Jobs Come and Go (One of the smartest economists in the world hits the nail on the head)

www.townhall.com ^ | 11/26/2003 | Walter E. Williams

[sly671]

Jobs come and go Walter E. Williams

In 1970, the telecommunications industry employed 421,000 switchboard operators. In the same year, Americans made 9.8 billion long distance calls. Today, the telecommunications industry employs only 78,000 operators. That's a tremendous 80 percent job loss.

What should Congress have done to save those jobs? Congress could have taken a page from India's history. In 1924, Mahatma Gandhi attacked machinery, saying it "helps a few to ride on the backs of millions" and warned, "The machine should not make atrophies the limbs of man." With that kind of support, Indian textile workers were able to politically block the introduction of labor-saving textile machines. As a result, in 1970 India's textile industry had the level of productivity of ours in the 1920s.

Michael Cox, chief economist at the Federal Reserve Bank of Dallas, and author Richard Alms tell the rest of the telecommunications story in their Nov. 17 New York Times article, "The Great Job Machine." Spectacular technological advances made it possible for the telecommunications industry to cut its manpower needs down to 78,000 to handle not the annual 9.8 billion long distance calls in 1970, but today's over 98 billion calls.

One forgotten beneficiary in today's job loss demagoguery is the consumer. Long distance calls are a tiny fraction of their cost in 1970. Just since 1984, long distance costs have fallen by 60 percent. Using 1970s technology, to make today's 98 billion calls would require 4.2 million operators. That's 3 percent of our labor force. Moreover, a long distance call would cost 40 times more than it does today.

Finding cheaper ways to produce goods and services frees up labor to produce other things. If productivity gains aren't made, where in the world would we find workers to produce all those goods that weren't even around in the 1970s?

It's my guess that the average anti-free-trade person wouldn't protest, much less argue that Congress should have done something about the job loss in the telecommunications industry. He'd reveal himself an idiot. But there's no significant economic difference between an industry using technology to reduce production costs and using cheaper labor to do the same. In either case, there's no question that the worker who finds himself out of a job because of the use of technology or cheaper labor might encounter hardships. The political difference is that it's easier to organize resentment against India and China than against technology.

Both Republican and Democratic interventionist like to focus on job losses as they call for trade restrictions, but let us look at what was happening in the 1990s. Cox and Alm report that recent Bureau of Labor Statistics show an annual job loss from a low of 27 million in 1993 to a high of 35.4 million in 2001. In 2000, when unemployment reached its lowest level, 33 million jobs were lost. That's the loss side. However, annual jobs created ranged from 29.6 million in 1993 to a high of 35.6 million in 1999.

These are signs of a healthy economy, where businesses start up, fail, downsize and upsize, and workers are fired and workers are hired all in the process of adapting to changing technological, economic and global conditions. Societies become richer when this process is allowed to occur. Indeed, because our nation has a history of allowing this process to occur goes a long way toward explaining why we are richer than the rest of the world.

Those Americans calling for government restrictions that would deny companies and ultimately consumers to benefit from cheaper methods of production are asking us to accept lower wealth in order to protect special interests. Of course, they don't cloak their agenda that way. It's always "national security," "level playing fields" and "protecting jobs". Don't fall for it -- we'll all become losers.

©2003 Creators Syndicate, Inc.

[cyclotic]

I agree with your genius comment on No. 1. Dr. Williams once wrote that if you did not understand Ecomonics in college, it is pure and simply the instructors fault. So...it was my teachers fault, cause he made it so complex in college that the entire class failed one of his tests. A few years in the real world and economics is easy to understand. I've learned more from Drs. Williams and Sowell than whatever my Econ instructors names were.

[motzman]

Who are the archtypical American heros today?

Any politically correct "victim" is a hero.

[vbmoneyspender]

And how does your argument apply to India? In any event, I thought the argument that people make in favor of tariffs is that they protect industries (and therefor the jobs that are associated with those industries) from the unfair competition that results from people who hire lower-wage workers. Based on that argument (which is the argument that is always applied to India) people who earn higher wages in the north should be able to turn their respective states into Shangri-La's by enforcing tariffs against goods produced by lower wages workers in the South, particularly against goods produced in right-to-work states that are concentrated in the South? Or am I missing something.

[Orangedog]

I was, until 6 days ago, a telecom engineer, so I think I can speak with some authority on the subject of this article. Williams has a point with telecom, but it can't be used as a blanket statement. Long distance has changed a lot in the past 5 years. Two years from now it will be vastly different from what we know today. It will litterally be too cheap to meter.

My job was to engineer the installation of big digital cross connect hardware. These machines sit in between the fiber optic backbone of the network and the long distance switches. One new site would cost around 6 or 7 million dollars to get it ready for traffic, and that was just for the hardware. Now that long distance traffic can and is being routed over the internet, what once took seveal thousand square feet of equipment can now be done with about a dozen racks of routers and packet switches for 1/4th the cost. Our engineering group had over 100 engineers three years ago. After three years of layoffs, there were less than 20 when I cleaned out my desk last week. When you have newcomers like Vonage, with 200 employees, taking on the big boys with 20,000...well, those jobs lost are a victim of the natual flow of technology. It sucks, believe me, I'm living it, but there's nothing that can stop it. This was the only field that qualified me to make really good money, and the few available jobs out there in telecom have tens of thousands of experienced engineers fighting for them. I've got a long road to go to get back up to that kind of earnings again. But I'll do it...I have no choice.

What's happening in manufacturing is another story. US workers are competing with people in near third-world countries and our universities educated many of them. That's where the IT jobs are going. Other machine tool and other skilled workers in the US are now competing with slave labor in China. Our own government is helping out by taxing and regulating industry to death.

