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Care about jobs? This is
a Must Read!
Adjust we must?
By Jim Surber
There are things that get a person to thinking. As an example, we all
know that the United States has been in the middle of an unemployment
crisis, since an estimated: 6.3 million fewer Americans have jobs than
at the end of 2007. At the same time it is also reported that the
country’s economic output is higher today than it was before the
financial crisis. The logical first question is, “Where did the jobs
go?” Outsourcing work and moving jobs out of the country are part of
the problem; but the factor that has increased output with fewer jobs
may be fast-moving automation driven by information technology, or
“IT.”.
Since the beginning of the Industrial Revolution in the 1700’s, people
have feared that new technologies would permanently reduce
employment. Their fears never came true and dislocations of labor
were always temporary because the technologies that made many jobs
obsolete, eventually translated into new kinds of work. The final
result was always a growth in productivity and prosperity with no
negative effect on employment.
While we all hope that this dynamic will continue replacing the types
of work provided for people, new research is showing that advances in
workplace automation are being implemented at a much faster pace than
ever, making it more difficult for workers to adapt. This wreaks havoc
on middle class clerks, accountants, and production-line workers, whose
tasks can increasingly be mastered by software and robots.
Economist Peter Diamond of MIT, who won a Nobel Prize for his work on
market imperfections, has said, “What’s different now is that the
nature of jobs going away has changed. Communication and computer
abilities mean that the type of jobs affected have moved up the income
distribution.” In other words, he seems to say that originally it
was the less-skilled jobs that were eliminated, but now it is those
jobs that demand more skill or training.
Others studying these trends have interesting observations and see a
paradox in the last few years. Before the recent economic downturn
caused U.S. unemployment to rise from 4.4 percent in May 2007 to 10.1
percent in October 2009, a disturbing trend was visible. From 2000 to
2007, while our nation’s gross domestic product and productivity rose
faster than in any decade since the 1960s, the growth of employment was
relatively low. This is likely because more work is now being done by,
or being helped by, machines. Examples include computerized kiosks and
voice-recognition systems replacing clerks, customer support staff, and
operators. This big adjustment will hurt until new stuff is found for
people to do.
In the few years before the crisis, job growth was mainly at each end
of the spectrum -- in lower-paying positions such as personal care,
cleaning services, and security, and in higher-end professional
positions for technicians and managers. For laborers, administrative
assistants, production workers, and sales representatives, the job
market didn’t grow, or in some cases became smaller. Additional
research shows that things only got worse after 2007. During the
recession, nearly all the nation’s job losses were in middle
categories, or the positions that were easiest to replace, fully or in
part, by technology.
Of course, big shifts in employment have happened before. In 1800, over
90 percent of Americans were employed in agriculture. This figure
dropped to 41 percent by 1900 and is barely 2 percent today. Just in
the past few decades, we have seen farming finally change from a way of
life to a strict business. The difference with technological
advancement today is that while advances in agriculture evolved over
centuries, and electrification and factory automation took decades, the
power of IT is estimated to be doubling about every two years. The
resulting question becomes whether the automation and improved
efficiency of IT is advancing too fast for the labor market to keep up.
It is also reasoned that as this continues, either displaced workers
will develop new skills, entrepreneurs will determine new ways to use
their skills, wages will decrease, or all three will occur. This
defines a big risk in that unless the US economy generates new
high-quality jobs, middle class workers face the prospect of menial
jobs with declining wages as more people compete for them.
Economic theory states that the labor market will “clear,” and that
there will always be things for people to do; but the theory doesn’t
say at what wage level. As employment prospects become crowded and less
rewarding near the bottom, top workers are being paid more because of
the multiplier effects of technology. About 60 percent of income growth
in the US from 2002-2007 went to the top 1 percent, who are executives
of companies getting richer by using IT to become more efficient and
much more profitable.
Many economists conclude that few people are sufficiently educated (or
technologically savvy) to take advantage of the fast IT changes and
find niche markets for new business ideas. They also argue that the new
technologies should be applied to updating and improving the
educational system which, of course, would involve government.
In the past few years, as virtually all candidates for every office
from County Commissioner to President of the United States are
posturing themselves as job creators, it is useful to consider just how
much (or how little) government in general, and politicians in
particular, can do. With public faith in a dysfunctional and polarized
government at historic lows, you wonder if people would get behind any
new proposal. I say new because I firmly believe that neither the
Democrats’ desire for stimulus through increased spending, nor the
Republicans’ desire to drastically cut taxes, will have any measurable
degree of success.
Mr. Diamond also writes that one of the most important things that
government can do for employment is to take care of basics, like
infrastructure and education. “As long as we have so many idle
resources, this is the time when it’s advantageous—and socially less
expensive—to engage in public investment,” he says. He also believes
that the economy will adapt and things will work out, once again.
We all should hope that he is right.
As one born long before 1980, I have been dragged figuratively “kicking
and screaming” into using, and relying upon, technology on a daily
basis. I’ve also been heard to say, “I’m glad that I lived when I did.”
But I can reluctantly agree that we have about as much chance of
reversing technology as a farmer has of again raising and supporting a
family on a small farm.
We must continue to adapt, hoping that those people who provide jobs
will quickly discover new opportunities, and that we who need those
jobs will be able to perform them.
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