Content & Social Engagement Strategist Mervyn Dinnen kicked of an interesting twitter discussion last night which also involved fellow analyst/peak-jobber Flip Chart Rick when he tweeted this Wall Street Journal article by former Treasury Secretary Lawrence H. Summers. Click through for the full article and an interesting chart. Lawrence H. Summers on the Economic Challenge of the Future: Jobs. Excerpt then an opinion:

The great economic problem for millennia has been scarcity. People want much more than can be produced. The challenge has been to produce as much as possible and to ensure that everybody gets their fair share.

In important respects, the problem has changed. There are many more Americans who are obese than who are undernourished, for example. But that is only a harbinger of things to come. The economic challenge of the future will not be producing enough. It will be providing enough good jobs.

What has happened in agriculture over the past century is remarkable. The share of American workers employed in agriculture has declined from over a third a century ago to between 1% and 2% today. Why? Because agricultural productivity has risen spectacularly, with mechanization reducing the demand for agricultural workers even as food is more abundant than ever.

All of this has had far-reaching implications. Tens of millions of people have moved from rural to urban areas to take jobs in manufacturing and services. Supporting those left behind has led the federal government to spend well over $100 billion in the past decade. Though global issues surely remain, the problems in American agriculture today no longer involve ensuring that food is available, but ensuring livelihoods for those who once worked in agriculture.

‘Software Is Eating the World’

What has happened in agriculture is happening to much of the rest of the economy. In Marc Andreessen’s phrase, “Software is eating the world.” Already the number of Americans doing production work in manufacturing and the number on disability are comparable. There are good reasons to expect an uptick in the next few years in manufacturing employment. But the long-term trend is inexorable and nearly universal. As in agriculture, technology is allowing the production of far more output with far fewer people. No country can aspire to more of an increase in competitiveness than China, yet even it has suffered a decline in manufacturing employment over the past two decades. And the robotics and 3-D printing revolutions are still in their second innings.

The question about how to create enough ‘good jobs’ for the people who need to work has been an issue for policy makers going back at least half a century as the Keynesian model of economics went out of favour. Although largely ignored Robert McNamara touched on the issue in his One Hundred Countries, Two Billion People in 1973.

For argument sake, let us consider that good jobs are those that employ you consistently (such as a full-time position with full benefits) and provides you with an income so that you can support your immediate family. The issue as I see it is that the concept of ‘good-jobs’ is in absolute structural decline and is in the long-term process of being replaced by other forms of ‘jobs’ such as contingent, offshored, outsourced or free all of which are stepping stones toward high-levels of augmentation and automation.

The question that Lawrence H. Summers needs to be asking is… How does the global economy work in a world of declining employment and potentially one that might require the great majority of us not to work at all?

Think your commute is bad. Consider what Nomakhosazana Mahlangu goes through each day. Via the Times Live. This woman travels 8 hours a day to and from work on the ‘Road of Death’. Click through for the photo’s and the rest of Nomakhosazana’s morning routine. Excerpt:

Every morning, while most people are asleep in warm beds, KwaNdebele-based Nomakhosazana Mahlangu wakes at 2am to get ready for her four-hour bus ride to work in Pretoria. The National Household Travel Survey 2013 was released and showed that of the 39% of people who use public transport to get to work nationally, 8% used buses. Reporter Sipho Masombuka and photographer Alon Skuy joined one of those people on her daily commute to work.

When domestic worker Nomakhosazana Mahlangu leaves home every morning, she knows she may not return at the end of the day. Mahlangu spends eight hours on the accident-prone Moloto Road travelling to and from her home in the former KwaNdebele homeland in Mpumalanga to Pretoria. It’s a journey that she and thousands of others make every day because it’s several hundred rands cheaper than living in Pretoria.

