Government, Not Automation, Destroys Jobs The world’s scarcest resources, entrep

Question

Government, Not Automation, Destroys Jobs

The world’s scarcest resources, entrepreneurs and scientists, are working to economize the most abundant resources, namely low skilled labor. All of that entrepreneurial and scientific talent is being wasted due to bad government policies.

A few weeks ago, road and highways minister Nitin Gadkari said that driverless cars would be banned in India in order to “protect jobs.” This kind of fallacious argument is nothing new. For the past year or so, newspapers have frequently published articles arguing that automation is to blame for job losses. Even seemingly intelligent people like Bill Gates have made outlandish suggestions, such as taxing robots, to compensate workers who might lose their jobs as a result.

By doing a superficial analysis, one may indeed say that automation causes job losses. But by digging a bit deeper, one sees that bad government policies are the root cause for unemployment.

Circumventing Regulation

Take the case of driverless cars. Driving is not a job that requires specialized skills. Low skilled workers are abundant and also inexpensive to hire. Why, then, is Uber so interested in developing driverless cars? It is because governments around the world have imposed costly regulations, or outright banned Uber to protect the taxi cartels.

Never mind that this creates an immediate job loss for Uber drivers, it also gives Uber an incentive to invest billions in developing driverless cars to circumvent the burdensome regulations. This will ensure that all drivers will lose their jobs in the long run, including the taxi cartels governments are trying to protect.

Lant Pritchett, at the Center for Global Development, wrote last month of a similar problem in the US. Workers from Central and Latin America could easily work low-wage jobs in the US.But minimum wage laws and immigration restrictions make labor artificially expensive.

That is precisely why Amazon is pouring billions into drones. In the absence of government intervention, it would be far cheaper to hire low skilled immigrants for delivering parcels. But since government won’t allow that, it is cheaper to use drones. Most delivery jobs in the US will be eliminated in the near future as a result of bad immigration policies. Policies which were, ironically, crafted to save those jobs.

Note the tremendous inefficiency this creates. The world’s scarcest resources, entrepreneurs and scientists, are working to economize the most abundant resources, namely low skilled labor. All of that entrepreneurial and scientific talent is being wasted due to bad government policies. Pritchett rightly laments that this makes it harder for poor people to escape poverty.

Pritchett’s observation is nothing new. In January, I wrote that even Karl Marx understood how technological progress is distorted when government tries to protect certain industries or occupations. A case in point is Indian manufacturing, which the government tried to protect from foreign competition.

Countries at a similar level of development have labor intensive manufacturing which makes use of cheap labor. In India, the opposite has happened. Whatever little manufacturing takes place in the country is extremely capital intensive. Why did this happen?

Laws Are Expensive

Before 1991, government imposed extremely high tariffs on imports to encourage domestic manufacturing. Manufacturing grew, but it became more capital intensive over the years, even though cheap labor was abundantly available. The explanation for this lies in India’s complex labor laws.

India has nearly 250 labor laws between the center and the states. The cost of complying with these labor laws is so high that companies found (and still find) it cheaper to use machines than to hire people, creating the phenomenon of jobless growth.

All of this evidence points to just one culprit, when it comes to unemployment. It is not greedy corporations and it is not automation. Ridiculously ill-conceived government policies are the sole reason that low skilled jobs are dying an untimely death.

INSTRUCTION

a) Make sure you use a graph and explain you graph with a minimum of 4 sentences (why did you do your shift or shifts and what happens to price and quantity as a result) for the last question.

Questions:

1.Why is Uber so interested in developing driverless cars?

2.When it comes to unemployment, what are the sole reason that low skilled jobs are dying an untimely death?

3.Use supply and demand to illustrate the impact of costly regulations on the market for taxis.

Explanation / Answer

Discussion......

Uber is a global transport technology company with a motive to earn a profit and for that, it needs to run some optimization with the following variables

profit = total revenue - total cost

in revenue side, everything depends on the operation of the Uber Car that is more Cars and more Revenue being generated.

