The Great Decoupling of the US Economy

by Andrew McAfee on December 12, 2012

If you were in charge of the economy, you’d probably care that it could produce a lot, that it had high productivity, that it provided lots of jobs, and that these jobs offered decent pay on average. You might well care about other things, too, but if these four indicators were all headed in the right direction over time (in other words, UP) you’d be pretty happy.

So how have we actually been doing in the US? Well, as the graphs below show we’ve been experiencing a long, slow decoupling between the first two of these — output and productivity — and the last two — jobs and wages. For more than three decades after the end of World War II all four of these measures went up together:

 

The French call the thirty years after the war les trente glorieuses, reflecting the shared economic prosperity of the period. Well, we had a bit more than trente spectaculaires of our own.

In the early 1980s the picture started to change for the average American worker. There were still a lot of jobs available, but they started to pay less well. Median household income became decoupled from the other three stats and grew more slowly than they did. By the time of the 2001 recession, median income was lagging behind pretty badly. If we’re going to stick with Gallic labeling, the years between 1982 and 2001 were the vingt troublantes:

 

By the end of 2011, things had become much worse in two ways. First, median household income was actually lower than it was a decade earlier. In fact, it was lower than at any point since 1996. And second, the American job creation engine was sputtering badly. Between 1981 and 2001 the economy generated plenty of low-paying jobs. After 2001, though, it wasn’t even generating enough of these, and employment growth started to lag badly behind GDP and productivity growth (on all three graphs here, GDP growth is charted on a separate axis because it grows more quickly than the other three). The last ten or so years have been les dix déprimantes.

What’s going on? Why have the things that workers care about – jobs and wages – become decoupled from the the other things that  economy-watchers care about? So far, explanations for this unhappy phenomenon include tax and policy changes, and the effects of globalization and offshoring. These are clearly powerful forces, but there’s one other one: technological progress.

I’ve been talking a lot about this latter force here and elsewhere, and it’s the subject of Race Against the Machine, a short e-book Erik Brynjolfsson and I wrote that came out a bit more than a year ago (we’re working on a full-length sequel now).

Our argument, in brief, is that digital technologies have been able to do routine work for a while now. This allows them to substitute for less-skilled and -educated workers, and puts a lot of downward pressure on the median wage. As computers and robots get more and more powerful while simultaneously getting cheaper and more widespread this phenomenon spreads, to the point where economically rational employers prefer buying more technology over hiring more workers. In other words, they prefer capital over labor. This preference affects both wages and job volumes. And the situation will only accelerate as robots and computers learn to do more and more, and to take over jobs that we currently think of not as ‘routine,’ but as requiring a lot of skill and/or education.

As a result, I don’t see the four lines in the graphs above re-converging any time soon.

Over the past couple days this argument has gotten some attention and support from Paul Krugman, a Nobel-prize winning economist, New York Times columnist, and incredibly popular and prolific blogger. On Saturday he put up a post titled “Rise of the Robots” in which he wrote:

If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality…

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.

But I think we’d better start paying attention to those implications.

Erik and I sent him an e-copy of RAtM after reading the post. Krugman is evidently a fast reader, because his Monday Times column, entitled “Robots and Robber Barons” had this to say:

There’s no question that in some high-profile industries, technology is displacing workers of all, or almost all, kinds. For example, one of the reasons some high-technology manufacturing has lately been moving back to the United States is that these days the most valuable piece of a computer, the motherboard, is basically made by robots, so cheap Asian labor is no longer a reason to produce them abroad.

In a recent book, “Race Against the Machine,” M.I.T.’s Erik Brynjolfsson and Andrew McAfee argue that similar stories are playing out in many fields, including services like translation and legal research. What’s striking about their examples is that many of the jobs being displaced are high-skill and high-wage; the downside of technology isn’t limited to menial workers.

Still, can innovation and progress really hurt large numbers of workers, maybe even workers in general? I often encounter assertions that this can’t happen. But the truth is that it can…

We agree completely. As we wrote,

computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off.

Krugman writes that “I think it’s fair to say that the shift of income from labor to capital has not yet made it into our national discourse… but it’s time to get started, before the robots and the robber barons turn our society into something unrecognizable.”

The national discourse needs to acknowledge the Great Decoupling, and also acknowledge that it’s not going to be reversed by a couple quick policy fixes or even, I believe, by deeper changes to our educational and entrepreneurial systems. I believe it’s a simple fact of the technological era we’ve been creating.

I want us to continue this work of creation — as I’ve said before, unplugging the computers would be about as bad an idea as ripping up all the roads and closing all the schools — but as we do so we need to rise to the grand challenge of dealing effectively with the Great Decoupling.

How would you go about addressing this challenge? Leave a comment, please, and let us know.

  • http://twitter.com/stimhel Timshel

    “The national discourse needs to acknowledge the Great Decoupling, and also acknowledge that it’s not going to be reversed by a couple quick policy fixes or even, I believe, by deeper changes to our educational and entrepreneurial systems.”

    Yes. Education is not the answer. The people who will be displaced by technology are not the people who will thrive in the new environment and cannot become them. Most people are of average or below average intelligence. For healthy, well-nourished children, we know of no childhood intervention which can raise adult IQ. If this were widely appreciated, we’d be far less likely to waste precious years chasing the false hope of a fictitious solution. As it is, we’ll get “How can we restructure classes to turn underachieving kids into roboticists?” and ever-growing poverty amid plenty.

  • JP Harris

    Perhaps the starting point is to ask the question: “What are the things that have value which still can’t be done by machines?” Wouldn’t these be the things to focus on and the areas of greatest opportunity? One suggestion: areas that require creativity and innovation. Machines can’t create.

  • Anonymous

    I now remember that this topic was why I started to follow this blog; I don’t buy it. Your analysis is based on the US economy, but there are other alternatives. USA should be just as capital rich as oil-soaked Norway (my home), but when the median income in the US took a turn downwards, it had just started its soaring flight in Norway. The main difference? Norway has proper, functioning equality measures going. Oh, and work in the law businesses isn’t its own industry here.

    So, you’re arguing that inequality isn’t the problem, but could that be because you’re not considering all possible equality measures? The most successful one in Norway, in my opinion, are the child day care subsidies. For a relatively small sum of cash, you’re entitled to a spot in day care for your child as it turns about 1 year. We’re talking about high quality, pedagogically founded day care. If you want, we can ignore the rather hefty amount of jobs that don’t require a lot of higher education (excepting pedagogic leaders, most are just assistants) that this subsidy creates.

    Instead lets focus on all the people, many with low quality education, especially women, that are now able to apply for full time jobs elsewhere. If they can’t get tech/knowledge jobs, what can they do? They can do manual labour, service labour.

