Summary: Labor unions and their left-wing friends are imposing a host of laws and regulations that are dramatically raising the cost of hiring workers. Minimum wage laws, Obamacare requirements, and many other policies are causing businesses to rethink new hires. Even expensive robots and other forms of non-human labor begin to make sense to strapped companies. Who will suffer the most under the new regime? The least skilled and the poorest—the very persons who were supposedly going to benefit from the new laws and regulations created. Call it “the War on Jobs.”
New technology creates jobs. The invention of the lightbulb puts candle makers out of work and the invention of the automobile puts buggy-whip makers out of work, but more jobs are created in the new industries than were lost in the old ones.
Until now, perhaps. The nature of the U.S. economy is changing. To a greater degree than ever before, politicians and bureaucrats and activist groups are working to make it too expensive for businesses to hire people for many jobs. Who will get those jobs? In many cases, robots.
The term “robot” comes from the 1920 science fiction play R.U.R. (for Rossum’s Universal Robots), although the basic concept of a mechanical worker was not new. (For example, there’s the Tin Woodman, a human turned into a mechanical worker, in the Oz series beginning in 1900.) Pop culture has featured countless depictions of robots replacing humans, but in reality, robots were long limited to mindless, repetitive tasks such as certain work on assembly lines. The first ATM, which accepted deposits but didn’t give out money, was installed in New York City in 1961 and promptly rejected by customers. By the 1970s, cash-dispensing ATMs were being installed across the U.S., and robots began to be used in increasingly sophisticated ways.
Now, things are getting serious. A recent book, Rise of the Robots by Martin Ford, depicts the robot revolution that is upon us, with the use of robots expanding in ways that hardly anyone expected. Ben Schiller of Fast Company wrote of Ford:
“Surveying all the fields now being affected by automation, Ford makes a compelling case that this is an historic disruption—a fundamental shift from most tasks being performed by humans to one where most tasks are done by machines. That includes obvious things like moving boxes around a warehouse, but also many “higher skill” jobs as well, such as radiology and stock trading. And don’t kid yourself about your own importance: that list almost certainly includes your job. . . .”
“It’s possible that at some future point, rapid technological innovations might shift the expectations of consumers about the likelihood and duration of unemployment, causing them to aggressively cut their spending,” he adds. “If such an event occurred, it’s easy to see how that could precipitate a downward economic spiral that would impact even those workers whose jobs are not directly susceptible.”
Among the jobs that could be taken soon by robots: flipping burgers. In 2013, Momentum Machines created Alpha, a robot that can make up to 360 hamburgers in an hour and pays for itself in a year. It shapes patties from ground beef, grills them, and makes burgers with onions, pickles, and tomatoes; it can customize burgers, making patties out of, say, one-third hamburger and two-thirds beefalo.
A typical fast food restaurant would be able to reduce management tasks and eliminate around $135,000 a year in labor costs with Alpha. Alexandros Vardakostas, the company’s co-founder, said the machine isn’t meant to make workers’ jobs easier. “It’s meant to completely obviate them.”
Restaurant chains such as Olive Garden, White Castle, Taco Bell, Applebee’s, Panera Bread, Burger King, Subway, Arby’s, and Chili’s are using specialized computer tablets for taking orders.
A startup called E La Carte makes a tablet called Presto that goes for $100 per month. According to Annie Lowrey of New York magazine, “If a restaurant serves meals eight hours a day, seven days a week, it works out to 42 cent per hour per table, making the Presto cheaper than even the very cheapest waiter. Moreover, no manager needs to train it, replace it if it quits, or offer it sick days. And it doesn’t forget to take off the cheese, walk off for 20 minutes, or accidentally offend with small talk, either.”
Mike Flacy of Digital Trends wrote that, “Hypothetically, a fast food restaurant could also place digital touchscreen panels with credit card readers and cash machines at the counter in order to eliminate all cashiers as well. The consumer would simply place an order through the touchscreen and wait for the custom hamburger to appear at the end of the assembly line, likely tagged with an order number.” Such a system would effectively eliminate most fast-food jobs.
