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Unemployment is inevitable, and that’s not a bad thing.

18 Mar 2013

The title of this post might confuse you. Not having an income is bad, right? How are you going to put food on the table?

The important thing when thinking about social issues like unemployment, is not to think on an individual scale, but on a society-wide scale. While you as an individual will have a problem when you lose your job, what does it really mean for society when unemployment rates go up?

The key to this is in a basic economical concept: supply and demand. When demand is larger than supply, you have a shortage. When supply is larger than demand, you have an excess. But what does that mean in the context of employment?

To understand this, you need to understand that manpower is treated like a commodity in the current economic system. There is a certain demand of it (jobs and their working hours), and a certain supply (job seekers). With this knowledge, we’re already very close to understanding the big picture, because adding up everything we just talked about, it turns out there’s another way to describe unemployment. Unemployment is effectively an excess of manpower. There is more supply of manpower than there is demand for it, which leads to a part of said manpower being in excess - which is exactly what unemployment is! 

Consider the idea of ‘creating jobs’. No doubt, regardless of where you live, you've heard some politician at some point say that “more jobs have to be created”. With our new-found understanding of what unemployment is, it suddenly becomes clear that that politician was advocating creating more demand, just to fit in all the supply of manpower. 

Consider this analogy:

A mobile phone manufacturer finds that they are producing so many phones, that a large part of them remains stocked up in a warehouse, because everyone that wants a phone already has one! Rather than cutting down on their production, the manufacturer decides to lobby for the government to introduce a ‘mandatory phone’ law: every citizen must buy a phone from the manufacturer, regardless of whether they want one. 

Sounds crazy, doesn’t it? Yet this is exactly what is being done for manpower! Rather than cutting down on the amount of work and production that takes place, which would result in shorter work weeks, artificial jobs are ‘created’. And who are you to disagree with that? After all, you have to work a full-time job to be able to put food on the table!

But isn’t it a good thing that everyone gets a chance to have a full-time job?

No. Most likely your idea is that if enough jobs are created, everyone will be able to put food on the table. Sadly, when taking into account how money circulates, that is not how it works.

Simply put, your salary comes from the funds of the company you work for. Those funds are a result of that company selling things to others. But who are those things being sold to? To a ‘consumer’, either directly or indirectly - the same ‘consumer’ that needs a job to survive! In the end, it’s one big circle. This means that if more jobs are created, more is produced or created, which in turn means that more has to be bought, which increases the salary you need, and so on.

Eventually it’s a zero sum game - if the total amount of salary handed out throughout a country increases, then the total amount of sales has to increase as well. The specifics are a bit more complicated, but in the end it basically comes down to this. No matter how many jobs you ‘create’, the compensation for that will have to come from somewhere, eventually landing you in the exact same position as where you started.

Unemployment cannot be solved by ‘creating jobs’, full stop.

But then what is the solution? 

As I said in the very beginning of this article, unemployment is not actually a problem. It’s solely a result of the way technology has advanced. As automation has increased over the past few decades, and many things have gotten significantly less labor-intensive, we simply do not have as much demand for manpower as we used to.

This is a good thing!

If we need less manpower to keep the same society running, that means there’s more time to do other things that are not essential to survival, but still important - such as self-education, innovation, arts, and so on.

But to get there, the way we think about work has to be changed. It is no longer reasonable to expect every single person to ‘contribute to society’ by working a full-time job. Society doesn’t need that kind of manpower, and it keeps us from working on more interesting and innovative things.

I will follow up at a later point, with a more detailed article on how this can be put into practice.

A note for commenters: Before telling me to “join the real world”, or accusing me of “living in an utopia”, please consider whether you really have a point. If you do, it should be trivial to point out the specific flaws in my reasoning, rather than attacking me with an ad hominem. If you don’t, then maybe it’s better to just not comment, and let this sink in for a while.