Posted on 11/04/2005 1:15:48 PM PST by SirLinksalot
The Naked Economist
by Charles Wheelan, Ph. D.
Man Versus Machine
I'm not often moved by numbers, in part because of several tragic math experiences in high school, but also because statistics and equations can often obscure the more interesting big ideas. But I recently stumbled across a number that is the big idea when it comes to the 21st Century American economy.
Answer this: Between 1979 and 2002 (the latest year for which we have data), what happened to the median weekly earnings of American men without a high school degree? These are full-time workers, and the comparisons have been adjusted for inflation.
I'll give you some context. For college-educated men, the median weekly wage rose 20 percent in real purchasing power from 1979 to 2002. Women with college degrees did even better -- up 34 percent.
Now, back to the guys who dropped out of high school. What's happened to their typical paycheck over the past two and a half decades?
Up 10 percent -- only half what the college grads enjoyed, but, as my dad would say, still better than a sharp stick in the eye.
Up one percent -- or basically flat, meaning that the typical male low-skilled worker has not seen any improvement in his standard of living in two and half decades.
Down nine percent -- a standard of living almost 10 percent worse than a generation ago. Down 27 percent -- meaning that over a 23-year period of relatively robust economic growth, low-skilled workers have seen more than a quarter of their purchasing power disappear and are now significantly worse off than they were in 1979.
The answer is d. Women who dropped out of high school did better, seeing their real wages fall only seven percent over the same period.
You Can Learn a Lot at the Movies
To understand the essence of what's going on, let me tell you about my night at the movies. I saw "Grizzly Man", a documentary by Werner Herzog about a guy who spends 13 summers in Alaska living among grizzly bears only to be eaten in the end by one of the animals he loved. That's not the relevant part of the evening, but it is an extraordinary film.
Here's the insight: As I parked my car in the garage, a mellifluous voice was saying repeatedly something along the lines of: "Please take your ticket with you. There is no attendant on duty. Pay for your parking at any of the kiosks inside."
I then bought my movie ticket at a different electronic kiosk (similar to the self check-in machines that most airlines are now using). Not only did the machine allow me to avoid waiting in line, but it also told me what percentage of the seats had been sold for every film at every time.
Both the automated parking and the automated ticket machine were new since the last time I'd been to that theater, no more than a few months ago. And that is why America's low-skilled workers are taking it on the chin. Forget the guy on the phone in Bangalore telling you how to use your new computer. He's a red herring. The job loss statistics tell the same story as they always have: Technology replaces far, far more low-skill jobs than foreign workers do. Think voice mail, ATM machines, automated customer service lines, self-serve gas, online bill paying, automated package tracking, and on and on.
Not one of those innovations is bad for the U.S. economy. Every one of them creates jobs -- albeit for people with skills in business strategy, engineering, software, marketing, and sales. And every one displaces people, like the guy who takes your $10 and gives you a movie ticket and $.50.
Want to Protect Your Job? Develop Your Skills
The 21st Century economy is not about jobs; it's about skills. After all, highly-educated people lose their jobs, too. What do you think happens when JP Morgan Chase merges with Bank One? Bruce Springsteen doesn't sing about those people because they are adaptable enough to turn around and do something else. At the time this column was written, the unemployment rate for college-educated workers was 2.1 percent, compared to 4.9 percent for the nation as a whole and 7.6 percent for workers with less than a high school diploma.
So what do we do for the people Bruce Springsteen does sing about? I'll be the first to tell you that the research on everything from job training to systemic school reform is relatively discouraging. Then again, so were the early attempts to put a man on the moon. The most important first step is to create the political will for massively upgrading the skills of those at the shallow end of the labor pool. Thinkers across the political spectrum have some clever and original ideas, but they need help getting past the baggage of their respective parties.
The Republicans need to ditch the absurd notion that tax cuts alone will help those at the bottom. The numbers are pretty darn clear: After 25 years of significant tax cuts and a steadily growing economy, there's not a lot trickling down to low-skilled workers that wasn't excreted by birds. Hence the Ukrainian proverb: A rising tide is good for those in big boats and bad for those standing on the bottom in heavy shoes. (Okay, that's not really a Ukrainian proverb, but doesn't it sound like it should be?)
The Democrats need to stop confusing things that lessen the pain in the short run with real solutions for the long run. Raising the minimum wage, for example, doesn't make anyone more skilled. It just charges more for the same increasingly outdated skills, which can be counterproductive. How? Just imagine that you own a movie theater and the minimum wage goes to $9 an hour. Would you be more or less likely to invest in automated ticket kiosks?