One of the more impressive innovations to hit a store near you is OSHbot, a robot helper at Lowes Home Improvement that speaks two languages, answers questions, and guides customers to items in the store either by name or with a scanner that can identify objects and provide product information. When the OSHbot’s battery runs low, it directs itself to a recharge station.
McDonald’s has switched to touchscreen ordering at 7,000 locations in Europe, and the touchscreen/customization concept is now being used at some McDonald’s in San Francisco. Lifehacker reported in July that “Late last year, McDonald’s Australia introduced its first Create Your Taste restaurant: a premium dining experience focusing on gourmet ingredients, sit-down service and burger customization via in-store touch screens. The system is now available in every McDonald’s restaurant across [Australia]. That was quick.”
The Australian reported in May:
“In the world of cafes and restaurants, android waiters are making their mark, with China, Japan, and South Korea leading the way. In northeast China at Ningbo, they take orders, serve food, and use an optical sensing system to navigate. But they can utter only a handful of phrases in Mandarin. Other robots can prepare food. The Wishdoing restaurant in Shanghai boasts robots that can cook dishes in less than three minutes. That means the vast slab of restaurant practices—taking orders, preparing food and serving dishes—can be mechanised.”
The Daily Mail (London) reported in June that “A restaurant in Jiangsu Province, China, is staffed by 15 droids that carry food to tables, while a hotel that’s opening in Japan next month will be staffed by 10 eerily lifelike robots.” In Sasebo in southwestern Japan, “The humanoids will check in new guests before carrying their luggage and cleaning their rooms at Hennna Hotel”—that is, “the Weird Hotel.”
Foxconn, primary maker of Apple products, plans to deploy up to a million robots in its factories. A Nike executive noted a solution for rising wages in Indonesia: “engineering the labor out of the product.” Nick Romeo wrote in the Daily Beast that such a shift might “silence criticism about horrendous working conditions in international factories that make beloved American products.”
Using the term “robot” broadly to include all sorts of human-replacement technologies involving artificial intelligence, robots could do the jobs of pastry chefs, typists, paralegals, math teachers, and anesthesiologists. As Fast Company’s Schiller noted, there’s software that breaks projects into tasks that can be fully automated, tasks that can be crowdsourced (assigned to a networked group of humans), and tasks that must be, for now, handled directly by humans. Robots can write music, diagnose disease, and trade stocks. The number of traders on Wall Street has dropped by a third since 2001, thanks to trading algorithms.
Amazon, which started as an online bookseller, is quickly becoming an integrated online and physical operation, mixing the Internet with traditional bricks-and-mortar; the mix is called “clicks-and-mortar.” The company’s network of heavily robotized warehouses makes same-day deliveries possible in much of the country, and the company is famously experimenting with flying robots (drones) that could make those deliveries. In June, Google’s self-driving cars passed the million-mile mark in total travel, perhaps on their way toward taking the jobs now performed by bus drivers and cabbies.
If you think your job is safe, consider this bit of sports news: “Things looked bleak for the Angels when they trailed by two runs in the ninth inning, but Los Angeles recovered thanks to a key single from Vladimir Guerrero to pull out a 7-6 victory over the Boston Red Sox at Fenway Park on Sunday.” A robot wrote that.
On the other hand…
The fear that technology will destroy jobs has long been a part of Western culture. Aristotle mused that if “the shuttle would weave and the plectrum touch the lyre without a hand to guide them, chief workmen would not want servants, nor masters slaves.” Queen Elizabeth I refused a patent for a knitting machine because she believed it would cause unemployment. In the 16th Century, the use of sheep for grazing was supposed to put humans out of work.
