Dear Prof. Mead:
I’ve valued almost all your essays and introduced many of my friends to them, but this one seems to be written in a drowsy state of mind. The reality is that most of the “value added intermediary” jobs that you describe can be:
1. Offshored, as any seasoned offshoring expert will attest to. You’ll be surprised by what can be offshored through the combination of technology, the web, and re-engineered business processes (some parts done in US, some parts done offshore, all transparent to the customer).
2. Automated or commoditized through online analytics. Here again, analytics is getting smarter and smarter by the day.
3. Further commoditized by analytics and software developed offshore!!
Another consideration: If current government policies succeed in squeezing out the middle class beyond the tipping point,which seems to be the primary objective of our elected officials, there is no hope of a market for value-added intermediaries being created out of the earnings of the lower class. Your proposition is too influenced by middle/upper middle class behaviors we have seen over the last 50 years. The new lower classes will have no choice but to do what our esteemed Leader(s) tell them to do. But who knows, perhaps for them the intermediaries could become another vote bank or instruments of control.
Even if all 300 million of us in the US were to form a long round ring around the country and scratch each other’s backs (serve each other, consume, produce nothing), which is essentially what you are advocating, no real or productive value is being created. That is not the path to a prosperous economy.
Wake up, please. Coffee is on me!
With all these overemployed people with time on their hands, why don’t we reap the gains of productivity and work less. This would allow the overemployed to handle their basic life chores, and would provide some demand for the labor of the currently unemployed. Shorten the hours per week for workers and enjoy more vacation time. I don’t think your suggestions are anymore than niche industries which means the majority of us will be cleaning houses, mowing lawns and changing diapers for a wealthy overemployed class.
Mr. Mead, I appreciate your observations on the service economy but I would submit that we very much need a return to making things. Preferably things that foreigners want to buy. As far as I know, that is the only way wealth is truly created, by adding value to a raw material and making it into something more useful.
Local government will need to get out of people’s business for this form of neo-entrepreneurialism to truly prosper. Zoning regulations often forbid businesses from operating out of your home. Local ordinances sometimes forbid a vehicle with commercial markings to be parked in your own driveway overnight.
State and federal governments will also need to back off of micro-managing employers with mandates such as healthcare, workman’s compensation insurance, etc. which raise costs and discourage hiring. The majority of new jobs come from small businesses, which are being strangled by a hostile business environment at the hands of government that makes Ayn Rand’s “Atlas Shrugged” read like prophecy.
Great post as always, Prof. Mead
Turtles and termite grubs are not milk and honey.
I have often thought that as we become a service economy the arts would experience a boom at a local level, and create a local alternative to the international fame and celebrity. Art and entertainment has become a commodity and lost much of its talent along the way, I’ve been hoping these students who have talent but can’t get jobs will MAKE their jobs. Local theater, local movies, local concerts and art galleries supporting the talent in the area is perhaps in the tradition of the old guilds, but maybe the time has come to reinvent the local guild
You’re right on the money, Mr. Meade. These naysayers are who hold America back. We’ve come to a transition point in America where we must adapt or fade away. And offering solutions to problems for a fair price is the answer to the jobs problems as well as a shot in the arm to America’s declining spirit.
If people are freed from government shackles to come up with an idea to make things and life better, there is no telling how fast we can bounce back and how far we can go.
The two political parties have held us back by being proxies to party leaders and special interest groups who want to maintain their hold on power. We must deny their control by becoming independent thinkers with enough courage to push them aside so that the we American people can have to freedom to prosper. Jobs will come back when we regain the freedom and encouragement.
“we are developing a surplus of both educated and uneducated labor, making workers relatively cheap” does not appear to be a prescription for middle class revival. It may be accurate, but certainly isn’t very hopeful. How do these new types of jobs scale to replace the manufacturing jobs that employed millions of unskilled and semi-skilled workers; jobs that have been lost to a combination of technology and foreign competition. Old industries have traditionally been replaced by new industries as productivity in the old industries allowed them to produce more with fewer workers. The trick has been that the new industries were able to absorb the displaced workers from the old. I see no evidence (or even theory) that the types of jobs that Prof Mead discusses can ever scale to absorb those millions. It would be nice to be proven wrong.
Let Americans use their native talents and we can do anything (including make things!) Go to any foreign country and you will see low productivity due to government and private bureaucracy, lack of personnel initiative and featherbedding. Only very low labor rates make up on this. The US has allowed this type of cost to creep up to astounding levels (Obamacare is just the latest).
The other thing is a general downgrading of skilled labor in the US. Recently Bechtel was looking for qualified welders to work on Nuclear plant projects (Pay > $50/hr) Half of the applicants failed the drug test. This is not new. 30 years ago I worked in the summer for an importer of machinery in Michgan. They offered me as much pay to become an installer as I got when I finished my masters in Engineering. The reason was they couldn’t get reliable workers competing with the cushy Big 3 union shops. They went through two guys (both druggies) during my 3 month tenure.
So to the USA – Lower barriers to employment and reduce unnecessary costs, raise the social status of honest work, and hustle.
Wealth creation is not constrained to manufacturing tangible goods. In fact, making things that the market will not buy destroys wealth.
Consider the command economy experiments where government decided what and how much to produce. The result was surplus of useless goods coupled with shortages of necessary goods. The Soviets destroyed untold wealth.
Wealth is created when two or more parties exchange something of value, each gaining something of greater value than that they relinquished.
This need not be a good, it could be an intangible like time.
Services create value for consumers when the service received exceeds the cost of services rendered. And assuming the revenue generated for the service exceeds the cost of provision, it creates value for the service professional.
A lawyer provides value to a client not just in legal expertise, but by saving the client the necessary years spent acquiring that legal knowledge. The client is thus able to pursue other profitable pursuits with that time.
Some people fail to see how an economy could prosper while being chiefly constituted of services, but as the article points out, their cultural acclimation blinds them. They lack imagination, and will not be the innovators driving middle class prosperity in the future. They will not found the next Google or Facebook.
