The “Not Enough Jobs” Scenario: An Economic Fallacy (But Possibly an Accurate Forecast)

Posted on August 13, 2015 by Dr. Mark W. Hendrickson Comments (19)

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Once again, a scholar with impressive credentials is broadcasting the gloomy notion that Americans face a job-poor future. The insufficient-jobs scenario appeared in George Mason University economist Tyler Cowen’s book “Average Is Over” a couple of years ago. It resurfaced again recently in the Pittsburgh Tribune-Review. Vivek Wadhwa, “a fellow … director of research … and distinguished scholar” at several prestigious universities, wrote that we need “a new version of capitalism” for “dealing with our jobless future.”

The crux of Wadhwa’s argument is his belief that technological progress will result in a society divided between a technologically savvy elite, who will prosper mightily, and a larger number of Americans whose jobs will be rendered obsolete and won’t be able to find new jobs. There’s an obvious fallacy here: If technological progress reduces employment opportunities, then why are hundreds of millions of people still working in the technologically and economically advanced countries of the world? What is it with these intellectuals and the recurring nightmare that progress results in a dearth of jobs?

An incident that the late economist Milton Friedman related comes to mind: While visiting a populous but undeveloped Asian country several decades ago, Friedman saw a gang of workers using shovels to excavate a hole where a building’s foundation would be laid. Friedman noted that the job would be completed much more quickly if a modern excavating machine were used. His host replied that a deliberate decision had been made not to use such a machine because the government wanted to maximize employment. Friedman’s rejoinder was to the effect that if the goal were to maximize employment in the country, they should ban the use of shovels and equip a far larger number of laborers with spoons. It doesn’t require great vision to realize that a fully employed nation of spoon-wielding ditch diggers would remain a very poor place.

Can anyone doubt that technological progress has led to economic advancement? The economic principle is elementary: As worker productivity increases (that is, as more wealth is produced from fewer units of labor) prosperity rises, too. When improved agricultural productivity has bankrupted farmers and resulted in our food supply being produced by an ever-smaller percentage of Americans, what has happened to all those ex-farmers? They found employment in new fields, thereby increasing the number and variety of goods and services produced. In other words, more wealth was created, and that is how a society achieves higher standards of living for the masses.

What has just been described is Schumpeter’s process of creative destruction. Old jobs that produce things of less value become obsolete and new jobs producing things of higher value take their place. This is the natural evolutionary course of free markets.

Any notion that there is a ceiling to the number of potential jobs ignores an elementary and undeniable economic truth—namely, that there is no limit to the potential number of jobs because there is no limit to mankind’s wants. As technology makes it possible to produce what are considered the modern necessities of life (cars and cell phones in addition to the traditional necessities of food, clothing, and shelter) more workers will be available to produce and provide new goods and services that entrepreneurs are dreaming up every day of the year.

Is there anything that can inhibit or halt the natural tendency of entrepreneurs in market economies to generate new job opportunities? Yes, indeed. Government intervention—excessive and costly regulations, wealth-and capital-depleting taxation, misallocation of resources via government spending programs, depreciating currency, etc.—can stifle economic activity, discourage business formation, and cause job opportunities to dry up.

What is scary about Wadhwa’s thesis and related plans (such as Hillary Clinton’s proposal for government to lay a heavier, more controlling hand on American entrepreneurs and businesses) is that their ill-conceived policies will produce results opposite to what they claim to be seeking. There will be less employment instead of more.

When Wadhwa says we need a new “capitalism” that redistributes more wealth and provides everyone with a taxpayer-supported guaranteed income, he is doing two destructive things: First, he is perpetrating a pernicious lexicographical hoax, proposing a new form of statism that is a repudiation of free markets—i.e., that is anything but “capitalism.” A more honest statement would be “It is time to replace capitalism with greater government control of economic activity.” The second destructive aspect of his suggestion is his apparent blindness to the fact that maximum economic freedom—true capitalism—is the world’s best hope for expanding job opportunities. To jettison capitalism and replace it with a greater degree of statism will impede economic growth, squelch the growth of businesses, and consequently hinder job creation, to the economic detriment of those who are hoping for jobs.

There will be enough jobs for Americans only if the political planners surrender their mad ambition to direct the economy from Washington.

Dr. Mark W. Hendrickson

Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.

19 responses to “The “Not Enough Jobs” Scenario: An Economic Fallacy (But Possibly an Accurate Forecast)”

  1. Steve says:

    I agree wholeheartedly with this article, with the exception of what is not mentioned: the vastly poorer quality of food being produced by North American farmers since Big Ag has taken control of the industry.

    • Jim Hallett says:

      You are right, and of course, the problem with Big Ag (as with all the Big Monopoly cartels) is that they are not a FREE market capitalist industry, but rather one that is in bed with the govt., getting its own welfare, and cutting every corner imaginable to profit, rather than respond to the demands of the marketplace. Thus we have depleted soils, GMO foods, HFCS and soy crap in just about everything due to govt. subsidies, and then lots of food on the grocery shelves from the Third World that is inferior, not to mention shrinking package sizes, deceptive labeling, and lots of kickbacks – thanks to the criminal thugs in the Sewer (aka Congress).