In contrast, some saw technology as a creator of jobs. The first great economist, Adam Smith, wrote in The Wealth of Nations (1776) about the effect of new technology for making pins. Suddenly, instead of making one pin a day or even 20 pins a day by hand, the average worker could make 4,800 pins a day. Were thousands of pin-makers thrown out of work? Hardly. The price of pins plummeted, increasing the demand for pins and the demand for people to work in pin factories, while businesses that used pins were able to cut costs, increase demand for their products, and hire more workers.
There’s an old story that a British weaver named Edward (Ned) Ludd (or Ludlam), one day in 1779, after being punished for idleness or taunted by local youths, went into a fit of rage and smashed two knitting frames. From this kernel of possible truth grew the legendary figure of General Ludd or King Ludd, the adversary of jobs destroying technology. Beginning in 1811, a group of English craftsmen known as the Luddites tried to bring the Industrial Revolution to a grinding halt. In the belief that new technology would destroy their jobs, they set out to smash textile machinery and put the torch to textile factories. It’s said that Belgian workers dropped their wooden shoes (sabots) into industrial machinery, becoming the first “saboteurs.”
Luddite ideas continued to impede human progress long after the original Luddites died. In 1930, John Maynard Keynes, the economist whose ideas led to many of the world’s economic problems today, wrote about a “new disease”: “technological unemployment . . . due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”
When the direct-dial telephone was introduced, the Communication Workers of America union did everything it could to stop the new technology, because union officials mistakenly assumed that it would cut the number of jobs. “Fortunately, we were unsuccessful,” CWA President Glenn Watts admitted some 30 years ago, “because the resulting boom in demand for telephone service created thousands more jobs.”
In 1910, the Bell System had one employee for every 578 calls per year. By 1981, it had one employee for every 250,000 calls. The number of employees did not go down. It increased 1600 percent.
Yet neo-Luddites thought of technology as jobs-destroying. In 1980, radical activist Tom Hayden, perhaps most famous for marrying Jane Fonda, listed direct long-distance dialing as part of a plot by the telephone company to cheat its customers, as an example of “corporations . . . externalizing costs to the consumer.”
Another Jane Fonda associate, Karen Nussbaum, executive director of “9 to 5” (the National Association of Working Women), warned in the early 1980s that technology meant repression. “Women office workers are going to find themselves working in dull, dead-end jobs for less money and in conditions that are going to lead to serious health problems.” (Nussbaum was later a key player in the takeover of the AFL-CIO by the radical Left.) Also in the ‘80s, California Rural Legal Assistance, a “public interest” law firm funded by taxpayers, sued to block the University of California from creating labor-saving devices for use on farms unless the university had first determined the “social consequences” of such technology.
That attitude toward technology was reflected in President Obama’s remarks during a 2011 interview with the Today show’s Ann Curry. Obama, promoting the efforts of his Jobs Council, sought to explain the weak economy as, in part, the result of jobs-destroying technology:
“There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM; you don’t go to a bank teller. Or you go to the airport, and you’re using a kiosk instead of checking in at the gate. So all these things have created changes in the economy, and what we have to do now—and that’s what this job council is all about—is identifying where the jobs for the future are going to be; how do we make sure that there’s a match between what people are getting trained for and the jobs that exist; how do we make sure that capital is flowing into those places with the greatest opportunity.”
Today, neo-Luddites seek to block new technologies such as GMO (genetically modified organism) foods, and they target companies like Uber. Indeed, Hillary Clinton, who admittedly hasn’t driven a car since 1996, attacked Uber in a July speech on the “gig economy.” CNET’s Stephen Musil:
“Many Americans are making extra money renting out a small room, designing websites, selling products they design themselves at home, or even driving their own car,” Clinton said during a speech at the New School in New York City. “This on-demand, or so-called ‘gig economy,’ is creating exciting opportunities and unleashing innovation. But it’s also raising hard questions about workplace protections and what a good job will look like in the future.
“Fair pay and fair scheduling, paid family leave and earned sick days, child care are essential to our competitiveness and growth,” the former secretary of state said, referring to benefits not accorded to independent contractors such as drivers at Uber.