Professor Mead, you are absolutely 100% correct. Everything people are saying now–ever single thing–about the supposed irrevocability of our economic decline, was said in the late 70’s.
Except, that back then, the situation was far more dire, because there was no recognizable high-tech revolution (it was still in its infancy, and no one could possibly grasp what was about to happen) to revolutionize the productive efficiency and exponentially expand economic opportunity.
The lesson to learn from the late 70’s is that government must act as a steward to the economy, and not a dictator.
This argument is economically ignorant, as several previous commenters have pointed out.
(1) Most of these jobs can and will be offshored — ANY job that can be done with a phone & Internet connection WILL be offshored — or will be done onshore at offshore labor rates. For example, one can work in certain areas of the Philippines with excellent phone/Internet access and make a living wage (covering all expenses for a Western lifestyle) at $20/day.
(2) If our service jobs are all for each other in the States but we still export trillions for buying stuff from outside the States, then eventually our dollar will be so worthless that we won’t be able to afford the stuff from outside the States — in effect we will be a 3rd world country.
“we are developing a surplus of both educated and uneducated labor, making workers relatively cheap”
The article makes good point, but the significance of the quote above must not be lost. Cheap labor is another way of saying lower standard of living.
Professor Mead’s recommendation of “value added intermediation” is fine as far as it goes, but is he really suggesting the creation of artisanal cheeses and planning children’s birthday parties can serve as a substitute for manufacturing as the basis of a prosperous economy?
Has there ever been a nation that became economically powerful that way, or has trade and manufacturing always been the basis for great economic strength? I understand that Professor Mead thinks we need to be forward looking not backwards looking, but is it unreasonable to ask whether there is any evidence at all that Professor Mead’s recommendations made in this post are anything other than his idle speculation?
I can understand why Professor Mead recommends the model that he proposes here; it has worked very well for him personally. The “value added intermediation” that he provides is all about knowledge, especially political knowledge. That’s what this blog is all about and it’s what a number of his other ventures are all about. He writes for the American Interest, he serves as a college professor, he writes books and articles, perhaps (I don’t know) he is compensated for work on the lecture circuit or he shares his advice for pay with government agencies or private companies. One thing that everyone who reads this blog can agree on is that he is brilliant and he does an outstanding job.
It is pretty obvious that even if “valued added intermediation” hasn’t provided Professor Mead with the income of a hedge fund manager, it has afforded him a wonderful career that is stimulating, lucrative enough, and provides a great deal of freedom and satisfaction.
The question is whether what’s worked for Professor Mead can work for everyone.
My guess is that while new college graduates will be increasingly lured in the direction that Professor Mead advocates, for tens of millions of people this will never be a realistic option.
In 2009 (the latest information I could find) less than 40 percent of Americans had a bachelors or associates degree. Less than 8 percent had a master’s degree and less than 3 percent had a doctoral or professional degree. 14 percent had never graduated from high school.
Professor Mead has already told us in a previous post where the Americans who never finished high school are supposed to find jobs. He recommends zoning changes and other modifications to federal, state and municipal regulations to help these Americans find jobs in junk yards, small retail establishments and fast food joints.
Of course, when manufacturing was strong, this class of people could actually make a reasonable living; now, Professor Mead thinks we need to accept the fact that these Americans will be permanently relegated to minimum wage jobs.
I look forward to hearing where Professor Mead thinks the 60 percent of Americans who have graduated from high school but never completed college are going to find well-paying jobs in the future.
How many jobs for wedding consultants and interior decorators does Professor Mead think the American economy is capable of creating?
It seems to me that the United States needs to find a way to reinvigorate our manufacturing sector or our ability to remain the most powerful and enlightened nation on earth will quickly fade.
I don’t think fostering manufacturing in the United States is something that is impossible to do. As I have said in other comments, nations like Germany and Sweden have prospering manufacturing sectors that export to countries around the world and they manage to do so in a highly unionized environment. Japan’s manufacturing sector is healthier than ours and it thrives with unions that may not be as assertive as unions in Germany and Sweden but are at least as assertive as American trade unions.
What those nations have that we don’t is an industrial policy; what we have is a political class consisting of far too many leaders who think that Ayn Rand was a prophet instead of the quack that she was.
A nation of artisanal cheese makers cannot long maintain the largest armed forces in the world. Where will the world be if American greatness passes?
I think it will be a far more dangerous place but let’s take Professor Mead’s advice and look on the bright side. At least we will still have our yoga instructors to keep us limber.
Look at it another way: the US has been headed this direction ever since women entered the workforce en mass. Yoga instructors? Online Travel Counselors? These are not jobs inspired by or for men. These are jobs that skim the excess money that working women bring home.
Men lost more jobs during this current recession. Diversity, HR departments, government jobs, education, health care – all resulting from larger roles of government.
Not saying that I want women to not work. But let us stare the problem in the face: lots of undereducated men not working and building things means lots of social unrest.
As JoeP makes clear above, the underlying assumption in this article is that those who use the services Mr Mead promotes have jobs which provide them with the wherewithal to fund their purchases (middle to upper class incomes). Without jobs that actually produce materiel goods which can be sold on a world economy and bring revenues to this country and with a government which actively works against creating new industrial capacity or developing homegrown natural resources (oil, shale, gas, coal) due to ecologically driven concerns for “the planet”, there is no hope for an economic rebound.
Prof. Meade is right. Even assuming that manufacturing is on the decline in America – a questionable assumption (http://blog.american.com/wp-content/uploads/2011/01/mfg1-1024×772.jpg)- there will be fewer manufacturing jobs, and even those will require more skills. Most manufacturing will be heavily automated, and the only thing that machines will not be able to completely replace in the foreseeable future is quality control. This is why our industrial production is holding steady, while the number of manufacturing jobs is declining.
Prof. Mead identifies one possible solution. Another area that will need improvement is education. American public schooling follows the “Prussian Model:” developed in imperial Germany, whose primary objectives are to mold children into being the kind of docile, obedient, schedule-following workers needed for manufacturing jobs (and/or military/government service). If there are no more manufacturing jobs left, and “personal trades” are the wave of the future, then we’re going to need to re-tool our schools most of all. (I’ve often said that if every college and university “school of education” vanished overnight America’s schools would be much better off.)
