Published on: December 16, 2013
The End of Peak Blue
Productivity Up, Future Uncertain

Productivity increases are almost always a good thing, but this time, rising productivity hasn’t translated into more jobs or higher wages. This has happened before, but it wasn’t easy. Can we transition again?

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  • Anthony

    Future uncertain: complexly global context (life is full of surprises, both positive and negative).

    Economic crisis (capitalism’s creative destruction) opens the door to socio-economic change. You’ve written extensively about this transition and its opportunity. However for many young, this has been a transition emphasized by high unemployment and little income (wages). Imponderables remain even though productivity increases; but because Millennials have the long term play, transitional change positions them at cutting edge and may inure to their long range benefit (economic/work changes as they have a longer time horizon than other adults in the society).

    One last point: any socio-economic system needs constant modification and individually managing change “as best we can” sans institutional (societal) support can be challenging – next civil rights frontier perhaps.

  • Peripatetic

    “The key to restoring the link between productivity and wages so that the
    rising tide lifts more boats is to increase the demand for labor.”

    I agree with WRM but would like to see another essay expanding on this proposed solution for the following reasons:
    1) Doesn’t this equation only make sense if the labor pool remains the same size or shrinks as the number of jobs increases? Given current policies and cultural trends, why would we expect that?
    2) I wonder whether innovation leads to job creation in an “information economy” as it did in industrial economies. When you invent something new in the information economy, it seems you can *very* quickly corner the market in what you are offering because no material product has to be mass-produced, and, once clever code is created, it can be replicated 100 times or 100 million times without any large difference in the number of employees needed to sell the software. Call this the Google/Microsoft worry: we live in a country of over 300 million people…and yet the vast majority of people use one search engine and one word processing program. This isn’t a criticism of WRM…just a plea for some reassurance that the information economy will not be even more ruthlessly oligarchic and monopolistic than previous economies.

    • Kevin

      Strict IP laws may exacerbate this as they are used to raise rates of return on capital and squash competition which would drive these down.

  • A major challenge is the scale at which innovation is now taking place. Think of the industries of the 19th and 20th centuries – railroads, automobiles, aircraft, retail malls. These were all human-sized technologies that changed the landscape. They created huge ecosystems, employing hundreds of thousands of workers at many skill levels.

    As WRM ponts out, information technology is much better for the environment but that is because of its finer-grained scale. The new firms and industries don’t employ that many people. Where are the human scale jobs going to come from?

    Perhaps the best hope is the radical down-scaling and decentralization of the enterprise, enabled by technology like 3-D printing. One can visualize blue-collar jobs being repatriated from China etc. and being performed in renewed local communities. Whatever it is will take time…

  • free_agent

    The discussion is good so far… But what I don’t see addressed is any “macroeconomic” analysis of what were the changes and growth that enabled the industrial economy to become an enormous sink for labor. What seems to have been the turning point in the US is when Henry Ford invented a far more productive system (the assembly line) that forced/allowed him to pay his workers enough that they could consume its product. At that point, industrial production entered a positive-feedback loop. Though this wasn’t the first time that industrial workers consumed industrial products, since the workers wore machine-made cloth. But it seems to have been about the point that the workers became demand for the overall output of the factories they worked in.

    ISTM that the question is what is the new analog of mass-produced consumer goods? …the stuff that the IT industry produces that the masses are required to produce and also that the masses can consume in exponentially higher amounts than they now can?

  • rheddles

    The key to restoring the link between productivity and wages so that the rising tide lifts more boats is to increase the demand for labor.

    Or to reduce the supply of labor. And reduced birthrates world wide indicate that people figured that out without the benefit of top down direction.

    That’s the job that the Millennials face; they are one of the special generations in human history that must build a new world.

    The situation is a lot more challenging than this. When industrialization occurred, all the young people who would have been laborers in the fields became laborers in the factory. The need for laborers remained, but the location of labor changed. It was a problem for those early in their career as a field laborer who could not make the transition to factory laborer. But within 80 years (a lifetime) those who could not make the transition were out of the labor pool and things returned to equilibrium. An information economy does not need anywhere near the number or proportion of laborers as the factory or field except in unautomatable menial service jobs. It needs bright intellects. If your IQ is > 110 or 120, life will be OK (alphas and betas). But that leaves a lot of people for whom life will be less than OK (gammas, deltas and epsilons). And that will be a problem. I for one am glad I will not be in the transitional group that lives to see the solution as I suspect I would find it most objectionable.

    • There are plenty of information jobs that do not require a great deal of intelligence. We’ve just been socialized not to pay for the work to be done.