    If the median income increases, what are these additional monies going towards? More things? More expensive things? Well, to some degree, but as we all know, technology is getting cheaper, and we need less gadgets to do more (the smartphone now taking the role of Internet device, radio, GPS, and so on), and this is also creating jobs of course, in detail sales and more. However. we find that we have more money for additional services, things like vacations, streaming services (possibly supporting more indie artists), house cleaning, hair dressing, nail polish, spa treatments, you name it. All require people now, most will in the future because seriously, who wants to be hair dressed by a robot? And if the median family income continues to increase, there will be innovation, real or not, in services to pick up the slack.

    The idea that robots will supplant a major portion of jobs required by the consumers in the near future seems positively false to me, excepting the case where the median consumer does not have enough money to pay for life quality increasing services provided by living people. This exception will be applied to economies where inequality keeps the median consumer down so it can’t afford these services, and since the people providing these services typically are also median consumers, you’ve just contributed to a downward trend instead of having these service employed consumers contribute to an upward trend.

  • http://twitter.com/umbrarchist umbrarchist

    labor

  • http://twitter.com/umbrarchist umbrarchist

    What good is productivity with planned obsolescence? Consumers are supposed to buy junk designed to become obsolete. But then economists can’t suggest mandatory accounting to influence the economic wargames on this planet.

    http://toxicdrums.com/economic-wargames-by-dal-timgar.html

  • JMK

    How would I go about addressing this challenge? We need serious research into the real world implications of a guaranteed basic income (http://en.wikipedia.org/wiki/Basic_income_guarantee)

    The only study that I am aware of was conducted in a single small town in Canada in the 1970s(http://www.cbc.ca/news/canada/manitoba/story/2010/03/25/mb-poverty-experiment.html).

    Without such experiments we will be left with wild speculation as to how able bodied people would react to being provided income to cover their basic needs without having to work at a job.

  • Anonymous

    So if technology and productivity lower prices, but now labor makes less money…

    …doesn’t labor still benefit from the lower prices? That is, if we automate so much that the only jobs left are menial servitude (say, the foot scrubber of a robber baron who doesn’t like machines), does it matter if even someone making these meager wages can afford an iPhone, cable TV, a car, and a bunch of furniture from Ikea?

    Honestly, if you look at some of the people on government assistance or under the so-called “poverty” line in a country like the US, it’s downright majestic compared to other parts of the world.

  • Anonymous

    I’ve got a problem with the whole “guaranteed income for basic needs”, when you don’t specify what “basic needs” are. Now, if you’re talking 10ft sq. of living space, three square meals a day, proper air conditioning in winter and summer, one shower a day, and five sets of basic clothing, okay, maybe I’m down with that. Add in expensive disease treatment, cable tv, and jewelry, and maybe I’m not so down with that.

    Oftentimes, the best thing for government to do is simply get out of the way and solely focus on the protection of private property rights and other negative rights.

    As an interesting thought experiment, what if you considered stay-at-home wives as “able-bodied people with basic needs covered without having to work at a job”?

  • http://twitter.com/geeksweep GeekSweep Studios

    unless they are programmed to create – which of course creates a new job , maybe a handful of jobs to handle the every day decisions a robot would to create “things”. just a thought.

  • http://twitter.com/BoBoZoBo BoBo ZoBo

    I am SO glad this fact is gaining traction. If you follow it to its logical conclusion, better technology and intelligent use of said technology should increase the output rate of any worker. Each worker can produce more… fewer people needed to reach a goal or make a product. The logical result, is that fewer people are needed to sustain an industry, even if that industry is growing. Meaning fewer people NEEDED to work to make an industry (or even society) to run.

    In the end, fewer people needing to work is a NATURAL RESULT of better technology that allows us to do more. Now we are reaching a point in history that technology is allowing us to do so much, that the increase in population is not meeting the growth gap that normally made up for this. The trend is already DECADES into this cycle, but the common logic amongst “experts” is that the above could not happen by technology alone, which of course, they are wrong. As a result, our mid-set and habits are completely incompatible with the reality of our world. And as most of our problems in life, expectations are the issue here. We are STRUGGLING to meet some obscure numbers of what we think should be normal employment and productivity numbers, but basing it off an incompatible past and (worse) stubbornness of antiquated “expert” ideas. As a result, we don’t understand why we canot solve the issue we have.

    For ONE, ignore the experts. Experts are for matters of the past. How many times have we heard “experts” and analysts try to predict and dictate things about the economy since 2008. Now how many times have you heard “didn’t meet expert predictions”?

    After we do that, we just need to change our mindset altogether. We are literally entering an ERA where fewer people are needed to sustain demand. So what do we do? We need to change our ideas of how long people need to work and how they are educated. Longer education cycles. Earlier retirement. More mentorships.

    How we think about compensation needs to change also. Your graph about salaries is correct. Unfortunately they cutting of salaries has been only one sided. Ridiculous CEO salaries and bonuses need to be rethought. If Anything we have learned from 2008 until now, none of these “masters-of-the-universe” have been nearly 1/2 as good as they claim to have been at solving problems. If they were, we would not be in the mess we are in now. Either they are not that good, or just got greedy. Either way, it needs to change. I cannot think for the life of me why anyone needs $10,000,000/year in bonuses. Yes, I get the “theory” and argument, but the reality is that it is not only un-sustainable, but no one really is that good at anything they do by themselves at that level. Nothing really justifies that much need for compensation for an office job. There is NO WAY any manager deserves a 100:1 pay ratio from anyone else in the company other than ego and greed.

    Allow the entire structure to receive a bump in salary and they will be able to sustain the members of their family that are caught in the natural wave of this technological ripple.

    For me the solution is simple. Unless we go backwards, this trend is here to stay. Better compensation is possible for everyone if a few can come to terms with their true value.

  • Anonymous

    “Most people are of average or below average intelligence.” Where are you from, Lake Wobegon? Exactly half the people are below average. Exactly half the people are above average. And, if you take it out to enough significant places… there is no one who is who is actually ‘average’.

    I think the poignant point of discussion is – “What do we do with all the people that technology left behind?”

  • Anonymous

    Andrew,

    Excellent post – and something that has been predicted by Science Fiction authors for years (starting in the 1950’s-1960’s – most prominently with Asimov) as the logical conclusion to an advanced technological society. I’m surprised that it took so many economists this long to figure it out… I saw this outcome when I was in my teen’s when the auto manufacturers were automating car production. My gosh, some of you guys are slower on the uptake than paleontologists, and geologists.

    Eventually, everything that a human can do can be done by a machine of some sort.. robot for physical work, computer (or computer system) for knowledge based work. I cannot think of a SINGLE HUMAN ENDEAVOR (including the creative arts) that could not, eventually, be handled by a machine.

    Where does that leave us? Taking to the logical extreme… take a look at humans… 35,000 years ago is where we will be (Planet of the Apes also comes to mind)… but instead of worshiping gods such as the Sun, Moon, trees and mountains, we will be worshiping the machines – that (if benignly) will keep us house pets. If belligerently, we’ll have scenes from The Terminator, The Matrix and iRobot. I don’t need to have three dogs and two cats to survive.. but I sure enjoy them as company. What is to say a machine might not enjoy us as company as well? They would communicate with each other via electronic means. We would communicate with them via archaic modulated sounds… we call it ‘speaking’ or ‘talking’.

