TMM Asks You: The Future of Employment

Where are the jobs going to come from? TMM aren't sure Rifkin's idea of a new mittelstand of craftspeople makes sense particularly, but then they have to come from somewhere - the secular decline of jobs in Race Against the Machine makes it seem pretty dire for a lot of jobs and we aren't just talking bond traders and FX dealers. Jobs where you can collect a steady and consistent rent for doing the same thing are on the outer it seems: 

For instance, creative writing, arts instruction, and other “soft skills” are not always as amenable to rule-based software or distance learning. We concur with Rhode Island School of Design president John Maeda’s vision that a move from STEM (Science, Technology, Engineering, and Mathematics) to STEAM (adding Arts to the mix) is the right vision for boosting innovation. The technology and systems for education have to be compatible with that vision. In particular, softer skills like leadership, team building, and creativity will be increasingly important. They are the areas least likely to be automated and most in demand in a dynamic, entrepreneurial economy. Conversely, college graduates who seek the traditional type of job, where someone else tells them what to do each day, will find themselves increasingly in competition with machines, which excel at following detailed instructions." - Race Against the Machine 

This is a great idea but would kill a lot of sacred cows - like company specific defined benefit pensions and the home mortgage subsidy. TMM like this idea a lot, but getting it done won't be easy and in the interim people can fall through cracks. It also runs counter to the life of anyone except an itinerant investor / hacker / engineer who lives out of a messenger bag with a laptop. So..... if it seems a stretch to us its a BIG stretch for everyone else. 

Decouple benefits from jobs to increase flexibility and dynamism. Tying health care and other mandated benefits to jobs makes it harder for people to move to new jobs or to quit and start new businesses. For instance, many a potential entrepreneur has been blocked by the need to maintain health insurance. Denmark and the Netherlands have led the way here. - Race Against the Machine 

Eliminate or reduce the massive home mortgage subsidy. This costs over $130 billion per year, which would do much more for growth if allocated to research or education. While home ownership has many laudable benefits, it likely reduces labor mobility and economic flexibility, which conflicts with the economy’s increased need for flexibility. - Race Against the Machine 

TMM are coming to the conclusion that the stable outcome here is centralized savings like Australian superannuation, portable healthcare and insurance policies and a fairly healthy degree of redistribution and consumption / sin taxes, much along the lines of Rick Bookstaber here and here. Quoting some of Bookstaber's piece below, just what do you invest in when the world is like this?

Take these two trends (Diminishing Consumption, Diminishing Labor in Production) to their extreme. We are in the year 2025. Because of advances in production technology, much of the path from extracting the required renewable resources through to the production and distribution of most of the items we demand can be accomplished with automated methods overseen by a small cadre of engineers.... The main items we demand, beyond food, clothing and shelter, are the nth generation game systems.... The entertainment industry has disappeared; it is all free, operated with the same open-source ethos that spelled doom for most commercial software enterprises over the past decade. Which also means no more advertising. We pretty much know what we want to buy, and depend on those in our FriendWeb™ (version 4.6) to guide us....If you look hour by hour at what anyone is doing, it is hard to differentiate the super rich from those a few rungs above subsistence level....If you look hour by hour at what anyone is doing, it is hard to differentiate the super rich from those a few rungs above subsistence level....

Perhaps more importantly from a fundamental economic perspective, what does this mean for the Phillips Curve? If labor drops out of COGS or becomes ~5% or less and/or has no pricing power then does the Phillips Curve become a random scatterplot as wages are no longer a key driver of inflation? What does this mean for monetary policy? Is loose policy just about redistribution from fixed to inflation linked receivers and "financial suppression" with ~0 redistribution to those who derive most income from wages? Is Ron Paul vs Paul Krugman really just a pissing contest between two guys on different sides of a vanilla rate swap? TMM don't have the answer but would be fascinated to know what you think.