NationStates Jolt Archive

Does economic inefficiency create jobs or eliminate them?

It creates lots of low paid menial jobs, and eliminates well paid skilled jobs.

I think economic efficiency creates wealth. I think entrepeneurs create jobs.

In the short term it might create them, because you end up needing more people to achieve something. Probably depends on the specifics though.

In the long term, probably not. I mean, that depends on population growth rates and stuff, but having a crappy economy isn't going to do wonders for the job market, and even those jobs that are available probably won't be the type you want to be doing.

I'm thinking old East Germany-type countries, where 100% employment was the target. They did that by having three people do what one could've done, and everyone was underemployed. When the system collapsed (I reckon it would've eventually, although politics forced the change quicker), two out of three people were laid off, and unemployment rates in the east are still ridiculously high.

It creates lots of low paid menial jobs, and eliminates well paid skilled jobs.

Actually I believe it would actually create well paying jobs in relation to the labor, as the output needed to fill positions would be marginalized, while pay scales would maintain a pay level to fill the positions. However, that would obviously be reflected in price baskets for the consumers.

I think economic efficiency creates wealth. I think entrepeneurs create jobs.

I think efficiency creates stability, entrepreneurs create wealth, and the population creates jobs.

Actually I believe it would actually create well paying jobs in relation to the labor, as the output needed to fill positions would be marginalized, while pay scales would maintain a pay level to fill the positions. However, that would obviously be reflected in price baskets for the consumers.


You have to define what you mean by efficiency.

For the most part it eliminates jobs.

I once was involved in a project to install 12 Robot tape backup systems.

It eliminated 40 jobs and created 2 average wage jobs.

Do prices drop from companies getting efficient? I don't think so. Prices tend to increase at the same rate and the companies tend to pocket the savings.

I think efficiency creates stability, entrepreneurs create wealth, and the population creates jobs.
What about statist nations? They are horribly inefficient but they suffer no form of business cycle, they are just consistently crap. Now, the idea that entrepreneurs create wealth makes sense, but I think that is because entrepreneurs and efficiency walk hand in hand as efficient use of resources make everyone wealthy and entrepreneurs seek the most efficient use of resources. Population does increase jobs but that is simply because bigger economies tend to have a need for more things.

You have to define what you mean by efficiency.

For the most part it eliminates jobs.

I once was involved in a project to install 12 Robot tape backup systems.

It eliminated 40 jobs and created 2 average wage jobs.

Do prices drop from companies getting efficient? I don't think so. Prices tend to increase at the same rate and the companies tend to pocket the savings.
Do the corporations just hide that money underneath their beds? No, of course not, they reinvest it into the economy in some form or fashion and because this money is spent jobs are created to meet this. In the short run jobs are lost but in the long run things get better.

You have it the wrong way around.

Economic efficiency does not create jobs. Rather, creating useful jobs increases efficiency.

Economic efficiency means that everything that can be produced and sold is being produced and sold: the economy is generating the maximum wealth possible.

If there are people who are unemployed but willing to work, then there is probably (but not necessarily) something that they could be doing that would add value to the economy.

This means that government policy, if it means to increase employment and efficiency, should do one or both of two things:

1) Encourage new private ventures that will create jobs.
2) Fund needed public works and provide for undersupplied public goods. If, for instance, education is suffering due to large class sizes, hiring more teachers both improves employment numbers and improves market efficiency--assuming, that is, that it actually provides a better public education. It can do the same by hiring street sweepers (where needed), and other people who can do jobs that need to be done, but for which the market does not naturally supply.

What the government should NOT do is "invent" jobs for which there is no real demand, or otherwise inflate employment numbers by hiring more people than are actually needed to get various jobs done. This is NOT efficient.

Inefficiency can create tons of jobs, if the history of statism tells us anything; the USSR was loaded with sinecures that had to exist in order to guarantee everyone a job. The problem is that those jobs are not sustainable and will disappear when the system collapses; also, the money spent on those positions makes it harder for the economy to keep up with demand and worsens the unemployment and instability following the collapse of the economy.

In the short term, it creates jobs. In the long term, it destroys jobs and devastates the larger economy depending on how severe the inefficiency is.

You have to define what you mean by efficiency.
For the most part it eliminates jobs.

The only problem is, economic history doesn't reflect that reality. Rising productivity has not affected employment; it changes the composition of employment, but it doesn't reduce it. Those 40 jobs that were elimnated were replaced by jobs in industries that service the machines, build them, produce the resources to build them, and were also replaced by jobs that are the outcome of the invested savings from

Do prices drop from companies getting efficient? I don't think so. Prices tend to increase at the same rate and the companies tend to pocket the savings.

Prices don't drop, but the amount you get per dollar does. $1,000 of data storage today is exponentially larger than $1,000 of storage 5 or 10 years ago, and the cost to sequence DNA now is a fraction of what it was in the 1980's. Similar drops are seen in the cost of discovering oil, producing cars or any other good. That's why calculating inflation is so difficult; we can't just take in to account the price of goods, we have to take in to account their quality or performance. It's in performance and quality that the falling costs are found.