Emily Zanotti wrote on the American Spectator website that Clinton spent half her speech “complaining about these young whippersnappers and their newfangled smartphones with the texting and the Facebooking and the Ubering. I mean, who do they think they are, circumventing an antiquated and burdensome, union-driven transportation boondoggle with ingenuity and common sense and a cooperative network that allows individuals to purchase products on a free market that they themselves police?”
Zanotti’s article was entitled: “Hillary Clinton, Old Person, Does Not Like This Newfangled Uber App.”
Hurting the working class
History shows that technology creates jobs—that is, that far more jobs are created by technological change than are eliminated. But has that formula been changed by the growth of the welfare state, together with all the rules and regulations and bureaucratic red tape that make it expensive to hire real people? Have unskilled and low skilled workers and many others been pushed out of the labor force?
As a presidential candidate, Barack Obama said he aspired to be a transformational president like Ronald Reagan. Reagan, he said, “changed the trajectory of America” and “put us on a fundamentally different path.” Just before the 2008 election, he declared that “We are five days away from fundamentally transforming the United States of America.”
In that, he has certainly succeeded. For one thing, the Labor Force Participation Rate—in effect, the employment rate—is the lowest it’s been since 1977. The current “recovery” is the first ever recorded in which the percentage of people with jobs declined. A study by the Federal Reserve Bank of St. Louis found that the U.S. was the only one of eight countries studied that was slipping backward by this measure, while a study by 38 developed countries by the international Organisation for Economic Co-operation and Development put the U.S. among only three countries with declining rates of labor-force participation.
The President brags about the decline in the unemployment rate—but that rate is relatively low only because it doesn’t count people who have given up looking for work (roughly 40 percent of the 8.5 million jobless, according to a Harris poll in May) and because it doesn’t count the 6.5 million who are stuck in part-time jobs when they want full-time work.
Today, more businesses are dying than are being created, for the first time in the 37 years for which these statistics are available.
For the most part, the well-off are doing all right. Some 95 percent of the economic gains during the Obama “recovery” have gone to the top one-percent of income earners. It’s working-class people and small business people who have suffered the most. They have been targeted by the President and his friends, who lead a Democratic Party that has essentially stopped pursuing policies to help the working class (or, at least, the segment of the working class that they classify as “the white working class”). Liberal writer Thomas Edsall wrote in the New York Times in November 2011 that
preparations by Democratic operatives for the 2012 election make it clear for the first time that the party will explicitly abandon the white working class.
All pretense of trying to win a majority of the white working class has been effectively jettisoned in favor of cementing a center-left coalition made up, on the one hand, of voters who have gotten ahead on the basis of educational attainment—professors, artists, designers, editors, human resources managers, lawyers, librarians, social workers, teachers and therapists—and a second, substantial constituency of lower-income voters who are disproportionately African-American and Hispanic.
Meanwhile, many on the Left have found common cause with Big Business against smaller businesses. Larger businesses are usually in a better position to deal with Big Government—to spread the costs of regulatory compliance over a larger number of workers or workplace locations, to hire accountants and “human resources” managers, and to lobby, conduct public relations campaigns, and make political contributions in order to receive better treatment. Businesses with bigger profit margins can pay regulatory costs that would sink businesses that are just getting by.
Indeed, regulations are often tailored to leave Big Business relatively unhurt while crushing the little guy. Often, companies like Walmart actually lobby in favor of regulations that force their less well-off competition to provide the level of wages and healthcare benefits that Walmart already provides or plans to provide in the near future. Similarly, Amazon once opposed sales taxes on Internet purchases, until the point at which such taxes actually came to benefit Amazon by helping the company weaken or eliminate the online competition.
The Obama administration and its ideological allies—including local governing boards in places like San Francisco, Seattle, and Washington, D.C.—are working to make it almost impossible to start or expand a small business. Indeed, there’s a term for the roadblocks built by politicians and bureaucrats that stand in the way of business creation: “barriers to entry.”
