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| -Image by Copilot, modified by Cluan |
Where we are now
Great wealth has indeed been created over the past 40 years. However, “the invisible hand" of the market, which free marketeers are fond of citing which was to bring wealth to all, has been busily transferring wealth upwards, rather than allowing any to “trickle down” as promised when giving tax cuts to the already wealthy. Under pressure from corporations and wealthy individuals, both top tax rates and company taxes have been progressively cut, leaving many countries with deep budget deficits and growing inequality, even before the recent automation and AI layoffs.
For the rest of the population, life has become less secure and more difficult since the 1980s and the changes are coming much more swiftly than in the past -far faster than society is able to absorb the displaced workers.
We see the evidence all around us, whether it is in crumbling infrastructure, boarded up shopfronts, rising homelessness, longer queues at soup kitchens, two people working full time and still struggling to meet rent or mortgage repayments, growing frustration and unrest – already evident in the Occupy demonstrations of 2011, the growth of the gig economy, declining life expectancy, and, as in other downturns, falling birthrates – helped along by more effective contraception, longer periods of education and the feminist movement, which asserted a woman’s right to decide if, and how many children she would have.
Despite creating more billionaires than any other country, the USA which embraced the economic rationalist model most strongly, is experiencing “levels of inequality not seen since the Gilded Age." Since throwing more people into poverty won't help the rest of the economy either, some of the more popular strategies for dealing with displaced workers are outlined below, along with some of their pros and cons.
What do we do with Displaced Workers
1. Retraining
2. Sharing the Available Work, Reducing hours
3. Self -Employment
4. Universal Basic Income (UBI)
5. Job Creation Schemes
Retraining
As we saw from the graduate glut, too many people chasing too few jobs, does not make for long term security, especially when jobs are changing faster than the time it takes to get new skills and companies continue to pick from a global pool of those who are already qualified, rather than pay for training themselves or to pay the taxes needed for the government to do it. [See Part III].
While there have been some successful retraining schemes -the closure of German coalmines for example, it took twenty years to achieve (2007 -2018) and cost €13 billion. It also took place in a booming economy -very different to the circumstances we are facing now, when sudden, abrupt changes are occurring almost daily and every industry is facing disruption at the same time. Germany also had the advantage of having a much larger economy with many 'adjacent' industries such as engineering and the full support of industry, workers, government and unions, as well as local authorities.
Training for what, is also problematic. In 2010, students were urged to learn to code. In 2023, it was "Become a prompt engineer." Now the latest AI models, can do both themselves. These days it might be "Learn practical skills' because although AI can design systems better and faster, it can not yet install or maintain them. This latest list of jobs was compiled by AI this year, but was based on data from last year, so it may already be out of date. Work in the renewable energy sector, agriculture, construction, environmental repair and personal services such as life coach or hairdressing look safe for now, along with jobs like ophthalmologist or maybe wine steward, but don't take my word for it. What is certain is that almost all of us will be retraining many times in our lives.
Self -Employment
Starting your own business is often seen as the salvation for those retrenched from jobs and it is often the use to which people put their redundancy payments. “Chase your dream” and “ Be your own boss” do sound attractive, but the reality is much more difficult than it looks. According to various sources, most new businesses in Australia fail within two years, with the usual reasons being poor cashflow management, lack of market demand, too much competition or regulatory compliance issues. Here's what running your own business looks like on the ground.
Having been in business myself for ten years, I can confirm that it’s much more difficult than it looks. You aren’t just dealing with the demands of the business itself such as purchasing, quality control, marketing, cashflow, book and record -keeping, but things like loan repayments, tax obligations – earnings, payroll and GST (VAT), employee compensation, deductions for superannuation, health and safety, insurance for property, business disruption, worker’s compensation and public liability and, if it’s a food business also food safety and inspections and you have to stay abreast of all those.
Add to that, maintenance of the premises and let’s not forget customer satisfaction either. Despite being popular, and even rating mention in Lonely Planet, there never was much money in it. Are you exhausted yet? I was. It also came at the expense of our family life and eventually my health.
