Me, Inc.
Megan McArdle and Arnold Kling (two bloggers who are very helpful in understanding the actual economy where we now live, by the way) make the point that life can be good when you have a comfortable job, but it’s dangerous, because it is likely to go away. Here’s Kling:
A job seeker is looking for something for a well-defined job. But the trend seems to be that if a job can be defined, it can be automated or outsourced.
The marginal product of people who need well-defined jobs is declining. The marginal product of people who can thrive in less structured environments is increasing.
The way I have put this is that workers in our economy are in a race between development of as-yet-non-commoditized cognitive capabilities on one hand, and wage reductions as capabilities are commoditized through technological advances (broadly defined) on the other. This has been going on for a long, long time, but it does seem to be speeding up – why?
I think there are several non-mutually-exclusive causes:
1. Information technology. Moore’s Law is creating the kind of advances in information storage, processing and transmission that automate knowledge work in the way that technologies 50 – 150 years ago were automating physical labor. Market research managers, journalists, software engineers, and most of the people they know, are now being subjected to this unpleasant process. As a practical example, the Internet has automated out of existence much of the labor that journalists, librarians, many middle managers in corporations and others used to do. The term we normally use to describe this (when it is not happening to us) is “productivity growth.”
2. Globalization. The decreasing relevance of large-scale war under Pax Americana combined with the economic re-emergence of Western Europe and Japan by the 1970s, and the Asian heartland more recently, have created trans-national labor pools through a mix of outsourcing, immigration, and importing labor content via shipped manufactured goods. We move the stuff, the jobs or the people; but, in all cases, labor in Indiana increasingly competes with labor in India. Ceteris paribus, this creates upward pressure on wages for the most skilled, and downward pressure on wages for the less skilled.
3. The market for corporate control. Starting with the leverage buyout movement of the 1980s, U.S., and later European, companies became more aggressive about seeking shareholder value through automation, outsourcing, and just stopping doing things that did not generate returns above cost of capital. The underlying causes were technology change and globalization, combined with a flexible American political economy which made the best of a worsening situation.
4. The death of the “Detroit model”. The comatose state of the whole Big Auto, Big Steel and related industrial supply chain is a very important example of these effects, but was also accelerated by other contingent factors. Because of its size, this matters. American domestic production of oil peaked in 1971; oil imports doubled between 1970 and 1975; and OPEC was able to drive large price increases. This tended to disproportionately harm those industries that were the source of high-wage union jobs. Private sector unionization has withered across the economy as the bargaining power of industrial workers declined. In what is probably inextricably both cause and effect, “non-distributive services” (finance, professional services, health care, and so on) became in 1970 a larger part of the private economy than goods-producing industries. This shift to services tended to enhance the prospects of the cognitive elite at the expense of traditional industrial workers.
I think that what both McArdle and Kling are pointing to is less an aberration, than a return to what is a more natural situation. The comfortable post-WWII combination of high incomes plus stability is the anomaly.
Of course, what sticks out like a sore thumb in all of this is the position of public sector workers.
(Cross-posted to The Corner)
Methinks the information technology bit is overrated. Advanced math and physics textbooks went way UP in price just as computer typesetting should have made such books far easier to publish. PowerPoint has made anyone able to put on a professional presentation vs. a talk in front of a chalkboard, so now everyone has to be professional. My accountant complains that having to put everything into a computer slows him down vs. he old days.
As for the Detroit model: yes that boom has passed, and the unions won’t admit it. But the foreign companies still pay well in the right-to-work south.
American employment is taking a clobbering because the tax code has ossified the job market. And employer is expected to be somewhere between a patron and a parent: computing taxes, buying health insurance, creating retirement and flexible [sic] spending plans. Meanwhile, the tax code encouraged everyone above standard deduction level incomes to stay mortgaged to the hilt, so moving to where the jobs are is near impossible for many.
If Republicans want to put forth a real jobs plan, it should start by decoupling employment with health insurance and retirement plans. Once upon a time assembling cars was a day labor job.
— Carl M. · Sep 15, 01:21 PM · #
Only if you can’t do math. Is there even a single subject (besides innumeracy) that McArdle has genuinely contributed to understanding on?
— Chet · Sep 15, 03:24 PM · #
“If Republicans want to put forth a real jobs plan, it should start by decoupling employment with health insurance and retirement plans.”
That’s only a valid course, however, if you follow up that decoupling with something other than “You’re on your own now, suckers!”
Mike
— MBunge · Sep 15, 03:57 PM · #
We get better at systemizing productive processes. Demand for substitutes for those processes declines; demand for complements increases.
— Pithlord · Sep 15, 09:28 PM · #
“I think that what both McArdle and Kling are pointing to is less an aberration, than a return to what is a more natural situation. The comfortable post-WWII combination of high incomes plus stability is the anomaly.”
Anyone who’s spent any time thinking about what happen to smart people in places like Kenya is unlikely to be sanguine about this.
Also, and someone related; looking for a crewman for an offshore passage South leaving late next month. Dreams deferred, etc.
— Tony Comstock · Sep 16, 12:10 AM · #
If it were related you’d hire a crewman from the developing world, whom upon being ferried back to the US would leave your crew and get a software engineering job.
— Kieselguhr Kid · Sep 16, 01:46 AM · #
It’s strange that this was posted at National Review, since these phenonmena all seem to point to me towards the desirability of a strong and redistributive social insurance state.
— Pithlord · Sep 16, 04:12 AM · #
Isn’t the US auto industry doing gangbusters right now, Jim?
— Freddie · Sep 16, 02:59 PM · #
Kid: You’re confused about which direction this boat is sailing.
Jim: You’re confused about Public Sector Workers. The net result of these shifts is that Public Sector Workers are going to be more like what you don’t like, not less.
— Tony Comstock · Sep 17, 11:50 AM · #
It’s strange that this was posted at National Review, since these phenonmena all seem to point to me towards the desirability of a strong and redistributive social insurance state.
Quite the opposite.
— The Reticulator · Sep 20, 01:08 PM · #
That’s only a valid course, however, if you follow up that decoupling with something other than “You’re on your own now, suckers!”
My guess is that the people who say this will have a hard time admitting that the “something other” should be or even could be something other than nationalized health care on the European model.
— The Reticulator · Sep 20, 01:11 PM · #
“My guess is that the people who say this will have a hard time admitting that the “something other” should be or even could be something other than nationalized health care on the European model.”
Hmm. When’s the last time a Republican talked up the Ryan plan to something other than a hardcore GOP audience?
Mike
— MBunge · Sep 20, 05:39 PM · #
Hmm. When’s the last time a Republican talked up the Ryan plan to something other than a hardcore GOP audience?
See what I mean? It’s hard to do, isn’t it.
— The Reticulator · Sep 21, 04:48 AM · #