Andrew Lockley – Exponential Investor (United Kingdom) –
By 2030 we’ll all be working 15-hour work weeks.
That’s the often quoted conclusion of John Maynard Keynes’ 1930 essay, “Economic Possibilities for our Grandchildren”.
Only, right now, a 15-hour work week seems a long way off. In the UK and US, working hours have actually increased since 1970.
Source: ourworldindata.org/working-hoursFrance, Spain and Italy’s hours are down. But they still average over 35 hours a week.
With all the advances in productivity since the 70s, we should be working less, not more. So what gives?
Well, maybe we are.
“Keynes’ 15-hour work week is here right now”
According to Forbes columnist Tim Worstall the 15-hour work week is already here.
He argues that although working week hours haven’t declined much, work inside the home has: “Keynes was right in general, we do all work hugely fewer hours than our grandparents did. Where he was wrong was in the detail. We mechanised the household and that’s what has given us the extra leisure.”
He points out that as ownership of electrical appliances has increased, home working hours have decreased. Time spent on housework is down from 60 hours in 1900, to just over 15 in 2015.
But that explanation feels a bit flat. Keynes was talking about a “solution to our economic problems”, not to household chores.
In his essay he says, “I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years.”
Keynes based this on the assumption that we would be around eight times better off today than we were in 1930, which we are.
So what happened?
House prices rise at double the rate of earnings
In the September issue of Cycles, Trends and Forecasts, Akhil Patel gave us a telling answer to this question.
He concluded that while wages have increased, all that extra money has gone into property:
The fruits of economic development always increases the price of land, which far outstrips the growth in wages.
This means that any increased surplus has “disappeared” into the rental value of land and house prices (which by extension means the portion of your earnings that goes to the bank via your mortgage). Wages are depressed to the lowest level that people will continue to expect.
The graph below illustrates this: the blue line represents average wages since 1955 – which have gone up, in nominal terms, roughly 70 times; average house prices have gone up by almost double this.
Source: Bank of England, Federal Reserve Bank of St. LouisSo as the world gets better, it necessarily follows that you will pay an ever greater share of your earnings in rent.
He makes a great point. But this is just a snippet of Akhil’s September issue. You can get his full explanation, and learn how to take advantage of it, by subscribing to Cycles, Trends and Forecasts.
So that goes some way to explain why we aren’t working any less. But the question now is: what’s going to happen as automation kills off increasing numbers of jobs?
We can’t all be working full-time, if there simply aren’t enough jobs for us to fill.
Watson wants your job
Every day, we hear more and more predictions of “robots taking our jobs”.
The chart below shows the impact technology has already had on routine tasks, in just the last few years.
Source: stlouisfed.orgOnce AI starts taking on non-routine jobs, we’re all in trouble.
Well, I say “once it starts”. The truth is, it already is.
This year, Fukoku Mutual Life Insurance in Japan fired 34 workers and replaced them with IBM’s Watson. The move, it said, would save it around £1m a year, after it had paid off the £1.4m Watson cost to install.
And in China, 40 hospitals are using a medical version of Watson. These AI doctors can evaluate cancer treatments, read medical images and send health alerts.
The jobs AI is replacing aren’t coming back anytime soon.
We may get our 15-hour work weeks after all
With half of our work taken by robots, there may only be 15 hours of work each week to go round.
And that’s why the idea of a universal basic income (UBI) is gaining so much traction around the world.
You’re probably already familiar with the concept of UBI, but let’s just have a recap.
UBI gives all citizens of a country a given sum of money. They get this money no matter their income, resources or employment status.
Some people think of it as a way of simplifying the benefits system. Everyone simply gets enough to keep them above the poverty line. Many argue that it would cost around the same as the current system we have in the UK. But provide greater benefits for both the employed and unemployed.
According to the World Economic Forum:
With basic income, all income from paid work (after taxes) is earned as additional income. So everyone is always better off in terms of total income through any amount of employment – whether full time, part time or gig. Thus basic income does not introduce a disincentive to work. It removes the existing disincentive to work that conditional welfare creates.
There are a number of UBI trials taking place around the world right now, in Finland, Kenya, Ontario, the Netherlands and Uganda.
And Silicon Valley is getting involved too, with Y Combinator running a pilot study in Oakland, California.
The results that are already in are largely positive: in Namibia UBI dropped crime rates by 42%; and in Manitoba, hospitalisations went down by 8.5%.
There’s a lot more research that still needs to take place before any concrete conclusions are reached. But the UBI movement is growing. And as AI gets more and more advanced, the debate won’t be going anywhere.
If it all works out, we might finally get our 15-hour work weeks. And we might get the answer to Keynes’ question: “If the economic problem is solved, mankind will be deprived of its traditional purpose. Will this be a benefit?”
Until that happens, you can follow Akhil’s advice and take advantage of the money flowing into certain types of real estate. Maybe you’ll even make enough money to cut down your own work week.
Until next time,