Peak Employment

What is ‘Peak Employment’ ?

Peak employment is the theory that due to factors such as efficiency, driven by technological innovation, and demand, developed economies may have already passed beyond the highest point of employment and that from this point onwards employment will continue to fall and unemployment inexorably rise causing increased social tension. There is plenty of evidence to support this theory but before looking at the situation now it would be wise to look first at a similar period of dramatic technological change two hundred years ago, and try and understand why the Luddites, who opposed industrial progess were wrong and take it as a small warning against making similar mistakes.

It is almost exactly two hundred years since the Luddites were founded (1811) as a reaction to the Industrial Revolution sweeping Great Britain. Today they are thought of simply as technophobes but their concerns were genuine, even if their methods were shortsighted and ultimately futile. The Luddites were originally highly skilled, and relatively high paid, textile workers who were being supplanted by low skill and low wage labour  who were needed to operate the new mechanized looms. Their solution was to smash up the looms.

The Industrial Revolution initiated profound social change in Great Britain. There was a huge migration from the countryside to the new industrial centres, creating a surplus of labour and driving wages downwards in these growing cities, and the new technology, being more efficient needed far less labour to produce far greater product.

The Luddites certainly saw that their standard of living was threatened but they might have been forgiven if they thought they foresaw ‘Peak Employment’. Afterall, if fewer workers were needed to produce the same quantity of product unemployment must inevitably rise, right ?

They were, as we all know, wrong. There were two main reasons why, the first was that Great Britain had a huge captive market in it’s growing empire, the second was that the Industrial revolution needed huge ‘support’ industries, like mining and steel production, and spawned newer technologies which created new markets and drove important infrastructure  development, like the railways and shipping.

But if the Industrial Revolution did not precipitate ‘Peak Employment’ could it be said to have stoked social unrest ?

“The concept of “Skill Biased Technological Change” (SBTC) posits that technology contributes to the de-skilling of routine, manual tasks.A changing world and new technologies are usually to blame for the world’s worries.”

Was the invention of the printing press responsible for the Reformation and the religious unrest that followed ? Was the invention of the combustion engine, mechanisation, and the production line responsible for the early 20th century conflicts ? Or did atomic power shape the late 20th century conflicts ? These questions I’ll leave to you, as I think I’m already wandering away from the subject of this article, which is ‘Peak Employment’.

So, it’s time to now look at the most recent technological innovations which are shaping our world today, the internet and computerisation. I’m going to look at the UK but I’m sure the findings can be extrapolated for all developed western economies.

Clark’s Sector Model (1950)

Industry, and thus employment, can be divided in to 5 broad sectors.

“Primary: This involves the extraction of resources directly from the Earth, this includes farming, mining and logging. They do not process the products at all. They send it off to factories to make a profit.

Secondary: This group is involved in the processing products from primary industries. This includes all factories—those that refine metals, produce furniture, or pack farm products such as meat.

Tertiary: This group is involved in the provision of services. They include teachers, managers and other service providers.

Quaternary: This group is involved in the research of science and technology. They include scientists.

Quinary: Some consider there to be a branch of the quaternary sector called the quinary sector, which includes the highest levels of decision making in a society or economy. This sector would include the top executives or officials in such fields as government, science, universities, nonprofit, healthcare, culture, and the media.”

As you can see Clark’s Sector Model has been shown to be broadly correct in the 60 years since it was developed. Primary and Secondary sectors have decreased, Tertiary and Quaternary sectors have increased, the sub- branch, Quinary sector which Clark’s Sector Model does not address has also increased.

There is an alternative way of looking at sectors of employment and that is to look at those that are used to evaluate GDP. They are :

1) Agriculture, hunting, forestry, and fishing

2) Construction

3) Production industries, Electricity, gas and water supply, Manufacturing, Mining and quarrying.

4) Service industries, Creative industries, Education, health and social work, Financial and business services, Hotels and restaurants, Other social and personal services, Public administration and defence, Real estate and renting activities, Tourism, Transport, storage and communication, Wholesale and retail trade.

The first employment sector has become more efficient due to mechanisation but, for now, it is now kept relatively stable thanks to EU subsidy.

The second employment sector is slumping but has potential for growth but you only have to look at Spain and Ireland to see examples of how an artificially stimulated construction sector can result in a bubble.

The third employment sector is more complicated. The utlities are private monopolies, infrastructure improvements could create employment but it’s difficult to see this happening without state intervention of some sort. Manufacturing has been moving east and shows no sign of returning any time soon. Mining has reduced significantly over the last 30 years, Quarrying remains controversial and is resisted locally.

The fourth employment sector, the service sector, is by far the largest making up 73% of UK GDP and it is perhaps hit the hardest by new technologies, specifically Retail and Financial business services where jobs are being regularly shed. And what is left in that sector ?

A large bulk of it is the Public Sector, most of the rest is take-aways, cinemas, and theme parks. OK, that is a simplification but these sectors, excepting overseas tourist related, just circulate money around the economy. And that is the only employment sector which remains relatively high, for now, but it is plainly unsustainable.

