The Population Bomb

Investment Analysis Clubs Macro Economic Trends and Risks
21

I have long wondered about this. I get that the drive of capitalism is “more, more, more.” And I also get that it is a natural human instinct; even billionaires who have everything their hearts could desire forever, till want “more, more, more”. Why does it have to be “more”? Why can’t “standard of living improvement” be the metric, rather than “more stuff”?

There was a short window of time when the “more”was not true: during the Great Depression, many workers, perhaps even most, agreed to take less (for less work) so that more people could remain employed. Indeed, before the GD, working hours were often 50-60 hours a week, 6 days a week including Saturday, but by the time it was over - and even in the exigent circumstance of production for World War II, the 40-hour work week became standard.

In July of 1933, the Roosevelt administration introduced the President’s Reemployment Agreement (PRA) to encourage work sharing with the goal of increasing employment overall. [Price Fishback], [Chris Vickers], and [Nicolas L. Ziebarth] studied the effects of the PRA in a [paper in the *American Economic Journal: Macroeconomics*] and found that employment rose significantly in the month following its adoption.
The PRA allowed companies to show their “business patriotism” by adhering to it in exchange for the right to display the [Blue Eagle] symbol of the National Recovery Administration. Through radio broadcasts, community gatherings, and door-to-door canvassing, the administration encouraged the nation’s consumers to shop only at firms displaying the Blue Eagle, which made it difficult for firms to say no. The drive resulted in nearly 9 out of 10 establishments signing the PRA within a couple of months of its introduction.

It does not go unnoticed that within a few months of the instruction of the PRA, almost all 50-60 hour work weeks disappeared.

So from this I have learned that during a time of mutual, national economic catastrophe some things can be done. (I would like to imagine that it doesn’t take such a disaster, but I think I’m dreaming.)

Given the stagnant Japanese economy over the past decades, and the looming threat of the same over China, the US, and Europe, I wonder if we couldn’t somehow use the emerging AI world (and consequent improvement in efficiency) to convince people to take a 35 or 32 hour work week as standard, and business owners to take a little “less” at the same time.

(I know, I know, fat chance.)

But there is a potential solution staring us in the face, if only we were brave enough to accept it - and had a leader strong enough to push it. Like I said, fat chance.

Oh well.

6 Likes
22

It can be, of course - but “standard of living” still costs money as well. Health care, housing, food, experiences and amenities (like parks and libraries and other things) all still consume resources. So if the demographics of your country shift, and you have fewer people doing and making and generating resources compared to your elderly population whose “standard of living” needs to be supported by their contributions to social support networks, things can get very difficult.

It’s actually easier to solve for “physical stuff,” because we at least have a roadmap for making physical stuff cheaper - advances in technology have vastly improved worker productivity in making things like food and tables and pants and such. Where it gets trickier is in labor-intensive services that are harder to provide using technology, and that suffer from Baumol’s cost disease. Those things get more and more expensive over time.

Of course, there are criticisms of the “lump of labor” approach that your ideas incorporate:

…but even if you solve for that, if the proportion of your working population compared to the overall population declines, you face scarcer per capita income and wealth regardless of how you allocate work over the working population.

2 Likes
23

Anyone consider that the proposed income tax exemption for tip income is to encourage more people to take food service jobs? Anyone consider that the proposed tax exemption for OT wages is to encourage people to work more hours? We’ll be back to Proles working 60 hr/6 day weeks in no time. And the “labor shortage” goes poof.

Steve

24

Anyone consider that the proposed exemption is not actually about tips as people receive in jobs like food service on which little tax is paid, but rather is about “tips” creatively defined as “earned” by people who make a whole lot of money?

7 Likes
25

Given the stagnant Japanese economy over the past decades, and the looming threat of the same over China, the US, and Europe, I wonder if we couldn’t somehow use the emerging AI world (and consequent improvement in efficiency) to convince people to take a 35 or 32 hour work week as standard, and business owners to take a little “less” at the same time.

In the spirit of this post, I decided to use AI to increase the number of posts I make on this board. No one is going to make due with less, that’s a non-starter. So I asked Perplexity to create a scenario where a 32-hour work week is implemented, but standards of living are maintained by tax increases on the wealthy. This was the result:

To fund a 32-hour work week while maintaining living standards, taxes on the top 10% of U.S. earners would need to increase by approximately 34.7%, raising their average effective tax rate from 27.3% to 36.8%. This calculation is based on the following data and assumptions:

Key Data and Calculation

  1. Current Tax Burden of Top 10%:
  • The top 10% of earners pay 72% of all federal income taxes21, contributing $1.728 trillion of the total $2.4 trillion in federal income tax revenue1.
  • Their current average effective tax rate is 27.3% 2.
  1. Revenue Gap:
  • Implementing a 32-hour work week while maintaining pay requires an estimated $600 billion in additional annual revenue to offset labor cost increases.
  1. Required Tax Increase:
  • To cover the $600 billion gap, the top 10%’s tax payments must rise to $2.328 trillion ($1.728 trillion + $600 billion).
  • This necessitates a 34.7% increase in their tax burden:Increase=600 billion1.728 trillion×100=34.7%Increase=1.728 trillion600 billion×100=34.7%
  • Consequently, their average effective tax rate would rise to 36.8% (27.3% × 1.347).

