Wednesday, March 16, 2016

Where Did the Jobs Go?

A lot of middle-class jobs have disappeared over the years.  While many were sent overseas, I think the bulk were lost due to automation.   How will this pan out over time?  By the way, guys, don't get your hopes up, this ad was listed under "Help Wanted, Women".

There is a narrative going around the Internet, probably spread by the Communist Party or Donald Trump.  The narrative goes like this:  "Millennials are being given a raw deal unlike any that their ancestors faced.  Back in the day, a man could graduate from college, get a good job, buy a house and raise a family - all on a single income.  Today, it is a joke - no one can pay off their student loan debts and the American Dream of Home Ownership is out of reach for an entire generation!"

There is so much to parse in this narrative, it is hard to know where to begin.  Let's take the easy ones, first:

  • The "American Dream" is not home ownership, but the chance to succeed on your merits.
  • The idea of supporting a family on a single income went away decades ago.
  • While housing is expensive, is has been expensive for most every generation.
  • Scrimping and saving is nothing new, it was the norm for all of us, our parents, and our grandparents.
  • "Back in the day" you could not get a good-paying job with a college education.   You needed only a high-school education.

It is this last tidbit that is interesting.   A friend brought by the classifieds section of the Hartford Courant from June 1957 that was found in the bottom of a packing box.  It is fascinating reading.

To begin with, you have to appreciate that comparing our era to previous ones is an exercise in futility.  So much has changed, it is hard to compare the price of canned peas today to that in 1957 and draw comparisons.   The world is a different place.

To begin with, the "help wanted" section is divided into "Help Wanted - Men" and "Help Wanted - Women" and this was not only the norm in the 1950's, but 1960's and even into the early 1970's.   We take it for granted today that job openings are available to all - even if wage discrimination and other forms of subliminal discrimination exist.   But back then, if you wanted to be a backhoe operator, you'd better have a pair of testicles, or the deal was off from the get-go.

Our world is a better place, in that regard.  On the downside, well, many couples today feel forced to work two jobs to support their lifestyle.  But again, our lifestyle has changed a lot.  And a lot of what we think of as "essential" to our current lifestyle - cable television, smart phones, designer coffees - were not even available to our ancestors.   And if they were, they certainly couldn't afford them.

Flip over a few pages to the car ads for 1957.  A "loaded" Cadillac with "power everything except seats and windows" (hardly loaded, is it?) is going for under a couple of grand, used.   If you read the car prices from back then, you realize that cars depreciated very quickly, and anything over 3-5 years old was almost a junker.   Cars rusted like mad.  Engines hardly lasted to 80,000 miles (which is why you see a lot of "barn finds" with 67,000 miles on the odometer).  No keyless entry.  No bluetooth or GPS.  NO AIR CONDITIONING at all.

Today, A/C, power windows, locks, and a remote key fob are the norm for even the cheapest of cars, as are anti-lock disc brakes, a nice stereo system, six airbags, and so forth.  Cars last longer, are better made, safer, and cost not a lot more, when inflation is accounted for.  Comparing the price of a car today with one from back then is specious (even accounting for inflation).  And no, they didn't make 'em better back then.  Cars of that era sucked.  What you see at the car show is better than what came off the assembly line.

So you see, we are comparing two different worlds.  It is hard to draw a line and say "They had it better back then" when women were treated as property and cars would kill you, if they just didn't break down all the time.

Housing may have been cheaper back then, but it is not some grand conspiracy to make housing more expensive.  Bear in mind that things like rent control came into being in the 1940's and 1950's as people felt the cost of housing was too much to bear - sound familiar?

But since our country was far less populated, it wasn't long before the suburbs were developed and new housing was made available - for far less.   Today, well, this largely isn't possible in crowded cities.   When we moved to Fairfax County, Virginia in 1987, people were still farming there.   By the time we left in 2005, the county was "built out" and no more building lots were available.   So a developer bought our house, tore it down, and put up two houses.

The cost of housing has gone up, not because of some grand Capitalist conspiracy, but because the amount of land around metropolitan areas is finite, but the population keeps increasing.   All that being said, I know when I moved to Alexandria in 1987 I thought, "I'll never be able to afford a house here!" and yet in two short years, I ended up owning a house - bought at the peak of the 1989 bubble.   Time is a great leveler.   And over time, well, things change dramatically.   What seems impossible today seems ridiculously easy in retrospect.

The same is true for student loans.  I thought I would "never" pay off the $38,000 I owed (which in today's dollars is about $68,000).  But things changed and I earned more money.  And what motivated me to earn more money was the cost of things.   I went to law school and changed jobs so I could afford to buy that first house.  Necessity is the mother of invention.

