Mathematics of Wasted Labor—an Example
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With kind permission from J.W. Smith, a part of the conclusion to Part I of World's Wasted Wealth II (Institute for Economic Democracy, 1994) has been reproduced here.
- That part is titled The Mathematics of Wasted Labor.
- In the preceeding chapters of Part I that leads to this part of the conclusion, details on how he arrives at those estimates of wasted labor in different industries are described.
- It is a vivid example of wasted and unnecessary labor using the United States as the case study.
- While the book was written back in 1994 and the numbers, facts and estimates are hence based on data from the early 1990s, the pattern and examples shown here are still very valid.
- We believe that the numbers are not so changed in just a few years to invalidate the principle and overall results here of millions of wasted jobs and the benefits of sharing the remaining productive jobs.
- At the same time however, a request is made for researchers and students out there to be able to provide more updated numbers.
- Formatting of the text has been changed to look similar to other pages within the globalissues.org web site.
- Chapter titles that are referenced within the text are other chapters from the above-mentioned book.
Also, please note that I do not make any proceeds from the sale of this following book in any way.
The Mathematics of Wasted Labor
The current unemployed or wasted labor available for productive work, if society restructured to take full advantage of the efficiencies of technology, is an estimated:
- 2.047 million people in the insurance industry (2.3 million less 11 percent calculated in the surplus guard labor [administrators] described by professors Bowles, Gordon, and Weisskopf);
- 1.5 million people in the legal industry;
- 1.9 million people in automobile distribution, repair, and transportation (2.17 million less 11 percent included in guard labor);
- 2.3 million people in agriculture;
- 5.4 million people in the health care system (6 million less 11 percent included in guard labor);
- 2.5 million welfare workers;
- 3.5 million people in the education system;
- 10.16 million excess guard labor (managers and supervisors);
- 2 million desperate street people;
- 13 million students sixteen years old and older;
- 5 million functionally challenged;
- 16.5 million unpaid homemakers;
- 15 million unemployed (official and unofficial);
- and 9 million unnecessary military and defense workers (see chapter 11). See footnote 1
This is a total of 80.807 million people not employed or employed non-productively.
The 1989 labor force was approximately 125 million.13 To that we have to add those who are not officially considered part of the labor force, such as:
- 2 million street people;
- 13 million students;
- 5 million functionally challenged;
- 16.5 million homemakers;
- and 5 million unemployed not counted in official statistics.
This gives a total of 166.5 million in the labor force of an efficiently structured society. We allow five million between jobs (double the unemployment rate of Japan) as normal. That leaves 161.5 million available for work in an efficiently structured society.
There are approximately 115 million employed U.S. citizens. Of these, 19.5 million have part-time jobs working an average of three days a week, or the equivalent of 11.7 million full-time jobs. Subtracting the phantom jobs (19.5 million part-time workers less the 11.7 million full-time jobs) leaves 107.2 million full-time jobs. To this we must add the 7.2 million working two jobs, for a total of 114.4 million jobs. The unnecessary jobs outlined above that can be eliminated are:
- 2.047 in the insurance industry;
- 1.5 million in the legal industry;
- 1.9 million in transportation;
- 2.3 million in agriculture;
- 5.4 million in the health care system;
- 2.5 million welfare workers;
- 3.5 million in the education system;
- 9.009 million excess managers and supervisors (after deducting 1.151 million already allowed in insurance, transportation, and health care;
- and 9 million unnecessary military and defense workers.
This is a total of 37.156 million unnecessary jobs and 77.244 million remaining productive jobs. At five days per week, that is 386.22 [slight correction] million days productive work per week; which is 2.4 days work per week of paid employment for the 161.5 million available workers.
If doubtful of any part of these calculations, study the unnecessary labor and intercepted wealth in real estate, the stock market, banking, and accounting, etc., as outlined in chapters 16 through 18. Also note the savings possible if retail sales were rationalized as outlined in chapter 19. That chapter demonstrates that, for moderate-priced and high-priced products, modern communications technology can eliminate a large share of the 1.9 workers that are distributing for every one producing. These four segments of the economy are only partially addressed in this first part. Their total wasted labor is too subjective to measure accurately, but demonstrates the potential of lowering the workweek, in an efficient society, even further. See footnote 2
And this is for a throwaway society. Superfluous consumer products are sold only because of a "created need." Direct access through communications technology could bypass promotional/persuasive advertising, reducing impulse buying and advertising labor (see chapter 19). See footnote 3
Nor have we included the wasted labor of the United States having twice the prisoners and parolees of other industrialized countries. Most of these nonfunctional, antisocial, and criminal personalities are created from the immense social tensions of excessive rights for some and lack of rights for others. Some people may give up or get angry at an injustice they can sense but cannot verbalize, others will resort to shortcuts to wealth, rights, and power.
And as if all that is not enough to prove that the enormous efficiencies of technology are consumed by unnecessary labor in this battle over interception of that wealth, a study by Theodore H. Barry, a management consulting firm, concluded that
I suggest the reader study the above six paragraphs and make their own calculation on just how little labor would be required in a society that worked productively, that fully paid people for that work, in which work was shared equally, and in which the goal was to maximize each person's free time. Instead, because the efficiencies of technology are increasing at almost an exponential rate, if that wealth is not shared — as opposed to the current battles over it — the waste can only increase.