Context and Limitations

  • Progressivity: The top 10% already shoulders 72% of income taxes21. This hike would amplify their disproportionate share, potentially intensifying debates about tax fairness.
  • Economic Assumptions:
    • The $600 billion gap assumes employers need 25% more labor costs to maintain productivity under reduced hours.
    • Productivity gains from shorter weeks (e.g., 4.1% in UK trials) could partially offset costs but are insufficient to eliminate the gap.
  • Broader Impacts: Without this increase, alternatives include public-service cuts or broader tax hikes (e.g., UK estimates suggest a 5p income-tax rise for all taxpayers).

Conclusion

A 32-hour work week would require a 34.7% tax increase on the top 10%, elevating their effective rate to 36.8%. This targets revenue adequacy while preserving progressivity, though actual implementation would hinge on productivity adjustments and fiscal policy refinements.

4 Likes
26

Well, that is certainly a possibility. Especially as the highest court in the land has decreed that kickbacks are “gratuities”, not “bribes”, thus perfectly shiny.

Steve

6 Likes
27

It also reduces their Social Security wages, meaning it decreases their eventual payout at retirement.

2 Likes
28

I don’t remember the details, but I do remember from earlier that “tip” was defined in terms such that a broker type person receiving a lump sum performance payment was considered a “tip”.

4 Likes
29

I take it as a given that anyone receiving a “gratuity” in the context the court was talking about, is so far above the range of the FICA tax that the taxability of their bribes…er, “gratuities” would not be material to their SS benefits.

Steve

2 Likes
30

It is hard to grasp how important this discovery was to modern farming and our ability to feed today’s large populations. Starting about 1917.

Nitrogen fertilizer, in its modern synthetic form, was invented in the early 20th century by Fritz Haber and Karl Bosch. They developed the Haber-Bosch process, a method for synthesizing ammonia from atmospheric nitrogen and hydrogen, which is the foundation for producing nitrogen-based fertilizers. This invention is considered a major breakthrough, enabling large-scale food production and supporting a significant portion of the world’s population.

2 Likes
31

Yep. The Green Revolution is aptly named.

We’ve had lots of massive shifts in productivity in certain broad areas of the economy. Agriculture, of course. The assembly line and robotics dramatically increased the productivity of making many manufactured goods. The computer and the internet revolutionized many information distribution and processing functions. Etc.

But for some areas of human endeavor - and arguably some very important ones - productivity hasn’t changed very much. To use the ur-example, it still takes exactly the same number of humans the same amount of time to play a piece of music written for a string quartet as it did back in Schubert’s day. That’s the extreme, but other vast areas of important activity have been resistant to getting a lot more output from the same input: we’ve not yet had “Green Revolution” style reductions in necessary labor for things like teaching a kindergarten class or providing nursing services in hospital. You still need lots of humans doing it.

So it’s often easier to “make more stuff” than “make more childcare” or “make more nursing” or other important services…because the first one has happened numerous times with a technological advance, but so far the latter ones haven’t seen that…

3 Likes
32

https://www.smithsonianmag.com/smart-news/57-billion-tons-of-top-soil-have-eroded-in-the-midwest-in-the-last-160-years-180979936/
More Than 50 Billion Tons of Topsoil Have Eroded in the Midwest

The estimate of annual loss is nearly double the rate of erosion the USDA considers sustainable

Degraded soil makes growing food more difficult and expensive. Without healthy soil, farmers won’t be able to grow nutrient-dense food to feed our growing population. The calculated loss in the region is part of a critical issue; some experts suspect that Earth will run out of usable topsoil within 60 years.

Soil exhaustion occurs when poorly managed soils are no longer able to support crops or other plant life. Soil exhaustion has consequences beyond limited food production; it also increases risk of soil erosion. Proper soil management — including crop rotation, fertilizer applications and irrigation methods — helps decrease the potential for soil exhaustion.

1 Like
33

Actually you can have a computer play the piece of music in place of people, and they will mirror it note for note, breath for breath, without a single human intervention. That’s pretty different than “Shubert’s day”. (More to the point, you can take that piece and play it for millions of people over and over, something you could never do in Schubert’s day, so I think you need a better example.)

Yes, some things have resisted automation, but perhaps not as much as you think. A century ago grandma lived in the attic, and the “caregiver to patient” ratio was 1:1. Now (mostly) they live in nursing homes. Now that ratio is 1:6 or higher.

Amazon is about to have more robots in its warehouses than humans.

Amazon Is on the Cusp of Using More Robots Than Humans in Its Warehouses

The e-commerce giant now counts more than one million of the machines at its facilities
WSJ link: https://tinyurl.com/4c43tr54

We will need fewer doctors scanning x-rays and the machine scans will be more accurate, too. Fewer truck drivers, fewer taxi drivers, fewer subway drivers.