      • rheddles2

        TM, Can you document that? I can’t think of many and of those I can, most are susceptible to automation soon. Look at the medical transcription business.

        • Sure I can. For starters, there will be good work for some time just defining what government is, identifying KPIs, and setting up digital dashboards and reports for 21st century government oversight. Even with going on 100k governments, that will not last forever, but what will last is verifying that the digital oversight is measuring an actual reality and is not a fraudulent put up job. Secret shoppers of government services is not something that is currently that common but, again, 100k governments. There’s an unmet need there for what is essentially an information job. I’m pegging it at at least full time employment for 3-4 people per county average which puts just this job at 10k permanent employment. The jobs will be permanent because the crooks will be permanently innovating as well.

          Sensor deployment/monitoring/interpretation jobs are going to proliferate. These will likely not be full time but will diversify income and are unlikely to require high degrees of skill or intelligence. Your everyday average joe will do this just fine. I’ve no idea how large this sector will become because a lot of the underlying technology is just getting rolled out right now so it’s a little early to tell.

          • rheddles

            there will be good work for some time just defining what government is,
            identifying KPIs, and setting up digital dashboards and reports for 21st
            century government oversight.

            Sorry, this doesn’t sound like operating a drill press or shoveling manure. These are jobs that do not utilize sub 100 IQ individuals (half the population). Secret shoppers for government services is people digging holes and filling them up. Amazon does not use secret shoppers.

            Sensor deployment/monitoring/interpretation jobs are going to proliferate.

            Deployment? Once it’s wireless, it’s just screwing a clamp on a pole. That won’t take long to get nationwide CCTV coverage. ISR analysis will be quite automated within 20 years. Even now ISR is not where the military sends the sub 100 IQ recruits. It would be interesting to know where the military does draw the line.

            I suspect the future will be dim fo0r the dim.

          • Here’s a use case for a “secret shopper” for government service. Note times when snow plow came on your street. Cross check with government issued KPI of same. This doesn’t strike me as beyond the capabilities of the average joe. Is that a full time job? No, but neither is secret shopping. I’m foreseeing a future of a number of piece work and seasonal jobs that together end up earning a decent lifestyle with a comfortable retirement.

            I believe that Amazon.com actually does use mystery shoppers to test their customer service. How do you know that they don’t? The mystery shopping thing is generally held very close to the vest because customer service managers have an incentive to treat those people like kings and goose their ratings for big bonuses. In a similar way, government cannot be trusted to do such evaluations for itself because it has an incentive to deceive us and occasionally does to society’s detriment.

            Government deception is a major cost in our society and we haven’t even done the very basics necessary to combat it. Thousand grains of sand style intelligence gathering works very well and generally does not require a lot of IQ to work.

            Right now, we are at the phase where we don’t even have a reliable list of all governments. Nobody maintains a comprehensive one. Once such a list existed, you’d have to iterate through all of them to find out what these governments actually did and what their performance standards are. And only then could you start assembling the sort of KPI infrastructure to independently evaluate their performance that I am talking about.

            There are somewhat less than 13k public schools. We don’t even have a consensus what school is for. Here’s a video on that from Seth Godin https://www.youtube.com/watch?v=sXpbONjV1Jc that would be useful. The idea that we’re going to quickly get past that is… really optimistic.

    • Tim McDonald

      You missed a very important datum. As producitvity has increased, the labor participation has decreased, and more and more people are being supported by those who do work. So we are have real wage erosion, as compared to wages outpacing cost of goods and services.
      This is why people feel they are worse off year after year.
      This is the true cost of NAFTA, which works well between the US and Canada, but with the government controlled wages in Mexico, has not resulted in improvements for Mexican workers, but more and more wealth concentrated in the hands of the wealthy.

      • lfstevens

        It certainly has increased welfare in Mexico. It’s our export of the drug war that has cost them so much. Even if NAFTA were a bad thing, it is no way big enough to explain what’s happening.

  • The key thing that’s changed is that productivity growth has been exceeding GDP growth for most of the 21st century. Here’s a chart of the two with 5-year smoothing. Since productivity is basically GDP divided by total hours worked, a moment’s thought will show you that if productivity is growing faster than GDP, then hours worked has to be shrinking. Fewer hours, fewer jobs.

    Conventional wisdom says that this shouldn’t happen, because high productivity should lead to reduced costs, which should increase demand, which should lead to higher GDP. But demand has to saturate at some point. I’d guess that this would happen at the high end of the income scale sooner than it would at the low end. At some point, rich people simply can’t consume any more goods and services. Sure, they’ll consume more and more luxurious versions of those goods and services, but there’s a limit to how luxurious a lot of things can be.