A service economy to the rich? What rich? Even if SEIU forces thirty buck-an-hour janitor and bedpan washer wages, something has to be there to sustain it.
That sustenance can only come from the sale of goods and services to those who can afford them, and education towards the manufacture of unaffordable goods and services is as worthless as hair braids on a jackalope.
Please… There’s no middle class in middling jobs.
Interesting post, as always, Dr. Mead.
How many people work for Microsoft, Intel or Google? How many are working for contractors supplying logic, parts and marketing for the above?
Forty years ago no one anticipated these companies and the prosperity they now provide to millions of Americans.
Our fate is linked to innovation.
Therefore, our future is beholden to research/development and education.
I might also add (political correctness alert — some may want to shield their eyes) that it may be tied to testosterone. Men are risk takers (some women, too, but far fewer). It’s mainly men who act on bold ideas and outlandish assumptions. Men invent. Men push. Men want to crush their opponents and get the girl or slay the dragon.
Sometimes that testosterone leads to invading Poland, alas. But when it’s channeled correctly, it propels mankind (and the sisterhood) too, if I may borrow a phrase … to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.
We need men of vision (women, too, of course) to harness cold fusion, push nanotechnology to the nth, and invent things we can’t even dream of yet.
The first step is to get government off our backs. The regulatory morass is designed to kill the entrepreneurial yeast.
The second step is to reform education. Today, it’s acceptable to be a little girl in school. Boys are bad; girls are good. It’s no wonder that boys drop out. In college, young men are sexual predators and laggards; women are scholars. Again, it’s no wonder that male enrollment continues to decline.
OK, I’ve dragged my knuckles across the keyboard long enough. If I’ve offended anyone, sorry. After all, I am merely a troglodyte male with a “sloping forehead.”
I am optimistic, however, that we all will evolve … live long … and prosper.
I see the writing on the wall: it’s time I close my failing real estate brokerage and apprentice to a master Mexican leaf-blower or busboy.
Or convert your failing real estate brokerage to a relocation agency.
All to the well and good, if the middle class survives — I have maid-service twice a month, with my wife and I earning very unremarkable middle-class salaries.
Should the middle class be squeezed out, then this is simply a reversion to “wealthy” and “servant class” — a phenomenon well-known to anyone who’s spent any time in San Francisco or New York. Not a bright future.
Here is an interesting example of what I think Russell is talking about. It’s not just boutique services.
Apple Inc has created billions of dollars of wealth for Americans, very much including employees, and yet it does not make a single thing in the US.
The companies that physically make Apple products also make products from other companies, both American and foreign based.
But Apple is the company that makes most of the money in the sector, and the reason is the very hard work of the service component – the workers who design and engineer Apple hardware and software. These people are very highly paid. Jonathan Ive, Apple’s chief designer, makes about $2 million a year and is worth $120 million. Even a designer starting out at Apple makes $200k a year.
In the mean time, the actual manufacturing process is so unimportant, relatively speaking, that it is subcontracted to companies on the other side of the earth, whose employees work for laughable wages. These wages are high for their region and that’s why they are able to attract good workers. But not even a US-based McDonalds’ worker would work for so little.
Why doesn’t Apple Inc hire Chinese designers at $2 an hour? Because he would not get the results. Apple hires the best creative talent from wherever it lives, and creates synergies by having all top management in Silicon Valley, a major hotbed of innovation. This is expensive, but Apple would not get the design quality they do if it was located elsewhere.
Now, obviously Apple is a very special and unique organization, but it seems to me that creating innovative designs is a much more promising field than banging out widgets, something literally anyone in the world can do.
It indicates to me that the business services people who can inspire and create better products will have a bright future even in America.
Hope that helps.
@David Dennis – I’d agree the designer jobs are good ones, but I think only a very tiny fraction of people can really be good enough at this to participate on the world stage. Some of the wealth they earn will be spread to *some* of the rest of the population who can provide services to these elites, but surely it’s not enough to make much of a dent at the population level?
Your post is interesting but you are only working around the edges of an economy of the size and complexity of ours.
First your “intermediary” future is already here. Hundreds of thousands of people are already working in this area. It is not a brand new economic sector of the size and scale needed to replace what has been lost. And as several posts have mentioned, it is easily transportable overseas.
Until such time as the rising economies of emerging markets make the per capita GDP and income gains necessary to reduce their advantage in cheap labor, we must focus on industries and service sectors that cannot be sent somewhere else.
Currently the best example of an unexportable industry that can create jobs for huge numbers of the lesser educated is housing. The industry has been languishing for 4 years and counting. Government “fixes” to date have been totally counter- productive. The markets have not been allowed to work in a way that allows the sector to repair itself.
The health of these old fashioned sectors is absolutely necessary to bridge the gap between today and the future. New industries large enough to keep the economy thriving in the future cannot instantly spring out of whole cloth. They take time to develop.
This is not to say we don’t keep one eye on the future; but the other eye must be squarely focused on current reality. Mature traditional sectors must be allowed to operate and thrive without government interference which currently is not the case. The Obama admin seems to think that you can just add water and create a “Green” utopia based on technologies that have not even been invented yet,while concomitantly sending the EPA out to harass solid industrial sectors. (Anyone see the irony of this harassment on the very industries that are among the last bastions of Obama’s friends in the industrial unions?)
Economies evolve…you cannot wave a magic wand to create instant change based on utopian ideology. As we have seen you end up with the dystopian opposite of high unemployment, bankrupt governments threatened downgrades etc.
We do manufacture things. Our manufacturing economy alone is larger than Germany’s whole economy. But the manufacturing is increasingly being done by computer-controlled machines. Over the last 30 years or so, manufacturing output tripled, but manufacturing employment only doubled. That is what increasing productivity means.
Automation and computers not only kill assembly line and clerical jobs, they also kill professional jobs. Look at any engineering office of 30 years ago and you will fine most of the engineers doing calculations by hand and most of the draftsmen drawing by hand. All this has been automated, and those jobs are permanently gone.
