What’s
Wrong Today:
Some
may remember “Lost in Space”, the TV series that ran from 1965-1968. Wikipedia says
that the robot was:
A
Class M-3 Model B9, General Utility Non-Theorizing Environmental Control Robot
with no given name. It was endowed with
superhuman strength and futuristic weaponry, but it often displayed human
characteristics such as laughter, sadness and mockery, as well as singing and
playing the guitar.
C3PO
is remembered as the kindly robot who often said “I don’t think this is a good
idea”, while the Terminator (“I’ll be back”) was a robot with both a bad side
and a good side. Now we have the Transformers, sentient machines that according to Wikipedia, share
these characteristics:
“Transformer”
stems from the species’ generally-shared ability to transform,
to change their bodies at will, rearranging their component parts from a
robotic primary mode (usually, but not always, humanoid) into an alternate
form; generally vehicles, weapons, machinery, or animals.
So,
What’s Wrong?
The
evolution of Hollywood’s robots pales by comparison to the evolution of robots that
are transforming global manufacturing: Although industrial robots look like
machines, not humans, they act as Terminators in our jobs market.
The
Wrongologist moaned here about how wages were lower as a
percent of income than at any time in our recent history. Paul Krugman also mused over the weekend about
the declining labor share of national income, saying this:
About the robots:
there’s no question that in some high-profile industries, technology is
displacing workers of all, or almost all, kinds. For example, one of the
reasons some high-technology manufacturing has lately been moving back to the
United States is that these days the most valuable piece of a computer, the
motherboard, is basically made by robots, so cheap Asian labor is no longer a
reason to produce them abroad.
Anyone who has walked a factory floor in the last 25
years knows that America’s manufacturers have been committed to adding robots,
improving efficiency while limiting labor cost.
This has in part, hastened the flight of
manufacturing jobs to Asia.
In fact, data indicate that US multinationals have been creating
nearly 2 million jobs offshore every year since 2006, while shedding 2.75
million per year at home during the same period. So, we lost 16.5 million jobs at
home while these corporate persons created 12 million offshore jobs (they ARE people my friends, your Supreme Court says
so).
Tuesday’s data from the
BLS indicate that there are just 3.7
million current job openings in the US.
The number of private
job openings was up 1.3% from last month, and is 6.5% higher than one year ago.
That’s nice, but, the current unemployment/underemployment
rate in the US (called U6, meaning those out of work, or who work part time
when they want to work full-time) is near 15%.
This means
we have about 17 million souls unemployed or underemployed, or 4.6 people who need a job for every
job opening in the US. Congress says the answer is to increase the
number of Science, Technology, Engineering and Mathematics (STEM) graduates.
But that is not the sole answer to the inequality in our economy, since there simply aren’t enough jobs for the
people who are looking for work.
Consider the
attitude of business leaders like Tim Cook, CEO of Apple. Apple got great press
because they may be bringing about 200 jobs back to America. In an interview
with NBC’s Brian Williams; Williams asked Cook how bringing
manufacturing jobs back to the US from China would affect the price tags
attached to devices like Macs, iPhones and iPads. Cook said:
Honestly, it’s not
so much about price; it’s about the skills, et cetera. Over time, there are
skills that are associated with manufacturing that have left the US, not
necessarily people, but the education system stopped producing them.
Here is
the drill: Corporate America (Apple) offshores jobs. Production lines are shut down. Skilled labor
is laid off. The economy absorbs some of the workers in other roles. The others
are among the long-term unemployed. Skills and experience are lost.
And then Mr.
Cook says we don’t produce the right skill sets anymore? Apple has 80,000 employees worldwide, with 50,000 of
that number based in the US. Keep the champagne in the fridge. There is nothing to cheer about if 200
jobs of a total of 30,000 offshore come back home.
It’s true
that the unemployed need to approach
their job search as a marketing problem that needs to be solved, maybe
by looking at jobs that cannot be replaced by robots. That is why low-end
services jobs in health care, hospitality and retail are the fastest growing
segments of employment. It also explains why wage growth is poor.
Matt Ygleslas at Slate adds a view of what contributes to
this situation. He blames the Federal Reserve and the Corporatists for much of
this problem.
See the red
trend line on this chart:
The red
trend line implies that there is a
structural cause of the trend in the labor share of business output.
Why
does labor’s contribution to income decline during recessions and rise during
booms?
Because
the Federal Reserve has dual objectives: Managing inflation within a band of 2%
to 4% annually and doing what it can to grow the economy. It uses monetary
policy to achieve those goals. Over the past 30 years, it has a nearly perfect track record of managing inflation
(which is to say there have been no sustained periods in which prices rise and wages
rise faster than productivity). But the Fed doesn’t
have a good record of achieving sustained economic growth.
One
consequence of this asymmetrical goal seeking is that labor’s share of national
income has declined.
Ygleslas
adds:
You often hear
members of the central banking establishment allude to the “hard won”
battle against inflation in the early 1980s. But the battle was in fact won
very quickly and decisively. And not coincidentally, since the victory the
labor share has tended to steadily decline as seen above.
Labor’s declining share of national income
isn’t just the result of technology and better robots taking the jobs of
skilled labor; it’s also the result of the Fed’s policy choices. Specifically their
anti inflation policies. The Fed has followed a policy that their prime
directive is to control inflation, not grow the economy or employment.
This means
their policies help corporations indirectly by keeping a tight rein on production
costs, which ultimately means your wages.
In the
early 1990’s, the Fed’s prime directive was still new. Corporate America was
unsure if they could rely on the Fed to do their bidding. There was a period
when news of growth in employment would cause the stock market to drop, because
the Fed and Big Industry worried that high employment levels would cause wages
to rise and then higher pay would lead to inflation.
It became SOP for the Fed to respond to
high employment levels with rising interest rates to drive employment
down. This policy helped prevent big wage gains.
So, here
we are: The Fed has a worldview that is more comfortable with recession and
prolonged periods of high unemployment than you are. But the Fed remains less comfortable
promoting policies that might allow wages to move higher. Those policies would usually mean
high employment. Their fear is that it could also mean the start of a cost-push
inflation.
C3PO was right;
these are not a good ideas.
Or, in the words of B9: Danger, Will
Robinson: The real danger is that you could lose your job due to the
policies of the job Terminators. Or not see a pay increase, or have your skills
eroded, or work as a temporary without benefits.
There should
be no turning back from more industrial efficiency; ultimately it is a good
thing. But people who have to work for
less than their cost of living erodes our culture.
This is
how our two-tier labor market, one tier of insiders who enjoy job protection and a
second comprised of outsiders with no protection, was born and how it will transform our society.
Unchecked,
this situation could become impossible, while over time, our emergent two-tier economic society may just collapse of its own weight.
Indeed, “Danger, Will Robinson”.
