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In the ongoing discussions about unemployment and how to get people back to work, the issue of automation is, in my opinion, too often ignored.  Politicians and the media tend to get focused on red meat topics like off-shoring and NAFTA, all the while brushing aside what I believe to be the largest challenge to current employment, let alone job growth.

Case in point:  Company A has been in existence for nearly a half-century, and generates slightly over $192,000 in revenue per employee.  Company B has been around for fifteen years, and generates nearly $1.18 million in revenue per employee.

Here is the rub:  Both Company A and Company B are in the exact same industry.

Company A is Wal-Mart.  In 2009, Wal-Mart generated $404 billion in revenue, and employed approximately 2.1 million people.  Wal-Mart's sales represent slightly less than ten percent of total retail sales in the United States, or $4.4 trillion, which is close to 23% of the United States GDP of $14.6 trillion.

Company B is Amazon.com.  In 2009, Amazon.com generated approximately $24.5 billion in revenue, and employed approximately 20,700 people.  Amazon.com's sales represent nearly 20% of the $156 billion generated by online retail in 2009.

Based upon those numbers, this can be extrapolated:  

Since its inception in 1995, Amazon.com has eliminated nearly 107,000 retail positions nationwide.  As a whole, online retail has eliminated approximately 535,000 jobs.

This is the tip of the iceberg.  As of 2009, online sales account for approximately 3.5% of all retail sales.  By applying the Law of Accelerating Returns, it can then be assumed that, by 2016, online sales will account for 7 percent of all retail, eliminating another 535,000 jobs.  By 2019, 14% of all retail will be online, eliminating yet another one million jobs.

The extreme scenario is, of course, if you apply these numbers across the entire spectrum of consumer spending, which accounts for 70% of US GDP.  It raises the distinct probability of a loss of over six million jobs by 2019.

We are moving from the information age to the digital age, and it appears to be having a massive impact on the economy of every nation around the world.  I have heard the argument that we can't account for future technologies that will create new industry and employment for upwards of 20 million people, but it is hard to foresee when, at least in certain segments of the vast retail sector, worker productivity has gone up about sixfold in the past decade.

A little over fifteen years ago, Jeremy Rifkin wrote a great book  in which automation creates a scenario where there simply isn't enough work available, and the extensive ramifications it will have on a society that has to re-think how income is generated and distributed.

Will it soon be necessary to massively expand the welfare state?  Is there a new industry on the horizon that can provide sustainable work for tens of millions?  Will the sharp increase in worker productivity mean that it is more beneficial to society if we simply pay some people to be consumers?

Lots of big questions.  I'd love to hear some big answers!

Originally posted to jeffinfremont on Wed Mar 31, 2010 at 02:02 PM PDT.

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Comment Preferences

  •  Here is the real problem. Given that what you (11+ / 0-)

    are reporting is true...why in the world would we be raising the retirement age.  We should have been lowering the retirement age to 55 which is what most of the other industrialized nations have done.  People over 55 should be working part time with Medicare in place to allow them to transition into a less competitive part of the landscape.  We as a nation do not plan at all and very few of our assumptions about the workplace and unemployment make strategic sense based on what we have seen over the last 40 years.  

    "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

    by lakehillsliberal on Wed Mar 31, 2010 at 02:09:15 PM PDT

  •  definitely a concern (3+ / 0-)
    Recommended by:
    Gooserock, kurt, slowbutsure

    My mother has had this concern since she started working in factories in the 70s.  It was the issue prior to NAFTA that most people working in manufacturing worried about.

    However, while the concern is valid and interesting, I don't think your conclusion is all that great.  Expanded welfare state maybe, but paying people to be consumers is a horrible idea.  We need to restructure the society so consumerism isn't the goal of life.  As it is today, we can easily feed every man, woman and child on the planet.  But we don't because some people want more than others.  Not everyone on the planet needs a private jet, most of the people with private jets don't need private jets, or mansions, or even 1 car per person of driving age.

    We really haven't prepared mentally for this transition that will forcibly take place in the next hundred years or so.  I'd go so far as to say we've been mentally moving towards its opposite over the last 2 decades or so.  Until we begin preparing ourselves and our children for a life without consumerism the world will look very bleak for the average person.

    And just to show i'm not totally anti capitalist, there is a way to keep our consumer culture going no matter how much population grows.  Its called space exploration and exploitation.  But since the major player in the space game (US government) is pretty much stopping anything beyond the edges of our atmosphere its highly unlikely we'll actually be able to do anything like asteroid mining for resources any time in the near future.

