HALP! - How does Technology NOT create unemployment?

While technology dismisses some jobs, it creats more jobs. As an example I'll use the solar power technology. If we bring in more solar power, we'll need people to make the panels, people to install them, and more people to maintain them. You can apply the same arguement to computers. The same arguement also applys to nearly every other field of endeavor that you would like to talk about. A side effect of all this is that we'll need more teachers to teach people how to do those jobs. So technology actually has a synergy effect which means that the end goal, in this case, is creating jobs.

You're welcome.

Bob

 

Yeah. Check out something called the Internet, which didn't exist in its present form 20 years ago. An entire web based industry has been built since. 20 years ago, companies had a secretarial pool or transcribing departmetn, but they didn't have an IT Department. When the horse and buggy was replaced by horseless carriages,the buggy whip manufacturing industry was destroyed. But workers in that industry found work in the auto industry.

 

The creation of jobs is a competitive endeavor across all geographic boundaries (countries, states, counties, etc.).
The biggest driver for new jobs is companies expanding into new product lines or service offerings.
Companies need free cash flow (profits) to fund these expansion strategies.
One of the better ways to generate profits is to increase productivity and efficiencies in a company's current production or delivery of services.
For several decades, technology has been the biggest catalyst for an increase in productivity and efficiencies.

So, take the following example:
Company XYZ was a real estate brokerage company ten years ago and employed 50 people across 5 offices that did most of their home sales deals using manual paperwork.
At this time, the company made a 10% profit margin.
Company XYZ fully automates the workflow and document management processes and dramatically improves the productivity and efficiency of doing home sales deals and discovers that it only needs 40 employees to do the same volume of work as in the past.
Company XYZ eliminates 10 job positions and the profits rise to 20% of revenue.
Their competitive advantage allows them to expand their sales territory, double the number of real estate offices, and grow their total staff to 80 employees (these 80 employees are doing the work load of 100 of their prior employees).
Profits stay at 20% of revenue but, in dollars, that is now 4x their original profits.
Company XYZ takes a portion of those new profits and decides to expand their services into mortgage lending, retirement planning, and home/auto insurance.
The company now hires 120 new employees to staff these new services.
Company now has 200 employees and the profits slowly evolve back to roughly 10% of revenues but for revenues that are 10x larger than the original revenues.

By the way, let's say a different real estate Company ABC is near Company XYZ but across state lines, for example in Illinois.
Because of high taxation, ABC can't afford to automate their work flows.
Company ABC's profits dwindle. They cut employee benefits.
They end up losing half of their best employees to Company XYZ when XYZ starts to expand.

So, that illustrates how a company that "cut 10 job positions" from their 50 employees through automation efficiencies ended up hiring 160 additional employees. Where as, the company that didn't automate, couldn't sustain their 50 employees and ended up only retaining 25 of them.

(To make this story Ferrari-related, the owner of Company XYZ goes out and buys a new Ferrari California while the owner of Company ABC has their new Chevy repossessed. )

 

Probably should move to the right section...

 

+1

Technology may eliminate some jobs, but will create many new ones as well. For example, I started an internet based software company, which has created many jobs. This company would not have been possible 20 years ago, prior to the widespread adoption of the internet.

 

Have to agree with most of the above - Rons Real Estate company analogy is a good one and reflects my experience - investment in software and training improved margins and attracted a better class of client - the result is now, to expand further, I have difficulty in finding graduate engineers of sufficient calibre and with the "right stuff".

To put it in an Aussie context (and this is just my opinion) - I think that Oz is at a technology crossroads - we used to be the lucky country, now we need to be the smart country - and it isn't happening. Let me draw a comparison: In the early 70's I had the pleasure (in more ways than one) of working in Denmark - before that, the most technical thing to come out of Denmark was lego - think of Denmark in the 60's and one thinks of dried herring and cheese. Denmark made the transition from a rural based economy to a technology based economy in about 40 years - sure, a lot of Danish exports are still farm products, but those farms are now marvels of technology. Not by coincidence does Denmark have one of the lowest unemployment rates and one of the highest standards of living in the world. Denmark is now one of the leading sources of electronics technology - not just B&O hi fi, either.

So, why isn't that happening in Oz? Simple - not enough investment in research or tertiary education that has a benefit to Oz. The watering down of Oz Universities is a classic example of what not to do (as an occasional academic) - we are lowering our standards, not improving them.

Our labour rates are among the highest, and getting less competitive - we need more "value added" industries - and the only way we can do that is through investment in technology. We don't have enough jobs for farm workers or taxi drivers (notice how many have PhD's?). Also we can't go on forever digging wealth out of the ground - it is very expensive to do that in Oz, compared to many other places....

