'The man who wants to take your jobs'

[sethg at ropine.com (Seth Gordon)]

John Chambers wrote:
> 
> Similarly, a small number of humans will probably always be needed to
> keep the economy running. But it may well stabilize at a rather small
> percent of the population.  What will  happen  to  the  rest  of  the
> population is yet to be seen.

See http://www.leftbusinessobserver.com/Jobless_future.html for a 
critique, with some hard statistics, of the "end of work" idea.  Key 
statistical point: The productivity of labor grew by about 1%/year over 
the 1990s, compared with about 2.5%/year during the 1960s.  The 
productivity of capital has been falling over the same period.  Key 
political point: if enough workers *believe* that all these jobs are 
vanishing for good, employers have a lot more power to demand wage 
concessions.

According to mainstream economic theory, the unemployment rate is 
primarily determined by the prevailing interest rate, which is primarily 
set by central banks like the Federal Reserve.  If interest rates are 
low, then more people will have an incentive to move their money into 
higher-risk investments, like the stock market, and companies that are 
more flush with capital are more likely to hire people.  If interest 
rates are high, then more people will have an incentive to move their 
money into T-bills, and capital-starved companies will have to lay 
people off.

(Please note that this model says nothing about *how much people will be 
paid* once they *are* employed.)

Of course, capital-flush companies can use their money to hire workers 
outside the US ... but they have to pay the foreign contrators in US 
dollars (or some other dollar-denominated securities).  If there's no 
demand abroad for a US export that can be bought with those dollars, 
what good are they?

I suspect that if the offshoring trend has a growing effect on the 
economy as a whole (as opposed to being a passing fad, or something that 
a sensible government can counteract with things like targeded 
job-training programs), the government will simply push down the value 
of the dollar relative to other currencies.

> 
> Maybe Wells was a prophet.
> 
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-- 
"You are surprised to be told by this crew that Oceania
  has always been at war with Eurasia? Where have you been
  for the past four years? Hiding under a rock?" --Brad DeLong
// seth gordon // sethg at ropine.com // http://dynamic.ropine.com //