When my late grandmother was a girl in rural Arkansas, no one had a job. Everyone old enough to walk and carry a pail worked from dawn to dusk. Work was endless, cruel and utterly universal, but a “job” in term of formal employment for wages, was rare. Those few who had been reduced to performing paid labor for someone else were at the bottom of the social and economic scale, a grim, defeated remnant.
My grandmother’s world was a time-capsule from an older, pre-capitalist society in which land ownership determined rank, and rank determined economic outcomes. Almost everyone worked in agriculture. A thin class of merchants, professionals and tradesmen occupied the small towns, serving the needs of farmers. In that environment, people who worked for wages tended to be impoverished and desperate. Alienated from the land by some form of misfortune they were society’s most pitiable figures.
We often hear assurances that disruptive technological innovations will create more jobs to replace the ones they destroy. Evidence for this comforting notion comes from a look at overall job creation over the last century or so. That may be too short a span of time and too great a confidence in continuity.
People did not always have jobs. In fact, the idea that responsible adults were supposed to have a “job” has only been around for a few generations. Our economy was not always built around employment. There is no reason to expect that it always will be. Capitalism created our very notion of a job. Capitalism is well on its way to replacing that concept.
Whatever jobs capitalism creates are incidental to its central purpose. What capitalism does is replace manual effort as the means of generating value. That may or may not create any jobs. Let’s review.
A person works 50 hours to produce 50 units of value. Instead of consuming all fifty of those units, he and ten other people each take 10 of those units and invest them in a project of some kind. Maybe it’s a machine, or a canal, or a company that will do the work in a different, more efficient manner. That new enterprise allows them to produce five times as much value from the same overall investment of work. From the returns on their successful investment come new investments that transform other kinds of work, and the cycle takes on an exponential character. Value, invested in improvements, yields new value beyond what was possible through labor alone. Capitalism may or may not create a job for someone, but capitalism always replaces work.
An example of this process can be seen in the story of the Pecan Shellers Strike in Depression Era San Antonio. This sheds light on the way innovation, organization, and government interact to facilitate capitalism.
In a strange twist, pecan production in San Antonio had previously been an industrial operation, but in the late 1920’s major producers stopped using machines. A massive influx of refugees from Mexico’s Civil War gave them a cheap source of labor, politically impotent, economically desperate, and willing to work for subsistence. Faced with this massive pool of exploitable labor and no political force to check abuses, businesses that controlled access to the pecan supply reverted to a pre-capitalist, almost feudal model of production. Capital owners lost their incentive to continue investment and became rentiers.
Entire families, including small children, worked to manually shell pecans in a style of labor that would have been familiar three hundred years before in Europe. Output dropped along with productivity and prices to consumers rose. As profits wobbled, producers simply placed more pressure on desperate workers.
First workers began to organize. A strike organized by a newly formed union won small wage gains for workers, but kept them locked into miserable conditions.
Next came government intervention in the marketplace. Labor organization achieved little through strikes and negotiation, but by organizing they were able to begin exerting political pressure. What broke this situation was a cultural/political innovation that tipped the balance in favor of technical innovation – a minimum wage. The Roosevelt Administration in 1938 intervened to ensure that the pecan shellers were covered for the first time by a federal minimum wage. That wage was significantly higher than what the shellers were earning previously.
With the stalemate broken by government regulation, capital owners resumed investment. Within months after the federal government imposed a minimum wage, an industry that had employed more than 12,000 people had roughly 3000 workers. Soon that number had dropped to a few hundred. Where thousands of people, many of them children, had been earning a penny or two an hour, a few hundred people were now earning more than a dollar an hour while machines performed most of the labor. The union disappeared, its workers dispersed, and its purpose diminished. On the capital side, less innovative and efficient producers went out of business, eliminating the rentiers, and the industry consolidated around the most successful investors.
What did the newly unemployed do with their lives? Attend school, mostly, since the bulk of them had been children. In strictly technical terms, the final arrival of industrial pecan production produced a net gain in “jobs” since none of the people involved in pecan production previously were employed in any formal sense. The arrival of industrial capitalism, paired with intelligent regulation, replaced the informal though brutal labor of thousands with a few hundred people who now had a “job.” Capitalism eliminated hundreds of thousands of hours of manual labor while creating the” job.”
What capitalism giveth, capitalism taketh away. Consider the evolutionary process we see in the Pecan Sheller’s strike and then extend it forward. What you see is the constant, relentless replacement of human work with technical innovations funded and enabled by capitalism. Sometimes capitalism creates jobs, but usually only where no formal employment existed before. Capitalism gave rise to the “job” as an intermediate stage. We are moving past that stage.
A fortunate few pecan workers saw their wages rise while the rest of the labor pool disappeared. As this cycle has repeated, the immediate rewards have consistently landed in fewer and fewer hands. Through cultural and political innovations (public schools and welfare programs), we have managed to spread the benefits of innovation beyond the immediate winners. Now we need to recognize our changing circumstances are create new methods to do this again.
Look closely at the labor which was replaced by one worker. The man (it would have been a man) who worked in the new pecan-shelling factory was now earning enough to support an entire household in a style far better than they would have enjoyed before. Previously, that family of six or eight would all have been working at shelling pecans. Now one person did that work using machines, freeing up a parent to tend to the family and children to attend school. That school could now be funded by taxes imposed on workers earning far higher wages and on capital owners making tremendous profits.