In California, where many burdensome regulations kick in once a company has 50 employees, companies avoid the burden by limiting themselves to 49 employees. (The companies are called “49ers.”) Under Obamacare, with obligations that kick in once an employee becomes “full-time” at 30 hours a week, some workers will be limited to 29 hours. (They’re called “29ers.”)
These policies are backed by unions that claim to represent poor, downtrodden workers. Yet, as we reported in the November 2013 Labor Watch, the grassroots lobbying for Obamacare was coordinated by unions, including the AFL-CIO, the Communication Workers of America, the teachers’ unions (both the National Education Association and the American Federation of Teachers), the American Federation of State, County and Municipal Employees (AFSCME), the United Food and Commercial Workers (UFCW), the United Auto Workers (UAW), and the Service Employees International Union (SEIU), along with Working America, an AFL-CIO front group run by the aforementioned Karen Nussbaum.
Regarding the “minimum wage,” Elizabeth Stelle and John R. Bouder of the Commonwealth Foundation wrote:
So who gains from raising the minimum wage? Politicians and labor unions. Minimum wage increases tip the balance in favor of higher-skilled—and higherwage—unionized workers by raising the floor from which they negotiate compensation. Politicians, on the other hand, can act like they did something for the little guy while receiving union support—which is no small matter. In 2012 alone, government union SEIU Local 668 spent more than $200,000 of its members’ dues on political activity and lobbying.
Mike DeRosa, a small business franchisee who owns several Burger Kings, points out that every time the minimum wage goes up, he has to fire employees. Asked about protesters calling for a $15 minimum wage, he said, “Whenever I hear somebody say that, my first thought is to hand them the keys and tell them, ‘You go run it.’ If you start to raise the minimum wage that much, you’re going to have to cut your staff by a third and you probably won’t be hiring youngsters for any of this.”
Regarding the Obamacare regulation that classifies a 30-hour-a-week worker as full time, DeRosa said: “Like every outfit in the country, we have modified schedules, and there’s a lot of people that have lost those two to five hours a week to get under the 30-hour-a-week hurdle.”
Last October, the Wall Street Journal editorialized about the “minimum wage” campaign:
Amid a historically slow economic recovery, 1970s labor-participation rates and stagnant middleclass incomes, we understand that people are frustrated. Harder to understand is how so many of our media brethren have been persuaded that suddenly it’s the job of America’s burger joints to provide everyone with good pay and benefits. The result of their agitation will be more jobs for machines and fewer for the least skilled workers.
Dan Mishek, managing director of Vista Technologies, told the New York Times in 2011 about the “hidden costs” of hiring, beyond the expenses of salaries and benefits:
“I dread the process we have to go through when we want to bring somebody on,” he said. “When we have a job posting these days, we get a flurry of résumés from people who aren’t qualified at all: people with misspellings on their résumés, who have never been in the industry and want a career move from real estate or something. It’s a huge distraction to sort through all those.” Culling the résumés takes three days. Then he must make time to interview applicants, and spend $150 for each drug test. Once a worker is hired, that person must complete a federally mandated safety program, which Vista pays an outside contractor a flat fee of $7,000 annually to handle. Finally, Vista’s best employees spend several months training the new hire, reducing their own productivity. “You don’t have to train machines,” Mr. Mishek observes.
Will there be a point at which it just isn’t worth it to hire people to do the jobs that robots can do?
Since the beginning of civilization, the course of history is that human ingenuity creates new technology and new technology means more jobs. Has Big Government grown so big that the course of history is changing?
