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Jobless Recoveries Explained

By       Message Phillip Michaels       (Page 1 of 1 pages)     Permalink    (# of views)   4 comments

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In business terms the computer age opened with years of accounting programs that--while making it easier to handle the numbers--simultaneously opened the door to doing lots of things we couldn't do by hand, on balance resulting in no net improvement in efficiency. As late as the early 1980s the effect of computers in business life was mostly about computerizing existing individual departmental functions. These computerization projects continued the phenomena of replacing by-hand work and simultaneously expanded the notions of what each department should and could do. In most cases the new efficiency was more than offset by undertaking more that would ever have been attempted by hand. Engineering departments at big corporations were well into converting to computer-aided design, manufacturing plants were using computer-aided production planning, and marketing departments were fascinated by the capability to use computers to identify trends. All of these things had been done by hand--or by the seat of one's pants, if they were done at all before.

Then in the late '80s came an incremental but dramatic change. Computer systems began to be taken to the next level. Departments that had computerized individually began to be linked together so that, for example, marketing's trend analysis automatically drove manufacturing's production. This small step linking departmental computer functions made for dramatic changes in efficiency. Manufacturing inventories were cut from months' supply to weeks' while the probability of filling an order on-time with exactly what the customer ordered soared. Initially, it was good for almost everyone because, in a growing economy, more efficiency didn't mean anyone lost his or her job, just that fewer new people were required. In logistic departments, for example, the number of SKUs managed by one logistics manager went from dozens to closer to a hundred just as the number of SKUs was expanding tremendously anyway.

The advantages of computer-driven processes are obvious. Computers work for nothing; can handle interminable hours; can easily avoid many of the errors humans are prone to; and once you get over the programming hurdles, can team together perfectly to accomplish large and increasingly complex tasks. Once these advantages had finally been demonstrated in the financial statements of a broad array of businesses (lower capital needs for inventory, larger profits due to more effective customer service, and the elimination of entire layers of distribution costs), the adoption and use of computers as a part of business increased exponentially. Here ends the good news.

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Unfortunately, as the pace of integrating computers into the business fabric increases, sooner or later the new efficiency begins to show up in the job markets. Up until the 1990's, economic recovery at a recession's end meant an upturn in jobs, but beginning in the '90's the economy began to experience jobless recoveries. There are, of course, other explanations for this phenomena, like the increased pace of exporting jobs to other countries. Of course, that job exporting process itself was underwritten by the growth of an information-driven society, where information and the processing of it could be literally anywhere in the world.

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Today, the computer is reaching the potential to dramatically change society on incredible scales--take for example the power of Twitter in the Iranian revolution. However, the processes that gave us the computerized vacuum cleaner that makes our lives easier also are beginning to demonstrate that much work no longer requires us. The "Humans Need Not Apply" signs are visible everywhere. Automobile manufacturing lines are full of robots building cars, shipping facilities have robots that automatically pick products from shelves to fill orders, airplanes can take off and land without human intervention, and robotic telephone systems speak and listen to us to provide all kinds of services. Well, but we'll always need people, right...right?

The "what then" problem with computers that was visible since the dawn of the computer age was what happens when computers have improved efficiency so much that we have many, many more people than jobs? The thinking in those early days was that computer efficiency was not necessarily a disaster. As computers are used, costs come down, making it easier for everyone to buy what they need, right? The problem with this thinking occurs when a lower price also means no job and no income.

If society is to continue and not become some gigantic version of hacienda society (where a few people own everything and everybody), there will have to be a new understanding of economics developed for dealing with a world that has a stable (not growing) human population (as the earth's population urbanizes, population growth rates fall below replacement levels) and that needs fewer and fewer people's efforts to produce goods. The implications for this new no-growth, highly efficient society are that a new means must be devised for the distribution of economic benefits. This may take the form of choosing to do the work in more labor-intensive ways, finding a more equitable distribution of the benefits of work (for example, this year's $100,000,000 man in banking is certainly not benefiting society like an Orville Wright), and/or changing the number of people owning society's productive capacity.

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Today's society does not appear to be prepared for the kind of collaborative effort needed to solve these exceedingly complex problems. The current Great Recession has brought to us with crushing speed to the fact that the "what then" problems of distribution of the economic benefits of our society--foreseen at the beginning of the computer age--have suddenly become, "Now what?"


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Writer, process designer, analyst, and democrat.

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