Employment is falling, unemployment is rising but hidden behind those headlines is the fact that part time Employment is rising.

Less people have full time jobs, more people have part time jobs, which means that the hours of work are being spread increasingly more thinly across the population.

Some might argue that it is only because of the economic slump that all of these things are happening and that it is only temporary.

But I think there is enough evidence to suggest that this is a long term trend that has just been disguised by the boom of the last ten years and is only now really becoming apparent.

I fear that we have already passed Peak Employment and the downward trend will continue, perhaps disguised by increasingly more part time employment.

[This article is the first in a series, the second being ‘Immigration: Cui Bono ?’ and the third being ‘Coming to Terms with a Borderless World Economy’.]

13 Comments

Filed under Economic Crisis, Politics

13 responses to “Peak Employment

  1. Human society is reverting to its historical norm (a large body of the population existing as peasents/serfs with a thin ‘crust’ of uber rich at the top, this used to be the old aristrocracy which is being replaced by the new aristocracy or 1% as they are being called).

    A large well-off middle class was the product of the mercantile and industrial revolutions as these phases come to a close then we a re bound to ge back to societies in tune with the rest of human history.

  2. Jayaydee

    So, Jason, what action do you think the UK and other governments will take in response to this? I assume they will have also done the research themselves?

    Your own response does seem to have missed out the remaining need for significantly large numbers in the fourth sector, included amongst which must be managers, etc.

    But what will happen to the unemployed? On whom the fourth, in particular, and other sectors will still, presumably, depend, for their (much-lower-than-now?) purchasing power?

    It would be helpful to have numbers needed to be employed in each sector and, perhaps, an idea of their income brackets.

    Or, are we only at a very “raw” data stage, at this point in time?

    Are there other papers, taking this issue further? Perhaps providing time-lines and effects?

    • I think the Government (of whatever persuasion) is busily aiding and abetting the Banks in sequestering as much of the physical wealth and assets they can to ensure they form the 1% at the top.

      As to the rest fo us they could not give two hoots as to what becomes of us

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  4. blackadder50

    A well presented post that provides some basic analytical approaches for starting to understand the complex dynamics of supply and demand for labour in an advanced western capitalist economy.

    Whilst analysis of the changing structure of employment demand by industry group is one important strand, it needs to be complemented by an examination of the skills, knowledge and education of the labour force in a rapidly changing labour market.

    To take all of this further, as Jayaydee points out, relevant time series data would also be required.

    However, as the story of the Luddites shows, we may underestimate at our peril capitalism’s potential to generate new and innovative sources of employment, often when it is least expected.

  5. Jayaydee

    Sadly, I feel that there are NO lessons to be learned from the early 19th century Luddite experience. Today’s circumstances are totally different. Therefore, and no rudeness intended, to hold onto such a view is irrational optimism, in the light of what we know is now happening.

    There ARE solutions, but some are extremely unlikely and others unpalatable, both for different reasons. It’s best I leave them for you and others to work out for yourselves.

    At this stage, and until events occur, we are helpless. All we can do is publicise our views and preliminary research – AS WIDELY AS POSSIBLE. And, in the meantime, see if we can dig up more information to guide us further.

    For starters, see:

    http://simple.wikipedia.org/wiki/Three-sector_hypothesis

    http://en.wikipedia.org/wiki/Post-industrial_society

    http://en.wikipedia.org/wiki/Colin_Clark_(economist)

    I should be very grateful if you and others would let me know if/when you turn up any other relevant material. I haven’t yet found very much via Google. We must not discount the possibility, however fanciful or slight, that, in view of its potential implications in today’s precarious situation, it has been kept out of the public domain, or has been removed, of course.

    • ecojon

      I suddenly thought about the collection of statistics and the downgrading of the UK Office of National Statistics by the formation of the Office for Budget Responsibility.

      Being in my late 60s I am not usually into conspiracy theories but I muttered to a friend recently that I was going to go back and read Marx to see if there was any clue as to what was happening in Capitalism – Amazingly he had also decided to do the same because of the economic situation.

      Part of my motivation was my feeling that I no longer had a clue what was going on economically and find it almost impossible to cut through the morass of conflcting/fudged data. So rather than info being removed from Google I believe we are being overloaded with junk info that ties us up in knots.

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  8. Mad Max

    Excellent post! I learned about Peak employment from “Death by Technology by Dan Thomas. Just like peak oil we’ve ignored this problem to the point of disaster. We need a revolution in ideas to move past these challenges or we’ve had it.

    “Be Smart!” – FIGHT THE CAUSE – NOT THE SYMPTOM

    U.S. Citizens
    Read “Common Sense 3.1” at ( http://revolution2.osixs.org )

    Non U.S. Citizens
    Read “Common Sense 3.2” at ( http://SaveTheWorldNow.osixs.org )

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