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Economics

What happens when 80% of the work is done by 20%?

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What happens when there’s not enough work? Unemployment and societal problems related to unemployment. But let’s be honest, the goal of civilization should be a 100% unemployment rate and we’re still quite a way off from that. So the present unemployment rate is far too low! Why is this even a problem? Initially, I thought it was due to the creation and distribution of wealth, but after examining it more deeply it may have to do more with the nature of work itself.

First of all, as with all historical periods, we’re in a very novel one. With technology advancement, the individual productivity is so high, that there shouldn’t need to be 100% employment. For example, back in the 1800′s, a country’s population was it’s foremost asset. The fertility of women[i] was of primary importance because having many children meant that there were more labourers for the land. With industrialization and automation, not only has the amount of labor required decreased, but the amount of skill required has diminished as well. In our socio-economic framework, labor is just an input and by necessity will decrease with the industrialization of nations. Labor is simply a constituent element of the system to make profit and humans are required to fit into the system to survive, not the other way around. As Gandhi said when asked by a reporter what he thought of Western civilization, “I think it would be a very good idea.”

It’s been over 80 years since Keynes spoke amidst the Great Depression, “I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue – that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable…But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.” Are we there yet?

In economic terms, we are no longer in a growth economy, but the entire system is predicated on a percentage growth of GDP year over year[ii]. This has been going on since the Depression, but the effects were masked since WWII because of the destruction and rebuilding of Europe, which allowed the export of American goods worldwide. This has been completely reversed in 60 years, and now the world runs off of American debt. The state of being in a growth economy is difficult to maintain, even cancer has to stop when it has destroyed it’s host. However, we still have a great opportunity to rethink the purpose of governance and civilization and not be servants to the tentacles of progress.

The needs of humanity are few. So what actually happens when 80% of the required work is done by 20% of the people? Or better put, what happens when there’s not enough real work to be done?

Education Inflation
Not only has the amount of education required to get a job increased, the amount of specialization in education has also grown. In the 50′s, one could get a job out of high school, buy a house, raise a family, and send kids to school on a single income. This is now the exception, not the norm. It now takes two incomes and children are in debt after going to school. Education is a business after all. In the 70′s and 80′s, a bachelor degree was considered good enough for a job. Now this has been increased to a master’s or PhD. I’ve met many recent university graduates that just can’t find work after receiving their bachelor’s and so they go back to school. If there were enough jobs/work that paid well, why would anyone spend six years and be 100k in debt before entering the workforce? The most extreme case of this is in China, where there are 6 million university graduates each year a quarter of which are unemployed.[iii][iv] Consequently, as the system doesn’t need the workers, we actively need to keep people out of the workforce and over-education helps in that regard.

Product proliferation
Contrary to popular opinion, human wants and needs are not infinite. Humans need to be convinced that they need more. The British needed to import slaves for the sugar plantations as the natives would not work[v]. As a consequence of the satisfaction of basic needs, at least in the first world, means we have all our basic products. What follows is that in the system, we must develop more wants such that we have more products. We need hundreds of different types of razor blades, hair products, etc. The creation of these desires happens through mass marketing and salesmanship as most of these products are simply unnecessary. Windows Vista may have cost up to 10 billion to make[vi]. What’s the improvement over Windows XP? In fact, is there any increase in productivity between using Wordperfect 5.1 and Microsoft Word? The diminishing returns of technological progress and product proliferation are costly.

Corporate raiding for fun and profit
Why create jobs when the most profitable thing to do is to destroy them? In developing nations, it’s easy to see businesses which can improve the standard of living and also make a profit through technological advances. But in the first world, there is a lack of these ideas. Capitalism underfunds true innovation for the purpose of profit maximization. In fact, even though it’s tough to do anything productive for the masses, coupled with favorable laws and accounting tricks, in the right scenario, it’s very easy to make a profit. How? By taking an otherwise profitable and productive company and stripping it down to the bones.[vii] Consider a leveraged buyout. What does that really mean? That means a firm gets a loan from a bank, buys out a company that has assets such as a pension, etc., and then uses those assets to pay the loan. Essentially, the company is buying itself, but is put under new ownership. If it doesn’t make sense, that’s just because it doesn’t make sense. Then, after the buyout, the new management justifies layoffs / work destruction and cutting capital costs for “efficiency”. Clearly, there isn’t enough productive work for capital to do.


The stagnation of the economy has been apparent for the past 20-30 years in the disconnect between work and profit. These are only some of the issues with the profit principle in the present economy. The essential requirements of the human condition are not that much, but the ease of living only comes from wealth of the land. Native Americans lived well off the land through control of their population, such that the first colonists, thought them lazy and indolent, and if they only worked harder, they could have even more.

As Keynes, among others, foretold, capitalism will lead us out of economic necessity. However, we have not taken advantage of its fruits. For instance, it is unnecessary as a society that there be full employment at 40 hours / week. Unfortunately, there’s no simple way to have both decentralized power and concentrated technological production to allow this to happen. It’s been demonstrated that systems that concentrate power, like communism in the State or capitalism in the owners, are dangerous. In any case, though the distribution of wealth is important, the system and the nature of the work are more important. In this era of affluence, why are we working so hard? It would be because we’re actively destroying wealth[viii]. But we’re not only in an era of wealth destruction, but work destruction. Whether this is good or bad remains to be seen, but it presents an opportunity that has never come up before that requires understanding economic laws differently.

tl;dr – we don’t need to work as much, but there are systematic issues with socioeconomic system that force society to labor

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  1. apologies for the objectification in advance []
  2. which is complete madness if one understands both the effects of compounding and the rather ambiguous measurement of GDP []
  3. http://www.reuters.com/article/2011/09/16/us-china-graduates-idUSTRE78F43620110916 []
  4. http://www.telegraph.co.uk/news/worldnews/asia/china/5907368/Wave-of-suicide-sweeps-Chinas-graduate-class.html []
  5. Can’t find the reference…yet again []
  6. http://seattletimes.com/html/businesstechnology/2003460386_btview04.html []
  7. This process isn’t a new phenomenon. Examples go back to the early 1900′s with Rockefeller and the Robber Barons. []
  8. Economically, environmentally, educationally []
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