I've been posting a lot about technological unemployment due to the continual boosting of worker productivity across the board, so it’s always nice to see the continued stream of articles that are providing more ammunition to fire at the those who see jobs creating themselves - or even to frame the economy as needing to create jobs as means of wealth allocation. This article talks about a “Second Economy” - seemingly a name for which economy takes the gains that technological unemployment have given up.
A quick Googling of the term leads to the original source of “Second Economy” - a McKinsey Quarterly article - it’s worth reading in full. Of course it’s behind a register wall, but I dug up a PDF here. Also, PasteBin’ed here in case that goes away.
It seems this idea of a Second Economy really just means an “automation economy” - they point out that robots aren’t taking over yet, but that computers have taken over a ton of jobs. They point to the idea of travel agents booking tickets, etc. - which is now fully automated through software. Nothing new - I’ve been talking about this for a while.
However, there are some good points they make that are worth iterating. The first article looks the metric of GDP per capita for the US versus Google (Revenue pre Employee) - the former is a bit over $100K and the latter is over $1.2M. So what he asks is whether this new economy may be creating such huge amounts of value per person, 10x in this case, that we may not be able to get as many new jobs out of the mix. An interesting measure, and this doesn’t even count the destruction of margins from the old to new economies which seems inevitable.
The McKinsey article uses similar logic to extrapolate that by 2025 this second economy will equal the size of the first - by simple extrapolation of a 2.4% productivity increase due to technology compounded over the next 15 years. Maybe they can claim that this 2.4% number counts the GDP losses - I don’t have the data, but I’m doubtful.
They aren’t oblivious to this fact of employment though, and in “Downside” they talk about how, just like farming went from low to very high productivity growth, that the same is happening in manufacturing and services. More production and less jobs. They then conclude that: “the main challenge of the economy is shifting from producing prosperity to distributing prosperity”. This basically means you have to accept a lack of jobs - that’s a pretty strong position for a McKinsey publication… There is a brighter / utopic side to this as well when they say: “if we do solve [the problem of distribution of wealth], we may at last have the freedom to invest our energies in creative acts.”
Overall, I think they’re right on predictions wise, and it’s interesting to see that mainstream business may actually be getting the right reports, but that have no incentive to change their ways.