From “minimum wages” so high that unskilled workers are effectively banned from the workplace… to overtime rules (being expanded to people making more than $50,000 a year)… to Obamacare mandates (including a new IRS fine of $36,500 a year per person for helping employees pay their insurance premiums)… to rules limiting employers’ ability to use flexible, “justin-time” scheduling… to requirements, current or proposed, for paid leave or paid vacations or “free” childcare… to licensing requirements (five percent of the working population needed a license or the equivalent in the 1950s; today, it’s almost one-third)… to “nondiscrimination” rules so varied and complex that they expose employers to unfair, possibly crippling lawsuits… to classifying contractors as employees and franchise businesses (often familyowned) as co-employers with their giant franchisors like McDonald’s… federal, state, and local governments are engaged in a war on jobs.
Jobs for humans, at least.
* * *
Dr. Steven J. Allen (J.D., Ph.D.) is editor of Labor Watch. Alec Torres is a communications aide and speechwriter for House Majority Leader Kevin McCarthy. The opinions expressed are the authors’ alone. This article originally appeared in the July 2015 issue of “Labor Watch” and appears here with permission.
Editor’s Note: Successful union activism in support of a $15/hour minimum wage will not only reduce the supply of entry level jobs – it will have a disproportionate negative impact on small businesses. Large corporations will invest directly in – or offer their franchisees access to – specialized automation equipment. Small businesses will not have the same access to capital and technology. Stuck paying workers more than they can afford, they will be forced to raise prices and become even less competitive. Yet another example of how unions and ultra large corporations can have overlapping agendas.
Sure. You can make $15 an hour at McDonald’s, at least in Seattle. You just have to perform better than this machine.
That machine is the not so distant replacement for cashiers demanding more and more pay.
A Reddit comment says the cashiers at this McDonald’s were replaced by machines.
Comments indicate the store is the company owned McDonald’s Innovation Center at 1253 N Schmidt Rd, Romeoville, IL 60446, United States.
Any readers care to check that out?
Math, Not Counting Benefits
- For a location open 24 hours: The cost of human cashiers, not counting benefits, $15/hour * 24 hours * 365 days/year = $131,400
- For a location open 6AM to Midnight: $15/hour * 18 hours * 365 = $98,550.
For the machine to be cost effective, all it needs to do is cost less than $100,000 a year to buy and maintain.
By the way, it won’t just be McDonald’s that eliminates cashiers. Expect to see machines like that everywhere. Basic cost-accounting math demands that outcome.
About the Author: Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education.
Editor’s Note: This article by Mike Shedlock leads off with a report on “drone transport ships,” but moves on to explore a provocative and very pertinent question: Are policies that create the “bubble economy,” i.e., artificially inflated asset values, partly motivated by a desire to counter the deflationary pressures caused by automation? We have explored this issue most recently in “Pension Funds and the Asset Economy,” and also in a post from 2013 entitled “Exponential Technology and the Role of Unions.” Shedlock may not have all the answers here – who does – but he is asking a question that must challenge anyone serious about promoting effective policies to stimulate sustainable economic growth. And Shedlock’s basic point – intervention to counter “good deflation” is futile, if not counterproductive – is consistent with the lessons of history. Every innovation ever conceived of was deflationary; only by deflating the value of existing services can you free up capital to invest in the next wave of innovation.
Here is the question of the day: Are drone, workerless ocean freight transport ships coming?
If shippers can pull it off, the cost saving would be immense. But what about the job losses? Insurance? Inflation?
Let’s explore the questions with a look at the Bloomberg article Rolls-Royce Drone Ships Challenge $375 Billion Industry.
“In an age of aerial drones and driver-less cars, Rolls-Royce (RR/) Holdings Plc is designing unmanned cargo ships.
Rolls-Royce’s Blue Ocean development team has set up a virtual-reality prototype at its office in Alesund, Norway, that simulates 360-degree views from a vessel’s bridge. Eventually, the London-based manufacturer of engines and turbines says, captains on dry land will use similar control centers to command hundreds of crewless ships.
Drone ships would be safer, cheaper and less polluting for the $375 billion shipping industry that carries 90 percent of world trade, Rolls-Royce says.