    So, what do we do about this? Become Luddites and outlaw machines? I don’t think that will happen – there is a lot of ‘good’ that they have and continue to provide us. But I think we need to temper those advances with a good dose of reality – what will the eventual outcome be? How can/should we manage/transform our society to ensure a decent quality of life for the humans left that have been outsourced by machines? Or, do we care so little for our humanity that the continued advance of such technology (and profits) is more important?

    This advance is like Global Warming… It was a long time in the making. It will be a long time before it plays out. But, it’s going to play out, one way or another. And sticking our head in the sand with our fingers in our ears going La La La La isn’t going to make it go away.

    Unfortunately, I don’t have many answers – at least ones that don’t massively intrude on free and open capital markets. It is market forces that are talking us down this path… that and our insatiable curiosity… I wonder if I can make my dog, cat, robot do this?

    FredInIT

  • Anonymous

    Even creative jobs can be automated, search for “genetic algorithms”. There are 2 solutions I’ve come up with off the top of my head. One is for everyone one to join and buy from MLMs (Multi Level Marketing). That way you devalue the production and inflate distribution. Hey, it works for some retailers. The second is, have everyone one become self sufficient, think 3d printing. I suspect there are other solutions as well.

  • Drew Brown

    Great ideas. Won’t better technology drive and incentivize better ways of working? How much of this is technology killing off the less-effective ways of working (the blood-leaching and phrenologies of the world)? To what degree does it just incentivize people to work differently, accommodating for the new technology?

  • http://twitter.com/EzShake Ezekial Shake

    Here is the blueprint:
    1. Full-time must go immediately down to 30 hpw, then 25 then 20
    2. Basic Benefits Package for all workers (including free cradle-to-grave single-payer healthcare)
    3. Once-a-decade 15% asset charge-off on the wealthiest 1% (raises over $1 Trillion and they’ll earn it back in 2 years)
    4. Minimum Wage raised immediately to $20/hr
    5. Transaction taxes on all market trades (raises at least $1 Trillion)
    6. Corporate-only Flat Tax – so they can’t hide their money and skate on their tax responsibility
    7. Capital Gains rate set at 25%
    8. Top Rate set at 50%
    9. Lift the cap on Social-Security so those earning over $107,000 pay into it an equal percentage (this raises hundreds of billion$ a year) … allowing:
    10. Double the Social-Security payout immediately, which opens up jobs for chronically underemployed Gen-X and Gen-Y (and now MIllennials), and:
    11. Lower SS eligibility to 60-62

  • Intanjir

    Your graphs are somewhat misleading.

    The BLS uses different notions of inflation for Productivity vs. Household Income.

    The basket of goods is very different for the sort of consumer items households purchase vs. the sort of items relevant to business costs.

    The Consumer Price Index(CPI) has undergone significantly more inflation than the Implicit Price Deflator for the Nonfarm Business Sector(IPDNBS). A significant portion of the divergence in your graphs is simply a reflection of this difference in inflation.

    Here is a nice pdf from the BLS showcasing this:
    http://www.bls.gov/opub/mlr/2011/01/art3full.pdf

  • http://twitter.com/zeroreference zero reference

    Take advantage of a post-scarcity economy to allow people to pursue a more fulfilling life for themselves?

  • http://twitter.com/zeroreference zero reference

    Take advantage of a post-scarcity economy to allow people to pursue a more fulfilling life for themselves?

  • http://twitter.com/zeroreference zero reference

    Take advantage of a post-scarcity economy to allow people to pursue a more fulfilling life for themselves?

  • http://www.vancouvergadgets.ca/ Vancouver Gadgets

    Sorry I didn’t have time to read all the comments in this post but I was thinking this article could have easily have been called “The Great Decoupling of the Global Economy.” I will be be coming back to this article and discussion later when I have a little more time as I find this kind of stuff fascinating.

  • puterboy

    How is this any different from the industrial revolution where a single machine could displace hundreds of workers, often skilled craftsmen. How many skilled cabinet makers were put out of work by machines that could churn out mouldings and spindles? The Luddites responded by trying to burn down factories. The reality is that the Industrial Revolution unleashed 100 years of unparalleld economic growth and improvement in living standards. By the mid 20th century even the poorest of the poor lived better than princes and kings of 100 years before with indoor plumbing, lighting, central heat etc.
    Why do we think that the displacement of labor by capital driven by the computer/robotic revolution will be any worse than the displacement of labor by capital driven by the industrial revolution? Capital substituted for labor then and it still does. Just that now the capital buys shiny electronics while before it bought heavy iron.
    The authors here are about as shrill and polemical as Paul Krugman who stopped being an economist decades ago. I guess birds of a feather flock together…

  • Alex

    We should probably try improving education before we hook everyone up to intra-veinous welfare. People need to learn some math and help out with the robots.

  • http://profiles.google.com/twitwad Randolph Crawford

    Puterboy, Who is going to hire you when every job can be done cheaper/better by a robot?

    The reason that tech improvements in the past did not lead to unemployment is that the tech made the worker *somewhat* more productive, not *infinitely* more. For the first time, it’s plausible for the machine to replace ALL workers. When that happens, the human is excluded from the job market. S/he receives no wage at all. Any new businesses or products that were spawned by future innovations and new tech will then filled only by more robots. Any human worker who isn’t superior to a robot will never work again. Eventually that’s everybody.

  • http://profiles.google.com/twitwad Randolph Crawford

    1) When your hours fall to 30/40 then 25/40 then 20/40, so will your wages. If not, who’s going to supplement those lost wages? The government? With what? The taxes you’re not paying?
    1) Why pay you at all? When you’re made redundant by a robot, your work week doesn’t shrink. It goes away entirely. You get 0/40.

    2, 3, 5, 6, 7, 8, 9, 10, 11) If you tax employers more, they will move their company and their jobs overseas to avoid your taxes.
    4) There’s no need for minimum wage. All jobs were automated. All employers owns their workers. All labor cost has fallen to zero.

  • http://profiles.google.com/twitwad Randolph Crawford

    I think we’ll see the impact of automation first in China. More chinese jobs are automatable than anywhere else. Already, Chinese employers are hard pressed to keep wages low to stay competitive. Their most visible employer (Foxconn) has already promised to hire 1 million robots ASAP. When this happens and the government fails to fill the void, a billion unemployable people will be very unhappy.

  • http://profiles.google.com/twitwad Randolph Crawford

    I think we’ll see the impact of automation first in China. More chinese jobs are automatable than anywhere else. Already, Chinese employers are hard pressed to keep wages low to stay competitive. Their most visible employer (Foxconn) has already promised to hire 1 million robots ASAP. When this happens and the government fails to fill the void, a billion unemployable people will be very unhappy.