Mahlangu wakes at 2am to prepare for the 1km walk to the bus stop, where she catches the 3am bus that kicks off her four-hour 126km journey to her destination in Garsfontein in Pretoria East. She is lucky today: the bus arrives in Machiding village on time and is not full yet, so Mahlangu gets a seat. “In some instances, particularly on the first Monday after month-end, all seats are taken by the time the bus gets to my stop. This means I have to stand in the aisle for the entire journey,” she says. It is the first of two buses Mahlangu takes en route on the R573 to work.

I remember on my first morning in South Africa during the taxi ride between my hotel (in Sandton) to my office (in Rivonia) there was a crash fatality awaiting an ambulance so the ‘Road of Death’ title doesn’t come as a surprise to me.

In a rather ironic twist Deloitte has been commissioned by some of Australia’s biggest industry groups (and polluters) to write a report asking for subsidised gas, although in their Orwellian brilliance they have dubbed it ‘two-tiered pricing’. Via the Australian Broadcasting Corporation. High gas prices threaten thousands of jobs, billions of dollars: industry. Excerpt:

A new report warns the riches promised by exporting Australian gas may have a devastating impact on local industries, particularly manufacturing. A coalition of half-a-dozen industry groups commissioned the report by Deloitte Access Economics. The report says domestic gas prices are rapidly rising as the market links in with international prices. It warns that, if the rise goes unchecked, the manufacturing sector alone will contract by as much as $118 billion by 2021, with nearly 15,000 jobs lost. The report also finds that mining might contract by $34 billion and agriculture by $4.5 billion.

Oh, the irony. I wonder if anyone believes this tripe?

Even Money Prediction

International gas prices are coming down globally and although Australia has signed some big forward contracts on its LNG production as soon as they finish those clients will be looking elsewhere to cheaper supplies coming on line from the Middle East, Russia and the United States.

With global energy prices coming down would any conservative developed economy on the planet implement a subsidies programme. Most doubtful.

Former High Court judge Michael Kirby paid tribute to the six activists who died on the journey to the 20th International AIDS Conference during the opening address last night. In that address (which I missed) and during an interview on ABC News 24 this morning he directly linked the current fight with AIDS in the Asia/Pacific region with economic growth and by default employment. He strongly urged Australian Prime Minister, Tony Abbott, to add the fight against AIDS to the upcoming G20 discussions to be held in Brisbane (mid November). Via the Australian Broadcasting Corporation. Michael Kirby urges Tony Abbott to advance AIDS response at G20, pays tribute to victims of Malaysia Airlines MH17 crash. Excerpt:

He told the researchers, policy makers and community leaders in attendance that inaction and obstruction by some world leaders is hampering the fight against AIDS. He urged Prime Minister Tony Abbott to use the upcoming G20 summit to influence other leaders. “As a conviction politician and an unabashed conservative, Prime Minister Tony Abbott of Australia may actually be able to help us to reach out to those political leaders,” he said.

Mr Kirby praised the Prime Minister’s long-term response to AIDS in Australia, citing his efforts as health minister in 2003 to 2007. “Mr Abbott steadfastly maintained adherence to the established consensus policies of AIDS,” Mr Kirby said. “When some parliamentary colleagues proposed an end to the highly successful needle exchange scheme that has virtually eliminated HIV amongst injecting drug users, he sided with the angels and refused to change.” Mr Kirby also described Mr Abbott as the “first Prime Minister of Australia ever to acknowledge that the current ‘war on drugs’ strategy can never be won”.

Mr Kirby hit out at countries such as India, Uganda and Russia for passing laws which discriminate against homosexuals, yet take foreign money for anti-retroviral drugs. He said he will name and shame those countries that are not pulling their weight in the fight against AIDS. “Taxpayers in many countries will not keep forking out for countries that are willing to take the contributions for anti-retroviral drugs but are not willing to protect their own citizens,” Mr Kirby said. “Many of those who have left the taps of infection still open are more likely to listen to him [Mr Abbott] than to others that talk a language that they abhor. “Conservatives, you see, can be vital allies in the struggle against AIDS.”

