Productivity Increases

Are we too productive? What happens when we don't need so many people to produce everything we consume?

This is on my mind today as more companies continue to shed their employees. While I know this will not be a trend that continues indefinitely, it is very true that humanity can produce more and more with less and less labor each year. Consider the following graph from the U.S. Bureau of Labor Statistics.


While there are many charts of productivity available, they all show one unmistakable thing: productivity is always increasing. This is even more true for countries that are just now beginning to industrialize or move into a post-industrial economy.

At some point, each industry will reach a point where a very small number of people will be required to produce everything that can be consumed by the rest of the people. This is true not just in manufacturing, but in virtually every field. In my own industry, computers and software, it takes much less human effort to develop quality software than it ever did before. This trend will continue as well.

The question at hand is what happens when there are more people than required to produce everything, both tangible and intangible, that we need and want.

In the past, access to capital—or stated another way, the ability to acquire goods and services—has been tied to a person's ability to produce something of value for other people. In other words, we trade our valuable items or time for valuable items or time from other people. We do this to provide the necessities and luxuries of life. Absent this ability, we depend on charity, either from private entities (people, churches, or other not-for-profits) or from government (social security, unemployment, etc.).

When the collective output of all working people is greater than the collective demand of all consuming people, we'll have reached a new stage of human development. Giving ability to people to continue accessing their necessities and wants, when in fact their services aren't required in production, will be a challenge we haven't fully addressed yet.

Bringing this from the esoteric to the practical level, we can see this playing out in the auto industry today. People in the US really have all the cars they need today. That's why there's been such a dramatic drop-off in purchasing new automobiles: they weren't really needed, just a high-priced luxury to upgrade routinely. When it was no longer desirable to upgrade, an entire industry was sent into a tailspin. Too many people were producing automobiles for the actual needs of the people.

This type of transition will continue in each industry and gains in automation, standardization, communication and, in short, productivity, decrease the number of people required to generate the supply to meet the demand. It's the same issue that has caused the US Government to pay farmers to idle a percentage of their fields for years. It was considered strategic to make sure we had the excess capacity of food production, so we subsidized that capacity. We are now making the same decision in the auto industry. What other industries will require our subsidies in order to keep the same levels of employment that we've become accustomed to.

"We are soldiers, so our children can be farmers, so their children can be artists." —Thomas Jefferson

The transition from soldiering to farming (production) wasn't as difficult as the transition from production to artistry (poetry, philosophy, music, etc.) will be. It will be exciting, to be sure, but figuring out the fair and equitable distribution of goods and services (wealth) will be the challenge.

Plato stated that contemplative leisure and a love of learning would be required for adequate philosophical discourse, and therefore for just rule. As few people could claim those in ancient times, and many people can do so today, it seems clear that many people will contribute to the ruling of society in ways that have never occurred before. As it should be.