BY PHILIP KOTLER
If We Face a Jobless World, What Can We do About it?
A depressing thought: U.S. citizens are facing the prospect of slower economic growth for the next 10 or 20 years. Instead of returning to the 3.5% growth rate of the post war period, GDP, at best might grow at only a 1.5% rate.
Larry Summers, the former Treasury Secretary and one of our world’s most prominent economists, suggested that slow economic growth and secular stagnation might be our fate for a long time. Japan has seen this, Europe may be facing it, and it might be the U.S.’s fate as well.
Northwestern University economist Robert J. Gordon forecasted slower economic growth in his 2012 article “Is U.S. Economic Growth Over: Faltering Innovation Confronts the Six Headwinds?” Gordon believes that the big gains in productivity that supported an expanding middle class and the modern welfare state won’t be repeated in the future. He sees technology continuing to grow, but not likely to bring about new breakthroughs on the scale of the steam engine, the internal combustion engine, indoor plumbing, electricity, the railroad, automobile, airplanes, computers, and the Internet. Each of these created great spin-offs, such as highways, air-conditioning, and efficient factories that kept the economy growing for decades more. Gordon doesn’t think that the digital revolution will have impact on the scale of previous major innovations. He sees six forces as dampening future U.S. growth:
1. our aging population,
2. our faltering education system,
3. growing income inequality,
4. rising foreign competition,
5. the inevitable impact of global warming, and
6. the need to eventually pay down our debt.
He sees these forces combining to spell stagnation and a future decline in living standards for a large portion of the US population.
Fareed Zakaria, in a 2016 talk at the Chautauqua Institution, pointed to two post-World War II major developments – globalization and digitalization – that have been reducing American jobs and wages in recent times. Globalization allowed multinational companies to move their production locations to wherever goods could be made at the lowest cost. Production moved to China and Asia and might eventually move to Africa. We can’t expect the United States to regain many of its former manufacturing industries. Our costs are just too high. U.S. manufacturers need to find more complex things to manufacture where they believe they have a comparative advantage.
Digitalization – the rise of the computer, Internet, software, the mobile phone, with instant worldwide communication of voice and data – has conferred many benefits, including greater access to world knowledge, greater efficiency lowering the cost of manufacturing, and a reduction of boring repetitive work. But digitalization has eliminated many jobs. A steel manufacturing company needed workers to watch and adjust the minute-to-minute temperature settings and to manage the smooth operation of the assembly line. Today these tasks can be performed better and cheaper by sensors and software. The giant Kodak company and its huge number of chemists, because it didn’t envision and adapt to changing technology, is today only a former shadow of itself as photographic film was replaced by digital recording of still and moving pictures.
Advanced level teaching in the past required live teachers. Today many students can learn chemistry, physics, electronics and other sciences on their own from MOOC courses viewed on their computer. MOOC stands for Massive Open Online Course and is an online course aimed at unlimited participation and open access via the web. Human teachers will never be eliminated entirely, but their duties may change and their numbers may dramatically shrink.
Let’s note that there are fewer jobs left in printing, publishing, banking, travel and countless other industries that are now run by software controlled equipment. We hear of software that can compose news items about sport and political events without needing the hand of a journalist. We hear that driverless cars will lead to driverless trucks and buses, all eliminating millions of driver jobs. “Pilots” in a remote cockpit somewhere on the ground, are already controlling flying drones. Why not passenger and cargo planes too?
Granted, we need people to design, manufacture, store and deliver the digital tools and software to run much of these industries. Digitalization does create new jobs. But the consensus opinion is that the number of new jobs created by digitalization will be only a small fraction of the number of jobs eliminated by digitalization.
This brings us to face a possible dystopian world marked by very few permanent jobs. Consider Youngstown, Ohio following September 19, 1977, when the Youngstown Sheet and Tube company shut down its Campbell Works mill. Before then, Youngstown residents enjoyed prosperity and a high homeownership rate and a good median income. The closing of the mill cost the city 50,000 jobs and $1.3 billion in manufacturing wages. The workers lost their jobs, their identity and self-esteem. The America Dream died in Youngstown that day.