Also, the savings are found in reducing inflation; rather than raising prices 5%, a company might only have to raise them 2% due to a 3% drop in production cost.

It creates lots of low paid menial jobs, and eliminates well paid skilled jobs.

I thought it created a lot of highly paid, upper management seat warmers. Or is economic inefficiency created by the existence of a lot of highly paid upper management seat warmers?

I thought it created a lot of highly paid, upper management seat warmers. Or is economic inefficiency created by the existence of a lot of highly paid upper management seat warmers?

It creates both; low-wage menial jobs for most people and a few high-paying sinecures for the elite. Of course, upper management can cause inefficiency itself, if the history of GM has taught us anything.

It creates both; low-wage menial jobs for most people and a few high-paying sinecures for the elite. Of course, upper management can cause inefficiency itself, if the history of GM has taught us anything.

I've noticed that, where I work, the worse the financial situation becomes, the more highly paid bureaucrats are hired, largely to dream up excuses for not giving pay raises to the lower levels while justifying large (25% or more) pay raises for themselves.

I've noticed that, where I work, the worse the financial situation becomes, the more highly paid bureaucrats are hired, largely to dream up excuses for not giving pay raises to the lower levels while justifying large (25% or more) pay raises for themselves.

That happens in a lot of companies, especially ones with publicly traded stock. Since stock performance is a marker for company performance and company performance determines whether a CEO and his other executives will remain with the company, they have an incentive to forstall the inevitable as much as possible.

These companies have to have media specialists and consultants on the payroll to convince people that everything's alright; it's no matter if they cost millions of dollars and contribute nothing to the company's recovery.:rolleyes:

A good example is comparing the restructuring of GM and HP. HP laid off workers and created a restructuring plan that emphasized progress, but did it without all kinds of media fanfare. GM laid off workers and has pretty much no restructuring plan other than reducing production and closing plants, and they have a nonstop media circus at every opportunity. You can already tell which company will do better in the long term...GM's lucky if it doesn't go bankrupt in a few years. Remember the movie Office Space? That actually hit the nail on the head when it comes to the actions of upper management.

That happens in a lot of companies, especially ones with publicly traded stock. Since stock performance is a marker for company performance and company performance determines whether a CEO and his other executives will remain with the company, they have an incentive to forstall the inevitable as much as possible.

These companies have to have media specialists and consultants on the payroll to convince people that everything's alright; it's no matter if they cost millions of dollars and contribute nothing to the company's recovery.:rolleyes:

A good example is comparing the restructuring of GM and HP. HP laid off workers and created a restructuring plan that emphasized progress, but did it without all kinds of media fanfare. GM laid off workers and has pretty much no restructuring plan other than reducing production and closing plants, and they have a nonstop media circus at every opportunity. You can already tell which company will do better in the long term...GM's lucky if it doesn't go bankrupt in a few years. Remember the movie Office Space? That actually hit the nail on the head when it comes to the actions of upper management.

This particular philosphy is also hitting public institutions. I work at the University of California, where this has become a common practice. The mission of the University is no longer educating students and producing cutting edge research, but lining the pockets of bureaucrats.

This particular philosphy is also hitting public institutions. I work at the University of California, where this has become a common practice. The mission of the University is no longer educating students and producing cutting edge research, but lining the pockets of bureaucrats.

Wow, that's terrible. I guess incompetence can spread to anywhere that bureaucracy is not checked; unfortunately, the nature of bureaucracy is self sustaining in that any attempt to reform it just creates more. Hopefully, the university will be able to overcome such a problem since they are the backbones of our economic efficiency in the first place.

The only problem is, economic history doesn't reflect that reality. Rising productivity has not affected employment; it changes the composition of employment, but it doesn't reduce it.

Those 40 jobs that were elimnated were replaced by jobs in industries that service the machines, build them, produce the resources to build them, and were also replaced by jobs that are the outcome of the invested savings from


That depends. You don't get a specialist that is assigned to your setup. You get a guy that takes care of several sites. Depending on what the service company declares a proper response time, it may add new people.

The same goes for the people that build them. Unless there is a signficant greator demand, the number of people that build them remain the same. Then again with the global economy, it may increase workers in cheap labor countries.

I want to correct the numbers. It was more like 90 now that I thought a bought it. I forgot the other shifts.

There was no job replacement. The savings did not lead to investment that created new jobs(in the company).


Prices don't drop, but the amount you get per dollar does. $1,000 of data storage today is exponentially larger than $1,000 of storage 5 or 10 years ago, and the cost to sequence DNA now is a fraction of what it was in the 1980's. Similar drops are seen in the cost of discovering oil, producing cars or any other good. That's why calculating inflation is so difficult; we can't just take in to account the price of goods, we have to take in to account their quality or performance. It's in performance and quality that the falling costs are found.


