The US has lost 38 million jobs as of May 23rd, 2020. Some of those may come back. Many will not. Going into 2021, the US will likely have the highest unemployment rate in the last 100 years.
I’ve written quite a bit about the fragile labor economy and believe the gaps I’ve written about have become more visible than ever.
Here are the questions I’m thinking about for the next year.
#1 What happens when work doesn’t seem a necessary part of our lives?
In Max Weber’s famous treatise on Capitalism published in the 1800’s, he argued that a central element that enabled capitalism to emerge and succeed starting in the 1500s was the fact that so many people eventually developed a “spirit” for capitalism.
Many people incorrectly equate this spirit as greed, but as Weber points out, greed is timeless and universal not a product of capitalism. It has been seen at all times in history and in all types of economic systems. Instead Weber suggests that capitalism might have become so effective because of its ability to restrain greed:
Capitalism may even be identical with the restraint, or at least a rational tempering, of this irrational impulse.
By channeling this natural human urge into work, it can theoretically benefit not only the greedy person, but society at large.
What then motivates work?
This is where things get tricky and where we might be on a slippery slope regarding our work beliefs.
Weber argues that the Protestant reformation and the shift from people believing work was a necessary evil to one where work was seen as an end in itself was the ultimate shift that unlocked the potential of capitalism to succeed across the world. As he says, “simply: that business with its continuous work has become a necessary part of their lives.”
In the US, this belief is deeply connected with how many measure their success in life:
This necessary part of people’s lives has been stripped away and many more are working remotely and questioning if there work is really all that essential at all.
#2: How does unstable work relate to how people think about the future?
To explore this, it’s worth taking a trip across the world to Japan, where the economy has been relatively stagnant since the end of the 1980’s boom years.
While Japan has softened some of the blow of this stagnation with a 15% increase in the labor participation rate of women since 2000, it also saw a steady increase “nonregular” work which grew from about 20% of the labor force in the 1990s to almost 40% in the late 2010s.
Many of these people, sometimes called “freeters” opt out of steady paid employment even when it is available. This loss of faith in the prospects of employment has fueled a vicious cycle in Japan. People stopped believing in the future and companies stopped investing in employees.
The result was a self-fulfilling prophecy that made the “non-regular” employment class of workers permanent:
Naoki Shinada, an economist at the Development Bank of Japan, explains that in the immediate aftermath of an economic shock, it makes sense for companies to use temporary and part-time workers to control costs and maintain flexibility. But problems arise when this becomes the standard hiring practice, making it “more difficult for firms to maintain some skills embodied in their labor force.”
People have lacked faith that things will improve in the future and so they take the “non-regular” path.
We’ve already seen these non-regular paths emerge as I explored this in my conversation with Sarah Kessler about her book Gigged.
Will we see a two-tiered labor economy emergewhere some have great jobs and others will do various gig work over the course of their lives?
#3 How will the cross-generation disconnect be resolved?
Part of the reason the belief that “if you work hard, you will be taken care of” exists is that it was true. Yet, this has become less and less true:
Every ninety out of one hundred people born immediately after World War II ended up earning more than their parents. For millennials, its a coin flip. What will this look like for Gen Z?
This has had a huge effect on household wealth where each generation (except baby boomers) have had less wealth at similar ages:
Younger generation have not just sat and mourned the decline of the American dream, they have changed their approach to life. Young people have put more emphasis on experiences over things and have delayed marriage, homeownership and having children:
As a result, the gap between the number of children that women say they want to have (2.7) and the number of children they will probably actually have (1.8) has risen to the highest level in 40 years. (From 1972 to 2016, men have expressed almost exactly the same ideal fertility rates as women: In a given year, they average just 0.04 children below what women say is ideal.)
What further cultural changes will emerge? How will people think about money, where they live and how they spend their time?
One thing that is already happening is a soft wealth transfer from baby boomers to millennials. Consider this:
“in 2000, 23 percent of men aged 21-30 lived with a parent or close relative, but by 2015, that number surged to 35 percent.”
That number is likely going up in the next couple of years.
Many of these parents quietly fund the lives of their kids because lets be honest its a bit embarrassing, especially in a country that believes in work so deeply. Yet this current crisis may be different.
In many western countries, the way to pass wealth down to the next generation was work. That mechanism is not working anymore and has not been working for a while. Will we see new norms emerge? Will boomers embrace a “pre-inheritance” and look to buy a house so their children can start raising their own families or will they continue to believe that work is the only way that people get ahead?
#4 What is the role of making stuff and our relationship to optimism and the future?
Over the past 50 years, there has been a consistent trend of decreasing manufacturing jobs offset by an increase in services jobs.
These new jobs are often positioned as “higher-value” work. While some are many are what Adair Turner has called “zero-sum” work – work that can’t be automated and does not drive productivity gains:
Look around the economy, and it’s striking how much high-talent manpower is devoted to activities that cannot possibly increase human welfare, but entail competition for the available economic pie. Such activities have become ubiquitous: legal services, policing, and prisons; cybercrime and the army of experts defending organizations against it; financial regulators trying to stop mis-selling and the growing ranks of compliance officers employed in response; the huge resources devoted to US election campaigns; real-estate services that facilitate the exchange of already-existing assets; and much financial trading.
Dan Wang has written about the role of this shift in our relationship to optimism about the future:
“Although manufacturing jobs can be wasteful, I don’t think (they have) this issue of being zero-sum.”
The conclusion being that if we just adding more manufacturing jobs we might increase optimism about the future. People have been talking about “bringing back” those jobs for decades – it’s not going to happen.
Silicon Valley is one place that has been dreaming about the future, one with software and robots instead of traditional manufacturing.
Can people become optimistic about these efforts especially if the robots are doing the building? Or do humans need to use their hands and make stuff?