This same human tragedy took place on a much larger scale during the 1930s Great Depression. More than 25 percent of U.S. workers couldn’t find employment. Photos show endless lines of unemployed people looking for work, or maybe just a cup of soup. Home foreclosures, hunger, family breakups, and growing crime, ripped many families and communities apart. Although deeply concerned, President Herbert Hoover chose to leave it to the states to act and he hoped that private charities would help mitigate the human hardships. He believed that self-reliance and individual initiative would resolve the crisis. He felt that federal government intervention would rob people of initiative and weaken the American character.
Fortunately, Franklin D. Roosevelt won the 1932 Presidential election. He immediately introduced dozens of Federal Government programs during the first 100 days in what he called The New Deal that would lift the three R’s – relief, recovery, and reform. Among the programs were the Civilian Conservation Corps, the Federal Emergency Relief Administration, the Public Works Administration, the Civil Works Administration, the Emergency Banking Relief Act, the Glass-Steagall Act, the National Industrial Recovery Act, The Tennessee Valley Authority, the Soil Conservation and Domestic Allotment Act, the Federal Housing Administration, the Securities Exchange Commission, the Works Progress Administration, and several other programs to relieve suffering, help industry recover, and reform practices that had caused the depression. FDR embraced the Keynesian Theory of deficit spending to reactivate the economic life of the country.
If our nation is again thrown into a Great Depression or becomes a Nation of Few Permanent Jobs, we should consider reviving many of these programs. First they would create jobs for workers as well as those planning and administering the programs. Second they put money into the pockets of low income persons who will spend virtually of this money and keep production going.
Is it Possible to be Live a Good Life and Yet Lack a Permanent Job?
When workers have a 40 hour a week job, their life has a “center” to it. Their job not only defines a good eight hours, or more, of their life each weekday but also it defines their relationships, their status, and who they are to other people. Although a high percentage of workers report that much of their work is boring, but they also mention pleasant moments around the water cooler and during the lunch period where they share a community. Long term employment usually engenders positive self esteem.
But all this disappears when workers lose their permanent job and they cannot find another quickly. Most end up with two problems:
- How to live on unemployment benefits while they look for comparable work, or how to live at a lower income level if that is only what they can find?
- If no or only part-time work can be found, then how to fill their new “unoccupied” time.
But every such person is different. Are they close to retirement age, with savings, little debt, grown children? Is their spouse earning income? Are they in a position to adjust/cope to their new reality with lower or no outside income––except from government programs? Or are they young, just starting out, raising a young family? Have little or no savings, a mortgage and credit card debt? Might the spouse have to try to find work? Can they downsize and hope for help over and above government handouts––perhaps from parents or other family members. And there are many, many people at all levels in between.
How to Live on a Lower Income
Job elimination is taking place continuously in many different industries, companies, and locations, for many different reasons. Company sales might be declining because of technical innovation by competitors, i.e. Kodak, Commercial and retail businesses might be shrinking due to shifting demographics, consumer tastes, and any number of reasons. Businesses in such distress will, no doubt, need to cut workers or adopt some work sharing arrangement if the workers are will. French companies have typically responded by establishing shorter work weeks. There is nothing sacred about a 40 hour work week. But a shorter work week at the same wage, will result in lower weekly pay. Unfortunately, the plight of many of these companies continue to worsen and in the end most or all of the workers lose their jobs.
Today when persons lose a job, they can go to their local U.S. Department of Labor Office and file a claim for unemployment benefits. The Office determines a payment amount and time period of workers’ compensation benefit based on the applicant’s past work longevity and earnings. Again you can imagine how this might affect younger vs older workers. The applicants will also see job listings and be encouraged to apply. They should want to find a new job before the benefits expire. And many workers may end up forced to accepting lower paying jobs in the service sector, retail, fast food, or other such industries––that pay less, offer lower or no benefits, and fewer hours of daily or weekly work.