  • http://profiles.google.com/twitwad Randolph Crawford

    More than 90% of the cost of most products is non-labor. The average $30,000 car includes only $1500 to $3000 from wages. Reducing the labor cost to zero will reduces price of goods by only 5 or 10%.

  • http://profiles.google.com/twitwad Randolph Crawford

    Laissez-faire government in the face of 100% unemployment is not a winning strategy.

  • Anonymous

    Granted – simple automation can probably get it arbitrarily close to raw materials and energy costs, but becoming better at extracting raw materials and energy depends on technological leaps of a different sort.

    In any case, I’m sure the labor costs of specific products vary widely, but that would be an important factor to put into any model – maybe we can’t give everyone doing menial scrubwork a car, but they might be able to afford both comfort and high technology.

  • Anonymous

    What can a government possibly do to “fill the void”? Hire half a billion people to dig holes, and another half billion to fill them?

    Sounds like the broken window fallacy: http://www.youtube.com/watch?v=gG3AKoL0vEs

  • Anonymous

    Why not?

    Put another way, could any government really do anything about 100% unemployment? Could it do it any better than people left to their own devices?

  • Anonymous

    I believe in the end, the horse and buggy makers that can’t learn new skills to get another skilled job, end up doing unskilled labor.

    Now, if we can get prices low enough on necessities that even unskilled labor wages can afford clean water, food, and shelter, we’ll have at least taken care of the basics. Beyond that, I suppose it’s an open question as to how luxurious the life of an unskilled laborer can possibly get – perhaps an xbox, cable tv and cell phone aren’t too hard to add in, but an actual personal vehicle might be beyond rational economics.

  • Anonymous

    Interesting…you think there is literally no upper limit on automation (*infinitely* more productive), as well as no limit to what tasks can be automated.

    Hrm…

    I guess at that point, the only thing left would be prostitution…although I suppose you could automate that as well if you *really* had constructible human replacements…

    Yeah, I’m not sure if the model actually goes to the limits you take it to, but it’s certainly interesting Asmovian fantasy :)

  • http://profiles.google.com/twitwad Randolph Crawford

    If Norway stopped exporting oil, could you still afford the social amenities you describe? Exporting a nation’s raw materials has funded many unsustainable government programs (e.g. cheap day care). The US benefitted from this enormously from day one. †hat makes it difficult to know whether that country’s ‘successes’ are atributable to superior policy rather than just superior land.

    You suggest that people who can’t get a tech job can get a manual/service job. Of course that assumes these jobs haven’t been replaced by automation. But that’s the topic here, the likelihood that such alternative jobs will fade away, and how quickly this will happen. Right now, it looks like automation is advancing faster and that the median job is declining into meniality faster. Those trends are hard to dispute.

    For the past ~30 years, well-paying US jobs increasingly have evolved from physical to virtual, which unfortunately are also more automatable. If automation leaves us with 90% menial jobs instead of 50%, as it was a few decades ago, is that not 1) plausible and 2) a big problem?

  • http://pulse.yahoo.com/_MKO6QNH44UQSPTNQH3G3KCE75A M

    A service job ? In the same economy where 20 people applied for every mcdonalds job ? All 60,000. LOL that is so not happening.

  • http://twitter.com/stimhel Timshel

    “And, if you take it out to enough significant places… there is no one who is who is actually ‘average’.”

    And if you don’t do that, instead using the word ‘average’ in its colloquial sense, referring to the people at or near the mean, as in ‘average people’, then what I said is true.

    So what’s to be done with the people the labor market no longer values? The temptation will be to create fake jobs to stave off the social pathology which accompanies drastic expansions of the welfare state. But jobs programs would destroy wealth in order to waste people’s time, which feels like a misapplication of effort. Is there a third way, between fake jobs and free money? If we aren’t paying people to work or to look for work, could we instead tie welfare payments to volunteering, seeking education, playing sports, participating in the community, or heck, tweeting and playing video games? Or would Goodhart’s Law thwart any attempt to buy socially benign behavior from the unemployed, as they inevitably learn to game the system?

    I don’t know. Good luck to whoever gets to tackle that one. On the bright side, Steve Hsu has suggested we’re ten to twenty years from being able to predict and then select the IQs of our children to within half a standard deviation, so whether or not we solve this problem satisfactorily, it may not be with us forever.

  • Anonymous

    >If Norway stopped exporting oil, could you still afford the social amenities you describe?

    That’s a very good question. The answer may very well be “yes”. Sweden don’t have oil, but they have a very similar setup with respect to subsidised daycare.

  • MachineMan

    As a worker in high tech industry, I can affirm that if all what we see in the lab is going to deliver, the work landscape will change radically before 2020. This means unemployment won’t go lower but will go higher. We are at a point where most clerical, accounting and audit jobs can be almost automated. So jobs at companies like Ernst and Young are going to be slashed. These won’t be the only ones. The technology is already there only willpower is lacking. But as we are starting to see in the banking sector, crisis can be a strong motivation for companies to change. Change in this case means slashing jobs and replacing them with machines.

    We won’t get out of it without some kind of universal welfare state. I know this will sound bad to a lot of tea party and or libertarians but this is the price to pay for the high tech world we live in.People will need to bring food on the table and a redistribution mechanism will need to be there for those who can’t work (because some days soon there will be some cleaning robots so you won’t even be able to make a living cleaning toilets). The basic income guarantee is a good way to make it a reality without slashing liberties. People who work will get more than the guarantee, people who don’t will have enough to live and won’t turn into criminals. (No guys, we won’t be able to open enough prisons to jail all of them !).

    This also means that most taxation must go from work to capital and this must be done in all industrialized nations. We don’t need to tax the machine but all capital gains must contribute to the effort.

    A lot of investment must also be done in education and I mean in real education, not golf courses for campuses but science, technology and mathematics. This is the only way for people to outsmart the robots and still be useful to the economy.

  • Eric Barrett

    this is brilliant, and so true. It´s the main driver -and will continue to be- of unemployment. The Proportion of global GDP which was spent on wages has been about 75% while the other 25% went to capital. This proportion will obviously invert, if not go up to 90% vs 10%.

  • Jen

    Just wondering how we got to the place, the mindset, where people must be “useful to the economy”, rather than the other way around. That sounds rather sad, absurd, and frankly dysfunctional/disordered (in the clinical sense) to me–even though I realize that such mindset is widespread, and on the whole, our culture *has* become dysfunctional. This seems to me to be at the core of this current problem. Increasing numbers,increasing productivity, without thought to increasing the well-being of people (and planet). It’s mindless and soulless. It sounds like the robots aren’t coming–they’re already here, and they are *us*.

    This mindset is also inherent in the notion that “real education” can be summed up by “science. technology, and mathematics”. What of those whose aptitudes and interests lie in other areas? What of those who generate the kind of “product” the value of which is not measured in numbers or dollars–the kind of “products” that many would suggest, make life worth living, make it more than mere survival, more than a virtual experience?

    The numbers tell an interesting story, and a very clear story in many ways. But they do not tell the whole story.