Mr Abbott was due to speak at the conference, but cancelled due to the MH17 attack.

Via Yahoo Finance from a couple of days ago. Janet Yellen’s Choice: Market Bubbles or More Jobs? Excerpt then a prediction:

The Fed’s monetary base has gone from around $800 billion before the financial crisis to nearly $4 trillion now while holding short-term interest rates near 0 percent for six years. Here we are, five years after the recession ended and stocks bottomed, and the Fed is still pumping its stimulus into the economy while its balance sheet has never been larger. Think about that.

If the apologists are right, inflation shouldn’t become a problem, wage growth should accelerate once the long-term unemployment rate drops, and stocks should stay high as corporate earnings keep growing. If the skeptics are right, we could see a whiff of “stagflation” as inflation kicks higher and the economy stalls amid structural problems in the job market (which I explored in my last column). An overleveraged and overconfident stock market may well crash back to earth as corporate buybacks slow.

There seems to be little agreement between the two sides.

White papers are thrown around. Academics and pundits bicker about the cyclicality of unemployment. Even politicians and non-governmental entities get in on the act, with the International Monetary Fund speaking up in favor more monetary stimulus while the Bank for International Settlements recently warned in its annual report that the Fed and other central banks have gone too far and risk repeating the mistakes that led to the housing bubble that caused the mess we’re in now.

At the end of the day, the truth will only be known in retrospect.

Lay-Down Misère Prediction

I have read a couple of hundred papers on the cyclicality of unemployment. The entire concept of cyclical employment is as dead as a maggot (it is now structural and in real overall decline). Looking at just the data in Australia has shown an increase in contingent jobs by an order of several hundred percent as compared to FT work which has only increased by a few score percent since 1978. Tell me the data is any different in London (it’s not, I’ve looked at that as far back as 1994). What about Chicago, Vancouver, Auckland or Madrid. All the same with the exception of Madrid where the floor has completely dropped out.

America plays loose and fast. They are working more for the next market bubble than for more jobs, even with the recent improvements in overall unemployment.

During the week Microsoft announced that it will be axing 18,000 jobs. When you consider that 12,500 of those jobs will be coming from Nokia recently bought out by Microsoft in 2013 and that Stephen Elop has had control of Nokia since September 2010 you might question Microsoft’s strategy in keeping on an executive with such a poor strategic record. Anyway, many people have. Here are three stories then a comment:

A good background on the first 40,000 job losses (not including the most recent announcement) via the BBC (published 14 June 2014). Nokia cuts another 10,000 jobs as losses deepen. Excerpt:

Nokia is cutting another 10,000 jobs globally and has warned that second-quarter losses from its mobile phone business will be larger than expected. The cuts bring total planned job cuts at the Finnish group since Stephen Elop took over as chief executive in September 2010 to more than 40,000. Nokia will also book additional restructuring charges of about 1bn euros (£811m; $1.3bn). Nokia shares closed down 18% and have slumped about 70% since February 2011. “These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength,” Mr Elop said in a statement.

Via The Register. Stephen Elop: ‘Hello there’ (and goodbye to 12,500 of you). Excerpt:

How would you like to be told that you may have lost your job? Probably not with an email which started with the phrase: “Hello there.” But that’s how Microsoft mobile boss Stephen Elop began his missive to the Microsoft Devices Group, burying the news about killing off Nokia X in par four, and the bit about which operations in the Devices Group would be “right-sized” in par nine.

He wrote: “We expect to focus phone production mainly in Hanoi, with some production to continue in Beijing and Dongguan. We plan to shift other Microsoft manufacturing and repair operations to Manaus and Reynosa respectively, and start a phased exit from Komaron, Hungary.” He continued: “We plan that this would result in an estimated reduction of 12,500 factory direct and professional employees over the next year.

