Taking Stock of Unemployment
by David Packer
In the language of system structure, there are two basic ideas: stocks and flows. Flows are like water in a pipe, measured in units per time intervals, like gallons per minute. Stocks are where the flows go and from whence they come, like bathtubs. Stocks are
accumulations of things, with inflows and outflows. The only way to change stocks--to fill them or drain them--is by changing flows in or out.
Because of the difficulty most people have seeing how stocks will behave given variations of inflows and outflows, stocks provide the biggest challenges in comprehending the behavior of our social and physical systems. They are hard to change, because they are often so large relative to the size of the flows. Think how long it takes to fully fill your bathtub, a swimming pool, an oil tanker. Think how long it takes for the CO2 in the atmosphere to drain away, even if the input is cut to nothing.
And think about the bathtub full of the unemployed in the U.S., which haunts us now. This is a very large stock of millions of people, about 10 percent of the workforce. Each month, a substantial inflow of new people join the stock, as individuals lose their jobs or come of working age; another substantial outflow of people get jobs, give up their job searches, compromise, die, and the like. As long as these flows are about the same, the stock of the unemployed remains unchanged, which it has for a while. Without going into numbers (which you can do as an exercise), it is clear that bringing down the stock, even assuming robust job creation, will take more than a handful of years.
Because people don't generally understand the length of time required to reduce a bloated stock, the political risk is also great. Beware, President Obama, of any rhetoric or commitments that make the task of draining this stock seem easy to do in the short run (like before the next elections).
Another question is how we got into this particular pickle so suddenly. One way to think of the situation is to look back a couple of years, when we were in seemingly happier times, and envision two bathtubs. One is the stock of unemployed then, a normal few percent of the workforce. The other is the stock of people employed in the bubble businesses--devising new financial instruments, marketing creative mortgages, designing and building houses and offices financed by those creative endeavors--and in businesses based on the added spending of those in the bubble industries.
Now visualize the burst of the bubble. When bubbles burst, explosive flows emerge, and the stocks into which they flow rise rapidly. Over a short time period, the bathtub of bubble employees flowed at amazing speed into the unemployed bathtub, more than doubling its count. As we know, unemployment soared.
So we are left with a dangerously out-of-balance system. Hoping for new bubbles to absorb the excess unemployed is absurd. The normal, responsible processes of increasing outflows and reducing inflows take real time. Just recognizing the structure in which we have trapped ourselves, by visualizing the stocks and flows, is a first step toward health.
It provides a perspective, a lens that increases the urgency for actions to change the flows and an anchor that protects us from false expectations of a quick-fix rosy future. And maybe, just maybe, there is also a flow into a stock of learning that will serve us well.
David W. Packer is founding partner of the Systems Thinking Collaborative, a veteran of the MIT System Dynamics Group and of Digital Equipment Corporation, and on a variety of boards. He and spouse Ginny have parented five and are now grandparents to twelve. And he is a Red Sox fan, among other things.