  • Jen

    Since your failure to understand what “averages” are has already been addressed, I’ll simply add that your apparent suggestion that the value of a human being, as well as their moral capacity, it determined by IQ and employment status is positively frightening. There’s a tempting comparison to be made here, but I’m trying really hard not to prove Godwin’s Law.

    Not to mention, the notion to “buy socially benign behavior from the unemployed, as they inevitably learn to game the system?”

    I hate to be the one to have to point this out to you, but in very recent history, the one’s “gaming the system”, as well as basically helping to blow the world economy to smithereens, have been the well-employed, so-called smart guys. Without some changes in our laws, and even the possibility of prosecutions, the very smart “experts” tell us that more of this kind of gaming of the system is “inevitable” from that same high salary, supposedly high IQ crowd.

  • Jen

    I think you may have answered your own question of ” do we care so little for our humanity that the continued advance of such technology (and profits) is more important?” just a few sentences later with “I don’t have many answers – at least ones that don’t massively intrude on free and open capital markets.”

    Unfortunately, it seems we have become almost completely out of touch with our humanity, and are behaving like automatons. This is more of what I mentioned in a previous response to another comment–when did we stop asking markets to serve people, and start making people and their communities slaves to the market? The solution to this problem may come about naturally, organically, as the resources used in the creation of all this technology are finite, whether we choose to be attentive to this fact or not. I’d like to think we’d have the sense to be good self-preservationists, if not good stewards operating from a sense of moral obligation to future generations and a sense of gratitude for our good fortune to have such a truly fantastic planet to live on (seriously, it’s really great–all this oxygen and water, delicious plants, and fascinating other species). But more and more, I despair of us waking up to this in time. We’re proving over and over that we’re not nearly as “smart” as we seem to think we are. Not even smart enough to discerns our ‘wants’ from our ‘needs’, even when they’re in direct conflict.

  • http://www.facebook.com/people/Jonathan-Dlouhy/1077084942 Jonathan Dlouhy

    No surprise that the bourgeois economist Krugman would miss this. Karl Marx talked about the effects of machinery, a.k.a. technology, in his pivotal book, “Capital”. If he has read it (doubtful) then he should know this. In any case, it seems rather obvious, but what passes for political discourse in this country routinely ignores it. Capitalism is the problem, not the solution. Unregulated, this is how it works. Even Adam Smith, who is quoted regularly but often incorrectly, knew that business needed to be regulated or it would immiserate the working class, also know as the bulk of the population. Neo-liberal policies have caused this to accelerate, now on a global basis, starting with the great Ronnie Reagan and equally great Maggie Thatcher. But even under these war criminals taxes on the wealthy were higher than they are now.

  • Anonymous

    The jury is still out on the Norway and oil question, but if the cut off was today, the answer is probably no. Luckily we’re aware of the problem, and may be able to do something about it. It is irrelevant here though, since the US is just as rich as Norway, and that without the oil, but still have entirely different problems.

    What I say is that if the consumers have more money to spend, then services will get a large proportion of those, making a positive feedback loop.

    I’m not trying to deny that workers are laid off due to automation, what I’m saying is that automation in itself cannot account for why they aren’t rehired in other jobs, like has happened all through the industrial history. All bets are off for the future, but _today_ this is a false conclusion.

    Since education is ridiculously expensive in the US, it is for example prudent to consider whether unemployed with existing student loans can afford to reeducate themselves, if not you have a source for long term unemployment right there. Expensive health care (this may get better with Obamacare) cause people to have less money left for other things, having a direct effect on what consumers can spend on e.g. services.

    About 30 years ago, the US started to lower taxation, increasing inequality. No wishful thinking whatsoever can disconnect that from what McAfee here is trying to blame on automation.

  • http://www.facebook.com/skdavie Sonja Davie

    This is a decidedly male-centric argument, with the assumption that you have to have a salary to have a job. Stay-at-home wives have many jobs, the main one being Carer. They care for husbands, children and homes. Will we ever accept machines as carers? Do we want a robot nanny or nurse? Would we shunt our old people into fully-automated care homes with little or no human contact?

    Empathy is something we cannot yet get from machines, and may never get. I see plenty of scope for human jobs in the future, but as a society we need to be prepared to properly fund them, instead of relying on (mostly female) volunteers and lowly-paid care workers.

  • Newton1PA

    Read the book

  • Newton1PA

    Maybe not to infinity, at least in the next 30 – 50 years, but technology keeps growing at the current rate, and it has not slowed down, it gets pretty scarey. Again, if you haven’t read ‘Race Against the Machine’ do so.

  • Newton1PA

    I’m a Chemical Engineer, not a automotive engineer, but I have a had time believing your numbers. Perhaps 10% of labor in the final assembly, but not throughout the entire manufacturing process from raw materials to finished product. What is your source?

  • MachineMan

    For education, there is no human activity that does not require a lot of background in STEM fields. Even artists are nowadays reliant on a lot of technology. Musicians, Photographs, Cineasts, all these people must have a good understanding of their technical environement. In humanities, you need to understand the world and this is not possible without a good understanding of science and technological facts. So you need a strong STEM level which does NOT mean you can’t do anything else if you like. You may do philosophy, politics, art, economics or whatever. But whatever interest you pursue, not understanding technology and science is going to be a disability. You’ll be able to hear many artists or professionals complain about how their profession has become technicised : The problem is the average science education does not allow them to take all this technology into account. As a result, they fail, they don’t really use the tool, the tool uses them.

    Now, you may have misunderstood me when I talk about people being useful to the economy. I didn’t mean it to be a end in itself. But you are in a system where the most useful and difficult to replace you are, the more you get from society. Historically there has been two systems: The feudal one where you get most if you were born the right way and the capitalist one where you get more if you can contribute to the economy. I prefer the second one. But in this second one if we do nothing with education, a few people will stay wealthy and the others will have a life sentence of poverty. The easyest way to solve this is not to break the whole system but to allow the most people as we can to be useful to the economy and earn a living. This means raising STEM level whether you like it or not. This does not mean numbers and science explains it all. This means that whatever you want to do, a good science and technology level is a prerequisite. People who don’t want to accept this fact risk to learn it the hard way.

  • MachineMan

    We will have to provide some kind of welfare state as too much of them will exist. Many people won’t be able to gain the kind of level in science to have a useful occupation in the economy. You may hate it but it is the cold truth.

    Now, by improving education, we can do a lot. When some people decided that anybody in the country should know how to read, they were regarded as lunatics. Yet, we did and most people today are able to read. If we decide that improving science, technology and mathematics is a priority in the developped countries, we can do a lot. Currently, less than 10% of the population has an adequate background in science. Raising this to 50 or 60% will help a lot in the future. Finding what to do with 50% of the population is easyer than finding what to do with 90%.

    Currently all these people still find jobs. They won’t be able to find them in the future if we do nothing.

  • Newton1PA

    True, but even the BLS report you provide confirms the trend is real.

