The end of the age of consumption and the decreasing need for labor are more related than you think
Here's a variation of a chart that has made its way around a lot lately - wages and salaries as a percentage of GDP (green line). We see that it's been falling consistently for five decades. But at the same time, as we see in the blue line, wages/salaries and profits as a percentage of GDP have been pretty consistent. The record profit margins we see in 2012 have been corporations gaining ground at the expense of labor. It's only unsustainable if you see labor clawing back its share of the pie - not likely in the near-term with 8% unemployment.
One can easily make the case that the only thing "wrong" with the economy in 2012 is that growth is below-trend due to the financial crisis and subdued public/private sector response, and capital has gained an outsized share of income gains relative to labor since the year 2000.
The role of the duel forces of capital and technology is to make us more productive, to allow us to do things that labor alone can't do, or to do them more efficiently. And they've done a good job. Since 1975, in the US manufacturing sector, hours worked have fallen by 30% (blue line, left axis) while output has risen by 170% (red line, right axis).
The issue, if you're labor anyway, is those productivity gains accrue to consumers and the owners of the factors of production, not labor.
And while until now these job-destroying forces have mostly been confined to the goods-producing and information sectors, it looks like the next wave is going to hit much broader in the service sector. As nascent technologies like IBM's Watson show, everyone from bankers to retail workers to health-care and education workers are at risk. "Long IBM, short labor" is a trade that should work for years barring government policy changes.
It's a bit perverse that we cheer the gains in health-care employment while we decry the rise in health-care costs - the two are related. Presumably, technology will cause health-care productivity to soar, reducing the need for health-care workers. Again, great for consumers and capital, bad for displaced workers.
The debate that's currently one-sided in policy circles but increasingly will become mainstream out of necessity, is about the balance of power between labor and capital. We've seen it in pro sports - owners and players haggle over what percentage of sports-related income players get to take home. And the debate was a lot more common in America's past - men like Samuel Gompers were champions of the cause in the late 1800s and early 1900s, trust-busting was popular, and government in general took a more muscular role in the economy with increased regulation, labor laws, and safety nets.
But there's another long-term issue in play than simply who gets what percentage of the national income pie. It's that Americans continue to define themselves by work when technology continues to reduce the demand for labor. A couple recent articles have probed this phenomenon. A New York Times piece talks about our addiction to busyness: "Busyness serves as a kind of existential reassurance, a hedge against emptiness; obviously your life cannot possibly be silly or trivial or meaningless if you are so busy, completely booked, in demand every hour of the day."
And last week the Financial Times posted a piece about the end of the age of consumption, with what would currently be considered radical proposals; "[government] should institute an unconditional basic income for all citizens. This would aim to improve the choice between work and leisure. Critics say this would be a disincentive to work. That is precisely its merit in a society which should be working less and enjoying life more."
Maybe this sounds extreme, but in the past democracies passed laws to restrict child labor and limit the length of the workday, and instituted unconditional basic income for all [senior] citizens. The end of the age of consumption and the decreasing need for labor are intertwined, and we have just begun to come to grips with this.