Posted on 12/18/2003 3:32:00 PM PST by 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.
You are presuming that he is a hypocrite. He is not. His views, spoken and unspoken, about this issue will remain unchanged.
The value-judgment you seek to impose on my remarks is quite irrelevant. The fact of the matter remains the same. There is a fundamental distinction between replacing jobs via technological advancement and displacing jobs via the formation of a cheap labor class. In the latter case, it makes no difference whether you export these jobs to an overseas underclass or create the underclass within the domestic economy. In either case, the end result is the same: a degradation of the earning and purchasing power of your own citizenry.
If you find that admirable & desirable, then more power to you, but don't pester me with this frivolous and fallacious analogy between innovation and exploitation - because I really can't be bothered.
Have a nice day.
The "higher paid, higher skilled" workers I'm referencing are American workers who are higher paid & higher skilled than their foreign 3rd World counterparts. That includes your typical UAW worker.
Moreover, an absolute drop in real wages does not merely factor the salary of those who still have the jobs which others have lost to outsourcing, but rather it includes those who don't have the jobs that were outsourced....
So out of curiosity, what is it that motivates you to demonstrate that you have such limited reading comprehension skills?
There are three types of people in the world:
Those that make things happen...
Those that watch things happen...
And, those that look around in bewilderment and say: "What Happened?"
If the result is judged solely on loss of jobs, then they really do deserve to be lumped together. They may be different causes, but they end up with the same result. That said, one is easier to swallow than the other from a pride standpoint. It is easier to accept that one's job has been replaced by a state of the art thingamabob than to accept that an uneducated person in a third world county can do the job, and for a fraction of the cost.
We can't very well become luddites and say 'all technology is bad', especially since we are now addicted to technology and we could not be nearly as productive (nor do most jobs at all) without it. However it does result in a lot of jobs no longer being necessary, and those displaced workers must adapt. Productivity soars, and the end product is often better and more consistant than before the technology came along.
Workers must adapt.
That is, always has been, and always will be the key to success. Change is the only constant in life. One who works on a production line assuming, or worse expecting, that their job will always be there as long as they show up is in a serious case of denial. Whether it is demand, technology, or cheaper labor, they have failed to continuously change with the times.
In my opinion unions propagate and magnify this problem by instituting "seniority" requirements that directly reject continuous learning and adaptation for the false promise of everlasting job security.
On the other hand, outsourcing to cheap labor is different. Not really. In both cases production costs have been reduced plain and simple. The only difference is those who failed to adapt will blame either a machine which is like blaming a brick wall, or a person, something everybody can relate with. No difference in the result, just the emotional side of the response.
Instead of replacing many jobs with a single machine, we are replacing many jobs with many jobs...just not for us. Case in point, who cares if our jobs are lost to a machine, or our jobs are lost to other people. The result is the same, the jobs are lost. The only real difference is that people are easier to blame than machines.
While the low-paid workers in China and India deserve to make a decent living just as we do, the fact is that many of them DON'T make a decent living from outsourced jobs. The very fact that makes outsourcing appealing to CEOs is what makes it less than satisfactory for the workers...paying pennies on the dollar for the same work
While that may be true to some extent, the fact is that they are doing the jobs at a lower cost. That lower cost then means that I pay less. By me paying less it means I have more money. I should not be forced to support a higher living standard for some any more than I should be forced to pay for homeless people to have cell phones.
Additionally, I could be saving money on my low skill processes enough to expand my business to employ more highly skilled (adapted) workers which would support not only a minnimal standard of living, but an ever increasing standard of living.
Also, the quality of the end product is very often inferior when compared with the original...witness the rapid backtracking of Dell, Lehman, GE/Marquette, HP/Compaq and others who either have returned customer support from India to the USA or are considering it due to complaints. Although they get tech support done for pennies, callers say they get meaningless script reading by people who are hard to understand and know little about US business. Not at all a cheaper replacement for US tech support jobs, just cheap crap.
This is a perfect example of market forces in action. If the cheap labor option does not meet the consumers requirements, consumers will chose a product that does. If that requires more skilled labor available here, those positions will be created and the demand will be met or someone else will and carve out their niche in the free market.
The article is thought-provoking though and raises some good points. It is good to admit that jobs do come and go, regardless of the administration or world politics. Otherwise the left seems to think there are only 2 types of jobs: ones magically created by Bill Clinton, and ones negligently lost by George Bush.
I agree. Happy holiday to you and yours.
Again, this is not a problem, if the markeyplace is free. There is no definition of "quality" other than what the buyers demand. The quality will be exactly what the consumers demand it be.
If the people who buy the product want and are willing to pay for a higher quality product someone will produce and sell it to them. If the quality of the product deteriorates because of "cheap foreign labor", and the consumers continue to buy it and do not demand a different product, then the quality was, in fact, too high in the first place.