  • Newton1PA

    Please, enlighten us, what kind of jobs do you for see?

  • Newton1PA

    Having just skimmed through all the comments I’m not surprised that no one has really addressed the main question McAfee raises: How do we address this challenge? I see a lot of ideological back and forth, fighting over old ideas, e.g. Marxism vs. Capitalism, that have largely been settled by the reality we face today. The fact is, we have never faced the challenge that is before us: as technology improves, the number of people needed to run things keeps getting smaller. Yes we may have a service economy for a while, robots don’t make hotel beds or cut lawns, at least not yet. But are these the kind of jobs we want our children to look forward to?

    I teach high school Physics to Juniors and face my students everyday with this thought in the back of my mind: 5 years from now you will be graduating college, maybe, with over $100,000 in student loans and maybe a chance at starting a career making $50,000/year only to see this career vanish in 10 years due to technological innovations, yet you will still owe over half of what you borrowed to get your degree. How can I best prepare them to survive this scenario?

    My goal is to teach my students as best I can to be critical thinkers and problem solvers and to hope they will be able to handle a world where the pace of change is growing exponentially. Will all of them be able to succeed in such a world, probably not, after all, half of them are below average, and many would have trouble succeeding in many of today’s service industry jobs.

    What we need to do is stop being so idealistic about the future and recognize that the days of a growing middle class may well be behind us and the idea of doing better than your parents may be the exception rather than the rule. We need to expose students to the reality of this new economy and prepare them for some hard work ahead with a lower probability of success. Not everyone is going to be a Bill Gates or Larry Page. Not that I want to raise a generation of ‘depressed’ adolescence but, as it stands now, they have no idea of the challenges ahead of them.

  • Newton1PA

    Having just skimmed through all the comments I’m not surprised that no one has really addressed the main question McAfee raises: How do we address this challenge? I see a lot of ideological back and forth, fighting over old ideas, e.g. Marxism vs. Capitalism, that have largely been settled by the reality we face today. The fact is, we have never faced the challenge that is before us: as technology improves, the number of people needed to run things keeps getting smaller. Yes we may have a service economy for a while, robots don’t make hotel beds or cut lawns, at least not yet. But are these the kind of jobs we want our children to look forward to?

    I teach high school Physics to Juniors and face my students everyday with this thought in the back of my mind: 5 years from now you will be graduating college, maybe, with over $100,000 in student loans and maybe a chance at starting a career making $50,000/year only to see this career vanish in 10 years due to technological innovations, yet you will still owe over half of what you borrowed to get your degree. How can I best prepare them to survive this scenario?

    My goal is to teach my students as best I can to be critical thinkers and problem solvers and to hope they will be able to handle a world where the pace of change is growing exponentially. Will all of them be able to succeed in such a world, probably not, after all, half of them are below average, and many would have trouble succeeding in many of today’s service industry jobs.

    What we need to do is stop being so idealistic about the future and recognize that the days of a growing middle class may well be behind us and the idea of doing better than your parents may be the exception rather than the rule. We need to expose students to the reality of this new economy and prepare them for some hard work ahead with a lower probability of success. Not everyone is going to be a Bill Gates or Larry Page. Not that I want to raise a generation of ‘depressed’ adolescence but, as it stands now, they have no idea of the challenges ahead of them.

  • Anonymous

    Well, of course it’s male-centric, that’s simply the way the world was at one time. As such, it’s probably the only real data we have about people’s decisions when they weren’t in the salaried workforce, and their financial needs were taken care of by a third party.

    Certainly, even when one doesn’t have a salaried job, there are things to do (humans have to attend to bodily functions in the restroom, for example, or basic hygiene), including caring for ones’ loved ones. But you bring up an interesting point – what if the only thing left for humans, after otherwise complete automation of the workforce, is “caring”? I’d posit that so long as the wages for such jobs could pay for the ultra-low priced items produced by our robot workforce, we’d be doing a decent job as a society.

  • http://twitter.com/earwulf earwulf

    The solution is simple: we need to bring median income back into equilibrium with productivity growth. If we do thus, demand will meet supply and GDP will continue on its long run trajectory (modulo climate and energy shocks). As the Fed has often reminded us of late, we live in a country with a fiat currency, where the government can create and distribute as much currency as it thinks wise. So why wouldn’t we choose to have the government make up the difference between median wages and ideal private income levels by paying out a universal basic income? The idea of a UBI was championed many decades ago by Martin Luther King; back then, inflationary pressures might have suggested that a UBI would not be prudent, but we have to recognize that we are now in a new economic regime. We have the potential to usher in a new era of shared prosperity and freedom, we should seize it.

    If you haven’t read this post by Steve Randy Waldman, you should. It’s relevant: http://www.interfluidity.com/v2/918.html
    We need better mechanisms to keep the price level stable. Giving money to holders of financial assets isn’t going to work forever.

  • pfudd

    My favorite way to explain it to others is this:

    Pretend you have two identical companies, A and B, that make widgets. Then company A buys a robot and fires one person. Even if the robot costs a year’s salary, company A is going to have more money than company B after the first year. Repeat until there are no more employees.

    In 1870, 70-80% of the population worked at agriculture. In 2010, 0.6% did. Where did the workers go? They trained for and found other types of jobs, in new industries that were created by technology. They certainly couldn’t fill all of the jobs in old industries, as those jobs were already taken by other workers. Now, all the new technologies are computer and robot powered; anyone who is displaced now will have to fight for the dwindling pool of jobs. Already Watson can beat any human at Jeopardy, he’s being trained in medicine and law next. Deep Blue can beat any human at chess. Google is building self-driving cars, and California is about to or already has legalized them for driving in public. McDonalds has automatic burger-making machines. Some factories are operated ‘lights-out’, which means that unless something breaks, the lights (and air conditioning) stay off 24 hours a day in order to save money, since there are no people in the building.

    Here’s a quote from 1955: CIO President Walter Reuther was being shown through the Ford Motor plant in Cleveland recently. A company official proudly pointed to some new automatically controlled machines and asked Reuther: “How are you going to collect
    union dues from these guys?” Reuther replied: “How are you going to get them to buy Fords?”

    “We are being afflicted with a new disease of which some readers may not
    yet have heard the name, but of which they will hear a great deal in
    the years to come-namely, technological unemployment. This means
    unemployment due to our discovery of means of economizing the use of
    labor outrunning the pace at which we can find new uses for labor.” –
    John Maynard Keynes, 1930

  • Anonymous

    How about co-ops? Companies need not be owned by a small group of people? They could just as well be owned by the employees themselves, pension funds, or other such entities that would ensure profit sharing. This would “solve” the decoupling of labour wages and GDP/profits discussed in the article.

  • Kirk House

    You can’t funnel welfare through businesses, it simply doesn’t work. You need to first look at replacing regressive taxation (think sales tax). The more interesting question is how to tax capital with out creating a new archipelago of tax havens.

    As technology is an international phenomenon, it would be interesting to see this chart with data from other countries and figure out which tax approach best mitigates the consequences of this trend.