    This may turn out to be the real problem with income inequality. There’s still plenty of potential demand at low incomes, but no money to allow the demand to be exercised. Meanwhile, too much money is going to where it can’t generate demand.

    The good news is that foreign demand is skyrocketing, which means that American companies have plenty of incentive to invest in automation to further increase productivity and drive prices down. At some point, really really cheap goods and services start to benefit poor people, even if they’re dependent only on government payments. Then you’ve got yourself a good old fashioned race between how fast productivity drives down prices and how fast it drives permanent unemployment.

    • Jim__L

      We need to encourage more competition in the sectors that generate the richest individuals — big finance, big software, etc. That would do more to resolve income inequality than any number of misbegotten, incompetently-managed government redistribution programs.

      All redistribution programs do is make the bankruptcy lawyers rich.

      • Let’s perform a little experiment: Suppose that we have a condition where, say, 30% of the labor force is permanently unemployable because they’re not capable of acquiring skills that will make their labor more valuable than the amortization on capital equipment for automation. Just go with me here for a moment–it’s a thought experiment. We’re talking ordinary, otherwise-middle-class, decent work ethic, averse-to-taking-government-aid workers who simply aren’t employable, for reasons having to do with, oh, let’s say magic.

        Under those conditions, what would you recommend as a policy response? Would guaranteed income (aka welfare aka redistribution) be on the table?

        Now let’s replace magic with automation.

        As I said to Peakview above, I’m perfectly willing to be convinced that my timing is off by a decade or two, and what’s happening today is more mundane, in which case I will agree with all the usual moral hazard and capital investment arguments about redistribution. But if we haven’t already reached the tipping point, it’s out there somewhere in the near future. I hope that there’s a better answer to the problem than redistribution. I just haven’t been able to think of one.

        • …Max…

          You’re stating the problem very correctly, I think. And what’s going to happen is, essentially, bottom-up eugenics. Even now the parents are investing lots of time and capital into future employability of their children but the more diagnostic (and then perhaps even engineering) tools are available to select for or enhance positive traits in the children before they are born, the more these are going to be used. Conversely, those without access to these tools — same as they have less ability to impart positive traits through nurture, social contacts and education — will be increasingly less employable in each subsequent generation.

          The choices are stark indeed: force people who they ought to marry and suppress family life as we know it? Let Morlocks and Eloi evolve and feed the Morlocks (or Eloi, your call) perpetually as they are incapable of feeding themselves? Let Morlocks (or Eloi) die out — or, more likely, marginalize themselves further and further economically?

          • That’s certainly one scenario. I’ve tried to stop talking about these simply because they’re a little too science-fictiony. Since you’ve goaded me into it, there are a few that are more probable:

            1) Massive population crash, either through generational attrition or through vastly more unpleasant means. This doesn’t really solve the redistribution problem, because you’ve still got a big percentage of the population unemployable, but the absolute number is more affordable.

            2) Lots of neural prostheses, getting everybody smart and/or talented enough to compete in the more esoteric areas of the economy that can’t be addressed with automation. Doesn’t solve the demand saturation problem, although you might argue that an enhanced individual has enhanced ability to consume.

            3) Global luddism. You can choose to stop automating. The problem is that the whole world has to choose it, and they won’t, because they’re less worried about unemployment than they are about being left behind.

            4) Good old fashioned Malthusian collapse. We escaped one Malthusian trap during the industrial revolution. That doesn’t mean that runaway productivity isn’t another such trap.

            5) And of course maybe high productivity enables a decent welfare state for a relatively small fraction of GDP. I don’t know what a society that isn’t based on work looks like, but I suppose we’ll figure it out. We always do, somehow.

          • Jim__L

            What we figure out is new jobs for the currently-idle to do, and we’re all the richer for it.

          • …Max…

            Yes, if it is possible. The initial “what if” argument is that automation proves to be cheaper.

          • …Max…

            (2) is attractive, but I very much suspect that my “bottom-up eugenics” is a lot closer to reality than that and is already starting to play out. (3) I don’t believe is even possible. (5) is exactly the Morlocks vs. Eloi, or “The Diamond Age” scenario. (1) and (4) are I think more or less the same thing.

        • Jim__L

          It really doesn’t matter whether you say “magic” or “automation” — your assumption of uselessness is unfounded either way.

          • “…your assumption of uselessness is unfounded either way.”

