Draft Horses of the World Unite!

The general story of productivity increases is that they free up resource to be used in other area; people that become unemployed retrain to work in more productive areas.

Tell that to the draft horses!

There was a type of employee at the beginning of the Industrial Revolution whose job and livelihood largely vanished in the early twentieth century. This was the horse. The population of working horses actually peaked in England long after the Industrial Revolution, in 1901, when 3.25 million were at work. Though they had been replaced by rail for long-distance haulage and by steam engines for driving machinery, they still plowed fields, hauled wagons and carriages short distances, pulled boats on the canals, toiled in the pits, and carried armies into battle. But the arrival of the internal combustion engine in the late nineteenth century rapidly displaced these workers, so that by 1924 there were fewer than two million. There was always a wage at which all these horses could have remained employed. But that wage was so low that it did not pay for their feed.  From: Gregory Clark,  A Farewell to Alms, page 286.  I have read the book, but avoided more typing by getting the quote from here.

So are we all becoming draft horses?  Are we too expensive to be worth feeding?

Arnold Kling notes with a few charts, that structural (permanent) unemployment seems to be increasing.

In the first chart below, he notes that the median duration of unemployment has increased dramatically. 

In the second chart he notes that employment is not increasing with manufacturing output.  Way back in the time of the Great Depression, economist raised the point that increases in manufacturing efficiency kept people from being re-employed even when purchase-orders began to pick up.

In the final chart he is showing (truncated to show greater detail) how many people are employed as a percentage of overall employable population.  Note that this gets rid of the whole, "are you looking for work issue"   Not only has employment levels  remained low during this economic “recovery”, but they have never recovered from the 2001 telecom-dot.com bubble collapse.

Some Indications of Structural Unemployment

Arnold Kling, Library of Economics and Liberty, 1 July 2011 (Hat tip:  MR).

Median Duration of Unemployment (blue) versus Unemployment Rate (red)

Manufacturing Output (blue) versus Employment (red)

Civilian Employment : Population Ratio

This observation is mirrored in another article in the  New York Times. 

The Wageless, Profitable Recovery

Steven Greenhouse, New York Times, 30 June 2011(Hat tip: MR)

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth.

The study, The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007-2009, said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.

Now one explanation for this difficulty Is that the profits are coming from the left over garbage from the bubble-boom being sold off.  This would be a necessary part of coming out of a bubble-bust.  Unfortunately, as electronics industry data shows, inventories are climbing.

Would you like a dash of  oats with your hay?