And, of course, there is some profoundly irrational individual behavior going on. Dropping out of high school is financial suicide. We can argue over whether it is a personal failure, a social problem, or some combination of the two, but let's agree on the key point: It's bad. Even finishing high school and skipping college is looking increasingly foolish. The median weekly wage for men with high school diplomas but no college fell 13 percent between 1979 and 2003.
The overriding lesson is simple: If your job can be done by a machine, then it soon will be. So try to be the guy who sells the machine.
The nice thing about machines is that they don't form UNIONS that will extort your profits.
Is this sort of Luddite nonsense still being seriously entertained?
He wants us to think Automatic Teller Machines Machines?
USA = FULL EMPLOYMENT.
They don't show up with an attitude either...
Since July 2000, the U.S. economy has seen manufacturing employment fall from 17.3 million to 14.5 million as of November of this year – a loss of 2.8 million jobs. Many observers fear that these jobs have been "shipped overseas" and call for various policies to support the U.S. manufacturing base.
Despite news accounts of U.S. firms "outsourcing" jobs overseas, the data shows that the decline in US manufacturing employment generally has not been accompanied by faster employment growth abroad. Indeed, it appears that the manufacturing sector – both here and abroad – is undergoing the same phenomenon: rapid growth in productivity is delivering rapid growth in output with fewer people employed in manufacturing.
In the U.S., manufacturing employment peaked in June 1979. Since then, manufacturing jobs have declined by 21.8 percent. While considerable, this is actually smaller than the drop in manufacturing jobs than has occurred in most other countries since their peak levels. The table below shows the year in which manufacturing employment peaked in 16 other industrialized countries and the size of the employment declines since that peak.
The data shows that 12 of these countries, including France, Germany and Japan, have witnessed larger declines in their manufacturing industries. Even South Korea and Taiwan have seen manufacturing jobs decline from their peaks in the late-1980s.
Two OECD countries, Canada and Ireland (not shown below), have enjoyed small manufacturing job gains recently. Canadian manufacturing employment was just 5 percent higher in 2002 than at an earlier peak level. In Ireland, employment was only 4.5 percent higher in 2002 than it had been in 1980, an earlier peak that was not exceeded until 1997.
Considering the worldwide trend in productivity gains, it is unlikely that even the best-intentioned government program can halt the decline in manufacturing employment in the U.S. or any industrialized nation. Except for a few displaced workers, perhaps, all of us benefit from the higher wages and greater employment opportunities that such productivity gains make possible.
"He wants us to think Automatic Teller Machines Machines?"
Makes about as much sense as "HIV virus."
LOL! The salesman makes profit once, the maintenance technician has a job for life. Let me know when the machines design, build, maintain and repair themselves.....
* Want to Protect Your Job? Develop Your Skills
* What do you think happens when JP Morgan Chase merges with Bank One? Bruce Springsteen doesn't sing about those people because they are adaptable enough to turn around and do something else. At the time this column was written, the unemployment rate for college-educated workers was 2.1 percent, compared to 4.9 percent for the nation as a whole and 7.6 percent for workers with less than a high school diploma.
* Dropping out of high school is financial suicide
* Even finishing high school and skipping college is looking increasingly foolish
Or P.I.N. Number.
And they don’t come to work drunk or otherwise impaired and damage themselves or something else, they don’t get sick, they don’t get pregnant and have to bug out for four months while you scramble to make other arrangements, they don’t go off on some phony-baloney stress leave, don’t sue for discrimination/harassment, don’t require medical insurance or cry and whine for a pension, more/fewer hours, or anything else.
They probably have plenty of other attractive traits too.
His article states machines will take your job if the job is capabable of being automated, get used to it, and make sure that you have something of skill to offer.
I'm not sure what is Luddite-like about that.
Hmmmm. I would hire a military vet that is working through college over a pimply faced party punk that had mommy and daddy bye him an extra four years of mediocre education and brain washing, any day of the week.....to each his own.
They probably have plenty of other attractive traits too.
---
Good job! Yes, the workplace has turned into a very ugly environment for employers. And all supported by every sue-crazy lawyer and a liberal judicial system.
It has discouraged the starting of many a business.
The original Luddites never read the whole article either....
The article is not at all "Luddite nonsense", you should read it. The author isn't complaining or blaming ills on technology. The author is merely making the point that if you lack skills you will have a hard time getting a job that pays well because you are competing with machines. He isn't complaining about it. As a matter of fact, he sees it as a good thing for the country. Obviously, it is not a good thing for the unskilled laborers looking for a job. But that is not the fault of technology it is the fault of the unskilled laborers for not building a skill set.
This point may be argued by many, but any unemployment rate at or below 5% is simply the act of 5% of a population of 300 Million moveing from job to job, career to career.
USA = Full Employment.
TY GWB
This is a "Oops, didn't read the article, comment, isn't it?
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