Anything which involves discretionary expenditure is also vulnerable to any downturn – be it unemployment in the town or even the Global Financial Crisis. Even so -called guaranteed winners such as franchises, which may have worked well elsewhere, may not work in a rural town if they need a large population to support them and, if not in a major city, freight costs can be crippling.
Australia does in fact support new business ventures in various ways – you receive a small allowance – about the same as our very low unemployment benefits and you receive some training in basic compliance issues and how to make a business plan. Nor are you hounded by the ‘Job Police.’ Normally unemployed people are required to meet stringent requirements such as doing a number of job applications and interviews in order to receive support, but for a time at least, you are free to pursue your dream.
Failure rates vary a lot by country — Germany's, for instance, is notably lower, which is largely attributed to its strong vocational training and apprenticeship system, which gives new business owners a much sturdier skills base before they start. Sorry to keep going on about Germany and Australia, but they just happen to be the places I know best.
Co -Operatives
Rather than going it alone and having all the responsibility, the idea of co -operative ventures with employees as shareholders is regaining support in some countries.
Australia does have some of these. Dairy farmer Co -op Norco has been going for 130 years and several grain co -operatives in Western Australia continue to thrive. A comparatively recent arrival is Melbourne’s Social Studio established in 2009. It is a non -profit co -op which seeks to give migrant and refugee women the opportunity to become Australia’s next fashion designers through its school, manufacturing and fashion label. There is also a co -operative program for Farmers, Fishers and Foresters.
In the UK, non – profit Power to Change, helps revitalise high streets by establishing community -owned co -operatives to bring back shops and services such as banks.
Internationally, one of the most famous is the Mondragon Corporation (Spain). Begun in 1956 by a Catholic priest at the technical school in the Basque region, where he was teaching, it is now one of the world’s largest and most successful co-operative groups, providing work for 74,000 people via 81 self -governing enterprises spread across manufacturing, finance and retail. Through its private university and its 12 R&D it is also active in generating and disseminating knowledge.
Others include Credit Unions, particularly in the USA and Canada, REI Рrecreational equipment (USA) and Ocean Spray (USA) - a co-operative of cranberry farmers. Amul in India is another dairy Co -operative. In the UK, The Co -operative Group operates, retail, banking and insurance services. In the Netherlands, the Rabobank is a global co -operative bank supporting food and agriculture, while Agriterra, also supports agricultural business globally. Did you know that Nestl̩, although now a globally traded company, also started as a co -operative in 1866?
The downsides include the difficulty of setting them up -legal and financial, and slower decision -making due to the need for consultation and consensus. The Australian Government does provide some help with this through its Co -operative Grants Scheme,
[I haven’t followed up on many of these – it’s a list formulated by AI and I am not even sure which one (apologies) but feel free to investigate further yourself.
Sharing the Available Work
Some of the most successful economies in the world, especially in Nordic countries which also happen to be among the fairest and happiest, prove that shorter work weeks, shared jobs, and paid care -giving boost productivity, wellbeing, and gender equality. Iceland’s 4-day work week trial which ran from 2015 to 2019 and involved 2,500 workers from a range of professions from office workers, hospitals, kindergartens and social services was deemed highly successful with improved productivity as well as greater wellbeing for workers. Indeed it was found to be so successful that now 86% of Iceland’s workers have adopted the shorter week.
A similar trial in the UK in 2022 — the world's largest four-day week pilot, involving 61 companies and around 2,900 workers — found productivity was maintained or improved, revenue rose slightly (1.4% on average), and 92% of companies kept the policy afterwards. There is a short summary here.
Longer Leave
Sweden has 480 days, of parental leave of which 390 days are paid at full pay. Thereafter it is paid at SK180 ($US18.43) per day.
Sweden also has another innovative program. In addition to 4 weeks paid holiday a year, employees are entitled to take six months off to work on private business projects, travel or gain further education, provided they have been full time employees for at least six months. Success stories from this program include Spotify, Skype and Mojang (the company behind Minecraft), making Sweden the start -up capital of Europe and the second biggest place for startups globally, after Silicon Valley.