  • http://www.facebook.com/frank.ray.716 Frank Ray

    What you postulate is the only sensible way I see for it to go.

    In James P. Hogan’s book Voyage from Yesteryear, Hogan relates a society where automation takes care of all material needs, not just the basic ones. No one has to work. But people have a basic need to exercise their creativity. If you find painting houses to be enjoyable, you can find someone who wouldn’t mind it if you painted their house. You don’t need to pay for supplies because they were provided by the automation. The person who’s house you painted, only needs to pay you a compliment.
    Hogan, though, also addresses the belief that we can’t get there from here. The only reason it worked was because a whole new society grew up in the presence of automation providing for all material needs, with no prior exposure to money. When people arrive who grew up in a monetary society, the new arrivals can’t grasp how it works. They keep trying to find the catch and looking for the gotcha. Looking for a way to game the system, even though they cant find the system.

    We’re not far from having the technology needed to build Hogans utopian society. What we need is someone who can find a way to get us from here to there. That’s someone deserving of all the respect the world can give. Until then, our capitalist system is the best thing we have going. It just needs to be allowed to evolve instead of people trying to coerce it back to the way it was.

  • http://twitter.com/MachinShinn Machin Shinn

    It always shocks me that otherwise intelligent people like this writer forget to mention a KEY economic event that occurred in the early 1970s which clearly set this trend into motion. Look where the green line representing Median Household Income is at 1971, pretty much its peak — its also the last year American workers were paid in a GOLD BACKED CURRENCY.

    The Nixon Shock of 1971, and the break up of the last link with gold that we had is the PRIMARY cause for stagnating wages, even in the face of increased productivity. How? Why? Simple, and its even something Keynes agreed with. Workers are unwilling to accept nominal wage cuts (‘sticky wages’) so Keynes argued we should inflate their wages away. This way, they won’t notice they’re getting poorer and will keep working. With an honest (gold) money system, this would have been impossible. There would have been armed, violent rebellions if people saw how much they were being robbed by the government and the politically connected owners of capital.

    A Fiat money system hit the working class in another way. The majority of their savings are in cash, which under a gold system gets more and more valuable every year naturally as the overall economy grows. So just by stashing a few dollars in their mattress or savings account, the working class could have secured their retirement. Today, that’s impossible. People have to gamble in the stock market to get the rates of return they nee to retire — the rates of return that come effortlessly in an honest money system.

  • http://www.facebook.com/jstoner John Stoner

    Exactly half the people are below median. Exactly half the people are above median.

    There, FTFY. Average != median.

  • http://www.facebook.com/jstoner John Stoner

    Right, but what happens when there is no unskilled labor left to be done?

  • http://www.facebook.com/jstoner John Stoner

    These manufacturing and automation technologies have a different omega point than you seem to see. The desktop manufacturing/3D printing revolution is also just beginning, and I see no reason why many of these technologies wouldn’t end up in your home instead of the factory floor. Not to mention that some of them are (crudely) self-replicating, at this writing.

    It’s really the death of the industrial model we’re talking about, and the birth of an economy with a more holographic structure, wherein production capacities are distributed across the economy.

    It’s already happened in media production. You can produce and distribute a lot of media with just a laptop.

  • Anonymous

    I’m not sure if that’s ever the case. It would take quite a bit of automation to replace the unskilled labor of a prostitute – I mean, at that point, you’d be pressing the boundaries of the definition of humanity.

    It might be that unskilled labor simply becomes a luxury item, or a status symbol, but there are a surprising number of unskilled things that humans are good at that are difficult to automate.

  • David Van Couvering

    Isn’t there some economic wall that will be hit? If nobody is getting paid wages, then who is going to be purchasing all this shiny stuff being made by the robots? Robots? It seems like the market itself will be forced to solve this problem somehow, or the robots will find themselves with nothing to do…

  • http://twitter.com/semiautomata Neil

    This decoupling isn’t a long term problem, because “jobs” aren’t the point of an economy – satisfying needs is. All things equal, people would prefer to get what they need with the minimum amount of labor. Productivity makes that more possible. During times of rapid change that can mean some people suffer temporary unemployment, so solutions should be aimed at helping those people adapt. (Additionally, purely looking at income ignores the huge increases in health insurance contributions that employers have “paid” their workers over the past 30 years. Rather than raising wages, employers have increased health insurance because those increases are incentivized by the tax structure.)

  • http://www.facebook.com/magarshak Gregory Magarshak

    It’s very simple to describe, but rather challenging for us to solve. The situation is that local comparative advantage has been eroded by outsourcing, and the demand for human labor (both local and remote) has been eroded by automation. Now, this has been happening for hundreds of years, and the luddites are rightly laughed at today for trying to stop the progress by breaking the machines. But they do have a point — if the net effect on the labor markets is that the workers will be in a race to the bottom, then who really wins?

    Of course, we can tax the capital just enough to subsidize the consumption activities of the population, making a permanent welfare state for everyone. This will release people from the effects of market discipline which may otherwise very well ruin the lives of many people and towns who are out of work in the new economy — as happened in the Great Depression. But is this really the solution? Research has shown that crime goes up in disenfranchised neighborhoods where people hardly help each other. On the other hand, crime goes down when everyone is locked away at home on their computer and independent of everyone else. The situation we will have is somewhere in between, being out with smartphones and google glasses, iWatches and other things, interacting with each other, but mostly contributing as consumers and not producers. It’s a scary world where most people will be the equivalent of poets or other liberal arts majors — trying to find a meaning for their existence, ever more plugged into the collective hive, which provides for them.

    Humanity is doing this to itself. I wonder if we will ever become the Borg :-P

  • Michael Russell

    http://www.zeitgeistmovie.com/

    In a world of Abundance, the only sane response is happiness. Simply cut the legal work week by 10% each time unemployment = 10%, spreading the work and the profits. Until, at last, work is optional, and we all have the freedom to self-actualize.

  • Michael Russell

    I don’t believe you understand economics. If you work for a for-profit corporation, then reducing your work week will never lower your wages, you’re still just as valuable, and I doubt you workers will accept a pay cut. Thus, the company must hire more people at 30 hrs per week to fill all their orders. How will they get the money? They are already getting the money, they just keep it as profits. This will raise the cost of labor, eating into profit margins, effectively spreading the wealth.

    Same goes for non-profit and government jobs, as work week hours decrease, it will take ever more people to provide the same basic services, homeland security, police, fire-rescue, garbage pickup, etc. You must either raise more revenue, or cut services, and I doubt people will accept a cut in services. Where will the money come from? Taxes, spreading the profit from all this new productivity and increased GDP, until it’s cheaper to pay someone NOT to work, an have them go to college so that they can do something really creative and useful.

    In a world of abundance, each person has an equal right to their share of the planet’s resources for survival. Then true merit becomes the measure of your power, when you can create value, you will be rewarded with responsibility. Else, you will fall to the minimum income level, and be taken care of like children. Only those who live off UNEARNED INCOME, like Mitt Rmoney, need worry. Those who earn their living by their work, creating value, will always be climbing.