    •  Using the Wal-Mart/Amazon.com example (3+ / 0-)
      Recommended by:
      DaleA, rmabelis, slowbutsure

      If a high-tech company were to pay a tax of $120,000/year per employee to offset the unemployment of five others (assuming $24k/year), the high-tech employee would still be generating in excess of $1.6 million per year in revenue.

      I would definitely float the notion of an automation tax if only to guarantee an income floor.

    •  Who's Got Missiles That Can Even Carry (1+ / 0-)
      Recommended by:
      slowbutsure

      barnstormers on a near space zero g hump dependably?

      I don't think industry's got a big fleet of mothballed asteriod transports yet.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Wed Mar 31, 2010 at 02:29:24 PM PDT

      [ Parent ]

  •  Another question... (3+ / 0-)
    Recommended by:
    DaleA, rmabelis, slowbutsure

    how much demand for retail office space has Amazon eliminated? If retail increasingly goes online, commercial real estate loses too. Even more difficult may be the long term trend towards working from home. If that trend accelerates, then demand for office space could really collapse. Finally there is the home school trend. While currently associated with fringe groups, an acceleration of this trend could complete the hat trick: no demand for retail space, no demand for office space, and no demand for primary education space. The entire family unit gets up at home, works at home, learns at home, plays at home, and sleeps at home.

  •  My big complaint about brick and motar (7+ / 0-)
    is that I can't find anything I want locally anymore.  Ok, that is an exageration but I honestly do try to buy locally.  I end up almost all of the time ordering over the tubes.  

    How can we have local retail when they don't stock what you want?  

    •  Nobody Can Compete With Mal*Wart. I Tried to Buy (7+ / 0-)

      some fabric for my home artsycraftsy biz but the Joann and Hancock fabric chains got crushed by Big Box.

      And of course they don't carry the fabric I need which is a very mainstream item.

      Same for the local hobby shops and hardware stores. All crushed by big boxes, and of course I need things for my home biz that are very common hobby items, but not high volume enough for big boxes.

      We have to restore trade tariffs, and we have to restore steep top-end tax rates so that the big decision making individuals no longer can take home income jackpots, and stop running our economy like a casino that drives almost all healthy profitable business out of the economy.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Wed Mar 31, 2010 at 02:26:50 PM PDT

      [ Parent ]

    •  How can you have local retail when (4+ / 0-)

      customers use the brick and mortar stores to select items and then buy it online? That's what happened to bookstores. People would go in to browse and then go home and order it from Amazon.

    •  Amazon - (2+ / 0-)
      Recommended by:
      Samulayo, kurt

      is moving their HQ's down the street from me in Seattle, and Costco is HQ'ed in a nearby suburb.  We still have plenty of small shops and medium size independents.  We are home to Starbucks and yet small coffee shops are everywhere.

      If folks here can compete against the big boys in their home town, why can't it be done elsewhere?

  •  We Have Astronomicl, Unsustainabl Trade Imbalance (9+ / 0-)

    So obviously a big part of the problem is straightforward job deportation.

    That said, I started my programming career 30 years ago automating away white collar university jobs. It's inconceivable to me that technology is creating as many new tasks for humans as it's eliminating.

    Technology has always eliminated unskilled manual labor. With the industrial age we began eliminating skilled labor and low-level management. In the information age we're now automating problem solving and decision making. Heck it's already physically possible to be operated on here in the US by a cutrate surgeon in India, via telerobotics. I don't know if anyone offers it but the equipment does now exist because the military has an interest in it.

    Humans only do 2 things: manipulate, and think. And both of these activities are being automated.

    So the answer to your question is yes, it'll probably become the end to natural job growth within the medium term future.

    If humans are going to be kept occupied, it's going to have to be by artificial government regulation, just as it took artificial government regulation to prevent the industrial age from restoring feudalism.

    The first place to start is to drop the retirement age to 55 for SS and Medicare, because employers have loathed older workers for generations. We had to pass anti age discrimination I think way back when boomers still had long hair, and as deregulation proceeded lately, businesses began purging workers over 45 quite a few years ago.

    I lost my technology career under Clinton not Obama or W.

    So retirement at 55, and the work week should drop to 32 hours for a 4 day week for most. During the Clinton boom the #1 worker desire in polling was for more time off (back when people felt they had enough money).

    If we did those things we'd end the unemployment problem before lunch this Friday.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Wed Mar 31, 2010 at 02:24:13 PM PDT

    •  I'm 55 and got retired unwillingly (7+ / 0-)

      Another unemployed tech worker here. If there were such a thing as a pension, I'd be just as unemployed, but I'd be paying my bills.

