The Future of Work

One of the questions I ask myself is when is enough stuff enough?  at one point do you have enough material possessions that getting any more of them doesn't do you any good?  I have seen a number of reports that say different things.  However, from what I can piece together this is how it works.  There is a great increase of happiness when moving from genuine poverty to having all your basic needs met.  So, getting electricity, basic health care, schooling, potable water, furniture, a refrigerator, a real stove, heating/cooling, a roof and walls makes a big difference in someone's life.  This is basically going from say $1,000 a year to $15,000 a year.  The more children you have the more money you need, but that's a substantially smaller portion of the amount necessary for these things (you don't need to buy a new house per child).

After the point of what in the rich world think of as necessities then we reach the area of nicer things.  A house is nicer than an apartment.  A garden is nicer than a stoop.  Expensive food tastes better than hamburger helper.  A new car is nicer than a used car.  Nicer things make us somewhat happier than less nice things, but the rate of increase is much lower.  Going from $5,000 to $10,000 is a hugely greater change in happiness than from $50,000 (median us family income) to $55,000.  Indeed, it turns out that much of this change in happiness is not down to how nice the things are, but how nice they are in comparison to your neighbors.  Happiness increases somewhat with wealth, but the amounts of happy and the curve at which they increase is largely based on differences within a country rather than based on your income.

In the USA I have seen figures given at which increases in wealth don't really make a difference in your happiness.  They range from $60,000 to $120,000.  Basically there is a law of diminishing returns.  The richer you are the less getting richer matters.  A billionaire is not going to get happier by doubling his wealth.

As technology increases we should expect wealth to increase because of an increase in productivity.  Therefore what should we expect over time if people care about their happiness and make rational decisions about their lives? We should expect wealth to increase to a certain point and then slow and stop, and then (or earlier) we should expect hours worked to decrease, and eventually we should expect income to remain steady while hours decrease.  What have we seen in the USA?

What can we tell from these charts?  Well, I think the first thing to notice is that the economy is not a flat line.  There are recessions and booms, and within these recessions and booms there are fluctuations.  However, there are lines that we can draw given enough time. 

The percentage of the population that has become employed has increased over time.  More people have jobs, we are in a particularly bad trough, but we have always come out of these in the past, and the rate of percentage increase in jobs is slowing down.  I attribute the greatest proportion of this change to the entrance of women into the workforce, and the slowing of this trend (and even reduction) to there only being so many women, and the increase in the retirment population as we live longer.  We should expect this line to flatten out at around %60, and possibly fall with more and more people being retired.

The average number of hours worked has declined in a quite remarkably steady way.  There is, however, a small curve, which if continued would level out at about 32 hours a week (presently the minimum amount considered necessary to be a full-time worker.)

From Franklin Roosevelt to the present day there has been growth in real income, with the rate of growth slowing down.  If you assume that trends will continue average income will flat line in the next twenty years, somewhere around $50,000-$60,000. It is useful to remember this does not include the capital gains tax.

Making assumptions that technology will increase as it has and there aren't global catastrophes of some sort our best prediction would be that the future of work will assume about 60% of people working, overall averaging about 32 hours a week, with a household income of about $60,000 a year.

The increase in productivity has largely come in the production sector.  What used to be done by lots of people in factories, mines, and farming is now generally done by machines.  The growth areas for work done by people has been in service work, basically doing things that only humans can do for other people.  At the moment only people make good predictions about what people want, and only humans can provide a pleasant environment for people when performing transactions.  A restaurant is much better than a vending machine.  People make much better films and music than robots.  At some point technology is going to get good at directly doing things for people.  At some point your house will be cleaned by robots, your food will be prepared by robots, you will be driven somewhere by robots, and substantial portions of your body will be robots.

So, with less to do, I imagine the amounts that people will work will go down again somewhat, while incomes will remain steady (and life expectancy will increase).  Hunter-gatherer societies work between 15-20 hours a week, and it would make sense for this therefore to be somewhere close to the amount the human brain evolved to work (probably somewhat more as the effects of agriculture have been felt in the genome).

My prediction for the future of work is therefore a general steadying of hours worked, household income, and percent of the population employed for the next two decades, or so.  This will require a shift in the thinking of Americans from the point being to increase money, but the point being to find an equilibrium that makes us happy.  Hopefully this effect takes place with a narrowing of the gaps between sectors of society.  Work will continue to move towards service industries, essentially doing things for people (which also helps happiness).

Sometime after those two decades there will be a relatively sharp decline in the number employed (massively long retirements and technology replacing service industries) while income remains steady.  Within my lifetime I expect that the difference between hobbies and work will not be obvious.