Elop had been elaborating on Microsoft CEO Satya Nadella’s earlier announcement, which had included a warning that a whopping 18,000 jobs would be lost from Microsoft as a whole – 12,500 of which would come from Elop’s troops. “We recognize these planned changes are broad and have very difficult implications for many of our team members,” wrote Elop.

Via Om. It is time to stop rewarding failure. Excerpt:

Silicon Valley (the notion) has become very much like rest of corporate America — it has embraced the philosophy of failing upwards. I have seen many executives get bumped up the ranks, get fancier titles and bigger paychecks, even though they were disastrous at their job. Many have left destruction and dismay in their wake. And yet, there they are getting bumped up — again and again. I was reminded of this disease this morning when I read about Microsoft cutting 18,000 jobs of which 12,500 odd will be at the Nokia division. Microsoft’s board might have eased out Steve Ballmer, but man, why aren’t they thinking about Stephen Elop.

When I met him in his prior gig at Microsoft, Elop seemed to be a nice enough guy, not quite a visionary, but good enough for what was then essentially a monopoly.  The very fact that a middling executive could be brought on for a turnaround of Nokia, and compete with the iPhone/Android onslaught with absolutely zero turnaround experience was one of those decisions that has confounded me and I continue to blame the Nokia board for shooting itself in the head. On his watch, Nokia essentially eviscerated. Android might have been a better decision, but he went with Windows Mobile. The stock tanked, market share shrank and like proverbial Lord Mountbatten he was part of the last days of the Nokia Raj.

Looking at the Nokia Annual Report for 2010 the company stated that:

The average number of employees for 2010 was 129 355 (123 171 for 2009 and 121 723 for 2008). At December 31, 2010, Nokia employed a total of 132 427 people (123 553 people at December 31, 2009 and 125 829 at December 31, 2008). The total amount of wages and salaries paid in 2010 was EUR 5 808 million (EUR 5 658 million in 2009 and EUR 5 615 million in 2008).

Now according to The Australian the total Nokia headcount that came across with the Microsoft acquisition was 28,000 while Reuters is reporting 25,000. If you take the lower average number of employee’s from 2010, prior to Stephen Elop taking over as CEO and look at the higher number of Nokia employee’s as quoted by The Australian you still get an 88% loss of employment under the former Nokia CEO and now EVP of Microsoft’s Devices & Services.

It is always a little hard to calculate these numbers given that not all the former Nokia business came across with the acquisition but 88% is an appalling number and not a great guide to where Microsoft might be heading in the future.

 

Via the BBC and thanks to a tweet from uber UK HR guy Michael Carty. Tories outline strike law manifesto pledge. Excerpt:

The Conservative Party has outlined plans to tighten the law on strike ballots if it wins the 2015 election. Cabinet Office Minister Francis Maude said the Tory manifesto would include the requirement for at least half of eligible union members to vote in order for a strike to be lawful. There would also be a three-month time limit after the ballot for the action to take place and curbs on picketing. Unions said the measures would make legal strikes “close to impossible”. And Labour said it was “desperate stuff by a Conservative Party that has given up any pretence of standing up for working people”.

Time limit

It comes after a day of strikes earlier this month by public sector workers, including teachers, fire crews and council staff, triggered by disputes with the government over pay, pensions and cuts. Ahead of the 10 July industrial action, Prime Minister David Cameron told MPs it was “time to legislate” to set a minimum turnout for a strike ballot.

Under the current law, a strike can take place if it is backed by a simple majority of those union members who vote – regardless of the level of turnout. As well as the 50% threshold, Mr Maude also pledged to require unions to set out on the ballot paper the exact form or action they were proposing, with a vote on each aspect of the dispute. Unions would also be required to give employers 14 days notice before taking industrial action, rather than seven days now. The Tories would also end “rolling mandates” for industrial action with the three-month limit – citing the National Union of Teachers, which is using the result of a 2012 strike ballot to stage action now.