On the 125th Anniversary of the Wall Street Journal, Summers wrote an essay on July 7, 2014 on the economic challenge of the future: Jobs. Summers said the economic challenge of the future will not be producing enough. It will be providing enough good jobs. The piece concludes, “the challenge for economic policy will increasingly be generating enough work for all who need work for income, purchasing power and dignity.”
The Economic Challenge of the Future: Jobs
The great economic problem for millennia has been scarcity. People want much more than can be produced. The challenge has been to produce as much as possible and to ensure that everybody gets their fair share.
In important respects, the problem has changed. There are many more Americans who are obese than who are undernourished, for example. But that is only a harbinger of things to come. The economic challenge of the future will not be producing enough. It will be providing enough good jobs.
What has happened in agriculture over the past century is remarkable. The share of American workers employed in agriculture has declined from over a third a century ago to between 1% and 2% today. Why? Because agricultural productivity has risen spectacularly, with mechanization reducing the demand for agricultural workers even as food is more abundant than ever.
All of this has had far-reaching implications. Tens of millions of people have moved from rural to urban areas to take jobs in manufacturing and services. Supporting those left behind has led the federal government to spend well over $100 billion in the past decade. Though global issues surely remain, the problems in American agriculture today no longer involve ensuring that food is available, but ensuring livelihoods for those who once worked in agriculture.
”Software is Eating the World’
What has happened in agriculture is happening to much of the rest of the economy. In Marc Andreessen’s phrase, “Software is eating the world.” Already the number of Americans doing production work in manufacturing and the number on disability are comparable. There are good reasons to expect an uptick in the next few years in manufacturing employment. But the long-term trend is inexorable and nearly universal. As in agriculture, technology is allowing the production of far more output with far fewer people. No country can aspire to more of an increase in competitiveness than China, yet even it has suffered a decline in manufacturing employment over the past two decades. And the robotics and 3-D printing revolutions are still in their second innings.
What about services? A generation from now, taxis will not have drivers; checkout from any kind of retail establishment will be automatic; call centers will have been automated with voice-recognition technology; routine news stories will be written by bots; counseling will be delivered by expert systems; financial analysis will be done by software; single teachers will reach hundreds of thousands of students, and software will provide them with homework assignments customized to their strengths and weaknesses; and on and on.
Those losing jobs due to increased productivity will be freed up to do things in other sectors. But there are many reasons to think the software revolution will be even more profound than the agricultural revolution. This time around, change will come faster and affect a much larger share of the economy. Workers leaving agriculture could move into a wide range of jobs in manufacturing or services. Today, however, there are more sectors losing jobs than creating jobs. And the general-purpose aspect of software technology means that even the industries and jobs that it creates are not forever. Not so long ago it was explained that the VCR might be bad for the movie-theater industry but Blockbuster was a major job creator.
Job availability is already a chronic problem in the U.S. Consider what has happened to 25- to 54-year-old men, a group that is instructive to consider because there is a strong prevailing expectation of universal work. Some 50 years ago, 1 in 20 men between those ages was out of work. Since that time the workforce has gotten substantially healthier and better educated. Indeed, the improvements in education have been far greater than anything we can expect to take place over the next two generations. Yet it is a reasonable estimate that 1 in 6 men between 25 and 54 will not be working if and when the economy returns to normal cyclical conditions.
If current trends continue, it could well be that a generation from now a quarter of middle-aged men will be out of work at any given moment. In such a world, more than half of men would have an out-of-work spell of more than a year at some point during their prime years. We do not yet fully know what the capacity to come back to work after such an experience will be, but the experience of men out of work for a long time because of the Great Recession is surely troubling.
So the challenge for economic policy will increasingly be generating enough work for all who need work for income, purchasing power and dignity. What will this require? The role of government was transformed to meet the needs of an industrial age by Gladstone, Bismarck and the two Roosevelts. We will need their equivalent if we are to meet the needs of the information age.