With the bulk of our high paying tech jobs going overseas to people who are paid what would be just over hamburger-flipper pay here in the states. If you think there are few kids in college studying math and science now, just wait another two years. What kid in his right mind would sprend 4 or 5 years and rack up a small fortune in student loans to study in those challenging fields when the jobs won't be here when they graduate? What we are going to end up with is ten times the number of lawyers we have now, because that's the only growth industry left where you can make a living.

[syriacus]

C-span ran a program on manufacturing jobs last week.

The speaker who represented the liberal point of view was unhappy that lower level manufacturing jobs were going overseas. He said that such jobs were necessary because they were helpful to beginning workers who were trying to get on the lower rung of the ladder as an employee. So he wanted low-level factory jobs protected.

Later he destroyed his own argument when he was overly-eager to say that the unemployment rate is not going down. He made a point of saying that the new jobs being created in the US were only part time and fast food jobs.

He neglected to make the connection that those are entry-level jobs, too. Beginning workers can start at those jobs as well as at factory jobs.

I got the feeling he wanted the low level factory jobs protected because those workers might be unionized and he could keep his own job as a union official.

[lelio]

Other peoples' freedom to purchase labor or televisions or athletic shoes where ever they please, that is.

How do you think that freedom came about? Since when did Consumerism become the yardstick bywhich we measure everything?

[greenwolf]

In 1970, the telecommunications industry employed 421,000 switchboard operators. In the same year, Americans made 9.8 billion long distance calls. Today, the telecommunications industry employs only 78,000 operators. That's a tremendous 80 percent job loss.

That's a bullshit analogy to the present situation. Being replaced by automation and changing times is one thing, being replaced with people doing the same work for ten cents on the dollar because they live in a country which has 10% the living costs ours does is not the same thing at all.

The man's an idiot, and not a genius.

[sly671]

sorry about that....I'll make sure to leave it alone in the future....thanks for pointing it out though

[lelio]

What kid in his right mind would sprend 4 or 5 years and rack up a small fortune in student loans to study in those challenging fields when the jobs won't be here when they graduate?

You're a "union thug" if you take that stance according to the (misnamed) poster E. Pluribus Unum. I'm not sure what he thinks those kids that were studying engineering are going to go into, maybe law or mowing lawns?

[syriacus]

From an August FR thread: Jobs that won't leave: In a changing economy, there are still a few jobs that remain safe

Among the jobs considered reasonably safe are doctors, nurses, plumbers, auto mechanics, soldiers, teachers, golf professionals and musicians. [snip]

... for Tommy Williams, 22, the future looks bright. Shortly after he graduated from the University of North Carolina at Chapel Hill last year with a bachelor's degree in radiologic technology, WakeMed offered him a job operating one of its $3 million MRI scanners. It was the only job Williams applied for. Although he would not say how much he makes, he offered a hint.

"Let's put it this way: The average starting salary is $45,000 a year," Williams said. There were 16 students getting degrees in radiologic technology last spring, and all found jobs easily, Williams said. Friends with degrees outside health care were not so lucky.

[syriacus]

I'm not sure what he thinks those kids that were studying engineering are going to go into, maybe law or mowing lawns?

Some medical or med tech career might be good.

[Moonman62]

I just told my buddies the same thing as what's in this article at lunch today and I've been posting the same thing on FR for about a year. Can I be genius too?

A person doesn't have to be genius to see it. Just throw aside ideology and look at a growing economy the way it really works.

[Orangedog]

Some medical or med tech career might be good.

That's what I thought about telecom 6 years ago. Med tech will suffer what IT is now. Med workers are already being imported. They have been since the pay became high for for US workers.

[onemoreday]

...
...E.....you say:

"....You are "free" to try.....or not to try.
Not. Bye...."
~~~
~~~
Bye. By the way, there are many definitions of the word "freedom," some honorable, some not.

Where ever it is you "go to" to "be free," I am sure you will be "safe,"..... though there will be no heroes there, so I guess you will be with "your own"

[E. Pluribus Unum]

You're a "union thug" if you take that stance according to the (misnamed) poster E. Pluribus Unum. I'm not sure what he thinks those kids that were studying engineering are going to go into, maybe law or mowing lawns?

Engineers have cyclically been scarce and highly paid, and engineers have cyclically been plentiful and stocking grocery shelves over the years of my life, pretty predictably I might add. Same thing with programmers. If things are bad right now they may well be equally good in five years.

Only idiots think the economy is static. It's not, and there is nothing that you can do about it other than pass knee-jerk laws that you think will fill your pocket but won't, and will make the situation worse and maybe even never let it get better.

[E. Pluribus Unum]

Please stop stalking me.

[sly671]

If you would read the ENTIRE article, you could see the point. He's showing how the government will try to limit the moving of jobs to other nations but not to automation. It's completely right to assume jobs WILL come and go so the interventions of the government are futile. Would you rather see your job go overseas with a possibility(even if it is remote) of it coming back or would you like to lose it to a machine with no possibility of you getting your job back? Or do you want to keep your job for a little longer until it may be automated and pay more for all the products produced?

[lelio]

Would you rather see your job go overseas with a possibility(even if it is remote) of it coming back or would you like to lose it to a machine with no possibility of you getting your job back?

You're missing out on the 2nd part what's happened over the past 100 years: you loose your job to a machine but now you're the one running the machine, or creating a new one, or fixing it, or something else. Its "creative destruction" of jobs.

That's the main problem with offshoring just because they have cheap labor: there's no "construction" in there.

[sly671]

So you're saying that it's better for 500 people to lose their jobs to a machine permanently so 2 or 3 people can maintain them than for jobs to go overseas until the natural long run equilibium of economics comes into effect and those jobs come back to the US? I'm sorry to laugh but that's kinda funny....

[bc2]

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