Anyone who thinks we can increase employment by more STEM education is deluded. You will be training people for jobs that don’t exist. Eventually the number of manufacturing jobs in the economy will be as small as the number of agricultural jobs is today.
All of this is happening in other manufacturing economies, including China.
The same thing has happened to law firms and brokerage companies.
The idea that the work week should be shortened has some merit. What is needed is to find some way to share the enormous output of modern industry among the citizens of the country.
Once more I find this article to be a combination of happy talk and magical thinking.
If a manufacturing town loses its only factory, that town becomes a ghost town. No yoga lessons. No artisanal cheese. Maybe government cheese if you’re lucky.
When the U.S. loses 50,000 factories, there is no money coming into the U.S. to support service businesses. Americans are going to be lucky to afford food, clothing, and shelter.
American elites will probably have to die off or be completely replaced before America’s leaders accept the truth that wide-open importation of goods from Asia and the financialization of the U.S. economy have been nation-destroying failures. They think that they will be saved by yoga and artisanal cheese. That is pure wishful thinking.
I believe that the British already went through this phase. It was called “going into service.”
Welcome to the “Upstairs/Downstairs” economy. Practice tugging your forelock when the masters pass by.
Your most recent entry is perhaps one of the most astute looks at the changing landscape of the second industrial revolution and the analogy of recognizing this world’s new economic and employment fodder. But what intrigues me the most is the reaction, many negative, to you pointing out our present shifting realities.
More than anything, many of the counter augments to you hypothesis demonstrate how deeply entrenched many are in the old, dying paradigm and how affective politic speech can be to obscuring facts. Two of the most aggrieves examples in the comment thread are JoeP and Fred McDermott MD, who implore us to believe that only if we made things we would have a perfect economy, full employment and all would be right with the world. The problem with their assumption is it is not pinned to anything factual.
America still makes stuff, more than any single country of the world. According to 2007 United Nations statistics, America accounted 24.7% of global manufacturing and that America’s output has tripled since the 1970s. So we still make stuff and will make more stuff, however manufacturing will not save the American middle class. Why? Because manufacturing does not need the American work or the German worker or the Chinese worker for that matter.
As has been the trend for going on more than a century, manufacturing is becoming less and less labor intensive. The mechanization of the factory floor has relegated the assembly line worker to the ash bin of history. It is no different than what has happened for more than 200 years on the farm; the acreage that once took a family of 10 to make fertile can be taken care of by a father and son now. And no matter how much JoeP, Fred McDermott MD, blue state politicians and union boss promise the land of milk and honey through making stuff, it will never come to be.
Is your vision, Prof. Mead, the future of the country? Time will only tell, but it is certainly a more realistic look at how to tackle the changing landscape than many of your detractors. But the naysayers are in a difficult position. Their circumstances are not too far off what Thomas Khun foresaw for adherents of old, unworkable theories in science — they can either accept the new paradigm or parish with the old.
Thank you Prof. And keep up the good work,
Dr Meade, I recently found your blog and have enjoyed reading it. Myself, I am fairly optimistic about our economic future (long term, not short term). I think the idea that we absolutely must sell lots of “stuff” to other countries to maintain our economy is rather dubious. First off, just like we can sell each other services and information, we can (and do) sell services and information to other countries. We have a trade deficit right now because our primary trade partners (the Chinese) would rather keep our money and use is for a stable currency in their economy, than spend it it here. My opinion is that the local services model that Dr Meade proposes is likely one, of many, emrging opportunities. Here are some other likely growth sectors:
1) Commodities Industries: Commodity prices, especially food, are rising globally. The American farmer and agribusiness (Monsanto, Deere, etc) will likely continue to be a strong point. This is something we can export, especially if we can break down trade barriers overseas. This will also include very good prospects for food products sector. Businesses like Kraft foods.
2) Energy: We are sitting on a ton of Natural Gas and Coal, much more than folks realize. We import oil because its cheap, but that will change. Even new drilling techniques are leading to more oil now (TX shales are greatly expanding). This will give us an edge in the future, especially in the chemicals and pharma industry, as we have access to cheap feed stock and a available workforce. Other countries with cheap access to natural gas are in severe labor disadvantages for the most part. We will also naturally wean ourselves off imported oil as private companies figure out ways to exploit the relaitve $/BTU gap that will widen between foreign crude and domestics gas/coal. Over the next 50 years, American enterprises will benefit from retooling us from a petrol to electric/natural gas economy.Our energy cost will moderate or at least grow more slowly than competitors like China that will be buying crude to fuel its expansion.
3) Manufacturing. Oh yes, the Chinese can’t manipulate their currency forever and a weaker dollar will give opportunities for American manufacturing abroad. Imports will become relatively more expensive and home based manufaturing will still have its niche in the new economy. Productivity will continue to increase, so manufacturing job #’s may continue be very flat while manufacturing revennue will probably greatly increase (fewer per captia employed making more each). This will flow into the services industries as well compensated manufacturing technicians and management will have money to buy the services being provided from others, like Dr Mead’s trip planners.
4) Recycling: The garbage man of tomorow will be a vastly more productive employee than the best miners from anywhere in the world. Why smelt ore from a mine when you can recover almost pure metal from the trash. Check out how many drudge articles in the last week are related to metal theft. There is a huge demand now, and our wasteful ways are actually a huge opportunities for a business model that will produce usefal raw materials from what we pay to get rid of evey day.
That’s just a few things that come to mind. A village CAN exist completely on its own without selling a speck of stuff to the next village. We don’t “need” to export anything to survive. We only do so because its more beneficial to us, and that won’t change anythime soon or force our village into oblivion.
BTW, Rome is a perfectly good example of a world power that did not owe its greatness to running a huge trade surplus based on manufacturing. Just because the Brittish Empire was built on extreme mercantilism doesn’t mean that only viable economic model for a great nation is to exploit tons of cheap materials from dependent trade partners and then manufacture them into finished goods at home. Later yall.