Automation (taking from what I think the thread starter means) did not create the storage increase. Competition did that. If you couldn't keep up with storage, you went out of business.

Even then, the storage increase also led to job losses. Less systems to manage means less people needed to manage them.

Automation does not create a matching number of job losses.


Also, the savings are found in reducing inflation; rather than raising prices 5%, a company might only have to raise them 2% due to a 3% drop in production cost.

That is arguable as you know there are many factors involved when deciding prices. Employee reduction is not always a reason to drop prices.

There is only so much you can raise a price before it opens the door to looking at your competition. If you have to pay more for support, why not buy new equipment as the price increase from your current vendor can pay pretty much the cost of the new equipment.

We use that on our vendors all the time when it comes time to renegotiate contracts. Vendors like to play the "we have worked together for a long time buddy, hey we need to really increase your costs!"

To close.

Automation does not increase the amount of jobs for what was loss.

I've noticed that, where I work, the worse the financial situation becomes, the more highly paid bureaucrats are hired, largely to dream up excuses for not giving pay raises to the lower levels while justifying large (25% or more) pay raises for themselves.

Don't forget the other games like changing issue dates for stock grants.

It's funny to hear these assholes bitch about too many laws that make it economically bad and yet quickly argue the rules were not explicity enough to say you couldn't do that!

Executive rip off is a fact of life. Talent isn't always required to have a title. I worked at a trucking company where some of the execs were getting paid from Accounts Payable. Try to figure that one out! :)

This particular philosphy is also hitting public institutions. I work at the University of California, where this has become a common practice. The mission of the University is no longer educating students and producing cutting edge research, but lining the pockets of bureaucrats.

Well you do have to pay for the retirement packages. The last chancler got that house in the Berkeley hills and how much money per year?

That depends. You don't get a specialist that is assigned to your setup. You get a guy that takes care of several sites. Depending on what the service company declares a proper response time, it may add new people.

The same goes for the people that build them. Unless there is a signficant greator demand, the number of people that build them remain the same. Then again with the global economy, it may increase workers in cheap labor countries.

There was no job replacement. The savings did not lead to investment that created new jobs(in the company).

Sounds more like a problem with the company than the automation itself; if they made that kind of investment but it didn't produce the savings necessary to grow the company it seems more like a bad business decision than anything else. Productivity investments are only a good idea if the benefits outweigh the drawbacks; workers are not cheap, so you only get rid of them if the benefits are worth the cost.


Automation (taking from what I think the thread starter means) did not create the storage increase. Competition did that. If you couldn't keep up with storage, you went out of business. Even then, the storage increase also led to job losses. Less systems to manage means less people needed to manage them.

Automation does not create a matching number of job losses.

Automation and productivity growth is necessary to be competitive; you can't really be one without the other.

However, overinvestment in automation at the expense of people can hurt productivity as easily as too many workers; you don't have the people with insight in to the industry to provide skilled managers for the next generation of the business, and the culture of the company will be decidedly more negative since workers see the company as indifferent to their employees.


That is arguable as you know there are many factors involved when deciding prices. Employee reduction is not always a reason to drop prices.

I'm not really talking about employee reduction, but rather productivity growth. If the cost of production rises by 5% and productivity rises 6%, your actual cost has fallen; that growth might have absolutely no effect on the number of workers or could even be the result of an increase in staff once existing workers have been maxed out in terms of productivity.

"Productivity" is an umbrella term covering a variety of measures, and automation is only one of them.

There is only so much you can raise a price before it opens the door to looking at your competition. If you have to pay more for support, why not buy new equipment as the price increase from your current vendor can pay pretty much the cost of the new equipment.

Competition is the main way that prices are kept down, while productivity enables a company to cut its prices further in order to steal market share from its competitiors. Without one, the other is less effective.

We use that on our vendors all the time when it comes time to renegotiate contracts. Vendors like to play the "we have worked together for a long time buddy, hey we need to really increase your costs!"

Yeah, I know what you mean all too well. Several members of my family work in aerospace, so they've had manufacturers try to pass on price hikes like that when it comes time to renegotiate for supplies. It gets rough, especially when some supplier industries have one company controlling 50% of the market.

Automation does not increase the amount of jobs for what was loss.

It changes the composition of employment, but ultimately ends up zero-sum.

We've seen huge growth in productivity, but people have remained employed and real salaries have grown regardless even though individudal industries have lost jobs.

In the long run, productivity might grow so fast that workers do get displaced, but if automation is that efficient, do they really need to work? I think by that time we'll be able to support our lifestyles without actually having to work for them...

Does economic inefficiency create jobs or eliminate them?
Some creates jobs, some eliminates them.

I would say that in the strictest sense of the term, it creates jobs. Public education (a form of economic inefficiency) means that more people have access to education than purely private education. The more education that a person has, the more likely that they will be to be able to adapt to shifts in the labor market.

Economic Growth may creat jobs

Efficiency would sustain or cut back on jobs.

or at least I think it would.