poverty. Two societies right next to eachother with diametrically opposite political systems, one succeeded, the other was a catastrophic failure.

sgt_doom's picture

Yo, dipshit debtonation, ever heard of the Congo Mining Company?

Ever heard of the Guggenheims?

Ever read a book?

BigJim's picture

Yes, wait, that's it, I can just now see how the Guggenheim's Congo Mining Company made Hong Kong rich.

Oh no, now I can't.

WTF are you talking about?

prodigious_idea's picture

Without EXPORTS, economies are usually precluded from growth.  Can't remember the last time I heard of a product from the Congo or Angola.  Never mind the political structure that impeded the otherwise distributive effect of economic growth, consider China's economic growth once their export sector grew.

AnAnonymous's picture

You never heard of product coming from the Congo, Angola? ummm, US citizens are really pampered by their State, which allows them to live in the bliss of ignorant life.

AnAnonymous's picture

If you think free markets are so bad, tell us all why Hong Kong be came the cross roads of Asia while communist China under Mao suffered famine,

_____________________________

Hong Kong is free market? Is it US citizen approved?

Hong Kong became the trade hub it is for the main reason the other do: the location.

Which is a physical property.

But hey, US citizenism is as US citizen do.

francis_sawyer's picture

 " People are literally DYING because of libertarians..."

~~~

People are literally being BORN because of socialism (as goes the argument)... The more useless eaters the better... Right MDB?

mkhs's picture

Well, I have a simple mind, and I prefer leaving it at " People are literally DYING."  Everything else doesn't make a bit of difference.

MeelionDollerBogus's picture

heheh, successful Re-Troll(tm)

Aziz, LIGHT

Seer's picture

Nailed it! :-) (+1000)

Michael's picture

When the USA defaults on its $17 trillion national debt, there will be plenty of jobs because China and the rest of the planet won't trade with us anymore, a great thing, and we'll have to make shoes in the USA again.

Complete and total worldwide economic collapse solves most of these problems for us. 

Don Keot's picture

  Michael, I wish I could give you more than +1, that is so right on, the Amish may be on to something.

Seer's picture

"and we'll have to make shoes in the USA again."

... to sell to the Chinese...  If we weren't massively in debt I'd say that this would all be good (manufacturing locally to sell to local markets), but, I doubt that cobblers will be able to make those payments on their $2,000/mo mortgages: either shoe prices go up to allow for the cobbler to make payment, or costs of other things go up as a result of the banksters passing along the reduced mortgage costs to everyone.

And the sad thing is that the cobbler, who was shafted like most everyone else, will end up having banksters as his/her customer base (no one else can afford the cost of the shoes).

Rock and hard place...

Don Keot's picture

The shops on Saville Row have done alright for a couple hundred years doing just that but I'm not sure how that affects the economy.  Seems like the suppliers of goods and services to the 1% are doing better than most.

NotApplicable's picture

Hey, quit screwing up the threadjack comment, and post your bait further down please.

derek_vineyard's picture

.............until those receiving million dollar bonuses start turning up bludgeoned and floating in rivers

Debugas's picture

you are right. It is called crisis of overproduction whereas in fact it is crisis of lack of payable demand.

And this lack of demand is the primary reason why we were accumulating debt for the last 40 years like crazy -to artificially prop up the demand

narnia's picture

the economy is not a zero sum game

MeelionDollerBogus's picture

Smart poor people get less poor by making money from dumber rich people. Dumber smart people get less fed then die sooner, leaving the Earth with many less poor people.

sgt_doom's picture

Many Thanx, MillionDollarBonus, for injecting logic into this conversation --- some of these insipid blog posts here.....

And please allow me to add a tad of actual arithmetic:

Since the 1980s, in America, there now exist only one-quarter (1/4) of the full-time, normal year-round employment jobs today, as compared to that period.

Why, as Caviar Emptor succinctly explained some time back, the restructuring of the jobs base downward.

We are no officially in the fourth jobless recovery, and back between 1987 to 1992 or thereabouts --- the first "official" jobless recovery (although I believe there were in actuality two prior to that), only one half of those millions laid off from full-time work were able to reacquire full-time work again (and half of those below their original wages, but let's ignore that for now).

So the first jobless recover back in 1987-1992 yielded one-half of the original employment, and the next three likewise.

Ergo, there is now 1/4 the existing full-time jobs (aritmetically would be 1/16, but we factored in retirements, deaths, incapacitating illness and maternal leaves forever).

Sorta simplifies this blog post a bit, now don't it??????

sunaJ's picture

Muppetology: verse 2

 

Little Miss Muppet
Relied on 'The Gummint'
To provide for her bread and cheese.

Come the stock market crumble,
She picked through the rubble,
Lamenting in hunger, "Why me?"

 

merizobeach's picture

All muppets please report for immediate Corzining.

The Axe's picture

the market is a no volume broken ponzi   look a iceberg....lets hit it...ha ha

Cursive's picture

"Peak employment" as it is defined herein is a monetary construct.  Thanks to artificially low money rates and easy credit creation via fractional reserve banking, the cost of capital is much lower than the cost of labor.

Essential Nexus's picture

Don't forget impractical labor laws and a massively expensive legal system.

Citxmech's picture

Yes, but economic reality is also tied-in to resource depletion and decreasing EROEI in the energy markets.  This is a really insightful way to look at decreasing marginal returns in an overly complex society.

sid farkas's picture

I can almost smell your newly minted PhD. You have a bright future on the board of the federal reserve or other govt agency. 

TruthInSunshine's picture

