Jobs will continue to vanish
I am going to post this at both sites, since I feel this works for both formats.
This may come across as a bit of a diatribe, and to some extent that is valid. Part of the invective that will come through in this piece is a direct result of the fact that I tried to post something similar to the blog on Friday, but it failed to post and I lost all of it in the ether. Part of it is the result of my long standing disdain for economists. My personal belief is that economists make a good sub-branch of history, but that they are so divorced from reality that their skills of prognostication are the equivalent of the daily horoscope - so general as to be worthless. Anyway, on with the show:
Many of the economists I have been reading lately have a serious tendency to use the terms 'productivity gains' and outsourcing as the explanations for our current economic doldrums. And, they are in fact correct, but they seem to truly fail to understand the magnitude of what is happening, and completely miss the point on what it means for the future. At least the ones that I have read; it may be that other economists are discussing this, and I have just missed their writings. I do not read every journal article. I don't have the time. But, the stuff published in the popular press is woefully inadequate.
First, let me take the term 'productivity gains' into more depth then is generally done, and do so by citing examples of which I have some personal knowledge. Much of the gains in productivity are not gains in productivity as the term seems to imply. They are in fact gains to a corporation's bottom line resulting from having employees work twice as much for the same wage. One example I can provide is a family member's recent experience at Home Depot. She made a very good salary working for Home Depot at the local corporate headquarters, but only if you thought she achieved this salary by working a 40-45 hour work week. She actually worked something on the order of 80-90 hours per week for this salary. What she had in reality was two jobs at a decent pay scale..maybe. I do not know what her salary was (she has since left the company, which I will come back to later), but for the sake of discussion, let's say it was $100,000 per year. Now many of us dream of making a six figure salary, but in this case, she was actually working the equivalent of two jobs at $50,000 per year. For a long time, I just thought she was an aberration, a workaholic, but I ran into another individual who works for Home Depot at an alumni function. I mentioned my family member's experience, and this person, who works at the corporate headquarters, stated that Home Depot has a reputation for burning out employees. This person said the average person stayed at Home Depot no more then 6 - 9 years. Now, as a statistic this may or may not prove true, but that is the perception among the small sampling I've done. So, this aspect of productivity gains is actually just changing your corporate culture form one of a team with camaraderie to one of a sweatshop with everyone sacrificing their personal lives out of fear of losing their jobs.
That is one side of the 'productivity gains', another is the direct result of technological advances that allow a worker to actually produce more within the same time frame. In this case, I will use another local corporation with which I have even more familiarity, and that is UPS. I worked for UPS for about two years, and I personally have no gripes with UPS, but recent technological advancements put in place in their distribution hubs and delivery cars provide excellent examples for this type of productivity gain. When I worked for UPS, a good loader on the line I worked could load between three to four cars during a 4-5 hour shift, depending on seasonal volume. Part of the work in loading the cars involved knowledge. The loader had to get to know where packages with particular addresses were to be place in the delivery car, so that the driver could efficiently run his route. Since it was difficult to remember every street address and their proper shelf location, charts were developed which the loader used as reference if he saw a new address, or simply forgot. At that time, UPS was investing a huge sum of money in information technology to make this system more efficient and to increase productivity. Their idea was that every package that came into the system should have a machine readable address (scanner readable), and that these scanners would be used to route an individual package throughout UPS's facilities. This included placing scanners on each of the delivery cars so that when the loader entered the car, the system would tell him exactly where in the car to place the package. Further, it would also provide information to the driver's 'board', informing the driver exactly how many packages were in the car, where they were located, and in what order he should deliver them. The board also provides information to the driver's managers on exactly when he had delivered a particular package to a particular address, increasing managements ability to hold drivers accountable for their time on the road (just a hair Orwellian, that).
UPS succeeded in doing exactly that. The system was not yet in place at the distribution center that I worked in when I left UPS, but has since been fielded there. I have a long time friend who still works there, and this new technology came up in a recent conversation. When I asked him about the effect of the new technology, he told me it allowed the loader to nearly double the number of cars that a loader could load during a shift, by taking all thought out of the process. While no one has lost a job due this innovation that he was aware of (it is a union job), do not expect your local UPS distribution center to hire new employees anytime soon. In fact, the volume of packages would have to rise to astronomical heights to put any hiring pressure on UPS at that center, and that center already operates at four times the capacity for which it was originally designed. This is the other side of 'productivity gains'; these the result of technology as opposed to longer working hours. But in both cases, there was no benefit to the employees, other then the opportunity to work harder for the same wage, and keep their job.
Here, I will give what many might consider short shrift to the problem of outsourcing, but this is because it is so much in the news, I do not believe I have anything constructive to add to this part of the dialogue. I just want to point out, that it is largely the result of technological improvements, especially information technology, which allows the outsourcing of jobs that Western countries are experiencing.
So, lets move on to what I believe supports my contention that most of the economists I've read, especially those representing our current administration, are missing the real point of all of this. There is no reason to expect jobs to come back, and there is every reason to expect job losses, not only to continue, but to accelerate over the next twenty years. Consider a very recent example of technological research that is currently in the news, which has the potential to eviscerate yet another area of domestic employment. The much ballyhooed attempt to develop automated fleets of vehicles for the US military. This is a congressionally mandated project, which requires the military to have a third of its fleets, non dependent upon human control. It is on the face of it, a very laudable goal, and if successful, it should save a great deal of lives. It will also have two other, much less discussed impacts. It will be so much easier to send our country to war, regardless of the reason for the war, if we can do so without suffering casualties. It will also put every trucker, delivery person and cab driver out of work. That may indeed sound hyperbolic, but I see no reason to doubt that conclusion. Once the technology is developed to the degree that a vehicle can operate completely independently, the costs of capital investment in that technology becomes anywhere affordable to corporations and the vehicles gain an acceptable safety level for use on public roads, the trucking industry will switch to automated systems. So, I would advise my readers not to invest in re-training for the trucking industry, unless you already have a plan to re-train for something else in the semi-near future.
Follow me just a little further here. Consider the impact of other technologies that are currently being developed, or are developed but have not yet come down in price far enough for general consumption. The automated lawn mower, when its cost drops to a level that makes it mainstream how many landscapers will lose work? Worse, anyone who has looked at the potential of nanotechnology, an area in which Georgia Tech has recently and with great fanfare, made extensive investments, will radically impact the manufacturing industry. If one subscribes to Google's newsletter on the subject of nanotechnology, one develops a real sense of the investment being made around the world, including the fact that a nanotechnology market has recently been developed to allow investors to hedge across an index fund of corporations in this area. But the potential is there for nanotechnology to destroy the economy as we know it through the development of self-replicating machines, and machines able to replicate anything at the atomic level once they have been programmed.
I will continue on this topic at a later date, but I want to close this section by saying that economic forecasts and public policies that underweight the technological progress that is coming down the pike in the next twenty years, are almost worthless. How to deal with these coming changes in very real terms is not easy. I have addressed one area in previous posts, that of bringing the average person into the information economy, as having potential for easing the painful economic disruptions on the citizens of Western economies, but I recognize it as limited in scope and effectiveness. More real analysis by greater thinkers across disciplines is needed to develop a real feasible road map to the future.
Edited 9:53 3/15/04