One thing Professor Mead fails to note is that all those people he hopes will find careers through “value added intermediation” will work for themselves or in very small businesses. This means it will be difficult or impossible for the workers in these new ventures to procure health insurance.
Unless you are 65 and thus eligible for Medicare, individual or small group coverage is simply prohibitively expensive except for the very wealthy. In many cases, it is impossible for a person who works for himself to find any health insurance coverage at all.
In New York State, where Professor Mead lives, group coverage in a typical HMO or PPO for a family of 4 averages around $1,200 per month; the same policy procured on an individual basis averages around $2,800 per month. Anyone who wants to look up the figures themselves just needs to go to the New York State Department of Insurance website.
The cost of health insurance alone makes Professor Mead’s theory untenable. Of course, things may get better. The health insurance reform legislation that President Obama got Congress to pass, guarantees that individual coverage will become available at rates that approximate group rates. This is accomplished through the creation of insurance cooperatives.
Of course Republicans opposed health insurance reform and if left to their own devices, would make sure that individual insurance coverage would remain permanently unaffordable. Unless I’m mistaken, Professor Mead also opposed Obama’s health insurance reform legislation.
Like so much in our economy, private health insurance coverage is at the heart of the problems afflicting American workers.
Unless health insurance is fixed, Professor Mead’s theory about “value added intermediation” will remain a pipe dream
“Yglesias pointed out that there will be a rising demand for personal services. . .”
True, the potential demand for a new class of household servants to service the personal needs of the well-off is virtually unlimited. If nothing else they could become status symbols the way Lincoln described the entourages of African-American slaves who followed their masters around.
More to the point, I think it is an error to refer to the number of jobs. The real issue is always wages. Lower wages enough and employers will start substituting labor for capital.
We may see fewer robots in automobile factories for example. Don’t laugh. The lowest cost combination of labor and capital is always the deciding factor, and the demand for labor is virtually unlimited if wages fall far enough.
Thus, instead of investing their savings in productive capital the rich will — or could — build more and bigger mansions, maintain more yachts around the world, etc. Employ more servants in other words.
But more likely we will just more labor and less capital in our most labor-intensive industries. That’s what trade theory predicts. It also predicts a long-term balance of trade, which means an expansion of employment in our exportable goods and services sector. That is where I would put my money. Look at the machine tool industry for example.
The video at the otehr side of this URL is related to your notion of progress (though you may have already seen it): http://www.youtube.com/watch?v=0FB0EhPM_M4
I love all of this nostalgia for manufacturing jobs. Have any of the commenters here ever actually worked at one. They’re not that great. There was a short (20-30 year) time frame where the pay and benefits (driven by union contracts that didn’t work out very well for the companies that signed them) were above average, but they were still repetitive, in many cases dangerous and in the long-term replaceable with automation.
How is a personal services job any less “class-driven” than clocking in and clocking out working in a manufacturing plant where white-collar bosses made more money and enjoyed more perks?
Before manufacturing, most jobs were agricultural. Again, all of the nostalgia for the family farm forgets that the labor was back-breaking and families were often one bad harvest (or locust swarm) from near starvation.
Job markets change. And many jobs are tedious and difficult. That’s life.
Oh, and I forgot to mention: cutting the workweek in half would double the number of jobs. A nationwide program to build a lot of New Towns in the Country could employ millions.
Of course this is assuming that is assuming people would like to live this way.
Two commenters talk about working less. Europe already does this, with far more vacation time than we get in the U.S. It does prop up employment, but slows growth and profitability. If anything this approach would drive jobs to places where companies could get more production per employee. It doesn’t work.
The simple truth is that we must brace for the fact that our standard of living, relative to the rest of the world, is moderating. On average the young will not do better than their parents. Prof. Mead is correct that there are many, many unfilled jobs and potential businesses that can be created. There is a massive shortage of computer engineering talent, which is iflating salaries. Yet every year we graduate millions of liberal arts majors, ill equipped to take advantage. I’d start there and shift almost all financial aid only to math and science degrees. Then get the SBA to really do its job and educate people on the businesses they can create (including ebay stores etc.). Too many people are waiting for their old job, and often it is never coming back.
“We have wandered into new and unchartered economic territory. Manufacturing jobs, once the mainstay of American middle class, are hard to find…. It looks as if we are trapped: globalization is killing job growth in the tradable sector and we can’t all work for the government or healthcare…. That could not be more wrong.” One answer is value added intermediation.
Concept value added intermediation as idea mitigating middle class economic malaise going forward, with U.S. demographic trends indicating more megapolises, may promise economic possibility for some; but in a country where the majority are, for all intents and purposes, employees and void of investment assets value added intermediation becomes job category seeking a market – how much is to be paid for various services? what happens when clients, customers are dissatified and seek monetary redress? what form/affect does radiation of control take vis-a-vis intermediation? how does unorganized, unskilled, and low paid employees fit into new schematic?
Value added intermediation provides a beginning; but since most Americans own nothing more than their household goods and a few modern gadgets (cars, SUVs, trucks, Ipads, Ipods, computers, etc.) recognizing radiation of control via capital (capital has command over vast resources that radiate through value added intermediation industries/markets) and its complexity for new ventures will avail an additional measure to weigh value added intermediation as mediation vehicle – not just employment opportunity under different name – for floundering U.S. middle class. Then, we may aquire more comfort in this “strange new land we’ve reached.”
“money rich and time poor” — nice phrase. Mind if I use it?
Dr. Mead, what are you smoking? Matt Yglesias? The guy who saw the world ending because GWB was President now thinks I’m going to remodel my kitchen more often because St. Obama is ruling us? That guy? A source of anything? Puleeese.
You ask where the jobs are and supply service jobs as the answer?
Every “Rosy Future” job you mention (vacation planner — ha) grows up around an industry that makes real wealth.
Wealth is created when you put a shovel into the earth and add sweat and genius. All the other ancillary jobs like custom cheese, new kitchens and all the other Yglesias wet dreams flow from that.
Take away the industry and you get Detroit. Add industry and you get Texas.