And to all the above can be added the reality that, when fiber-optic/satellite/computer networks are all in place, it is anticipated that most jobs will be at home. See footnote 4 As only 5.6 percent of automobile miles are recreational, considering only the current mileage for recreation, this would drastically reduce commuting time and eliminate many automobile support jobs. See footnote 5
The claim will be made that reducing working hours and sharing jobs without lowering the living standards would make a country's products more expensive and unable to compete in world trade. But every unnecessary job and welfare payment is part of the total cost to society and that cost is reflected in the cost of its production. Unnecessary insurance and legal or any other costs, whether paid by business or labor, show up in the cost of production.
Eliminating unnecessary jobs and sharing the necessary ones add no cost to society and, to the extent that wasted capital is saved, it will be cheaper. A society is only as productive as all of its citizens collectively. If all Americans were productive while working five days a week they would produce twice what they need and strip the nation's resources in the process. If Americans were to restructure to a respectable standard of living at two and one-half days work per week, their production could be traded equally with any other society that was equally efficient. However, if trading with a society that employed its labor twice as many hours and marginalized the rest of its workers, equal trade would require costs being converted to labor units employed per unit of production.
This is already roughly done. The governments of Sweden and New Zealand provide substantial services to their citizens and that wealth can only come out of production. German industrial workers are paid over 50 percent more than their U.S. counterparts and German industry can only stay competitive by government supports. Historically, Japan has promised lifetime employment for their industrial workers and, while currently running at 65 percent of capacity, the wages of the unneeded workers must be paid, one way or another, by the consumers of that production. The European Common Market heavily subsidizes its farmers. The United States provides its farmers with enormous supports, and on and on with all major governments. Trading with unequal labor values is the primary injustice in world trade. Equalizing those labor values will go a long way towards equal rights for all.
For those who fear these concepts, bear in mind that this philosophy opposes one of the key aspects of communism — the distribution of all production for free. Countries with communist economies have enormously unproductive labor, while this treatise envisions every person being fully productive and fully paid, the elimination of welfare for all except the truly disabled, and all people enjoying the maximum amount of free time. In short, full rights for all.
Restructuring to a just society, with true equal rights, would mean saved labor, saved resources, reduced environmental pollution, and increased free time — a very high quality of life.
To make sure there is no double counting of management and supervisory labor, I lowered this by 800,000. Back to text
Under the above conditions, the unemployment level should be close to zero. Economists will immediately warn about the high cost of labor without an unemployed reserve labor force, but this would not be a problem. With computers matching workers with jobs, and almost everybody having more free time, no employer should have to look far for needed workers. With everybody working less than one-half the week, competition would be fierce for extra work. This would not be out of desperation but out of a desire to work for the many products or satisfactions a modern economy can provide. Back to text
We are primarily discussing U.S. labor wasted internally. Though it has been documented by others, we will be addressing how distribution by unnecessary labor evolved differently in the former Soviet Union.
With their rights far more restricted, distribution by unnecessary labor, in yet a different form, also evolved in Third World countries. In an experiment, a research institute 'tried to set up a legal gov-ernment company without easing the way with tips. It took a lawyer and three others 301 days of full-time work dealing with 11 government agencies to complete the paperwork-which, when laid end to end, measured 102 feet. (One of the researchers then tried the experiment in Tampa, Florida, and finished in 3½ hours). In another experiment, a former governor of Peru's central bank inves-tigated how long it took to get permission to set up a small clothing factory-289 days and 24 requests for bribes. In a more politically sensitive industry, it could have taken up to eight years (Walter Ingo, The Secret Money Market [New York: HarperCollins, 1990], p. 21). Back to text
In an attempt to lower traffic, Los Angeles may experiment with fifteen thousand city employees working on computers in their home. This will save both transportation and office space (ABC News, (Dec. 3, 1993). Back to text
There will be many challenges to such a potential reduction in labor expended without a loss in living standards. But, with only the nonproductive jobs eliminated, there will be no loss in production. Then will come the job of distributing that production and the most logical and fair way to do it is by a large reduction in the working time of fully productive labor, and sharing that work.
However, the labor savings may not be as great as these statistics indicate. Much of the wealth that provides the high living standard of developed societies is wealth appropriated from Third World societies. Arjun Makhijani, in From Global Capitalism to Economic Justice [(New York: Apex Press, 1992), pp. 162-63, 167-69], points out that some Third World labor actually outproduces First World labor, while being paid one-fifth that of workers in the developed countries or less. If there were true equal rights worldwide, meaning labor being equally paid for equal work, it is likely that the average person would have to work over two and one-half days per week. Unequal wages are the result of institutionalized historical unequal-power relationships, and are as true of internal wage structures as of wage rates between societies. Once full equality is obtained, wage rates should still mirror the difference in productivity, but the range will be much narrower than that w