Running out of jobs? (2 updates)

(Perhaps it’s time to step away from the ELCA’s problems and look at problems that are of more consequence.)

A concern being raised by many economists is the potential for a “jobless recovery” from the current recession. In this scenario, economic activity begins to pick up but unemployment remains stubbornly high. One person in particular, however, has focused on this and raised serious concerns that this could be a long-term and even worsening development.

Martin Ford is a Silicon Valley software entrepreneur who has been studying and writing about technology produced automation and increased efficiency. The loss of manufacturing jobs is a well-known development of recent decades. Ford says this is already spreading into so-called knowledge industry employment and the process is certain to accelerate. The scenario he envisions is one of ever-growing “structural unemployment,” i.e. people indefinitely unemployed or grossly under-employed.

His blog has a lot of material and it is being picked up by others in the economics community. I’ll leave it to you to read more there (or in his new book) if you’re interested. Obviously if Ford is being prescient then dramatic changes and enormous challenges lie ahead.

Or are they actually already here? Unemployment figures are notoriously difficult to gather or interpret. It is widely accepted that many people that are under-employed or who have stopped looking for work are missed by these statistical reports. Many urban areas have large pockets of persistent double-digit unemployment and many people who haven’t worked in years. This reality is also common in many small towns and rural areas.

The social problems of such places have befuddled us for years: crime, gangs, drug abuse, mental illness, broken families, chronic illness, dysfunctional schools. One interpretation of this may not be as simplistic as it appears: people with nothing to do get into trouble. Ford is raising the alarm that this is a reality that, not only is not going away, but is actually growing.

What would happen if a society is developing in which an ever growing number of people are economically superfluous? If you have ever been unemployed you know how devastating it can be to your self-esteem. It doesn’t bring out your better self. Hollywood’s dystopian futures typically involve alien invasions, natural disasters, or horrendous wars. The future Ford is envisioning and warning about is much more mundane but equally disturbing: a world of millions of people with nothing to do.

Update: Elizabeth Warren is a Harvard law professor and chair of the congressional banking oversight panel. Her column today on Huffington Post presents a stark picture of the current state of the shrinking middle class. Notice in particular the chart showing the divergence, beginning in the 1970s, of growth in productivity and growth in hourly wages. This is one symptom of the situation Ford is describing: Why is wage growth not matching growth in worker productivity?

Update 2: Prior to yesterday's Washington job summit, economist and former Labor Secretary Robert Reich raised his concerns about the difficulty the recovery will have producing jobs in sufficient quantity and quality. Money quote:

But here's the real worry. The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.