The European Union is funding a 3.5 million-euro ($4.8 million) study called the Maritime Unmanned Navigation through Intelligence in Networks project. The researchers are preparing the prototype for simulated sea trials to assess the costs and benefits, which will finish next year, said Hans-Christoph Burmeister at the Fraunhofer Center for Maritime Logistics and Services CML in Hamburg.
Even so, maritime companies, insurers, engineers, labor unions and regulators doubt unmanned ships could be safe and cost-effective any time soon.
Crew costs of $3,299 a day account for about 44 percent of total operating expenses for a large container ship, according to Moore Stephens LLP, an industry accountant and consultant.
The potential savings don’t justify the investments that would be needed to make unmanned ships safe, said Tor Svensen, chief executive officer of maritime for DNV GL, the largest company certifying vessels for safety standards.
While each company can develop its own standards, the 12-member International Association of Classification Societies in London hasn’t developed unified guidelines for unmanned ships, Secretary Derek Hodgson said.
“Can you imagine what it would be like with an unmanned vessel with cargo on board trading on the open seas? You get in enough trouble with crew on board,” Hodgson said by phone Jan. 7. ‘There are an enormous number of hoops for it to go through before it even got onto the drawing board.'”
100% Guaranteed to Happen
Anyone who does not think drone, workerless ships will happen, cannot think clearly.
Skeptics did not think the auto would replace horses or trains. Skeptics thought flight was impossible. Even simple constructs we now take for granted such as coffee on airplanes was once considered ridiculous.
So yes, driverless cars and workerless ocean ships are 100% guaranteed. The only question is “what timeframe?”
I do not have an answer to that question, but let’s not bury our heads in the sand over what is inevitable.
Furthermore, it’s likely workerless ships arrive before driverless trucks hit mainstream.
After all, the ocean is a vast place and there are no road or other constraints except in docking. If landing is a major concern, how difficult would it be to helicopter in crews specifically for the final landing?
What About Jobs?
Let’s get a grip on the problem of jobs. Yes, many will vanish. But others will appear. I cannot name one technological advancement in history that did not ultimately create more jobs than it destroyed.
- Lightbulbs replaced candles
- Cars replaced horses
- Trains replaced the Pony Express
- Personal computers
- Internet replacing libraries
Can someone tell me why it’s supposed to be different this time?
What About Inflation?
Therein lay the problem. Driverless cars, the internet, and other price-deflationary advances have outstripped central banks ability to inflate prices and wages.
Try as they might, central banks have only managed to foster asset bubbles (they don’t even see) not the 2% price inflation they want.
Yet they keep trying. Prices went up but not as much as central banks want. Wages rose less than prices, especially for those on the bottom end. Home prices soared so Congress initiated countless affordable home programs. Then home prices crashed and Congress and the Fed acted to prop up home prices.
No one really wanted affordable homes, they just wanted ill-advised affordable home programs. Now people scream about income inequality and for higher minimum wages.
This all stems from one bad idea – central banks fostering inflation.
One Bad Idea Leads to Another, and Another
In the effort to produce 2% inflation, One Bad Idea Leads to Another, and Another
That construct is corollary number six of the greater “Law of Bad Ideas“.
Can the Fed Prevent Boom-Bust Cycles?
Heck no, the Fed causes them! For details, see Bubblicious Questions: What Causes Economic Bubbles? When Do Bubbles Burst? Can the Fed Prevent Bubbles?
Also consider Deflation Theory Reality Check.
Such are the challenges the Fed faces, and they are losing the battle because the advancement of technology is inherently price-deflationary. Technollogy has overtaken the Fed’s (central bankers in general) ability to inflate consumer prices.
Here’s the irony: Ridiculous efforts to prevent price-deflation cause asset bubbles that inevitably collapse, which in turn bring the very conditions central banks wish to prevent.
About the Author: Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education.
“Robots will steal your job, but that’s ok.”