So, to answer the original question - technology is the only way we can improve employment - and, it may be the *only* way to avoid increased unemployment..
Rant over..

 

You may want to look backward even farther to the Industrial Revolution.

Prior to it, society was mostly agrarian. People grew their own food. Come the Revolution, we need more people employed in manufacturing, distribution etc. of goods. Farm employment goes down, but overall employment likely goes up as workers shift to new industries. Helped to create the Middle Class which then drove up demand for products and services which in turn resulted in higher employment.

Good luck,

Neil

 

If I am not mistaken the term is Creative Destruction.

From wikipedia

 

Humans have been creating methods to work-less since the beginning of time. The entire point is NOT to merely make work but to make productive work. You can easily employ everyone, have them dig a hole and fill it back up again over and over again. Your net output is nothing. However its not easy to create productive employment.

Advances in technology allow for productivity to increase therefore less work is needed to attain the same output. This increases quality of life. It allows scarce resources to be used more efficiently, ie. freeing up human capital from farms to manufacturing. 200 years ago 90% of the population worked on a farm to feed themselves + the remaining 10%. Thanks to major advances in farm technology, 2-3% of the population now feeds the remaining 95%+. Those 95% then went into manufacturing, research, home building, medicine etc, and the cycle continues. Most economists do not understand that pursuing full employment is an absolute waste, you want to pursue PRODUCTIVE employment. Technology is the great equalizer and does more for the common man then anything else.

 

Ever see how many hours in a "work week" on a pre-industrial farm?

Sure, on a modern farm, a farmer with a combine-harvester can do without dozens of farm hands ... at five cents a day.
Instead, the combine-harvester manufacturer employs people on the production line, as well as personnel managers, supervisors, fork lift operators, etc. And they get parts from other manufacturing firms.

Not to mention all the six figure computer programmers and DBAs to run the databases to keep track of it all.

Minimum wage is over $7 an hour, and a "full time" work week is down to 40 hours (out of 168).


Then there's the old joke about:
In the olde days, the men worked, and the women stayed home and cooked and cleaned and ironed and raised a family.
Today, the house is so filled with "labor saving devices" that it takes two family incomes to pay for them all.

 

technology just increases the proliferation of modern goods and services as it makes it easier and most importantly cheaper for poor people / countries to get them. Therefore as the price of technology decreases (as economies of scale take pace) the price of the goods and services decrease, thus bringing technology into the hands of underfunded and less educated individuals. (think global effect)

Just look at the computer... remember how expensive it was? Now everyone has a computer that is more powerful than the spacecraft that put humans on the moon...

In short, the more technology people have access to the more intelligent they tend to be. Technology on almost all levels speeds the share of knowledge.

Translation, the more educated you are the greater chance you have a job (though if the flat line of unemployment moves with this inflating population of educated people (by technology) then maybe it holds true. But i would highly doubt that.

should probably read a book called the world is flat.

but then again im an economist by nature.

 

please PLEASE read :

"Economics in One Lesson" by Henry Hazlitt

it's short, it's classic ... and it's a fountain of wisdom

 

Huh?

How about IT departments starting in the mid-1960's?

Secretarial pools and transcribing disappeared in the mid-80's when Wordperfect came out.
But before that, can you imagine the paperwork involved in an insurance compnay, when it was ALL paper-based?

I don't know too many people becoming 'six figure programmers' anymore. DBA's are a lot cheaper too.
Yes, there are some very highly paid people in the industry, but I don't see any 'new' people that will make anywhere near that, and I work in an IT shop with about 800 'programmers'.

One thing you can study is how programming itself has changed, in order to make it easier to implement and manage software.
When it first started, we used Assembler or COBOL, then BASIC, then C, then C++, then Visual Basic, now Visual C#. Look at the progressions, the tools available to 'program' each of those languages, it almost does it for you.

Look at the progression from Novell to Microsoft Server, to Server 2000, to Server 2010. A lot of stuff you used to have to do you don't do anymore, it does it for you.

Pretty soon, everything will be on a cloud and you won't need many people in IT to do things.

 

I would say that generally the long term effect of technology is increased (skilled) employment and reduced (unskilled) employment. New technology increases employment by requiring skilled people to design and implement it. When technology replaces or displaces old technology (like the cotton gin) skilled people must build and operate the machines and some previous (unskilled) labor gets displaced.

Since generally speaking technology makes the work get done easier, the net produced is either the same or increased, so if the rate of pay for the task achieved is the same then the net amount of pay is the same or increased. That way democratic ideals can allow the redistribution of the pay to those displaced unskilled workers that the bad new technology has displaced.

BT