On the cost side, there are many variables some objective and some are political involving (labour cost/law and order related cost/ regulatory fees/ and others)

with an assumption that no restriction on the mobility of factors of production then the model becomes so simple and the Uber will move at the place and earn more profit where it get the cheap labour, undoubtedly be developing nations have the potential of low-cost labour as an input.so under no other variables in the picture any company should move to the place of low price factors abundant places and thus there will be always employment coming up and income getting generated.

but this is not the real picture in any political economy

because the players in the picture are

Government/ People(consumers)/and producers class of goods and services(UBER)

all of them have a different optimization problem with a given set of variables.

but if the end goal of each player will be the welfare of the society at the end of just redistribution of resources then it would be a dreamy outcome of euphoric society.

but there is asymmetry of Information regarding the goal of each players and also the political boundary differentiating the factors prices based on the domestic policies.

So the cost of creating Goods and services stays different in different location due to political boundary obstructing the mobility of factors even in today's world. Others being the political class itself which is striving to please its voter in the present setup of governance to keep its incumbany safe by getting reelacted. Others are people ( citizens) of the nation having the desire to have a safe and smooth lifestyle with all the need it requires and thus it togather elect the favourable government to rule over them but most of the time there is il information or sometime short term goals did not fixed the ccountability of the government. sometime illdrafted legislation also cost to the corporation as well as to producers.

over all the regulation ( through laws and policies) has to be in favour of managing the market and save it from its being failing from being the true reflector of price for the consumer and producers.

Answer--1)

UBER is a company which has to run its business eitherway to be in the market as the operation is the only way to earn the revenue but there are cases and ways to minimise the cost of the operation, so to minimise on the cost of operation UBER is Intrested in developing driverless cars. it will keep its operation cost low even at the place where the low cost labour (drivers) are not available of delebrately keept out of the availability by enforcing laws and changing policies.

having driverless cars is less costly and time consuming and also certain than to influence consumer about the benefit of services and low price which is to come there ways by having UBER.

In a country like USA where imigration of low skilled labours from other country is restricted to save the domestic job as the politician think about there significant variable (citizen especially the voters) who will ensure the incumbancy. under these circumstances UBER may find it less costly to use scarse resources of our society (Scientist) with the certainty to be in the operation.

ANSWAER-2

Low skilled unemployment is defenitely dying untimely death because of the following reasons.

Job creation is now not the motive of even government or corporate like UBER.

Because government regulation and policies are intended to short terms fancies for being reelected and save the incumbancy, which is quite impossible in the democratic structure of the government. And corporate are looking at the places where there is ease of diong business and based on the technological development the certainty of being operational is quite high rather than being dependent on circumventing the regulation in their favour.thus one can infer the reason like

Rregulation in favour of political class is killing Jobs

technological development Like driverless car is killing the job one is enforcing other as the political class is the higher authority to look after the concern of people at large.

and the bad cordination between the nations at different level of development at the policy level ( protectionims in a new form)

small pressure group and domestic cartels are also responsible for untimely death of low skill jobs.

ANSWER 3)

keeping the graph in the mind there can be two case

a) no regulation
b) costly regulation.

in case of no regulation there will be equilibrium oprice at the point E as in graph and the graph given but when there is peak hours and demand rose that is shift of D1 to right means there is surge in price but will be temprorary and bring the price back at the E( this is because of more driver are to be engased)

when there is regulation then there will be a limited supply that is either it is decided by the government by imposing restriction on numbers of cars to be played or high fees under both cased there will be huge gap between demand and supply and thus the consumers of car services are supposed to pay price above E always.  

indirect impact--

loss of Jobs/ low level of Income/ poverty/bad state of transportation or heavy load on existing transportation. thus loss of incentive on infrastructure devlopment / low revenue to the government in long run as fee or regulatory fines has to change some day because of democratic structure of government.

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