This time it's different

By Razib Khan | July 3, 2010 2:11 pm

I’ve been hearing about structural adjustment due to technology and gains to productivity from people since the early 1990s. The sort of dynamic which motivated the original Luddites. But this chart from Calculated Risk makes me lean toward the proposition that the time is nigh. In relation to previous post-World War II recessions the big difference in unemployment seems to be in the area of the long term; these are those whose skills will degrade, and are probably least likely to reenter the labor force at an equivalent position.


DurationUnemploymentJune2010

CATEGORIZED UNDER: Economics
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  • http://math-frolic.blogspot.com “Shecky Riemann”

    The sheer rapidity of current technological change makes this a different economic downturn than experienced before. Possibly that same technological change will generate whole new industries needing an influx of workers… otherwise, Paul Krugman may turn out right in predicting a coming depression (something, a lot of economists may be thinking, but afraid to say out loud).

  • http://lyingeyes.blogspot.com ziel

    Possibly that same technological change will generate whole new industries needing an influx of workers…

    When manufacturing was revolutionized by Henry Ford’s assembly line it actually vastly increased the numbers of industrial workers. I agree with your skepticism that any emerging technologies will have such an effect.

  • http://haquelebac.wordpress.com/2010/04/06/my-fossil-railroad/ John Emerson

    Pretty much everything that’s happened in the last 30-40 years has worked to the disadvantage of American labor. Untangling the specifics won’t be easy, but you’d want to start by enumerating the factors at least. besides technological change there’s immigration, offshoring, international trade, the weakening of unions, anti-labor political leadership, changes in tax structure, etc., changes in industrial organization and finance….. most of these had net negative effects even though there were some positive effects too.

  • Alexander Pico

    The key is developing strategies for scaling new industries domestically, and not relying soley on their invention… at least according to Andy Grove. http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html

  • bioIgnoramus

    I find it hard to believe that the weakening of the unions harmed “labor” since the job of a union is to give advantage to its members at the cost of its non-members. Averaged over those two sorts of “labor” it’s unlikely that they gained net. Even worse, although the purpose of a union is nominally to give advantage to its members, in fact it often ends up that its real purpose is to give advantage not to the members but to the union officials.

    These dramas were played out in Britain in Thatcher’s time, and the anti-union crusaders were proved triumphantly right, in my judgement.

    The main effect on US labor over the past 4 or 5 decades must have been, I’d guess, that their competitors emerged from bankruptcy, bomb-damage and socialism, and showed US labor to be essentially uncompetitive.

  • http://haquelebac.wordpress.com/2010/04/06/my-fossil-railroad/ John Emerson

    So you say, bioIgnoramus.

  • Luke Lea

    When economists talk about “technological change” in this context what they really mean is “labor-saving technological change,” examples of which you see featured on Modern Marvels all the time. Its net effect, by definition, is to reduce the demand for labor relative to supply at current wages. In order to restore balance, unless you artificially restrict the supply of labor — by legislating a shorter standard workweek for example — it is necessary to reduce real hourly wages, which since Keynes is usually done by the relatively invisible process of inflating the currency two or three percentage points per year.

    But in the current deflationary period that is not happening despite the best efforts of the Fed, which may explain the rise in long-term unemployment. If deflation persists expect to see a decline in nominal hourly wages as stated in current dollars per hour, which is more difficult to conceal.

  • bob sykes

    Off-shoring cannot be a big reason for job loss. China is also losing manufacturing jobs as the decrepit and grossly inefficient factories left over from the Mao era are modernized. I suspect the same is happening in India. Back in the 70s/80s we had a steel industry that was largely left over from the WWI (I not II) armaments build up. That industry was modernized and is nowadays competitive on world wide. But the job losses were horrendous, and the Rust Belt has nevered recovered. Detroit lost half its market share in the US because of manufacturing inefficiencies.

    This raises the question, What will happen to our current immigrants, both legal and illegal? The vast majority are unskilled, and many do not speak English and are illiterate in any language. There has got to be something very, very ugly festering here.

  • James

    The fundamental underlying cause of the long-term unemployment surge is demographic. The baby boomers are retiring although some sooner than they would have liked!

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About Razib Khan

I have degrees in biology and biochemistry, a passion for genetics, history, and philosophy, and shrimp is my favorite food. In relation to nationality I'm a American Northwesterner, in politics I'm a reactionary, and as for religion I have none (I'm an atheist). If you want to know more, see the links at http://www.razib.com

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