If they don’t take any of these jobs, some with an entrepreneurial spirit might do paid “gigs” such as baby sitting, lawn mowing, driving others with Uber, renting out sleeping space with AirBn, doing shopping for others or finding opportunities in health care, e.g. taking care of the elderly. There are also decent jobs available after only a short program in retraining.
But there will still be those who end up with an income below the poverty level. Imagine how hard this will be on them and on their families? How will they pay the mortgage, credit card debt, and provide food, clothing and shelter, for themselves and their families? They will have to undertake sharp cost cutting. They will have to buy less clothes or buy at Goodwill or a number of other second hand goods outlets. They will have to do more cooking in the home, or eat lower cost meals out of the home. They, no doubt, will cut down on movie attendance and rely on TV for entertainment if they can still manage the monthly fee.
Most will receive some benefits from the government(s) and society’s safety nets: Social security, welfare, rent and heat assistance, medical care, etc.
But ultimately, the nation will have to figure out other arrangements to help needy people, living below the poverty line, meet their living costs and improve their status. One possible form is the Earned Income Tax Credit. The person still has to file his or her income tax return, however low it is. The person would apply and receive a refundable tax credit depending on his or her income and number of dependents. This payment helps persons meet their living expenses without going into further debt. The worst thing is for low income people to go into deeper debt to pay their bills.
An alternative proposal gaining attention is the idea of a Universal Basic Income. Everyone – rich and poor – receives each year a fixed sum from the government. Suggestions have varied from $1,000 a year to $10,000 a year. Countries such as Denmark, Finland, Sweden and Switzerland have been considering this. How would this be financed? Ultimately the government may have to raise tax rates on the wealthy and redistribute the money.
How to Fill Unoccupied Time
Our citizens were raised to live a life of work. Even rich families expected their children to work hard in school, learn some skills, get a good job after college, and work a 40-hour week or more. Whatever their interests were, these had to be subordinated to their chosen career. Their interests could be handled as hobbies or pastimes.
Now that robotics and automation will lead to fewer factory or office jobs, how should we educate our students? Whatever career they study for may not exist or might offer too few jobs when they graduate. Schools must give our students the basic skills of reading, writing and arithmetic. We should give students skills in business and finance so they can manage living with possibly lower incomes. We should give them skills in fixing things so they don’t have to hire others to hang pictures, fix a leaky faucet, or paint their walls. We should give them opportunities in the creative world of cooking, acting, playing in a band, writing poetry or fiction or whatever. We should give them a good education in science, history, psychology, and sociology. All the great educators expect schooling to give students broad knowledge of the past, present and future and ignite their native curiosity and creativity.
The problem of finding and defining oneself outside of a normal permanent work life arises all the time for one group of citizens: those who have to retire at (say) 65. They have to pack up their belongings, say goodbye to their factory and office mates, and leave the premises. They have to figure out what do with the rest of their lives.
Retirees end up with a great variety of retirement life styles. Some retirees spend their time watching TV or using their computer and Internet. Some retires spend large blocs of time playing cards whether bridge, poker, or other card games. Some turn to writing poetry or a book such as a murder mystery, a personal memoir, or a nonfiction book. Some start studying a foreign language or mastering a particular cooking cuisine. If their money allows, many will travel. If they don’t have money, maybe virtual reality technology will enable them to visit and see places from the comfort of their home.
The problem that we will now face is that many people will retire not at age 65 but much earlier. Many unemployed persons today have stopped looking for a permanent job. They are supported by their family, by some anti-poverty and welfare programs, and by some miscellaneous earnings opportunities.
Our politicians need to start talking now about how to assist a growing number of people with low incomes who have lots of time on their hands.
 Lawrence H. Summers, “US Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound,“ National Association of Business Economics, February 24, 2014.’’’
 Robert J. Gordon, “Is U.S. Economic Growth Over: Faltering Innovation Confronts the Six Headwinds?” NBER Working Paper #18315, Issued in August 2012.
 Derek Thompson, “A World Without Work,” Atlantic Magazine, July-August 2015.