The labor and employment problem under capitalism

The capitalist system is not kind to the laborers and workers these days.  When most of the world was still agrarian in the old days, anyone who was physically fit could work with his physical labor, probably on a farm or a field to provide food for himself and his family.  Even during the Industrial Revolution, most people could find a job in the factories without graduating from high school.  As the modern economies evolve into complex industries and service sectors, many workers may have been liberated and decoupled from the direct stranglehold of the gentry and the hardship of physical manual labor.  However, they face a different set of challenges nowadays.  Professor King came back today to explain to our group how the labor market works in our capitalist free market economy.

Different skill sets are required of the modern jobs in order for a worker to be employed.  The more technical and difficult the job is, the more education and training it requires of the job holder.  Unfortunately, our education systems and job training programs do not mesh seamlessly with the job market.  Consequently, there is always a mismatch of the supply and demand of the labor.  As a result, there are always people who want to work but cannot find jobs and certain jobs are available but cannot find qualified workers.

The demand for the labor in the job market is determined by the aggregate demand of all employers, dependent on the demand for their businesses, driven by demand of the consumers, motivated by practical or emotional decisions, based on logical or illogical reasoning.  Ultimately, such interrelationships in the capitalist economy render the job market very much unpredictable, whimsical, cyclical and prone to booms and busts.

To meet such erratic labor demand, the supply channel is fairly rigid and out of anyone’s control, both in the availability of number of workers and their skill sets.  The total labor force available is determined by the total working population. Since most countries have no population control, each only fluctuates with its birth rate, mortality rate and migration.  Even with China’s one-child policy (which has recently been changed to allow only-child parents to have two children), it can only slow the growth of the population but not really regulate the working population.

More importantly, the skill sets available for the labor market are no less inflexible or inconsistent.  Even though most citizens receive some form of universal basic education in all developed countries, such education and even higher education do not necessarily provide a skill level that will guarantee lifetime employment, good paying or not.  Since most people are educated and trained early on at young adults, there are many disadvantages to this job preparation system.  Once people select a vocation that has fixed or specific skills, they are rendered less flexible and less responsive to market changes. Their skill sets may or may not match the concurrent or future job offers, meaning they may or may not find a job now or later in life.  While each individual juggles between his own passion and the potential job prospect, picking a career becomes a guessing game, subjecting each person without a job to financial insecurity at the whim of the job market.

How does the reality play out in history?  Inevitably, when times are good and businesses are booming, jobs are plentiful and employers just hire anyone they can and train them on the job while lifting wages to compete for the scarce workers.  Conversely, when times are tough and businesses are shrinking or disappearing, jobs are scarce and the unemployed are left out in the cold.  When the economists talk about the economic upturns and downturns and policies to smooth out the volatility, they obscure the immense human sufferings of the jobless who are the most helpless behind all the charts and statistics. No expert has found a solution to perfectly match the labor demand and supply to eliminate the collateral damage of unemployment.

Unemployment happens when there are people who want to work but cannot find a job, usually under three scenarios.  Those are: when companies are not creating enough new positions or not replacing existing ones, when the job seekers are not qualified for the positions available or when new technology displaces or eliminates existing positions.  Theoretically, if the economy keeps growing, existing businesses will expand and new businesses will be started to absorb the available workers and unemployment will fall.  That is also why the capitalist economy has to be growth-oriented, as it has to continue to expand to create enough wealth to keep maintaining or lifting the living standard of the growing population.  But no economy has ever sustained perpetual growth and no economist can explain how to maintain perpetual growth continuously.

With the recent developments of global outsourcing and rapid technological advances, particularly computer technologies, there has been a massive disruption in the labor markets around the world and a considerable displacement of workers.  They hit the older and less educated workers the hardest since they represent the most vulnerable menial and manual labor sector, which happens to be the easiest to be replaced by advanced automation and robotics.

The reordering has been fast and abrupt.  Overnight, the disadvantaged who may have worked all their lives can become unemployed and lose the means to support themselves and their families, through no faults of their own.  The worst is once their low skill jobs are gone, they are not coming back.  Even with aggressive retraining, it will take a lot of time, effort and monetary commitments to get them ready for the new jobs.  By then, who knows?  The job market conditions may change and the process may have to start all over again.

Persistent unemployment and under-employment can cause serious long term hardship, on an individual and on a society, especially in a large scale.  How do you help people when they cannot find a job in this winners-take-all economy?  If any, the current short term solution is some form of government intervention, regulation and support to provide a temporary cushion or safety net, through limited social benefits and possibly job retraining.  But the ideal solution of a permanent living wage job for everyone remains elusive and seemingly impossible.

At this point, our group got very baffled by this whole labor market setup.  As an example, if we know we have to feed a fixed number of mouths (our labor supply), why do we adhere to a haphazard and irregular food delivery system (our labor demand)?  In addition, for all we have touted the advance of science and technology as human achievement, why do we allow any new inventions or developments to take away the livelihood of a certain vulnerable population and let them suffer without any sufficient compensatory safeguards to offset and ameliorate the devastating effects on their lives?  We considered this an ultimate slap in the face when good science brings bad news instead of good news.

Lamentably, it seems like the world has forgotten about the spirit of science, espoused once by the great scientist, Albert Einstein, in an address at Cal Tech in 1931:

It is not enough that you should understand about applied science in order that your work may increase man’s blessings. Concern for man himself and his fate must always form the chief interest of all technical endeavors, concern for the great unsolved problems of organization of labor and the distribution of goods − in order that the creations of our mind shall be a blessing and not a curse to mankind. Never forget this in the midst of your diagrams and equations.

Unfortunately at the present time, the global economy is facing unprecedented unemployment challenges.  Since the financial crisis in 2008, major western economies have been sluggish, afflicting rich countries with high unemployment and low wage growth while slowing the pace for poor countries to rise above poverty.  Even the recent up-and-coming BRIC (Brazil, Russia, India and China) economies are stalling.  As mentioned above, there are many structural obstacles that make it hard to improve on the current labor market mechanism easily and quickly.

Nevertheless, the lack of employment should not translate into a loss of livelihood and should not subject the unemployed to a life of desperation and destitution.  We believe a guarantee of universal lifetime labor employment with a living wage for everyone should be essential to the basic functions of a decent human society and should be prioritized in how we structure our economy.  Is it possible in NATORZ?

Let us imagine what if…