I now order my Subway thru the app, so I am telling it what ingredients and how much of each to put on the sandwich, that could comfortably be done by a robot (yes, it will take some time for customers to get used to it.)

Code writers, fewer. Clever ad agency slogan and jingle writers, probably cut by half. Ad placement is now done by algorithm, not youngsters grinding out placement schedules. Speaking of which, ad salespeople, replaced by automated ad placement software.

I acknowledge there are some thing which will not be replaced: it will be hard to apply nail polish to fingers, so all those nail salons will probably be around for a while. And yes, we’ll still need nurses and kindergarten teachers and such.

And in fact, I’d hypothesize that there will be MORE service workers. The displaced farm population didn’t just vanish from the earth, they found other things to do, giving people more and more leisure time with more and more things to do. That’s been the history, as agriculture wound down (and no, it didn’t start with nitrogen in 1917, the percent was dropping long into the 19th century) services increased. The trend continued as manufacturing employment went elsewhere.

Some service jobs will disappear, no doubt, but new ones, as yet uninvented, will appear. Meanwhile there is no reason that the kinds of improved productivity can’t continue even with a smaller population, aided by the same kinds of technological improvements we’ve seen over the past two centuries. Of course it will take some serious readjusting on the part of business and of employees and of philosophy - which is why I pointed out that the last time it happened was in the midst of national crisis. Maybe it will take that kind of thing again. I hope not, but I wouldn’t be surprise in the slightest.

4 Likes
34

That’s not really a direct comparison, though. Living in a nursing home isn’t a fungible substitute for living at home and getting health care there. The ratio of workers to patients for home health care providers and home caregivers hasn’t changed all that much over the years.

And even taking your 6:1 ratio, that’s far less than what we’ve seen in areas like agriculture. A century ago nearly half of the U.S. population worked in ag; now the figure is closer to 2% - a 25x change. Put another way, the average ag worker today produces enough food for 70 people - a century ago, an ag worker produced enough food for a little more than 2 people.

Which isn’t to say that technology doesn’t improve the productivity of service work. Technology in scanning, payments, and inventory means that grocery stores and restaurants and the like can get by with somewhat fewer workers than fifty or sixty years ago. But nowhere near the fewer workers necessary to produce the food that goes into those places in the first place. Or look at air travel as another example - in the 1970’s airlines were able to carry about 500 passengers per employee annually, and now that’s about 830 passengers per employee. More efficient, to be sure - but nowhere near the types of gains in manufacturing most physical products.

It’s true that it’s going to be the future soon (to quote JoCo), and maybe there are advances around the corner that can allow us to have the same kinds of massive increases in productivity for non-good resources as we have with making “stuff.” But history suggests that it’s harder to wrench that kind of efficiency out of services than it is out of goods.

1 Like
35

Which makes you wonder, why are the mega rich Tech Bros so concerned about collapsing population if they are actively trying to make it so there are no jobs for these people to do?

7 Likes
36

Ayup. Sort of a vector of my reply to claims of millions no longer working in farming. They all went somewhere.

Steve

38

Oh I’m not saying we’ll get “the same kind’ of increases, just that there will be some. Think about how hard it is to get a human to answer the phone at a company, the receptionist is an endangered species (except maybe at high priced law firms and such.)

The industries I’m familiar with have already done a lot; there used to be lots of grunts placing airtime buys and working over schedules with TV stations/networks piece by piece; that’s largely gone away in favor of computerized scheduling and billing; Google & Facebooks “Dutch auction” placement eliminates the human touch entirely.

I called a landscaper and dock company to get estimates on some work; nobody ever came out, they gave me an “approximate” price via drone photography. Saves a human chasing around for a day for bids that may never come true. Nobody digs ditches anymore, that’s a DitchWitch or similar, and an irrigation system is put in in 3 days instead of two weeks.

But sure, it’s not going to be like going from small hunter/gatherer smelting ovens to US Steel works in Pittsburgh, or from handcrafted automobiles to Henry Ford’s production line. (I do note that Amazon warehouses have gotten vastly larger while the number of employees per warehouse has dropped, so…)

Anyway, the point is maybe we don’t need all those people to have a growing economy. But if we’re to support the old folks who were part of the “last” economy, then we’re going to have to tax the machines (and/or AI) more than at present to pay for it. That can be done, although not with the current mindset, which has been shaped and formed over many years by JC’s, Wall Street, Faux, Ayn, Reagan & similar. But it can be done. The election in New York shows a massive discontent with the way things are going, I think - although I don’t want to read too much into that, given that it’s a very blue city. It’s only when that message reaches Iowa that the change could happen. On that front I’m not so optimistic.

5 Likes
39

“himself” is adding to the list of people he wants gone. Besides everyone that might be an illegal, he wants to toss USian “criminals”. Anyone think the USian “criminals” would receive more scrutiny that immigrants, before they are tossed? Start at the 1:35 mark.

I worked for people of a certain stripe, for decades. Get your papers in order, and keep your mouth shut, except when echoing the company line.

Steve