Why I Will Never Hire Anyone, Even at $1/Hour

One of the most appealing beliefs about technology–that it will always create more jobs than it destroys–is no longer true. It was true in the first and second industrial revolutions, for one simple reason: the new industrial revolution created vast numbers of low-skill jobs that offered displaced workers abundant opportunities for work that did not require more than entry-level skills.

It only took a few minutes to learn one’s job on an assembly line in the first industrial revolution, and many workers recoiled from the sheer boredom and physical repetitiveness of this work. This is one reason why Henry Ford famously raised his workers’ wages to the then-princely sum of $5/day: the high turnover of people quitting was killing him.

I covered this in The Alienation of Work (April 15, 2014):

After the success of the moving assembly line, Henry Ford had another transformative idea: in January 1914, he startled the world by announcing that Ford Motor Company would pay $5 a day to its workers. The pay increase would also be accompanied by a shorter workday (from nine to eight hours). While this rate didn’t automatically apply to every worker, it more than doubled the average autoworker’s wage.While Henry’s primary objective was to reduce worker attrition–labor turnover from monotonous assembly line work was high–newspapers from all over the world reported the story as an extraordinary gesture of goodwill.

In other words, labor had scarcity value. This is no longer true, as we shall see.

The second industrial revolution (telephony, radio, consumer marketing) required more training, but there were tens of millions of relatively well-paying entry-level sales and paperwork positions created for people who were automated out of factories. For example, my father made enough selling appliances at Sears in the 1950s to buy a house, support a wife and four kids and pay for luxuries such as modest family camping vacations.

This is simply not true in the third industrial/Digital Revolution: the jobs being created are not entry level or low-skill, except for informal menial jobs like running into Target to do some shopping for a highly-paid person who will pick up their items from you on the curb.

These menial service jobs are often awarded to the lowest bidder, while the enterprise that operates the auction skims a significant chunk of the revenues.

Believers in “technology always creates more jobs than it destroys” also overlook the work of Immanuel Wallerstein (and others) who identified the job-killing trend that cannot be reversed: the cost of labor is rising for systemic reasons that supercede supply and demand of labor.

In other words, the total compensation costs of labor rise even when labor is abundant or in over-supply.

Wallerstein identifies three long-term forces that are undermining capitalism’s key function, the accumulation of more capital:

1. Urbanization, which has increased the cost of labor.

2. Externalized costs (dumping private waste into the Commons, environmental damage and depletion, etc.) are finally having to be paid.

3. Rising taxes as the Central State responds to unlimited demands by citizens for more services (education, healthcare, etc.) and economic security (pensions, welfare).

I explain these in more detail in Is This the Terminal Phase of Global Capitalism 1.0?(February 8, 2013).

In other words, the costs of labor paid by the employer are rising for structural reasons, even while supply and demand is reducing the wages paid to employees. This is why labor costs have tripled in China, while take-home pay hasn’t tripled.

Labor overhead is all the labor-related expenses paid by employers: the vast majority of pundits, most of whom have never hired a single employee with their own money, tend to overlook the overhead costs paid by employers: workers compensation insurance (soaring), healthcare insurance (soaring), disability insurance, unemployment insurance, 401K or pension contributions, etc.

The “solution” in the Digital Revolution is to eliminate all labor overhead and transfer all these risks and expenses onto the free-lancer. As a free-lancer/self-employed worker, I am well-acquainted with these overhead costs: it costs $15,300 annually to purchase stripped-down healthcare insurance for my self-employed wife and I.

This is $7.66 per hour for a 2,000-hour work year. The total value of the labor overhead paid by employers for someone of my age and experience exceeds the $15/hour being trumpeted as a minimum wage.

In other words, it would cost an employer $30/hour to pay me $15/hour.

The net result of reducing labor to auctioned-off surplus is that the state, and thus ultimately the taxpayer, is paying the overhead costs. The person being paid $5 to shop at Target (or $50/day to deliver whatever the high-earners didn’t order through Amazon) for a top 5% earner can’t possibly afford $15,000 a year for healthcare insurance, much less all the other benefits paid by employers.

So they end up getting social welfare benefits for low-income people such as Medicaid, food stamps, Section 8 housing subsidies, etc. In other words, this form of menial labor is ultimately subsidized by taxpayers.

The person paying someone a menial sum to perform some service may think they’re “hiring” that person, but in reality the taxpayer is footing the majority of the costs–the real “employer” is the taxpayer.

