Joblessness: The great Global crisis of the twenty-first century

Edward Galesar of Harvard University writes a long essay covering history, society, politics and economics. The kind of essay which was basically how economists wrote and tried communicating with the public. This art is mostly lost now as much of economic thinking has become garbled amidst equations and race for publishing.

He takes you through a tour on how the jobless problem in America started. He focuses on America joblessness is a global problem:

In 1967, 95 percent of “prime-age” men between the ages of 25 and 54 worked. During the Great Recession, though, the share of jobless prime-age males rose above 20 percent. Even today, long after the recession officially ended, more than 15 percent of such men aren’t working. And in some locations, like Kentucky, the numbers are even higher: fewer than 70 percent of men lacking any college education go to work every day in that state.

The rise of joblessness—especially among men—is the great American domestic crisis of the twenty-first century. It is a crisis of spirit more than of resources. The jobless are far more prone to self-destructive behavior than are the working poor. Proposed solutions that focus solely on providing material benefits are a false path. Well-meaning social policies—from longer unemployment insurance to more generous disability diagnoses to higher minimum wages—have only worsened the problem; the futility of joblessness won’t be solved with a welfare check. The loss of work for so many also reflects the emergence of a modern labor market with little interest in less skilled job seekers. American wages were high in the 1960s and 1970s because of steady demand for unionized labor in Detroit and Allentown. Automation and globalization have destroyed many of those jobs, and the process is likely to continue. Technology gurus like Elon Musk believe that future innovations will make the human contribution to other economic sectors, including services, increasingly obsolete as well.

Yet every underemployed American represents a failure of entrepreneurial imagination. We can do better. Our educational system must improve the way it provides skills that bring higher earnings, and we need to experiment with new forms of vocational training. We should encourage entrepreneurial energies, including by making it easier for small businesses to get up and running in low-income areas. And social programs that deter employment should be reformed—and ideally replaced by a simple pro-work subsidy. It’s time to end the war on work.

He says problems started as people migrated to cities. Yes cities provide better economic opportunities, but there is often a case of demand-supp,y mismatch:

America began as an oasis of plenty in a world of poverty. Farms from New Hampshire to Georgia offered any free man crossing the Atlantic the chance to exchange hard work for a full belly. In 1820, 78 percent of the American labor force farmed. While droughts and pestilence often threatened disaster, joblessness was no part of then-rural America. If you didn’t work, you starved, and there was always another patch of land to hoe and seed.

Unemployment arrived only when workers moved to cities. A vital strength of urban life is that it can connect people who want to work with people who have capital and ideas. But sometimes, those matches aren’t available. Almost half of America’s workers had left their farms by 1870, setting the stage for the recessions of the 1870s and 1890s. University of Florida economist J. R. Vernon estimates that the unemployment rate hit 8 percent in 1878 and may have exceeded 15 percent in the 1890s. In both downturns, financial crises had led to bank failures and massive firm bankruptcies. In 1894, the Pullman Strike disrupted the nation’s transportation network.

Yet as soon as the banking system recovered, American entrepreneurs resumed hiring cheap, usually unskilled, labor. Nominal wages actually fell over both the 1870s and the 1890s because workers had to accept low pay. With no government safety net, long-term unemployment meant deprivation—or even death.

He discusses the solutions as well which despite best intentions might not work. The core problem is Sapiens after destroying much of ecosystem around them are now looking to destroy Sapiens themselves! The surge to become uber-efficient and looking to replace people with all possible machines is eventually taking its toll. Most of the entrepreneurs react to the way financial markets evaluate them and latter rewards efficiency over everything else. The incentive system has been laid in such a way over the years that there is no escaping efficiency and doing away with human involvement wherever one can.

This war on work had started much earlier but is only beginning to be heard now. Earlier, quite a few developing markets raised voices over how much of this so called growth agenda was not addressing the problem of employment. But the developing world was ignored and as it did not have much voice either, things were ignored. The problems were creeping in developed world too but thanks to central banks bailing them out in each of the crisis, things just continued. It required a bigger shock which came in the form of 2008 crisis and then suddenly the developed world also began to realise how the war on work has come to their lands too.

All this while economists were busy building one fancy model after the other totally ignorant of the societal trends. Those who warned were ignored/sidelined just like the developing countries. Now chickens are coming to the roost.

The problem is much bigger for the countries with larger populations..

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