At the same time elsewhere in the world, other societies were experimenting with socialism to achieve similar goals. Their results ranged from marginal to disastrous. Our approach worked well because we were careful not to crush the freedom of capital owners to invest in new innovations. Instead of imposing central ownership of capital with the bureaucratic rigidity of collectivism, we kept capitalists free to make their own decisions.
Replacing human work with capital plus machines created a new wave of value. Political innovations channeled a portion of that value into a process that gradually converted a city of wretched slums into a first world metropolis. With each new cycle of innovation, more work has disappeared. In earlier cycles, almost all of that work was mechanical, replacing nothing but muscle. But as it had advanced, mechanization is being replaced by even more lucrative automation, replacing non-mechanical human functions.
Changes in the character of work in our time are putting new strains on the “job” as a social construct. Fewer Americans are “employed” than at any point in our post-agricultural history and the number is in continual decline.
Our political and economic order came to be organized around the idea of a full-time job. A job is where we get money. A job is how we get access to health care. We enforce our notions of fair play, economic justice, and basic human rights by regulating the terms of a job. When Donald Trump sees a protestor at his rally he tells them to “get a job,” because good, decent citizens have jobs.
What happens when the same economic forces that only a short time ago created our concept of a job suddenly render that concept obsolete? We have already entered an era in which jobs are transient, popping into existence and then disappearing in a short span of time. Fewer Americans than ever before are ‘in the workforce’ by the terms we have defined. More and more people earn their money from activities that do not look like a job. That trend is accelerating.
Just a decade ago, about 100,000 Americans worked in the video rental industry. The largest employer in that business, Blockbuster, employed more than 60,000 people at its peak. If wages for corporate office employees are included, then the average worker at Blockbuster earned about $35,000 a year, adjusted for inflation. Today, more than 95% of those workers have lost their jobs.
More than any other company, Netflix represents the force that destroyed the video rental industry. Average annual earnings for their employees are well over $125,000. Software developers and IT engineers there can earn base salaries in excess of $200,000, along with stock compensation that can double that amount. Instead of supporting 60,000 workers, Netflix has 3000 employees.
Given the compensation involved, it should not be surprising that careers in these new industries tend to start late and end early. Fifteen years as “labor” in a company like Netflix is enough to allow someone to spend the rest of their life earning a living from capital. Across of much of their remaining life, that former Netflix employee will be technically out of the labor force. And for many of the years prior to working at Netflix, that employee would have been technically unemployed, occasionally showing up in census records in the bottom-earning quintiles.
This new pattern of employment contributes to one of our most worrying economic trends, the rising earnings of the 1%. Our Netflix employee at different points in her life might show up in economic statistics as “poor,” “unemployed,” “out of the labor force,” and also spend several years earning wages that rank in the highest 1%. In fact, a study at Cornell found that one in twelve Americans will earn wages in the top 1% at least one year of their careers. Almost 40% will chalk up at least one year in the top 5%. Netflix employees at different points in their career arc are padding our measurements of the 1% and the poor.
Combine the statistical impact of workers displaced by the rise of companies like Netflix with the strange statistical impact of workers benefiting from these trends and the result is a hopelessly confusing muddle. When we examine employment and income we still see them through the lens of 20th century industrial capitalism. We are living through a massive economic boom making Americans richer, freer, and more in charge of their own futures. When examined through a 20th century framework it looks a lot like a Depression.
Our political innovations are dragging behind our technical progress to a degree that is threatening an earthquake. A combination of capitalism and technology is innovating us out of a job, and on the whole it is a fantastic thing. When thousands of pecan workers lost their jobs to political and industrial innovation, the results were fantastic. What made those results great was our willingness to change our culture to spread the value created by capitalism. Taxes funded schools. Regulations blocked capital owners from exploiting workers to extract rents. We adapted quite well.
Adaptations that helped my grandmother’s generation absorb their new realities have lost much of their utility. In our next stage of economic advance, our most lucrative work will start relatively late in adulthood, after many years developing knowledge, skills and experience. That lucrative work may or may not look like a job.
More people than ever before will earn the bulk of their living from accumulated capital. Labor, in a traditional sense, will evolve into narrow specialties or creative enterprises. Most manual labor will be in service professions. Even the most financially successful workers will have to survive many years of adulthood with minimal incomes, or none at all. This new economic order is already producing vastly more wealth than anything that came before, but it has also broken the political and cultural model under which we still live.
With no adaption, our current economic and political model will create a terrifying rift. Currently, people with significant family support or inherited money are the only ones who get to participate in this new economy. If you cannot survive from the ages of 17 to about 30 without a steady income while also investing significant capital in your own professional development, you cannot cross the chasm. Millions of talented people are being left behind. We are all losing what they could have contributed.
Relatively few of San Antonio’s pecan workers made the leap to industrial work, but they didn’t have to spend ten years in expensive education and unpaid internships. Adaptations that worked in that environment are not working anymore.
A basic income could preserve the potential of this emerging economic model. Adaptions created to cope with 20th century conditions are reaching the end of their usefulness. Our best hope is a model that makes everyone a stakeholder in this economy while preserving the freedom of capital owners to invest and innovate.
A minimum wage, regardless how high it may be set, provides no relief to those without a job. As the jobs era comes to an end, it is time to start looking for ways to deliver a more meaningful shared prosperity. A basic income is the logical answer to a post-jobs economy.