In other words, this informal “work” is a simulacrum of paid employment. All the costs being offloaded onto the informal worker end up in the taxpayer’s lap.

How can this be lauded as a functioning system of employment? It can’t, because it isn’t.

Those who believe the Digital Revolution will create more work also overlook the realities of risk when it comes to employing people. Once again, I wonder how many of these people have ever hired a single person on their own dime, i.e. with their own money, paid the overhead costs of an employer and took the risks of hiring employees.

Here’s one example from real life: you hire a fellow cash-only (informally or through some sort of labor auction exchange) to clean the roof gutters on your house. He falls off your roof and is seriously injured. You may think your insurance will cover you, or the labor auction exchange’s claim of coverage will protect you, but guess again:you could be on the hook for a huge settlement/judgment that will not be paid by your homeowner’s insurance or the labor exchange.

Labor laws don’t disappear just because you’ve hired someone informally.Anyone violating labor laws is also exposed to lawsuits and claims, exploratory “fishing” or otherwise. How about claims of ethnic, religious or gender discrimination? Those don’t disappear just because you’re an informal employer.

Many people seem unaware that a $10,000 claim for violating labor statutes may cost $10,000 or more to defend in court (or in pre-trial legal expenses). You’re out $10,000 either way.

Few pundits seem to put themselves in the shoes of those performing menial tasks for their “betters” for minimal compensation. What are the risks and rewards for managing an injury (real or faked) for those auctioning off their labor for a few dollars?

Those within the insurance industry know that there is an entire class of people who claim injuries in department stores, etc. so they can settle for $5,000 each “incident”– and they get the settlement because it will cost the corporation far more than $5,000 to contest, investigate, go to court, etc.

How good a job will you get when the worker bid so little to get the work? Once again, few pundits seem to put themselves in the shoes of those performing menial tasks for their “betters” for minimal compensation. You want to supervise people who are rushing to finish the task so they can hurry to their next low-paying gig? No thanks; be my guest. From my experience, it will cost me more time/money to re-do the work that was done poorly than it would to have done the work myself and forget hiring someone for the lowest bid.

This is why I will never hire anyone again, no matter how low the wage or cash payment: the risks are way too high and the rewards far too modest. Anyone who’s been a “real” employer like I have knows the realities, risks and costs. Those who’ve never hired a single employee with their own money are ignoring the realities.

When I need some real work done, I hire licensed contractors who pay all the labor overhead costs and pay for liability and disability coverage. These are very costly, so the service is costly. But you get what you pay for.

As for hiring someone myself–I can’t afford the true costs or risks. It literally makes no financial sense to hire someone if you pay the full freight. I will hire formal enterprises that pay the full costs of their employees, but only when I can’t do the work myself.

Setting aside these issues, the ultimate killer of jobs is scarcity and surplus.

The reality of capitalism is that profits and high wages only flow to what’s scarce, and as Michael Spence et al. explain in Our New Robot Overlords & The Third Type of Capital (October 18, 2014), conventional labor and capital are no longer scarce.

Conventional low-skill labor has no scarcity value in the Digital Revolution, and its value is heading to zero, regardless of what we may believe or hope. The same is true of conventional financial capital, which is why the superwealthy are buying existing income streams rather than investing in new (and risky) production.

Believers in “technology always creates more jobs than it destroys” never address the knotty issues of taxpayer subsidies, secular trends of higher labor costs, the eradication of low-skill jobs that pay enough to live on without taxpayer subsidies, or the structural surplus of conventional labor and capital–the scarcity value of both are dropping to zero.

While many hope that every low-skill person can become a high-skilled worker, training people doesn’t create jobs for them. As I have often noted, churning out 100,000 PhDs in chemistry doesn’t automatically create jobs for these experts. Indeed, there is already a surplus of highly educated/trained workers in a great many fields.

The truth is we need a new system–one that deals with the realities of labor, capital, scarcity and surplus head-on. The need for a social economy rather than a merely financial one is why I wrote my new book.

This entry is based on my new book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.


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  • November 9th, 2015 We Have Never Seen Global Trade Collapse This Dramatically Outside Of A Major Recession

    If you have been watching for the next major global economic downturn, you can now stop waiting, because it has officially arrived. Never before in history has global trade collapsed this dramatically outside of a major worldwide recession.


  • Tyler

    Taxation does not fund monetarily sovereign governments. Please visit mythfighter.com.