They have to birth machines to do the productive work that allows, at least for the time being, the wards of what remains of the net taxpaying population (about 47% of the total workforce pays more than they receive, and that % is shrinking), being the Too-Big-To-Succeed-Independently & Too-Knowing-&-Owning-of-Politicians Financial Institution parasites (aka Cronies & Best Friends Forever of the New York branch of The Non-Federal Reserve-less Non-Bank), the system to continue.

That system is a direct and unrelenting bleeding of capitalism's virtues until the day the last true entrepreneur, who was not weened on the gigantic mammary gland of what is the gargantuan queen maggot that is the modern day nation-state, that is propped up by the most foul activities and directed by the most foul creatures imaginable, decides that he/she can't work any longer or harder so that increasingly larger units of their sweat and toil are stolen, to prop up Big 'Sis any longer, and they turn off the lights and join the dole.

The Military-Financial-Money Masters complex is aiming for your head, bitchez.

http://cache.gawkerassets.com/assets/images/8/2011/06/surveillancefly.jpg

Rise of the (labor/task-oriented) Machines, bitchez.

 

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012...

http://www.openmarket.org/wp-content/uploads/2011/09/robot-helping.jpg

http://www.popsci.com/files/imagecache/article_image_large/articles/robo...

http://www.avenuesocial.com/blog/wp-content/uploads/2012/06/automated-So...

http://johnmichaelweir.com/wp-content/uploads/2011/09/productivity.jpg

 

NotApplicable's picture

I kept looking in the article for the idea of credit-fueled capital consumption as a driver, but it was nowhere to be found.

Like I tell every luddite, human needs are infinite while the human labor to meet them is not. If there is a lack of balance, it is due to a lack of freedom for the individuals concerned.

Citxmech's picture

I would say human desires are infinite.  Their needs are very finite.  The problem we have is that growth has been fueled far beyond that which is sustainable.

Seer's picture

GROWTH is NOT sustainable, PERIOD!

Growth -> "increasing expansion of a thing" (assuming "growth" is being applied in a positive direction [rather than negative, as in "negative growth" (which is kind of oxymoronic)]).

Sustainable -> "perpetual" (otherwise, STATE a timeframe!)

Let's be clear about what this means.  This is the premise that nearly everyone passes over (and is why people keep pounding their heads against the wall trying to figure out why things aren't working).

It's really simple, and bulletproof, math.  Look for Dr. Albert Bartlett's (video) presentation Arithmetic, Population and Energy for a very clear overview of this.

Citxmech's picture

Absolutely correct Seer. Poor choice of words on my part (Apologies to Prof. Bartlett!).

Maybe it would be more accurate to say that growth to a sustainable state is plausible - as long we're not talking about huge time-frames (though nature seems to abhor any such mechanism).

Of course, the human race is way beyond any point that could be considered "sustainable" right now. IMHO, our current challenge (which we're losing) is how to contract intelligently so as to avoid a catastrophic die-off.

BigJim's picture

What you appear to be completely blind to is improvements in productivity and technology.

For instance... 25 years ago we were using 60 watt carbon filament bulbs. Then we went to 20 watt compact florescents. And now 5 watt LED bulbs are here. A 12-fold decrease in energy consumption... and they're still being improved.

30 years ago, cars typically got 20mpg. Now the equivalent vehicles typically get 40 or even 50.

TVs... computers...

Yes, Malthus was right, the Earth cannot support an infinite number of people.  But if the new NatGas fracking revolution's promise is even half true, we've pushed the peak cheap energy point out a good twenty years, plenty of time to develop, perfect, and deploy Thorium.

Population growth in the developed countries has dropped to barely replacement levels, and what reproduction there is is almost entirely down to recent immigrants from the developing world. There's no reason to suppose that once they become prosperous, their reproduction rates won't  plummet too.

Stop panicking about infinite real economic growth scenarios.  Just because our present monetary system demands it, doesn't mean the underlying, real economy needs it to bump along just fine. Once we change the monetary system, most of our problems disappear.

Citxmech's picture

Unfortunately, there has been a decreasing rate of return on technology investment and the actual cost of production on the commons (otherwise known as ruination) has been externalized so it is not factored into pricing.

The longer we let our bets on ever-increasing industrialization ride, the more sure it is that we will eventually lose.

BigJim's picture

You're right, the sooner we give up bulldozers and go back to digging using sharpened sticks, the less we'll have to lose.

Citxmech's picture

The choice we face is closer to how much industrialization we can afford/the environment endure.  If our answer is above a sustainable limit - we will be down-sized.

object_orient's picture

All those improvements and the cost of living is still far higher than 30 years ago, thanks to inflation, higher gas prices, higher electricity rates and falling wages. Some deal. I can't wait for the new monetary system that will solve all these problems.

BigJim's picture

  ...and the cost of living is still far higher than 30 years ago, thanks to inflation....  I can't wait for the new monetary system that will solve all these problems.

Where does one begin?

Liberty2012's picture

Individuals freely exchanging their work (without being stuffed into never ending boxes of regulation).

BigJim's picture

Indeed.

But when I was asking "where does one begin?" I was referring to the (quite astonishing) assertion that inflation had nothing to do with the monetary system.

ejmoosa's picture

Return consistent profit growth back to the US business environment and you will see peak employment once again.

 

Keep sucking the profits out of companies to support those that are choosing to sit this cycle out while enjoying all the benefits, and we have indeed seen the peak employment in this nation.

catch edge ghost's picture

Yeah but... we ain't no where close to Peak Ink.

New_Meat's picture

Where is Trav7777777 when we need him?