  2. Paul Anthony says:

    I agree with his assessment of the detrimental effects of government policy, but not with the rosy expectation of job growth. It might be reasonable if the population were constant, but the rate at which the human race is increasing its numbers combined with the technological advances in production of things, we are approaching a point where the labor of all the people will not be needed to satisfy the needs and wants of all the people.

  3. Tom D says:

    There is probably no question that the educated part of the work force in their 20's, 30's and 40's whose jobs disappear will very likely be able to find new employment. Then we have those of us in their 50's or 60's or even older whose job disappears. Being in that 60 plus group, the job market is slim. Why would a company invest time and money to train someone like me to do a new job when their time in the job is likely to be only a few years? And then we have the young and uneducated. How do they get these jobs requiring new technical skills?
    And as I write, the answer becomes clear – yet another government spending progam for retraining!

    • Jim Hallett says:

      The responsibility for developing new skills or getting education does NOT rest with the employers of the world, nor with the govt., but rather with the individual. Some feel entitled to have what they have had in the past, despite the fact things have changed. Labor unions in particular did a great disservice by extorting higher wages and benefits than the market warranted, and thus people were overpaid, and now they are disillusioned when those days are gone. We don't have anything near FREE markets here (how could we when money is controlled by the globalists of the Federal Reserve and has no sound backing), and of course, with the immoral govt. stealing and controlling things, the whole voluntary agreement process is out of whack. It really started to go sideways with the FDR "Nanny State" nonsense, but now with global competition and America not producing much anymore (outside of the high tech field), there are lots of people left scratching their head and foolishly DEMANDING that the govt. do something. All it can do is what it has always done – steal from productive folks and squander it in less useful avenues. This is precisely why we have $18 Trillion in debt (and growing), and a bleak jobs outlook.

      • Phil says:

        Sir you are exactly right! Exactly. All of this overregulation is also catastrophic. Obamacare, you name it. If we went back even to the Reagan years and slashed the Federal Register in half, we would see a huge economic boom. This is INSANE!

        I would recommend that one answer at this point is to learn to live modestly, and be willing to do work that you enjoy for a moderate wage. The good old days are gone. Build your freedom bubble, enjoy things that do not cost a boatload, and move on. Relocation to another country is also an answer. Gotta be creative and appreciate every day that we are alive and breathing.

  4. Scott theczech says:

    Dr. Hendrickson, I read somewhere that all human economic endeavor is capitalism. The question is who controls the capital and to what extent [sic]?

    This brings to mind another question on which I would enjoy hearing your thoughts; should human labor, being a component of capital, be taxed as if it were income, or is it merely and even exchange? If it is to be taxed like other forms of income, what economic impact does that levy have on markets in general? I've often wondered about this economic question – thank you for considering this request.

  5. Stephan F says:

    A good piece. But not to take away from your fine report doctor, you know what really bugs me is that I have reached my limit with the constant harping about employment and jobs. Jobs, jobs, jobs, that’s all we get from the propagandists in the media and, of course, from whining politicians. I’m sick of hearing about jobs (uh oh, here he goes again).

    We’re beating a dead horse here people. With everyone constantly harping about jobs, the situation has clearly fallen into the category of what Henry Hazlitt calls the “fetish of full employment”. There is absolutely nothing the government, private industry, individuals, or any other living sentient being can do to help the so-called employment problem. The only person on the planet who can help you get a job is…wait for it…YOURSELF! You alone are the only one who can make you employable. Got that?

    But, but, how do we help the employment situation? Answer: We don’t. When people say things like that, what they really mean is how can we increase demand for more labor? The problem is labor demand is not created by some group of schemers who believe they alone can determine how much labor demand there should be. The cold reality is that the demand for labor must occur within the mechanism of the marketplace, aka: Adam Smith’s “invisible hand”. So there’s your answer kiddies: demand for labor comes from the natural process within the marketplace and not from some artificial construct.

    Peter Schiff recently commented on the employment issue by saying, “If full employment, in and of itself, is the holy grail of a healthy economy, why not just ban factory machines? Bang. Problem solved.” And Henry Hazlitt had this to say, “Nothing is easier to achieve than full employment. Hitler provided full employment with a huge armament program. War provided full employment for every nation involved. Slave labor in Germany had full employment. Prisons and chain gangs have full employment. Coercion can always provide full employment.”

    The obvious point Schiff & Hazlitt make is that, sure, government can provide jobs coercively. Any two-bit dictator can easily put people to work, but that’s not desirable, nor is it creating employment. This reminds me of one of my favorite comments from RJR about how the government could achieve full employment by having pyramids built in the Mojave Desert.

    Despite those harping unendingly about unemployment, that isn’t even the crux of the issue. The real cornerstone and central focus should be on productivity. All this talk about jobs is purely gratuitous. Full production is what really matters because it’s all about producing and creating wealth. To paraphrase John Pugsley for the 8000th time, “"Most people are oblivious to the fact that it is not the labor (jobs) we want but the product of the labor. We do not want the effort of making a television, we want the television."