  • mulga mumblebrain

    The obvious corollary to capitalism’s decline, the financialisation of economies, the rise of inequality and indebtedness and the age of labour expendability as computerisation and robotisation increase, is surely massive population reduction, by fair means or foul. The overlords seems to have endless possibilities to achieve this end. Thermo-nuclear war, Ebola or some new scourge, ecological collapse etc, or all three and another that has escaped me, to make it Four, as with Horsemen.

  • JerseyCynic

    CHS is spot on again! cut the strings now. I wish I could bring CHS to the first meeting of our town’s boards…. Here’s how we ‘stick-it-to-the-man” seminars

    Anthony Sutton concluded that this was all part of the economic power elites’ “long-range program of nurturing collectivism”[2] and fostering “corporate socialism” in order to ensure “monopoly acquisition of wealth”, because it “would fade away if it were exposed to the activity of a free market”.[6] In his view, the only solution to prevent such abuse in the future was that “a majority of individuals declares or acts as if it wants nothing from government, declares it will look after its own welfare and interests”, or specifically that “a majority finds the moral courage and the internal fortitude to reject the something-for-nothing con game and replace it by voluntary associations, voluntary communes, or local rule and decentralized societies”.[2] In Sutton’s own words he was “persecuted but never prosecuted” for his research and subsequent publication of his findings.https://en.wikipedia.org/wiki/Antony_C._Sutton



  • JerseyCynic

    Here’s a good one…

    here’s a good one –

    “…………….The scene is Kentish Town, London, February 1858, sometime around 4am. Marx is a wanted man in Germany and is hard at work scribbling thought-experiments and notes-to-self. When they finally get to see what Marx is writing on this night, the left intellectuals of the 1960s will admit that it “challenges every serious interpretation of Marx yet conceived”. It is called “The Fragment on Machines”.

    In the “Fragment” Marx imagines an economy in which the main role of machines is to produce, and the main role of people is to supervise them. He was clear that, in such an economy, the main productive force would be information. The productive power of such machines as the automated cotton-spinning machine, the telegraph and the steam locomotive did not depend on the amount of labour it took to produce them but on the state of social knowledge. Organisation and knowledge, in other words, made a bigger contribution to productive power than the work of making and running the machines.

    Given what Marxism was to become – a theory of exploitation based on the theft of labour time – this is a revolutionary statement. It suggests that, once knowledge becomes a productive force in its own right, outweighing the actual labour spent creating a machine, the big question becomes not one of “wages versus profits” but who controls what Marx called the “power of knowledge”.

    In an economy where machines do most of the work, the nature of the knowledge locked inside the machines must, he writes, be “social”. In a final late-night thought experiment Marx imagined the end point of this trajectory: the creation of an “ideal machine”, which lasts forever and costs nothing. A machine that could be built for nothing would, he said, add no value at all to the production process and rapidly, over several accounting periods, reduce the price, profit and labour costs of everything else it touched.

    Once you understand that information is physical, and that software is a machine, and that storage, bandwidth and processing power are collapsing in price at exponential rates, the value of Marx’s thinking becomes clear. We are surrounded by machines that cost nothing and could, if we wanted them to, last forever.

    In these musings, not published until the mid-20th century, Marx imagined information coming to be stored and shared in something called a “general intellect” – which was the mind of everybody on Earth connected by social knowledge, in which every upgrade benefits everybody. In short, he had imagined something close to the information economy in which we live. And, he wrote, its existence would “blow capitalism sky high”.


    Re: Karl Marx was funded by the Brits and the London Economic League to write Das Kapital
    “Karl Marx, the “Father of Modern Communism” was himself an occultist and high-level Freemason, intimately associated with Rome’s Giuseppe Mazzini (1805-1872), the most powerful Freemason on the Continent and founder of the Mafia, and Albert Pike (1809-1891), the most powerful Freemason in America and creator of the Klu Klux Klan. He was PRIVATELY tutored by Jesuits in the huge Reading Room of the British Museum while writing The Communist Manifesto based upon the ten maxims or planks the Order had perfected during the French revolution of 1789-1798. His writings were financed by the Society’s wealthy cartel capitalists, such as John D. Rockefeller, Jr., and J. P. Morgan, also Freemasons who, being in their doctrines and deeds, were in fact the revived old Order of the crusading Knights Templars.” (Karl Marx: A life, Francis Wheen, New York: W. W. NORTON & Co., 1999).