Germany also has paid parental leave. Parents get 65–67% of their salary for up to 14 months (shared between parents) and its Part-Time Work Act (Teilzeit- und Befristungsgesetz), grants employees in companies with 15 or more workers the legal right to request part-time work after six months of employment, provided work demands allow it.
Universal Basic Income (UBI)
While there is nothing I would like better than for the government to hand out dollops of money, there are several reasons why that isn’t such a great idea, although it may help some local economies to survive. In the first instance, the business lobby would object since it believes ‘free money' kills initiative and incentive to work. It would also most likely involve additional taxation which would also incur its wrath.
The second objection is that, unless it is means tested, it will do nothing to level the playing field or enable those at the bottom to get ahead. Unless everyone already has their basic needs met, including a home, it would just maintain existing inequality. If there is no measurable increase in productivity, it would also most likely add to inflation, which would also bring loud disapproval from people seeing the value of their savings or retirement funds erode.
There is however, an argument to be made for raising the amount of income support which unemployed people receive. Unemployment benefits in Nordic countries and Germany are generally higher than in most English-speaking countries, which, together with more secure housing and universal health care, ensures that people do not fall as far behind.
There have also been both controlled trials and natural experiments where higher rates of income support have yielded positive results as well as boosting local economies. In 2019, Stockton, California began giving 125 residents a no -strings attached $500 per month for two years with no work requirements. At the time 28% of recipients were in full time employment. A year later that number had risen to 40%. Once the 'foreclosure capital of the nation,' the city's financial health improved, crime rates were falling and the population began to grow. The health of recipients also improved and they felt less depressed and were able to take more risks.
Another pilot program in Cook County Illinois, begun in 2022, which guaranteed 3,200 low -income workers a $500 a month basic income, has been extended to 2026. Recipients reported feeling more financially secure as well benefiting socially and emotionally.
Similar stories emerged in Australia following the pandemic, during which homeless people were housed and Australia's unemployment benefit was briefly raised. Several recipients also found employment afterwards, presumably because they had had the chance to sleep properly, have showers and could afford better food and things like haircuts or dental care, but also most likely due to to improved self esteem. Surely a better investment than having to spend on prisons or policing.
Job Creation Schemes
To this day we still draw great benefits – far in excess of their original cost, from jobs created during the Great Depression. I have already mentioned the roads -especially the US freeways, but there were many other projects too, including the Hoover, Tennessee Valley and Grand Coolie Dams in the USA, Germany’s Autobahns, Moscow’s Metro, Australia’s Sydney Harbour Bridge (though begun earlier) which are also legacies of that era. Home building was huge for many economies including the USA, UK, Sweden, Canada and Australia. In Australia it lasted right through to the post war baby boom and the subsequent immigration boom. These projects not only provided work and social stability at the time, but also literally paved the way for the ensuing period of prosperity.
It isn’t as if there isn’t plenty of work that needs doing. Housing is a pressing problem again throughout the English -speaking world – less so in Scandinavia which has continued to prioritise housing, or Germany, which at least limits rent rises and gives renters much more security of tenure. I also keep hearing about the appalling state of water supplies in the US and the enormous amount of remediation work, as business and industry rush on to the next big thing, without cleaning up the mess they leave behind. There is also any amount of environmental work to be done.
In Australia, our public schools have no air conditioning or solar panels, with the former becoming increasingly necessary and the latter preventing a further drain on power supplies. We also need more adaptation strategies to counter climate change such as building seawalls, upgrading drainage and bridges to withstand stronger floods and storm surges and so on. There is also much work to be done in the renewable energy sector, including the roll out EV charging stations and our public transport could do with a boost too.
“People work” of all kinds – nursing, hospitals, aged care and mental health, has been severely neglected and will need more workers for years to come. Remedial teachers, speech therapists and physical therapists are also not yet easily replaced by robots. AI itself needs more human oversight, before more disasters like Australia’s automated Robodebt scheme cause more harm. Counsellors and change consultants are also likely to be in demand.
The big question is, how will we pay for it, as revenue from both income tax and businesses will decline at the same time as large numbers of people are being laid off and become dependent on government support? That will be the subject of Part V.
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