THE PRESSING PROBLEM NOBODY DARES DISCUSS(Source blacklistednews.com) One of the key takeaways from historian Peter Turchin’s new book Ages of Discord is that real wages stagnate or decline in periods of labor oversupply and rise in periods of labor shortages.
This is common sense: the price/value of everything is ultimately set by the dynamics of supply and demand: the price/value of anything that is overly abundant drops. Or put another way: if demand is outstripped by supply, prices decline as long as there is surplus supply. If we set aside the many emotions generated by immigration and just consider statistics, we find that the U.S. added almost 14 million new immigrants in the decade 2000-2010. A Record-Setting Decade of Immigration: 2000-2010. In periods of strong job growth, demand from employers is high enough to absorb the added supply of labor from native population growth and immigration. In periods of stagnant job growth, immigration adds to the oversupply of native labor from population expansion.
Common sense suggests high immigration becomes an economic issue when job growth no longer absorbs net native population expansion and the influx of immigrants. The fourth dynamic generating labor supply/demand imbalances is automation. Though automation has been a dynamic force reducing the demand for human labor for hundreds of years, the pace has increased as software and robotics are now increasingly replacing higher-skill workers.
The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
As software eats the world, it eats higher-level skills that were once immune to automation. This means that the strategy that worked for 200 years–moving up the skill-value chain to tasks that could not be profitably automated–no longer works.
Over 90 million adults (out of a total population of 317 million) are counted as “not in the labor force,” i.e. not working or seeking work due to disability, being in school, domestic duties, early retirement, etc. The percentage of the population working or seeking work has fallen significantly. There is a basic structural problem with supporting 100+ million non-employed adults. The economy has to be productive and profitable enough to support this vast populace without relying on debt, which is as we all know borrowing from future workers and taxpayers to fund consumption today. Given the vast expansion of public and private debt since 2008, it’s clear that we are not supporting the populace out of cash flow, so to speak; we’re borrowing trillions of dollars from future workers/ taxpayers to generate the temporary illusion of solvency.