I'm not yet convinced that the majority of current unemployment is structural, since employment has declined across the board and in structural unemployment there are jobs that people could fill if they held a different skill set. Until those jobs exist, there's no benefit to retraining people (which is the main difference between structural and cyclical unemployment.) Since we aren't getting any fiscal stimulus either it's mostly an academic question. It only becomes a useful distinction when trying to design policy interventions. However, it is an open debate and I know smart people on both sides. It is also likely that even if I'm right, current unemployment has or will become structural as people remain out of work and their skills become out of date.
I was mostly noticing that if there aren't jobs anywhere we may be running up against one of the base assumptions of economics, namely that demand is infinitely increasing and thus greater GDP also produces the demand to sustain it. If instead increases in GDP come entirely from productivity gains and the profits go to people who have a marginal propensity to consume of less than the people made redundant it can lead to reduced demand. On a large enough scale, we eventually sate human desires at low enough levels of labor utilization that we never achieve the natural rate of employment (at least, without government intervention or exports).
It's actually my main complaint with classical economics: it states everything in terms of dollars as interchangeable with utility, and then assumes that utility is the same regardless of who is consuming it, whereas in reality even money is subject to diminishing returns.
It is a discussion of the argument against my argument, which is that there isn't a fixed number of jobs in the world and so employment by some doesn't necessarily deprive others of jobs (women entering the work force, for example, hasn't raised male unemployment and low skilled immigrants actually boost employment of already-present low skilled workers.)
The argument I'd make is that the marginal propensity to consume is the key to predicting the effects of a shift in employment. The reason immigration boosts employment is because low skilled workers have a high marginal propensity to consume. Automation has previously increased leisure time, especially in the private sphere and while some of it has gone back into the labor market (for example, the rise of two-income families), certainly not all of it has. There is a fundamental difference between adding more workers, who have a vast range of potential desires to sell to, and adding more capital, which has only creation, maintenance and replacement costs. However, unlike the Luddites, I'm looking forward to my life of leisure under my new robot overlords. Especially if I can have one in my home that enjoys cooking for me :)
I was mostly noticing that if there aren't jobs anywhere we may be running up against one of the base assumptions of economics, namely that demand is infinitely increasing and thus greater GDP also produces the demand to sustain it. If instead increases in GDP come entirely from productivity gains and the profits go to people who have a marginal propensity to consume of less than the people made redundant it can lead to reduced demand. On a large enough scale, we eventually sate human desires at low enough levels of labor utilization that we never achieve the natural rate of employment (at least, without government intervention or exports).
It's actually my main complaint with classical economics: it states everything in terms of dollars as interchangeable with utility, and then assumes that utility is the same regardless of who is consuming it, whereas in reality even money is subject to diminishing returns.
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It is a discussion of the argument against my argument, which is that there isn't a fixed number of jobs in the world and so employment by some doesn't necessarily deprive others of jobs (women entering the work force, for example, hasn't raised male unemployment and low skilled immigrants actually boost employment of already-present low skilled workers.)
The argument I'd make is that the marginal propensity to consume is the key to predicting the effects of a shift in employment. The reason immigration boosts employment is because low skilled workers have a high marginal propensity to consume. Automation has previously increased leisure time, especially in the private sphere and while some of it has gone back into the labor market (for example, the rise of two-income families), certainly not all of it has. There is a fundamental difference between adding more workers, who have a vast range of potential desires to sell to, and adding more capital, which has only creation, maintenance and replacement costs.
However, unlike the Luddites, I'm looking forward to my life of leisure under my new robot overlords. Especially if I can have one in my home that enjoys cooking for me :)
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