By "cheap labor class" I take it you mean people in other countrie who are willing to work for less than you?
God created those people, not evil companies wanting to take away YOUR job.
Get over it.
The last two industries you mention are volatile, cyclic industries that have been up and down many times in my lifetime.
You must be a young pup to not realize that.
Nonsense. You don't understand economics. You think you do, but you don't. Of course you're immune to reason by now, but for the benefit of people who missed econ 101...
Cheap labor does not "undermine" technological innovation, it displaces it to another industry. Cheap labor produces CAPITAL, and capital will seek its highest rate of return, which is not in hiring more labor, but in innovation. It will therefore always drive innovation in a area where the gains of cheap labor have been maximised, or in non-labor intensive production. THEREFORE, LABOR WILL ALWAYS -- DID I SAY ALWAYS? -- WORK ITSELF INTO OBSOLESCENCE. THE FUNCTION OF LABOR, IN AN ECONOMY, IS TO SEEK LEISURE BY INNOVATION THROUGH CAPITAL.
Automated technology NEVER is implemented unless it is cheaper then the aggregate labor it replaces. Both automation and cheaper labor serve the same function in an economy, and that is to reduces the cost of a product. There is no difference in the motive which drives them, and that motive is higher profits. And profits are re-invested as capital. And again, capital will seek the highest rate of return.
When the cost of labor goes down, consumers buy cheaper products. The consumer, viewed as an aggregate, wins. The cost of living goes down. For consumer A, whose wage is unaffected, capital is freed up. That capital will seek the highest rate of return. The highest rate of return will be from innovation. For this sector of consumers, cheap labor (the old economy) produced capital, which produces innovation, which produces new jobs, which did not exist before the cheap labor produced them. The tragedy is that the consumer is not an aggregate, and the jobs lost to cheap labor ("moved overseas") are real people, who will not get the new jobs from innovation -- UNLESS THEY ARE SMART ENOUGH TO RETRAIN. For them, this is the cruelest system -- except for all other systems.
For these other consumers in the same economy, the cost of the products goes down but their wages also go down, because of cheap foreign labor. So their situation is either the same or worse. They, or their children, will gravitate out of that industry (or vote for protectionism, or form a labor union if they can get legal protections). Their mistake is to think that the process which drove their wages down, or lost their job, has driven everybody's wages down. That is nonsense.
Or, they think that some people's wages are higher but those people are not "really productive" or "aren't making anything". More ignorant nonsense, which is repeated every generation but never is true. A free economy will not reward activity which is non-productive, over time. A free and rich economy will reward frivolities for some consumers, who will eventually consume their capital while others are increasing theirs by investing it in the innovations which create new jobs. Conspicuous and stupid consumption, and the sporadic wealth of frivolous workers (entertaners, for example) is the price of freedom and the sign of a healthy economy.
The loss of jobs as capital is created is painful for individuals but necessary for the economy.
What many of you really want is capitalism and protectionism, both. what you want is France. That combination has never worked in the long run, and never will.
Of course you have to have a good wage to buy products. And you know what? THe good wages shift over time, from one industry to another. We are not becoming poorer, as an economy. We are not sending all our jobs overseas. There are still sectors of our economy where you can walk out of school and make enough money on day one to buy a home and two cars and take a cruise. People ALL OVER AMERICA ARE MAKING FORTUNES, young -- just like they did in 1950, and 1900, and 1850. But they are not in the jobs where fortunes were made in 1950, or even in 1980. And that is good.
Ignorant populists have been screaming in America ever since there has been an America that the good jobs need to be "protected" by coercive means, and thankfully they have lost that argument, by and large, which is why we are rich today.
We did have that flirtation with communism, known as the labor movement, but it continues to recede under the pressure of economic reality.
There are myths of America which try to explain our success by non-economic explanations. We've only ever had one competitive advantage, as an economy, and that is that our markets have always been FREER than everybody else's. Freedom is the only difference between us and them, and the day we start "protecting jobs" is the day we start becoming India.
We're not genetically smarter nor better endowed with natural resources. We're not blessed by God because we behave ourselves morally. Our one economic advantage has always been the courage to allow the creative destruction to happen.
"ROFLOL, this situation is just a taaaad bit different, and he knows it."
I'll say. Note the use of the weasel words "no significant economic difference". Nevermind that there is a huge difference between inventing new technology - which opens new doors, and simply replacing an American worker with a non taxpaying, civil rights lacking, foreign lacky. And this shortsighted rush to the bottom will have political consequences that will only make things worse.
This is the destruction of the Republic by the evil axis of globalist pinkopoliticians and their puppetmastermercantilists, foreign and domestic.
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