The Paradox of Too many People, Capital and Too Few Jobs and Resources

The present times are characterized by an oversupply of everything related to the job market and the presence of so much capital at the disposal of companies. On the other hand, the physical resources needed like oil, gas, minerals, and water are in short supply. This means that a paradox is created where there are more people than resources and more capital than avenues for productive investment. This “double whammy” would hit the current generation hard, as they have to contend with the paradox of too much labor and at the same time too few physical resources.

A situation where there is stagnation in the job market and inflation in the price increase is known as stagflation. While the hitherto protected and insulated economies of the west are now undergoing a painful transition to high unemployment and low growth, the Eastern world is realizing that the good times are over and hence, the return to the dizzyingly high rates of growth and plentiful employment is impossible. This is leading to a situation where the present generation is becoming frustrated and showing their anger through mass protests and strikes on just about everything that bothers them.

The Perils of Oversupply

Oversupply of labor means that when employers advertise for jobs, there is more than hundred times the number of applicants for every vacancy. This means that job seekers have to contend with low paying jobs far lesser in pay and working style than what they had studied. Indeed, some media reports have shown that engineering graduates in India are working in grocery stores and in menial jobs that do not have any connection whatsoever with their education.

Many youth in the west as well as the east are delaying marriage, having kids in case they are married, and are generally not leaving home and staying their parents as they can save on living expenses this way. This situation is a recipe for disaster as can be seen from the events of the Arab Spring and the Occupy movement where disgruntled and disaffected youth took to protests and social disorder as a means of expressing their anger.

Further, with so few jobs and so much capital at their disposal, companies are putting off hiring and instead, deploying their liquidity in the stock market and other forms of speculation that do not result in net job creation and only serve to exist as a highly lucrative source of income.

Speculation instead of Job Creation

This is the reason we see the stock markets rise even though the economy is in doldrums. This is also the reason we see the capital drifting towards speculation instead of productive employment. Further, investment needs resources that are dwindling and hence, corporates have realized it is better to speculate rather than invest in scarce resources. Even those companies that need resources are either putting off their expansion plans or lessening their output from the existing resource base.

Therefore, the paradox of oversupply of capital and labor and at the same time the dwindling resources means that there is no net value adding economic activity wherein the only growth is from the services sector that does not need any of these factors of production. This can be seen from the way in which the jobs that are being created are from the services sector where the fresh graduates are flocking to for employment.

Of course, as mentioned earlier, services can mean anything from high-end finance and IT to low end hair salons and retail stores and hence, it is important to note that fresh graduates be realistic about their chances. Instead of building castles in the air, they must have their feet firmly on the ground and hence, must apply for employment accordingly.