      •  You would not necessarily be unemployed. I have (1+ / 0-)
        Recommended by:
        kurt

        found tons of stuff to do and it has opened my eyes to the opportunities and the need to improve my skills.  I live in a community with tons of high tech and tons of start ups.  I would love to do nothing more than retool and work with younger people on their business ideas.  Take an equity stake and move to the next.  If it goes great, if not I have other things in the pipeline.  Learning and growing all the way.

        "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

        by lakehillsliberal on Wed Mar 31, 2010 at 03:52:22 PM PDT

        [ Parent ]

    •  Good points (2+ / 0-)
      Recommended by:
      DaleA, slowbutsure

      In regards to your comment about artificial regulation, I once joked to a friend that in a couple decades we'll all be working as software testers, even though it's a well-known secret that the software can test itself.

  •  Here is the real problem. (3+ / 0-)

    The only alternative to natural job growth of jobs in the private sector is, horror of horrors, socialism. Real high tax wealth redistributing socialism. An economic system such as they have in Europe. Too many Americans are in favor of individualism to make this possible. The Protestant work ethic and the idea of personal responsibility are opposed to the policy proposals that would actually lead to a better life for most Americans. A return to Feudalism in the form of the corporate state is our likeliest fate.

  •  If we paid for requesting and proposing (0+ / 0-)

    solutions to non-existant problems, like this diary and its responses, full employment would be assured forever.

  •  I think manufacturing is where (6+ / 0-)

    we've gone wrong. Retail jobs growth will only lead to more credit card debt. Manufacturing is what creates wealth.

  •  and your example (2+ / 0-)
    Recommended by:
    happymisanthropy, rmabelis

    and your example above (diary) is just another example of the reasoning why after capitalism plays out a while, it FAILS.

    Greed will not save the day in the end.

    (regarding the bank mess) They want to cure the patient but not deal with the disease.

    by dark daze on Wed Mar 31, 2010 at 02:57:01 PM PDT

  •  And the point is what, exactly? (3+ / 0-)
    Recommended by:
    kurt, longislandny, methylin

    We should limit new tech because it causes employment displacement?

    I'm sure the buggy-whip manufacturing lobby would be thrilled to have your support.

    •  Not at all (4+ / 0-)
      Recommended by:
      DaleA, happymisanthropy, rmabelis, DRo

      I'm more interested in finding out if we have hit a tipping point where automation is outpacing human labor.  If that's the case then we're going to need to start re-thinking how income is earned and distributed unless you're comfortable with millions of your fellow citizens living in cardboard boxes and rooting for sustenance.

  •  Automation is a fact of life. (2+ / 0-)
    Recommended by:
    happymisanthropy, rmabelis

    One way or another, society will adapt to the consequences of new, more efficient technology.

    We really need laws that encourage companies to manufacture goods in the USA, instead of outsourcing everything. Yes, that means enacting evil tax cuts for corporations.

    Every movie is a popcorn movie.

    by methylin on Wed Mar 31, 2010 at 03:33:13 PM PDT

  •  I don't think we'll run out of work (1+ / 0-)
    Recommended by:
    kurt

    due to computers & automation.

    It is true, the necessities of life has been and will be taken over by automation. But we don't live on necessities alone. We are creatures of desire. As long as humans have insatiable desires, there will always be work for other humans. When we are hungry we wanted bread. When we have bread we want ham. When we have bread and ham we want hand-churned ice cream. Likewise when we have basic clothes to keep warm, we want hand rubbed jeans. We want 700 count sheets and Egyptian spun cotton towels.

    •  But what will that work entail? (0+ / 0-)

      As I said in an earlier comment, I can easily see a scenario 15-20 years from now where the vast bulk of the workforce is employed as software testers, even though it's a well-known secret that the software can test itself.

      Is it our destiny to serve as bureaucratic drones because we want to maintain some kind of illusion that our current lifestyle is static?

      •  As I said- work will involve satisfying desires (0+ / 0-)

        You are still thinking of these mechanical, routine type work. Software will test itself (I don't know how but I'll take your word for it!), but somebody will still have to write that software. Someone else will still have to write an improved version of that software. The key here is that when one human need is satisfied, a new human desire arises. For example- maybe in the future Everyone has a basically perfect Microsoft Word. Guess what- will people be happy? NO! People will want to create hologram documents. When Microsoft releases Word Hologram, then people will want talking holograms. After that talking hologram with sex. After that (ok- I don't know what will top talking hologram with sex, but I am sure people will desire something else)
        As I said, as long as human desires is the bottomless pit that it is, there will never be lack of work.

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