Do Not Be Deceived , The Era of Low Unemployment Is Gone in Western Nations, at Least for Next Decade.

The  world is undergoing a transformation that is breaking social systems from United States to Nigeria. Mortgage crises, euro-region debt burdens and series of other problems have seriously affected many key financial districts around the world. Everything has changed and the capacity of capitalism to sustain human progress has been put to test.

The world has a new normal: economic uncertainties. America with all their top elite universities seems not to have a roadmap on how to navigate out of the valley of spiraling economic difficulties. In this convoluted world with high level of interconnectivity, one economic problem leads to another. Nothing seems to be working in fixing the economy.

The global unemployment rate is rising and what used to be the problem of the developing world is creeping into the advanced nations. Unfortunately, the rate is not going down anytime soon. Why? The future of industry is not designed for a majority human workforce. Rather, a byte and bit workforce. Websites, powered by supercomputers, will continue to compete with humans.

As technology penetrates, we will continue to experience displacement across all the key industrial sectors. We have already phased out the industry that hires special secretaries to work the typewriting machines. The ticket masters have been replaced by websites. Increasingly, websites are offering professional counseling from finance to romance that humans used to do. A new generation of smartphones will displace the language interpreters, when we have language translators inbuilt in our phones. Today, an engineer equipped with computer aided design tools will do better than ten engineers a century ago.

In nearly all industries, technology is enabling firms to do more with lesser human power. Human productivity has consistently improved over the centuries and our standards of livings have correlated with it. However, while the industrial age technologies made sense of the factors of production of labor and land, the new age calls for knowledge.  Through robotics and automation, hundreds of man-hours can be replaced with a simple machine that never asks for benefits.

So, unlike the industrial economy, having more startups may not translate to more jobs, because in most cases those startups create technologies that eliminate more human jobs across the industries. This seems to be at odds with nearly every major economic roadmap from academia to governments (I stand by it).

Specifically, for every one person that is hired in most Internet startups, 2 jobs are lost across all sectors (my numbers). When ten parents decide to use a website to help their kids improve their mathematics skills, part-time teachers are displaced. When a big bank opens a web portal that enables customers to make informed decisions, financial planners will be cut. In general, who needs a stock picker, when most websites offer quality analyses free? Our society is changing, and people and firms must give things free to compete. That is why websites that require subscriptions are seldom popular.

This is a global redesign and it is very important that policymakers understand that what worked in 1960 may not necessarily work now. Information is moving fast and the reaction of the consumer is spontaneous. They are being rewired through online communal ties resulting to new patterns of lifestyles.

Nevertheless, what we are seeing today is just the beginning. The future of the world is one where many people will be unemployed. We will continue to innovate, however, that will not create enough jobs to change the trajectory of global unemployment rate.

The biggest crisis is coming. It will come in 2022 when nanotechnology would have matured from lab to the market. First, it will help displace millions of cotton, rubber and agricultural workers across the globe when engineers can make these devices in the lab. They can hire fifty people to produce the same quantity of cotton one million people used to produce in Sudan.  They will displace those workers and clusters of wars will take place across the developing world.

There would be unprecedented cycles of revolutions as unemployment increases. Commodity market will morph into technology market and millions will lose heritage and culture because human innovation has disrupted them. I have called this the ‘war of nano’.

As we indulge and celebrate the innovations we witness everyday in technology, it is important to note that nothing like this has ever existed. A man can become a media company, without a distribution network and the delivery men. A company can exist entirely on Internet, cutting off all the real estate professionals.  A bank that used to employ 5000 staff could use 600 people because it has modernized its infrastructure.  Technology is competing with us and we are losing the battle.

Yet, most governments seem not to understand what is going on. When you continue to measure the characteristics of the knowledge economy with the tools of the industrial economy, the world cannot be governed right.  Pushing government funds to create startups and new companies in the hope of reducing unemployment could be fallacious. This is not an industrial age new companies that hire in legions. The best companies work to eliminate head counts with the powers of microprocessors.  From US to UK, human productivity due to technology has accelerated faster than job creation and the old labor equilibrium distorted.

It is an illusion to think that any government policy will change the structure of labor in the long-term since daily we are encroaching into new territories with new technologies. The launch of Google created millionaires, but also crushed many industries. Sure, it created new industries, but those employ fewer workers, in average.  It looks so evident that the cinema, bookstores and all those traditional networks that employ humans will be completely replaced with websites in the near future. Unfortunately, the business model of internet is knowledge-based, requiring few skilled workers. Unlike the factory model, it takes just a few to run those companies.

The world needs to understand that increased productivity and technology penetration will change our labor model, forever. Now is the time to begin that process of designing systems to manage a society where many will be unemployed.  We must change the way students are trained and educated.

Our present education model is job-centric: the brightest students expect to be hired. That is why most companies are not created by the valedictorians and best students, but middle of the pack who struggle sometimes to get good jobs. The former gets accelerated corporate infusion and they rarely have to create new firms. With getting job in mind, our education loses the very purpose of education-the liberation of the mind. Until we change that paradigm to enable students get mental and entrepreneurial readiness, many will be unemployed. The truth is that anyone with skills, in anything, has a big market to succeed today than ever. Focusing on that element of personal discovery will help students prepare to graduate in a society of fewer jobs and prosper.

Finally, governments must modernize those industrial age tools they use to track unemployment. There are thousands across the developed world that make decent livings on web ventures, yet are classified unemployed because no one has developed the right tools to capture the ‘informal Internet labor’. Technology makes it possible for people to build personal wealth in Beijing while living in San Francisco, technically classified unemployed.  This supports my notion that lack of quality data is affecting government ability to develop a strategy to reduce unemployment since most of the ‘unemployed’ people are working. That technology that displaces jobs through higher productivity can also help improve government statistics.