Saturday, September 10, 2011

The changing world of employment 

The economics blog The Big Picture proposes that it really is different this time -- that technology is so transforming the economy that traditional macro economic solutions are not going to increase employment much.

We also maintain, however, at least some, if not much of the weakness, especially in the labor market, is structural and not cyclical. Take the U.S. Postal Service (USPS) as the poster child of the current problems plaguing the U.S. labor market. The USPS has 571,566 full-time workers making it the country’s second-largest civilian employer after Wal-Mart. It has eliminated 110,000 jobs in the past four years and according to the FT,

During the next five years, the service plans to cut 220,000 staff – about 120,000 through lay-offs – and close up to 300 processing centres on top of plans to shutter up to 3,700 post offices released last month.

Now why is this? Not enough stimulus? Monetary policy too tight? Insufficient quantitative easing? To paraphrase James Carville, “It’s technology, stupid!” The rise of the internet, e-mail, and Twitter coupled with some piss poor management, which failed to adapt to the changing times, and the result is one of the nation’s largest employers facing bankruptcy and mass layoffs.

Borders Books Inc. is also in the process of liquidating the last of its stores, which will result in a final mass layoff of close to 11,000 employees. True, they failed because of “lack of demand” for their goods and services. But not because of cyclical forces that could be offset by fiscal and monetary expansion. The rise of the e-book, Kindle, and iPad shut them down.

The Shumpeterian “creative destruction” of one sector is not being equally and instantaneously offset by job creation in the sectors benefiting from technology. This takes time, retraining, political vision and strong leadership. Companies can’t hire enough software engineers in these fields because the current labor pool lacks the education, training and skills.

Policymakers must recognize the global economy is sitting at the elbow of an exponential curve in technological advances that is and will uproot everything from manufacturing to how we read our mail and books to how medical services will be delivered.

Read the whole thing. It is provocative no matter what your politics.

While the argument is interesting and even superficially compelling, the United States economy has been through astonishing economic transformation in the last, say, 130 years. See, e.g., this graph of the farm population, which over two generations went from roughly half the population to a tiny fraction:

Farm population

I can't dig up a link, but in the first third or so of the 20th century domestic servants made up 20% or so of the labor force in the United States. It is a tiny fraction of that now.

Yet, all these people were ultimately absorbed in the United States economy, which always grew along with the change. The difference, though, was that things were (mostly) simpler then. The aggregate weight of local, state, and federal regulation was much, much, lighter, so both businesses and employees could change much more quickly. The West was still open, so people could pull up stakes and move to California or Oregon or Washington or Texas at relatively low cost, and land was cheap and plentiful and business was new and exciting and markets were blossoming. Yes, unemployment was tough and grinding, but Americans exploding in to a country seemingly bursting with possibility. It did not matter that entire categories of labor were essentially going away.

Some of these differences we cannot get back. California can never be empty again. But we can create the conditions for all sorts of new opportunities that will create growth and will absorb the workers who are now losing their jobs. The trick is to embrace the change rather than to stand in its way. If we used incremental federal spending to reduce the time it takes to obtain all the permits necessary to do any sort of activity -- whether from launching a medical device to building a new oil refinery to opening a new bar in downtown Princeton -- by say, 70%, the economy would explode with opportunity. Why? Two reasons. First, the return hurdles on any new project would collapse because, well, time is money. Second, the people who decide to launch new projects would not exhaust themselves merely contemplating the bureaucratic and regulatory obstacles. (Never underestimate -- as our current president apparently does -- the importance of morale in the creation of jobs.)

Of course, it is easier said than done to reduce aggregate permitting time by 70% -- the first step is to reduce the number of permits required -- but a president with the right attitude in an atmosphere of perceived crisis could get it done. Sadly, this president would have to replace virtually everybody he appointed to run the federal regulatory apparatus, but some president could make it happen, even at the state and local level (if we can coerce states in to raising the drinking age, we can certainly deny federal funds to any local government that takes more than 5 business days to issue a building permit).

Release the hounds.


By Blogger W.LindsayWheeler, at Sat Sep 10, 11:01:00 AM:

"Not enough software engineers"

The General IQ of a European is 110. For minorities the General IQ is between 80 - 100. It takes a certain level of IQ to do the upper echelon work. You can not open the floodgates of the university and expect to fill demand.

3/4 of all college students in America---DON'T belong there. They don't have the discipline, the smarts, the background in reading and writing to do upper education.

The Elites of this country, are figuring in on Globalization, moving our manufacturing base out and making every body a "White collar" worker. They live in unreality. This whole country lives in Unreality.

We need a manufacturing base to put 3/4 of the people to work. To earn a living. The Liberal mindset, like Hillary Clinton, "everybody needs a college education". Who is going to flip the hamburger? Who is going to dig the trench for the foundation? Who is going to fix the transmission? Who is going to be the private in the army?

Liberals and our Elite never think about this.

It is too late Tigerhawk. They done moved the manufacturing base out of this country. With the Federal Reserve and union pay raises every year, Inflation has skyrocketed! Inflation climbs every year. Look at Solydyne! Obama's big push! The company is bankrupt and I get attacked for wanting to reimpose Tariffs.

Screw America---Because America screwed itself. it's Over. It's done. all that is left is to watch while Rome Burns. And Burn it is going to happen. It's finished. Welcome to your Third World Hell Hole.  

By Blogger Georgfelis, at Sat Sep 10, 09:32:00 PM:

My opinion on Borders is a bit simpler: They were making a small and shrinking profit on most of the things they sold, but it was just devoured wholesale by over-paid Management drones. Had Management decided to slash upper and mid level management by about 80%, reduce board-level compensation, and generally "Get Small Up Tall", they would not only still be here today, but flourishing.

There are far too many companies who used the "Fat years" to expand a great number of employees who add nothing to the bottom line, and when the "Lean years" hit, they try to fix it by firing the actual people who make the company money.  

By Anonymous jhc, at Sat Sep 10, 09:59:00 PM:

Echoing Georgfelis, I stopped at a Barnes & Noble this afternoon that seemed to be doing well (at a quick look). But I also learned today that the Borders store closest to my house (in St. Louis) is having its "Final Week" sale. The doors close for good very soon.

I don't know anything about selling books (CDs, DVDs, und zo weiter) but I found that an interesting contrast.

That said, I agree with your main point: it's not your father's economy any longer.  

By Anonymous Anonymous, at Mon Sep 12, 11:36:00 AM:

The Post Office in Britain is going through exactly the same process as the US Post Office.

I don't think manufacturing can provide many jobs in the future, because routine assembly tasks are increasingly done by computers.


Post a Comment

This page is powered by Blogger. Isn't yours?