Your original premise is correct: the U.S. is losing manufacturing jobs. Unfortunately, you did not widen your field of vision sufficiently. EVERY SINGLE WESTERN ECONOMY is losing manufacturing jobs. In fact, CHINA has LOST more manufacturing jobs since 2000 than the U.S.: 4.5 million vs 3.3 million. Clearly, to dream of a “program” to grow manufacturing jobs is the equivalent of a “program” to grow agricultural jobs. That barn door is open and all the horses have long since fled. It would be the equivalent of trying to turn the clock back by lowering productivity and wages by dumbing down technology.
Now does a “program” of “value added intermediation” provide a solution? It doesn’t seem that that “service” provides a path to job growth. In fact, you seem to be implying, with the example, that Mom & Pop stores are going to challenge Wal-Mart and the big box outlets for retail market share! We are now in an era of personal and household deleveraging and inflation + growing tax burdens. Where does the disposable income come from to “intermediate” the basic purchases that will be all the middle class will be focusing on – food, transportation, shelter, clothing, and security. In all these area either “intermediation” has begun or the nature of the need is such that “intermediation” is difficult.
At least 7 million jobs have been lost since “The Great Recession” began. I simply fail to see how “intermediation” services will restore even a small share of these, bring those who have abandoned the work place back in or meet demand from new entrants into the working age population.
I applaud you for a series on the future of employment and must say I look forward to reading it. Most of your ideas in this first post I notice are for people blessed with above average intelligence. Nothing wrong with that. Society can’t function without them!
But what about those not born in Lake Wobegon? They make up half our population after all. I hope you will try to imagine their opportunities in your future posts.
While you are at it and before you write off the likelihood that many of them will find jobs in the manufacturing sector, please consider the advantages of part-time factory work from the employers point of view. The argument is made in notes iii through vii and is documented with some real world examples in notes viii through xi.
It’s not literature but I would love to read your reaction.
These jobs, all of which are intriguing and certainly opportunities, can, nonetheless, only be supported by the tangible wealth created by mining, agriculture and manufacturing. We cannot create an economy where we all trade back massages for tax preparation. Someone has to feed us and sell us the materials for shelter.
As the rest of world becomes developed, what will happen? I think that, if we are smart, manufacturing jobs will come back to this country along with many others too. But what does “smart” look like? It looks like business friendly: a reasonable and predictable regulatory environment, laws that most people can understand most of the time and low taxes. But what do I know? I just work for a living.
Remember the TV series ‘Upstairs, Downstairs’
about servants and the Upper Class sharing a
home in Victorian England ?
That is one way to solve our socioeconomic
problem; The majority of us can become the
servants, or the slaves, of the productive
_OR_ the US could become the source for
leading-edge Hi-Tech manufactured goods, designed and made in the USA and not available elsewhere.
James, echoing Mr. Mead, said at 2011-07-29-1033 that “Wealth is created when two or more parties exchange something of value, each gaining something of greater value than that they relinquished. This need not be a good, it could be an intangible like time… Some people fail to see how an economy could prosper while being chiefly constituted of services, but… their cultural acclimation blinds them… They lack imagination.”
But as “stuff” says with more perspicacity at 2011-07-29-0824, “Turtles and termite grubs are not milk and honey.”
Most people, and particularly modern Americans, require large numbers of material goods to perceive themselves as enjoying wealth, or even basic well-being. These goods are the products of advanced technology and the sophisticated logistical, manufacturing, financial, and political infrastructures which permit this technology to be employed on a massive scale. But they are first and foremost physical artefacts. If we ourselves do not manufacture these artifacts, but nonetheless desire to obtain them, then we must offer some good or service which the manufacturers will themselves desire to obtain through trade. When considering local personal services in this light, we must ask what their exchange value will be in terms of these artefacts (presumably mediated by some form of money). How many iPhones will a factory owner in coastal China offer in exchange for personal yoga instruction or college-admissions advice to be delivered (in English and in a culturally American manner) in Peoria, Illinois? If no one who wants these inherently local services is actually a producer of artefacts, then no new artefacts will enter the local area — except by charity or theft.
There are some services that can be globalized, and there are Americans that can and do offer them. But the rest cannot obtain their desired artefacts by trading services to this tiny proportion, or by trading services to each other. Some outside this tiny proportion will obtain the artefacts by selling natural resources, rather than artefacts, though high labor costs and other cultural and regulatory restrictions make this relatively difficult in a Westernized economy. Many, many states around the world exist to demonstrate that the production of globalized services and natural materials do not suffice to obtain advanced technological artefacts and infrastructure for a large population over a large area.
Put simply, Mr. Mead’s article offers a falsely hopeful interpretation of a phenomenon which will inevitably lead to the gradual impoverishment of the Westernized world, absent immense (and immensely unlikely) political and cultural change.
I would add to what WigWag (and others) wrote that I am currently looking for one of those unemployed people to help get my house ready to rent or sell. Must be handy with a caulking gun and paintbrush and willing to wash windows since I have a right shoulder in need of Medi-care, and am still waiting.
My dilemma is that in this idyllic Hilltown adjacent to the Pioneer Valley, no one can be bothered to consider my offer, especially since I think the pay rate should be less than $20/hour for such tasks, and I have had enough people scream at me that no less than $40/hour will tempt them.
And, I am stuck with a very affordable pre-war co-op in the North Bronx, and completely unable to find a lawyer who will deal with the man who will only talk with a lawyer. I paid one $2,500 in 2010 only to find I was paying for him to listen to the Managing Agent lies, and the time to repeat those lies back to me. I can not sell or rent or even walk away legally because NO lawyer will deal with this man who breaks the law because he can.
Manufacturing Matters, and I really wish academics and politicians would stop deluding themselves with visions of post-industrial service utopias.
Like JoeP, I have valued many of your essays – but not this one. You write about people being “money rich and time poor,” but there are many, many more people who are both money poor AND time poor. And they are unlikely to make a living making custom cheese.
