The Real Problem with Job Creation.
The Changing Nature of Work
The first part of this is a rewrite of something I wrote almost 10 years ago. Since then the ogre of technology eating more jobs has further evidenced and I discuss this at the end. Looking at the monthly BLS Report without seeing what may be coming is a really bad idea. We need to start addressing the fact that workers will need to be more adaptive to obtaining new job skills as technology changes what jobs will be available.
Every month we look at the BLS Employment Situation Report. It is one of the most important pieces of economic data issued each month. Underlying the numbers is a larger picture of the changing nature of the U.S. economy. The source for data for the American workforce is the Bureau of Labor Statistics.
One exercise is to pull tables of goods producing non-farm employees v. service producing employees. In January 1988 the number of goods producing workers (seasonally adjusted) was 23,668,000. It peaked at 24,706,000 in March 2000 and has fallen to 18,887,000 most recently. In January 1988 the number of employees in service-producing jobs was 80,060,000. This is now 137,499,000.
There are many things that can be derived from such data but I would suggest that there are 2 big points: 1) 85% of the workforce is in service producing jobs and 2) almost all new job growth is in service-producing jobs.
Indeed, none of this is news but I think that it requires perspective. We are not on the Enterprise where the Captain says, “replicate some blankets, clothing and food for these people,” and the replicator makes it. Stuff is made abroad. This is done because economics dictates it. It can be made less expensively there and, thus, there is no good reason to make it here. Even within the United States we have seen a movement of manufacturing jobs from the union-friendly states of the Mid-West to the South. Alabama and Mississippi have caught up with Michigan and Ohio in terms of percent of workers in manufacturing jobs.
As the economy is becoming more of a world economy where stuff is made in other countries this concern is diffused. Should we be concerned about how much money people who work in factories in Asia make? Maybe, at some time in the future, our concerns will translate into better lives for people there. For now, stuff will be made abroad and wages will be determined by the market there. We might be horrified at the low wages being paid to seamstresses in factories there but the real question might be: what were these people doing before they took those jobs?
The movement of many jobs to China and India has moved an enormous number of people out of poverty. The fact that these folks are not U.S. citizens makes this no less important.
Is This Work?
At some time in the past, a large sector of the economy was agrarian. The Industrial Revolution came along and we became a nation of factories. Perhaps the folks who operated the machines felt that they were not really working. “The machine is doing all the work, I’m only turning the controls.” Even though operating a backhoe might not seem like as much work as digging a hole by hand, the fact is: it accomplishes the task at a much lower cost. I don’t think that there are many successful excavating contractors who use shovels exclusively. The important thing is not getting calluses but getting the hole dug. The contract to dig the hole will go to whomever can do it at the lowest cost.
We are in the second iteration of the Industrial Revolution. The machines are now computers. Our jobs are service jobs. They are made to somehow seem less “real” or less important. A commonly held belief is that “service producing” jobs pay less than “goods producing” jobs and that, by not making goods we are becoming a nation that cannot compete in the world economy.
Our merchandise trade deficit is viewed as a symptom of malaise.
This is nonsense. There are several serious problems with the notion of service jobs as not being a viable basis for a healthy economy for the 21st century:
1) the concept is imbued into the fabric of American Protestant ethos. Work is good. Work should be hard. Real Americans are Masons not lawyers. This is absurd. I am (by education) a physicist. Work is measured in foot-pounds. Pick a 10 pound object up one foot and you have done 10 foot-pounds of work. Pick a 1 pound object up 10 feet and you have done the same amount of work. You can use a pulley to pick up a very heavy object and you are doing no less work than if you had busted your butt picking it up without one. Work is measured by accomplishment – not perspiration.
2) the government-defined concepts of goods producing and service producing are fuzzy.
If I buy a frozen hamburger at Safeway it is a good. If I buy it cooked at McDonalds – it is a service. If I am a trucker who works for a manufacturing company and move parts around for them I am a goods producer. If I own the truck and am contracted to do the exact same work, I am a service producer.
3) the changing nature of work is a derivative of the extent of technology. The average product has a lot less “stuff” in it and a lot more intellect. The PC that I am typing this on was produced with a lot less effort by “goods producing” workers than the first Univac 1107 that I used. Its ability to accomplish tasks is largely the result of a lot of work by service producers: programmers, circuit designers, electronics engineers and physicists.
Is someone worse off because less physical work has been done to build my computer?
4) as union-dominated manufacturing jobs: producing steel, cars, and television sets, have vanished to appear in other countries there is a political-social concern that this represents a failure to the people in these industries. Much of this is political. Organized labor is devoted almost entirely to one party.
The perception is that the loss of these union jobs is not socially beneficial, that those hard-fought gains of workers are being lost to service-producing jobs at lower wages with less benefits. Perhaps labor unions have lost power but their workers are getting more done.
Expansion in service producing has not only resulted in a reduction in the number of people producing goods. It has made them more productive. America is not de-industrializing. It is getting more done with fewer workers. The important point here is that this expansion in productivity has required not more work, not more raw material but more capital. I want to repeat that last item for emphasis. The requisite for higher productivity is capital, lots of capital.
The movement to see that people at McDonalds should make $15/hour is an attempt to claim that wages should be mandated by politicians rather than the market. These argument miss the point that what the people at McDonalds lack is the skills necessary to get better paying jobs. The question is whose responsibility is it that these folks lack skills? Is it the responsibility of the rest of society to pay someone to train them for better jobs or is it the responsibility of individuals to get themselves trained. For the most part, what folks in low-paying jobs lack is education. Most of them are stuck at McDonalds because they did not get sufficient education for a better job. Mandating higher wages would only transfer wealth from customers to employees. The employees would have more discretionary spending and the customers would have less.
Things May Get Worse
However, the problem may get much worse. If Artificial Intelligence increases its abilities we may be about to see another iteration with automation of many service sector jobs even for people who have college degrees. While technology has the ability to destroy some jobs it also creates others. It may be possible for technology to help people get educated in the skill set necessary for the new jobs rather than the old jobs. I am a big believer in the value of on-line education. It is much less expensive than alternatives and it should enable each individual to learn at their own pace. Unless we see people get more adaptive about their work skills we will see less employment.
In fact, I would rate the necessity of making people more adaptive to new jobs as the single biggest necessity for economic health in the next few decades.
Where Is This All Going?
I believe that there is a serious social and philosophical thing here. If technology can free us from the necessity of work would we not be on the next evolutionary step as a species? This changing nature of work may be a step in that direction.