We seem to have returned to the question of technological unemployment, judging by what’s going on in the comments section. As I’ve said before, I believe that technological unemployment is a factor in our present situation but it’s not the most significant factor.
While remaining convinceable, I’m also unconvinced. Why is Singapore’s unemployment so low? Heck, why is Germany’s unemployment rate lower than ours? Don’t they have technology there? If your answer is that they have better policies than we do, something with which I’m in broad agreement, then you’re not complaining that technological unemployment is our main problem but rather bad policies.
I would think that if technological employment were the most significant problem we’d see rising unemployment everywhere and stable unemployment nowhere. We don’t.
As I’ve said any number of times while I think that technological unemployment is a real issue it’s not the most important factor now. I think that our main problems are a combination of predatory mercantilist policies on the part of so many other of the world’s major economies and deadweight loss.
Here’s a good article I stumbled across on technological unemployment. It presents ten different views on technological unemployment.
For those of you who believe that our primary problem is technological unemployment and the way to solve it is a guaranteed minimum income, I have a few observations. First, you need to recognize that technological unemployment is a structural problem rather than a cyclical one and, consequently, if you’re right Keynesian deficit spending will not produce economic growth. Second, there are only two ways to finance such a program: extension of credit and increased taxation.
Again assuming that you’re right financing a guaranteed minimum income via extension of credit (“borrowing”, “printing money”, etc.) will actually reduce economic growth which sounds like a perverse outcome to me.
Running the numbers is a really useful exercise in clarifying the mind on a subject like this. The total number of unemployed is about 10 million. Unemployed plus underemployed something like 20 million. The number of long-term unemployed plus discouraged workers is about 6 million. Let’s use that last figure as a sort of floor.
Paying each of those six million a guaranteed income of $20,000 a year will cost $120 billion a year. Given the assumption extending credit at that level annually forever is a lot of credit.
If you prefer to tax, $120 billion is about 20% of the gross incomes of the top .1% of income earners. How, exactly, will you accomplish that? The present effective tax rate of those ultra-rich is typically about 15%. You want it to be much, much higher than that. Since you’re talking about 20% of gross, you’re talking about an effective tax rate of significantly more than 35%, probably something more like 60 to 70%. We’ve never accomplished an effective tax rate that high in this country.
$120 billion is about 5% of the gross incomes of the top 1% of income earners. That group presently has an an effective tax rate in the low 20s. You want to increase that to around 30%, once again higher than we’ve had to date. How are you going to do it?