I like your essays, Mr. Mead, but I have to ask: why must we have an economy that excludes manufacturing? The forces that contributed to our abandonment of manufacturing were polical, and the way I understand it, anything government has done, government can undo.
NAFTA and GATT were curious animals, the product of Progressive elites who love nothing more than to engineer our society instead of allowing it to flourish organically. They are possessed of the psychological malady that compels them to control other people.
There is no reason for us to ignore our own economy which is still the world’s largest. We should be making our own computers and cars and washing machines here on our shores. The move towards a global economy has not as its goal the enrichment of other counties through greater freedom for their people, it seeks to dismantle ours for redistribution to the rest of an ungrateful world. We would do well to withdraw from it and concentrate our efforts on a robust American economy with a diversity of jobs for Americans.
Millions of American jobs have fled America.
America is no longer a safe haven for commerce – it is run by a Marxist now and the jobs that have gone will never come back.
That’s what you get when you elect a Marxist – the poor take over and kill the country.
Until Obama is kicked out more and more jobs will flee America – there is nothing that can stop this…………..
Add to the list of tomorrows’ jobs the education of VAIs (value added intermediators)
Late night TV commercial:
Announcer: (loudly and enthusiastically)
You can get your certification in value-added intermediation from home in your spare time!
(list scrolls from bottom of screen towards top)
certified value-added travel intermediator
certified value-added college selection intermediator
certified value-added personal/family communication plan intermediator
certified value-added electronic purchases intermediator
certified value-added health care system intermediator
certified value-added insurance intermediator
certified value-added school system intermediator
certified value-added financial decisions intermediator
certified value-added home retention intermediator
certified value-added special needs intermediator
certified value-added birthday planner intermediator
In all of the discussion about lost jobs, I find the below to be strangely lacking; perhaps I have just missed it?
It seems that one of the largest issues with job losses is this: Relatively fewer people exist. For us to continue to grow our economy – to create jobs – presupposes a continued growth in employable human beings, right? But as the Boom retires and the Echo ages, there are millions and millions fewer people. Anecdotal: Five years ago in my town we had three Little League leagues… and six elementary schools. We now have two LL leagues and five elementaries. And I’m in a suburb of Los Angeles, not the flyover rural agrarian hinterlands.
This is fundamental demographics – the kind Steyn always discusses. But it also leads to the inescapable conclusion that many of the lost jobs will NOT come back as there are no people here to take them.
We can pretend that all these jobs can come back with the right policies, and we can pretend that we need to grow X-million jobs/quarter to reach the level of jobs we had 10-15 years ago, but that’s just fantasy. Most of the jobs that have left are not coming back… and it’s not just because of policy and cost. It’s also because there are too few workers here.
The other intriguing thing is this: Our policy folks – the legislators in Congress and the States, and the various Governors and the Pres don’t seem to understand that the Industrial Revolution is, for the Developed world – OVER. We talk about – this article discusses – the Information Age, but our policies – unions, unionized teachers, an education calendar styled on the Agrarian Age (for cryin’ out loud; how many really driven, smart people only want to work 10 months a year? consequently – only “the dregs” are in the education system – and that’s an observation made years ago by the Dean of the BC School of Education), all are designed for the Industrial Age. Unions are an artifact of the Industrial Age. Democrats don’t get this because they cannot exist absent union “donations,” having run-out of ideas in the 1930s, and Republicans seem to stunned by being in the majority that they seem unable to articulate, well, anything at all (like why they are negotiating with themselves instead of playing hardball with the Dems).
I’m kind of a political junkie and spend LOTS of time reading columns, articles, etc. I don’t see the two above issues being addressed… but am not sure why…
Box turtles are not a good idea for a lunch items. One of their favorite foods is the Amanita Muscaria mushroom which they find a delectable woodland treat. The turtles are immune to the toxins in the Amanita, which permeate their system and make them a potentially deadly meal for a human. There are documented cases of such poisonings. This is why the box turtle has remained fairly common in West Virginia and the rest of Appalachia.
I would submit that we very much need a return to making things..
“We” still make about as much as we used to. Robots do most of the work. A “return” to making things (we never left) will not do much good.
More engineers and designers might be good though.
@ M. Simon: You are completely right. The US manufactures more than ever; it just doesn’t take many people to do it. In the future we will make even more stuff and use even fewer people to do it.
I worked in manufacturing (and may still again). It is not offshoring it is machines. Those jobs are never coming back.
Machine intelligence doubles every two years. Humans are losing ground except in areas requiring judgment. Engineering. Design. Marketing campaigns.
There is another name for “value added intermediation;” colloquially, workers who voluntarily or involuntarily take on the type of work that Professor Mead recommends are called “freelancers.” The problem is that in most cases, “freelancers” experience downward as opposed to upward mobility.
Numerous Fortune 500 companies are actually encouraging the move to freelancing by laying off clerical and accounting workers and then “hiring” them back (or hiring people with similar skills) to do precisely the same work but without benefits. These new “value added intermediators” lose their sick and vacation pay and they lose their health benefits. After all, that’s precisely the point; they cost corporate America much less because these freelancers are left to fend for themselves if they get sick and need to go to the doctor or the hospital.
While this movement may look appealing to society’s winners like Professor Mead, it looks alot less appealing to a person hired as a temporary worker without benefits who ends up doing the same work that they previously did as a full-time employee.
The treatment of Freelancers has gotten so appalling in New York, that a highly successful “Freelancers Union” has been formed. Perhaps Professor Mead sees their advertisements when he travels of the F subway train; they actually advertise extensively.
The Freelancers Union offers health insurance (at relatively competitive rates but nothing like the group rates offered by real employers) as well as other types of insurance benefits. In addition, they lobby for fair tax rates for Freelancers; in New York, freelancers pay an onerous extra tax that almost no one else pays called the Unincorporated Business Tax. Recently they’ve successfully lobbied for state legislation that makes it a crime to fail to pay freelancers for work that they’ve done.
More information on the Freelancers Union can be found here,
Not all “value added intermediators” are single proprietors or small businesses; in fact, some of the largest companies in America are getting into this business.
