Jobs creation in the AI world
Few months ago, I had written how substantial part of the jobs in the current world are nothing but disguised unemployment. Vinod Khosla in his recent blog had mentioned how productivity gains could result in people no longer required to work and people will explore the things they like instead of working for living. Jobs, in short, are the illusions created to give people sense of purpose. In this blog, I intend to put some numbers to my previous thoughts about jobs. Of course, such calculations must have been there in the existing economic literature. But I want to build from the ground up based on my understanding.
Let’s start with a city/country of 100 people and assume that the population remains the same. At the begining, the society was hunter/gatherer or primitive farming society. At this stage, the primary requirement was food and clothing. Each individual had to produce their own food and clothing as there was no technology. Assuming each unit of food and clothing equals production of 1, the total production in the economy is 200 units.
In the next stage, the productivity doubled, so each person could produce 2 units of food and 2 units of clothing. Now, one possibility is that people can work for half of the time as that is sufficient to meet their needs ( as Keynes had predicted). But that does not happen as I guess people want to be seen working. They continue working same hours. So only 50 people are required to produce the earlier needs. What would the remaining 50 people do? But they do not remain unemployed, as the earlier 50 people have more needs (say more clothing, entertainment, amenities). So the remaining 50 people are also employed.
Now these productivity gains continue, but people keep on increasing their needs. These increased needs are in a way wastage, but they are important for the growth of the economy as I had argued earlier and also to create jobs. Had the needs not increased, people would have had more free time (and they would have worked for 4 hours) or there would be people who are unemployed. This is the situation now, where more and more needs are being generated, which is keeping people employed.
But what happens when the productivity increases so much that say only 5 people out of 100 are required to meet all needs of all 100 people? Now 5 people can work full time and rest 95 can just chill. Or the unemployment will be 95%. Keeping people employed is so much ingrained in our psyche that no government would like to have such situation. Another point with increased productivity is that the skills required are much higher and not all people in the population are capable of producing at that productivity level. That creates additional problems as now the possibility to work less number of ours is reduced as not all can reach that high productivity. 95 people are getting lower returns for their labor. This causes the social divide to widen.
Also, we need to invent ways to transfer the production generated by 5 to other 95 in ways which does not sound demeaning to remaining 95. In the current society, there are several options for this.
- One way is to keep on inventing jobs, which will give illusion to those remaining 95 people that they are working and are not just getting a largesse. As I had explained in my earlier blog, there are multiple ways this is already happening such as overhiring or people having work for 2–3 hours a day or even influencers.
- Another way is universal basic income. Government takes money from the rich and then distributes to the people in terms of minimum income which is sufficient to meet their basic needs.
- Another possible way is to incentivise rich to make donations via charity. This is kind of direct transfer without hassels of bureaucracy.
The first option will get more and more difficult as we need to create more fictional jobs to maintain dignity of people. Companies, governments no longer need to be efficient as the inefficiency creates more fictional jobs. Here are some examples.
- While DOGE might have good motives, all the departments in the Government help to create employment for people
- People do complain about complicated medical industry in the US. But the whole convoluted system results in creation of jobs.
- Universities often depend on the largess of the Government or the students who want to give away their wealth for an intangible benefit. This helps create multiple jobs for teachers n researchers.
- Security guards n store assistants in India create multiple jobs, even though they all might not be needed.
What happens when the companies become efficient? The companies would make more profits. These profits would go the shareholders and Government (because of higher taxes paid). The additional money to the Government can then be routed back to the people who lost jobs. But getting money from the Government is demeaning compared to getting money from the fictional jobs. But money going to the Government is only a part of the profits. The rest goes to the shareholders, who can deploy it for other purposes, which can result in job creation. But will these be again fictional jobs?
Perhaps people need to change their perspective about jobs. Jobs need not define their identity to the work they are doing. Identity can be defined by something they are exploring or their hobbies. The world could be very different when earning income is no longer the motivation of the life!