    • Stephan F says:

      Oh wait. There is one thing government can do to create demand for more labor; get the hell out of the way.

      • oscarwildeweenr says:

        “the world image contains no observable magnitudes at all; all that it contains is symbols.” ~ max planck, the philosophy of physics

        But, no shortage of cymbal-clangers, violating your ear space & telling you it’s music, either. it’s loud out there. Fortunately, quiet can still be had.

        full anything's a function of the measuring container – which moves, is not static, & is more narration than measurement. & that's before the games measurers play, official & otherwise, are stuccoed on. "gratuitous," as you write.

        one vector, purely blue sky, that would increase vitality, efficiency, effectiveness & so by side effect improve productivity would be anhelminthics in the air, or water supply.

        but since parasitism is a human feature, top & failure-proof to bottom & emulating wannabe’s, rather than some infiltrating bug, lots of peeps, those of the tapeworm tribe, oppenheimer's political ones, would be poofed. and then, merely, a new generation would fill the vacancies.

        human condition, the macro, is what it is. what it isn't is a problem to be solved.evi & evo lution are packaged together.

        perverted/subverted/inverted/reverted wholly pragmatic self-interest, never left the jungle animal routines & rationalizations (“gratuitous”)….the problems that the ball of tape mass poses to economic individuals are needs be solved, to whatever extent, by those individuals themselves. the old work-around. personal tool kit. not the gov weapon-tool. that one, all places & times, is designed by/for the tape worms & their own vitality sapping tape-garrote "gratuity" measurements. to even touch that is to be that. there’s no joining ‘em to beat ‘em. All mr. smiths who go to Washington immediately become segments.

        “u can’t touch this” ~ mc hammer went silver, gold & platinum. There’s never been or will be a shortage of hammer-touchers. Trespass, & not just aural, is music to their primitive ears. They can’t stop themselves. Or be stopped. Work around accordingly.

  6. ingmar says:

    i agree with the asian offical in friedmans example. and to look solely on high productivity is pure american and the reason why your country is so unfriendly. come visit asia instead of sitting from some office knowing it all. what a piece of nonsens

  7. Peter says:

    "There’s an obvious fallacy here: If technological progress reduces employment opportunities, then why are hundreds of millions of people still working in the technologically and economically advanced countries of the world?" That's where I realized the writer does not have a clue. The argument was not rebuked. Technology and robotics really does reduce the working population.

    • Scott theczech says:

      Prove it please.

    • Scott theczech says:

      I think you meant to say "refuted" instead of "rebuked" Peter. And you have not refuted the writer's argument with your post either.

      Employment data is highly complex, however history has shown that with increased technology comes increased demand for technicians. Heck, even auto mechanics aren't called that any longer – they are automotive technicians and I haven't noticed a decrease in their employment numbers even though automobiles have become more sophisticated, reliable and automated. This is but one example among many. Another good example of technological advancements increasing employment opportunities would be with advent of medical devices and instruments; we not only need x-ray technicians, we now need PET Scan, Ultrasound, CT Scan, Magnetic R, etc., etc. What an explosion in job opportunities has come about due to just that one industry!

    • Jean says:

      Not really, Peter. It changes the complexion of the workforce (e.g. not as many laborers, since a robot or piece of heavy equipment can easily replace 50 or more manual laborers) but it adds to the need for technicians, programmers, etc. And there is still a need for a human to input data, monitor controls and verify results. In other words, many of the skills that were necessary to do certain tasks (such as body build, strength, or stamina) are no longer needed. But what hasn't changed – nor will it ever change – is the need for creative problem solvers.

  8. Phil says:

    You make great, great points. Just gotta hang in there and adjust. It is really rather rewarding, though at times I admit it is challenging. Life can remain an adventure. I like to pursue more spiritual and intellectual pursuits as well, and engage in less expensive yet more fulfilling activities like martial arts, etc.

  9. The education can fulfill his or her fantasies. An education gives individuals data and learning for landing a position and seeking after their fantasies. There are numerous professions and openings for work that can help fulfill what a man needs out of life.

  10. A lot of people not able to get the jobs in the market because of the slow economic growth in the markets and the low educated people. They should work hard in their education so they can able to get good jobs in the market.

  11. acw says:

    PLEASE…are you serious Mr Ivy League Tower "Henderson?"

    When the Chinese build factories, the don't build the most efficient, they build ones that will create the most jobs. The Chinese have learned long ago that the way to relative internal peace in their country was to put as many people as possible to work. NOT EVERYONE can get a degree in computer science and there aren't enough "white collar" jobs that can't be exported to support a American lifestyle of previous generations.

    WHEN WILL YOU LEARN? Trickle down economics only works for the 1%.

    I say WRONG to your concept of increased productivity. Its a idealistic theory that only works on pen and paper. Create jobs for the blue collar worker and then white collar work will abound. Just ask the Chinese.

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