Anyone who has recently driven through Mountain View, in the heart of Silicon Valley, is likely to have had the memorable experience of sharing the road with a car that has nobody inside. Google’s “autonomous cars” are being tested there, and apparently they drive better than people do – they are smart, safe, sober, and tireless. They have the potential to eliminate 3.6 million full-time jobs in the United States.
Anyone purchasing materials at a Home Depot store, or their local grocery chain store, without interacting with a human cashier, has seen the future of retail employment. According to the Bureau of Labor Statistics, there are 3.4 million people working as retail cashiers in the United States. Most of those jobs are also at risk.
What about agriculture? New robots are coming that can do anything a farm worker can do. As noted in this report, “Robot harvests on the horizon; farm owners predict machines will revolutionize costs,” a machine is now being tested that can thin lettuce shoots, a job that requires extraordinary precision and finesse. If machines can thin lettuce, they can do anything on the farm.
Manufacturing? Old news. Robots are on track to completely take over manufacturing. What about journalism? Can robots displace reporters? Read your local newspaper’s high school sports reports – but don’t be too sure a human composed the story, because many newspaper chains have already automated routine reporting. They crowd-source the data gathering with mobile phone applications, and let software applications produce more consistent, more comprehensive written coverage. By the way, how much would you like to bet on whether or not a robot can cook a better Big Mac?
Enough already. If you don’t think technology and automation in this era represents a fundamentally new phenomenon compared to the pace and impact of technological advances in previous centuries, I’ve got a bridge to sell you. Jobs are being relentlessly eliminated via automation. This is throwing highly skilled workers alongside semi-skilled and unskilled workers into a labor market where most of them will not find a new job that comes anywhere close to paying them what they used to earn in the job they lost.
And this is why public sector unions should be illegal.
The mega-trends of automation, globalization, plummeting birthrates and an aging population are not immoral or happening by design, they are simply parts of an inevitable phase of human evolution at which we find ourselves today. The stratification of wealth that attends these trends is the effect of them, not the cause.
How governments, America’s in particular, midwife today’s epochal transformations of human civilization must not be distorted by a government class who exempt themselves from the challenges facing everybody else. If government workers, through their unions, are permitted to make a separate bargain with the shrinking pool of wealthy global elites who benefit from automation and globalization, it will be mutually corrupting. Whatever political economy must emerge to enfranchise those billions who will otherwise become dispossessed by automation and globalization, it is not feudalism, nor fascism. The growing alliance between government employee unions and the ultra-rich is a recipe for both. We’ve learned from history the consequences of such choices.
Despite preaching the opposite, public sector unions, by definition, undermine the empathy that government workers feel for private sector workers. Because empathy between the government and the governed can only exist if every taxpayer funded entitlement, whether it is retirement security, or health security, or protection of civil liberties, is implemented and earned according to formulas and incentives that apply to every citizen equally – regardless of who they work for. To cite just one pertinent example, currently in the United States there are more total liabilities in the public employee pension funds – representing 17% of the workforce – then there is in the entire Social Security fund, representing everyone else. This is not a formula for empathy. This is not a valid social contract. And it is the result of collusion between powerful financial interests and public sector unions.
The technological advances that eliminate jobs at the same time as they empower the government and the super-rich raise profound questions: How will government evolve to enable or encourage improved economic security for all citizens? How will government evolve to craft and enforce environmental edicts? How will government evolve to combat crime and terrorism? What policies are adopted and how citizens accept them will depend in great part on whether or not government employees are making the same sacrifices and following the same rules.
To paraphrase Federico Pistono, robots will not only steal your job, they will watch you. The capacity of government to employ robots for police and military applications is without practical limits. Do Americans want a unionized government that protects itself, or a government staffed by people who are personally experiencing the same conditions as the rest of us? Which government might be more likely to equitably navigate the seismic, perilous, wondrous currents of this age?
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UnionWatch is edited by Ed Ring, who can be reached at email@example.com.