A very good argument can be made that the financial industry in America was saved from oblivion after the savings and loan crisis by the advent of disintermediation in financial markets. Former Goldman Sachs partner and current NYU Finance Professor, Roy Smith, makes precisely this argument in his book, “Comeback: The Restoration of American Banking Power in the New World Economy, Harvard Business School Press, 1993”
But after a period of disintermediation in the financial industry that began in the late 1980s and early 1990s, banks began to follow Mead’s advice in the first years of the 21st century and offer value added intermediation services to their clients. One result was the mortgage crisis.
As soon as banks stopped issuing mortgages for their own accounts and instead decided that mortgage origination was the value added service they could provide to those who wished to own the mortgages in securitized form, mortgage lending became far more irresponsible.
Allowing banks to become value added intermediators was disastrous for the American economy.
This doesn’t mean Professor Mead is wrong in suggesting that value added intermediation is a trend worth watching.
But it does mean that this trend is not entirely positive.
We can grow all the food we need with 3-6% of the population. We can manufacture everything we need with 10% of the population. We have all the resources we need to support ourselves. Self sufficiency is ours…so there is sufficient cause for Meadean optimism.
What about the rest of us? Over 60% of us are supplying highly professional to low-education-requirement services to each other. Entrepreneurialism is very much alive. Just take a look at the bulletin board at your local yogurt place. Perhaps these entrepreneurs could be fostered with microloans (as in 3rd world countries).
I really worry about the bottom 25%. These are people with problems such as mental health, physical and mental disability, psychopathy, low general-mental-ability, lack of conscientiousness, alcoholism, and drug addiction. They now live in prisons, mental institutions, halfway-houses, public housing, shacks, and on the street. Many probably can’t be helped much, but some can, through educational, religious, and medical programs.
A big problem as that the jobs in the high-tech agriculture and manufacturing jobs aren’t going to go to marginal players who can be rescued from the bottom 25%. Nor are they going to be competitive at getting most of the jobs in the service sector which require at the very least conscientious in the form of reliability. We need to think more about how to manage the bottom 25% in a way that allows them to live with dignity and participate in saving themselves without becoming an overwhelming burden to the other 75%.
As for the balance of trade issue with the Chinese, I have always thought of it as a combined Wilsonian and Hamiltonian project to bring China into the modern world peacefully. If someone could just develop a computer simulation showing that in a world of free-traders the mercantilists eventually lose big, it might convince the engineering-oriented party elite to give it a rest. Perhaps some of our pro-global warming scientists could be recycled to this project. They can make anything happen with a computer simulation.
On the other hand, if a more convincing econometric showed that we couldn’t win against a big-time mercantilist, we could just shut them down because we don’t really need them. Don’t worry be happy… and creative.
The Chinese can’t build your deck or remodel your bath.
Furthermore, the number of jobs that could be created by destroying our K12 education monopoly is astronomical. People are willing to pay for education, but are now forced to pay for an army of mediocre teachers and even more worthless district administrators.
All one needs to do is go to a large home school or charter conference to see the industry of Education services waiting to be born.
Kill the school district, give birth to a new knowledge industry, all paid for by dramatic property tax cut and pink slipped administrators ( who deserve to be on the bread lines they’ve helped to populate.)
Economics is not a hard science, that is pretty obvious. People, including the experts, cannot agree on first things. Compare that to physics (but not climate science!).
Nor is it a branch of pure math given that the welfare of a society so obviously depends on the economic policies its government adopts.
So if neither a science nor a branch of pure mathematics, what does that leave? Just politics? An art? A logic? A combination of logic and art whose aim is the material welfare of a society or of certain classes within it?
WigWag is good.
The force is strong with you, Luke!
OK, maybe weather science and economics are more like flawed belief systems than science, but we still need an answer to the Chinese balance of trade question. What about gaming? Gaming and scenarios seem to work well for the military. Suppose you created a game with currency traders, economists, industrialists, diplomats, politicians, and maybe some military on several opposing teams. Let them play out various scenarios and see what sort outcomes and problems occur. After a few iterations with different sets of players the outcomes might start to fall into familiar patterns. I would be surprised if something like this isn’t being done already.
There’s a reason why it’s called Capitalism, it’s because Capital is what fuels it.
Most new jobs are created by small businesses and entrepreneurial activity. These are mostly funded with home equity, which is unavailable with the continuing home deflation of the last few years. And the other sources of job creating investment capital are being crowded aside by the $2 Trillion a year in Government borrowing at the Federal, State, and Local levels.
In order to get new jobs, either the Government hog must be pulled away from the trough, or homes must appreciate in value. I recommend both, and there is a way to do this, I’m just not going to tell you how.
The fear of America’s decline has become exaggerated by our recent economic troubles. We should not forget that this seems to have happened during just about every other historical period of downturn. And although the 24-hour news cycle may have exacerbated the shrillness of the debate, it does seem that something else has happened. That something is the “rise of the rest” as Zakaria calls it. America’s power has not so much waned as others have caught up, and why shouldn’t they?! Yet also important to all of this is that our own expectations have outpaced what is reasonable to expect in the first place.
As the beginning of this article states we must realize that we have lived beyond our means and cannot perpetuate it. I know kids on financial aid at college whose parents are major contributors to their yacht club and others who cannot afford to pay for summer classes but have iPads. Ultimately we need to start making tough choices and realize we cannot have everything. When we remember that thrift is a virtue, our situation may not seem so dire after all.
There are plenty of jobs in hotels and resorts. Check out hcareers.com for a listing of hundreds of opportunities.
I like working in the sales and catering part of hotels. Travel, work with event planners, and it’s fun and pays well. I started at ecornell.com and aprinda.com
“As the rest of world becomes developed, what will happen? I think that, if we are smart, manufacturing jobs will come back to this country along with many others too. But what does “smart” look like? It looks like business friendly: a reasonable and predictable regulatory environment, laws that most people can understand most of the time and low taxes. But what do I know? I just work for a living.” The world has moved on as the world gets smaller, the days of milk and honey are a thing of the past jewellery quarter birmingham