  • John

    How are all these stats calculated? I see a source, but what are they really measuring? Are they adjusted for inflation, and by what metric?

    The notion that somehow the cost of labor is not directly tied to that labors’ productivity (outside of some interference on the market though gov’t coercion) is against all good economic theory. The decoupling does not exist, the productivity of teh average american is actually in decline for several decades.

  • http://www.facebook.com/people/Alvis-Brigis/501926897 Alvis Brigis

    McAfee and Brynjolfsson are right – nations and peoples need to become more cognizant about the cannibalistic nature of accelerating change. The situation is only getting worse, so it’s time to contemplate solution scenarios, one of which might be an explosion in paid info-gathering jobs: http://www.fastcoexist.com/1681839/the-world-needs-18-billion-jobs-but-what-if-they-already-exist

  • Wu Hang

    Shouldn’t we also include the curve for inflation. Though it may be obvious for someone, it would be more obvious for me to know the inflation throughout the year

  • Thierry Dagaeff

    The real issue is: what is it worth to increase productivity if people can no more buy the produced goods? At some points, there will be a major breakdown. Either you only produce luxury goods for the capital owners and some basic/survival cheap goods for the workers and unemployed, or you have to re-balance these curves at some point. Let’s consider the 2nd option (for reasons I hope are obvious). Now, how is the income/wage computed? What is the unit? Money! Consequently, you cancel the gap by indexing the value of Money on the Productivity. In other words, you just take this gap as the basic metrics of your economics system. By doing so, you make sure the produced goods can be consumed. It is still possible top be richer than your neighbor, since you can work harder, have a better position or better capabilities, or be the son of a richer father. There are still luxury goods that cost more money, so people still have motivations to enrich themselves, if this is how they feel (fill). To me, this is a simple way to synthesize what are in some other posts (like the UBI or etc.).

    Besides, I have another comment: If there is no hope the gap decreases without taking drastic measures, the curve shapes will however change at some point. because resources are not infinite, productivity can’t increased indefinitely. Thus “natural” changes will happen anyway. Unless we consider measuring productivity taking into account other values than material goods. Two lessons here: we have to decouple productivity from economic growth, and growth from physical good.

    Conclusion: I propose to mix (1) decoupling growth from volume measurement; (2) increasing the importance of non-material goods into the measurement of productivity, in particular cultural goods; (3) indexing the value of money on this new productivity concept. Note that (2) serves (1). For (1), see also topics like: new business models for sustainability, sustainable innovation, or social entrepreneurship. For (2) see also studies on motivation and money (see http://www.ted.com/talks/dan_pink_on_motivation.html?goback=%2Egde_3779015_member_240029345 for the fun!).

  • Ben

    Peoples Capitalism: Encourage mass investment, have banks buy stock and loan that stock to the people, get everyone to own capital.

  • Sven Kahle

    An entire paradigm shift is called for. The distribution of goods and services is facilitated through work, and for most, capital must also be acquired through work. An individuals very existence is defined and validated morally and spiritually by their contribution(work) to society. If the logical course of technological progress reduces the distribution effect of work beyond a certain threshold, the entire economic system becomes dangerously unstable. The works of humanity. Childcare, eldercare, education, arts and sciences are currently unvalued or undervalued should be considered as a means for distributing the wealth of an economy. This and other “redristibutive” measures will have to be the bridge to solutions that are too difficult to imagine for current power structures, a world where everything is free, and spirituality and morality and environmentalism govern. Sci-if writers get to work!.

  • SocraticGadfly

    A 35-hour work week. Customer service jobs that actually pay something, with employers who value providing actual customer service. Oh, and pigs flying, since that will happen in the US about as quickly as the other two, given the status of the two current “mainstream” political parties.

  • http://fi.linkedin.com/in/jonisal Joni Salminen

    35-hour work week exists in France – doesn’t solve this problem at all. Increasing minimum wages shows in increase of prices, i.e. inflation. The problem is lack of skills — very big proportion of the workforce is unable to “control robots”, produce software, etc. The solution, rather than regulation, is EDUCATION. We need to increase flexibility of education and decrease its cost. Or, you in the US need to. We in Finland have it free, and although education cycles need to be shortened, the society works better.

  • http://lone-star.com/ Rita A King

    Great comment! As an HR Generalist for a small but growing Operations Research and Decision Analysis Consulting firm, I
    partner with some academics in a capstone class working to prepare
    graduating seniors for the marketplace. Although practical, at that
    point, it is really too little too late. Many professors have an
    overarching mindset that the “purity” of traditional education must be
    maintained at all cost. This staunch elitist outlook however is very
    expensive for all stakeholders involved.

    The higher level
    critical thinking you mention, along with advanced math, sciences and
    people skills (collaboration and communication), provide our business
    with a talent pool able to perform well in highly complex and critical
    projects.

  • http://khanneasunztu.wordpress.com/ KhanneaSuntzu

    A century ago those at the top would have concluded – “we need to eradicate 25-35% of the adult population, maybe a war or a pandemic”.

    Good to know we live in more civilized times now.

    ……………..

  • Carolo199

    What about a little less automation and a little bit more personalization? Technology, robots and automation are replacing people in the interest of corporate profits but they cannot replace relationship management. People are starting to miss dealing with a human beings and
    companies should start to realize this in order to gain competitive advantage.

  • Jason Kalapothakis

    Introduce universal basic income along with price regulation for basic goods; at the same time abolish the minimum wage. A host of other policies will be needed as well but I will not state them here in any detail.

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  • Anonymous

    I think what we’re missing is “need”. The years after WWII, there was great need. Need for equipment, need for workers to operate it, need for well everything since there was a great collective burning of the world. It needed to be rebuilt. There was even a great need for men since so many perished during the conflict. Today, the world is consumed with two activities… The movement of monies in a great game of ‘musical chairs'; trying to land in a good, profitable chair every time the music stops.The second is the world is consumed with building little gadgets, most that we really don’t need, just ‘want’. ‘Want’ has carried us a great distance the last couple of decades… but what many people in this hyperproductive economy ‘want’ now is to slow down, to rest. We’ve turned working from a marathon (a career that lasts your life) to a sprint that has us every day pouring our heart and soul into that day, that week, that year… at such a pace that can not be expected to last a lifetime nor at a pace those older among us could manage. We’re too productive for a world that only needs so much. We can’t slow down or we’ll individually lose our income, our wealth, our marriages, etc. We are as an exhausted rock climber, three quarters the way up the sheer cliff… We can not rest where we are, we must push on at all costs to make it to the top or fall to our doom.

  • robotwatcher

    Create robots for the benefit of humanity–i.e. robots that equalize the gap between rich and poor.. also replace politicians and bankers with these robots–it’s time for the technological revolution to start working for humans instead of for rich people uninterested in human progress, just interested in their own profit margins.

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