But getting back to jobs - where have they all gone?   Many of the jobs advertised in the 1957 paper were clerical in nature.   Back then, major corporations had huge office buildings.  In New York, there was the Chrysler Building, the GM Building, the Pan Am building, and so forth.  Each company had a huge high-rise and inside were armies of clerks.  It was a human computing machine, that did all the accounting, invoicing, and "keypunching" as well as typing and document preparation.   Today, this is all done by personal computer.

So, "where did the jobs go?"  Well, you are looking right at it.  Odds are, you are reading this on a PC, laptop, pad device or even smart phone.  These devices are the "automation" that took away a lot of middle-class jobs and will continue to do so.    

Why hire an accountant to do your taxes, when you can log onto Turbotax?  Why go to a bank and make a deposit with a teller when you can take a picture of the check with your smartphone and deposit it instantly?

And yet, the local "for profit" college advertises classes in "bank teller" - a job that requires only a high school education (and a clean background check and a drug test).  It is also a job that will largely disappear in the next few years.  More middle-class jobs, gone.

The "row-bot" that replaced your job isn't some sophisticated machine with arms and legs that welds or bolts or paints, it is merely the personal computer and the software that replaces so many menial jobs which are little more than data entry.

Think about it.  Your HR officer in your company.  He or she pulls in a six-figure salaryThey explain your 401(k) and stock option benefits to you.   A website can do this for a lot less money.  Screening new employees - something that can be done with a computer or, thanks to computers, outsourced to India.  It all ties together.

So what does this mean for the future?   Well, more and more "jobs" will be outsourced to China or India.  We could stop this by using protectionist measures.  But that would just accelerate automation in the USA.   You tell McDonald's that minimum wage is now $15 an hour, and they will bring over the ordering kiosks they they already use in Europe.   Make the wage $20 an hour, and they will buy a machine that makes french fries or burgers.   And such machines exist, it is just that low-wage employees are still cheaper - for the time being.

And a lot of other jobs will go this way as automation improves.  Taxi driver?  Replaced by a self-driving car.  And you can kiss the "rental car reservation counter clerk" job goodbye at the same time.   What is the job, other than data entry anyway?  If you sign up for Hertz #1 Gold, you bypass that counter entirely.  Your car is parked under your name, picked by a computer.  You made the reservation by the computer as well.  Only the guy shuffling cars, washing cars, and checking you out, remains.

And no, we can't stop this trend if we wanted to.  We all want cheaper products and better service.   And over the last few decades, we've gotten this.   Neglected in this "the older generation had it easier" nonsense is the realization that everyday items today were very expensive back in the day.  My Dad refused to buy a Coleman cooler because it cost $99 in 1970.  Today, it cost less than that - not even accounting for inflation.   A Weber kettle?   A $99 extravagance, back in 1970 - enough to buy a new Zenith television! (black and white, of course).   Today, the price remains the same, but with inflation is 1/4 of the actual cost - and this is so because it is made by non-union labor overseas.

So, what are we to do?   Will there be a permanent underclass?   What are the options?  Well the first one, which the Japanese seem to be trying is to have less people.   If robots are doing all the heavy work, then fewer people are needed to run a society.   The remaining people in turn can enjoy a higher level of living and consume less overall and preserve the planet more.   According to some sources, Japan has lost a million people over the last few decades, as the population ages and reproductive rates drop - and immigration is stifled.

With the need for fewer "drones" in our industrial world, maybe a smaller population makes sense.  However, this goes against the dictates of every major religion in the world, including the religion of economics.  Economists have always based their economic models on one thing - growth.  Growth means increasing prices, particularly in the value of land.  It means that everyone is elevated on the shoulders of the next generation.  It is, in short, a pyramid scheme of the first order.

Developing an economic model not based on growth will be the challenge of the next Century.   Achieving slow growth, no growth, or an actual shrinkage in the world population will be the next challenge.  And sadly, I think this will occur not due to contemplative thinking on the part of mankind, but due to war, disease, and pestilence.

The other alternative is to create jobs for people who are unemployed.   And to some extent, we do this today.   We have "grants" the government gives to "artists" who claim to be creating.  And a small army of bureaucrats (a job-creation scheme in and of itself) monitors this art production and awards grants.

Still others just get money for doing nothing, and that wears on the human spirit.   So, I think in the future, companies will be given tax credits for creating meaningless jobs.   Assistant Director to the Vice-President of Human Resources, or something like that.   Everyone will have a title and a nice office and do basically nothing except look busy.

Either way, we have quite a challenge for the future.   There are a lot of people out there who will be supernumeraries.  And what do we do with them?   And what happens when them is us?