            Say more. What makes them useful? I’d be overjoyed to be convinced that I’m recto-cranially inverted on this whole thing, but you’re going to have to convince me that there’s some dynamic that permanently keeps the value of labor lower than the cost of automation, but high enough to be able to live on.

            I will concede that some jobs are not automatable, but I’m pretty sure that that number gets very small very rapidly. The old convention wisdom on this was that automation merely displaced workers into new industries for which automation was unavailable. But what happens when the new industries automate from the git-go?

          • “That’s the problem of government by philosopher-kings… when they can’t
            think of a solution, they assume the solution doesn’t exist, and
            couldn’t possibly be discovered by the hoi polloi.”

            I hope that I’m a member in good standing of the hoi polloi. If not, the letter must’ve gotten lost in the mail. But you’ve got the dynamic wrong. The hoi polloi generate solutions because public debate surfaces issues and then people try to find ways to make money off the issues. Last time I checked, this is what public debate looks like.

            You’re making an assumption that there’s always a solution that gets you back to full employment, because there always has been. But that only remains true as long as the foundations of the economy remain pretty much the same. My argument is that there are historically new forces at play here. I actually hope I’m wrong. I encourage you to at least think about what will happen if I’m right.

          • Jim__L

            In general, if you’re coming up with rules and regulations that the hoi polloi must follow, or how to spend their money after you tax it from them, you’re not a member.

        • Jim__L

          You do realize that removing social pressure for mothers to work outside the home would reduce our unemployment rate considerably, right?

          Unless you think that can be automated too, a la Invader Zim — “I love you, cold unfeeling robotic arm!”

          • Reducing the work force makes redistribution cheaper, but doesn’t eliminate the need for it. Take all the mothers out of the work force, and you remove some but not all of the people who are permanently unemployable.

            Actually, the one thing I can think of that robots are likely to be bad at for a very long time is human interaction. One of the ways to mitigate unemployment is to value high-touch service much more highly than we do today. Teaching, child-rearing, care-giving, and personalized service could be real growth industries, but the pay is currently lousy. I could see some minor cultural shifts that might cause us to value those occupations a lot higher. That might delay the problem.

            Of course, you put a high enough value on this stuff and you’ll stimulate a lot of research into strong AI. But the opportunities to use weak AI on almost everything are so huge that there’s an awful lot of low-hanging fruit to be picked before we go after the hard stuff (which turns out to be the soft stuff).

    • Peakview

      This is similair to the Bernake philosophy. It is exactly backwards for promoting employment. Interest rates need to go back to at least typical levels. Companies now substitute equipment for labor because the cost of money is so cheap. Not letting brief, sharp corrections to happen for twenty plus years is causing this slow-moving train wreck.
      Also, all “solutions” (getting out of the way of the entrepreneurs is the real solution) need to recognize that the US is still in the process of having its labor rates normalized with the rest of the world. We are not operating in a vacuum that US policy alone can address.

      • If nothing fundamental has changed, then I completely agree with you. But I think something historic is happening with productivity, and if that’s the case, we’re going to need to rethink a whole bunch of conventional wisdom. Reducing regulation is incredibly important. Clearing labor markets is incredibly important. Normalizing monetary policy is incredibly important. But none of those things is going to change the fact that it’s cheaper to automate than to hire labor. (Low interest rates make the case for automating even more compelling, but it’s plenty compelling even with higher rates.) And none of those things is going to change the fact that human demand is finite.

        I’m perfectly willing to be convinced that we haven’t yet reached the point where automation isn’t always cheaper than labor, nor that we’re seeing demand saturation. But they’re going to have to happen pretty soon. And the thing is, if these things are starting to occur, we’d see exactly this behavior out of the economy.

  • Charlie

    Do you not have an explanation for the phenomenon of rising productivity failing to push up compensation? Here it is.

    Toward the end of Bush’s last term, I read an interesting fact that in 1960
    (coinciding with the first time in my life I was paying attention to politics)
    5.25 percent of us worked for the (non-military) government at any level, that
    is, one person in nineteen. I went to the Bureau of Labor Statistics site and
    looked for current figures (when our employment happened to be at its peak). We
    had 150-million workers, 22 million of whom worked in government and 8 million
    in publicly-paid jobs in education, healthcare, research and the like, that is
    20 percent, or one in five.

    I was shocked. Even though I’d heard several times we’d grown government
    four-fold as a nation, I didn’t bother to think of the consequences until
    comparing the change in the ratio of public to private workers. [background: I
    was a venture entrepreneur in Silicon Valley who put together several business
    models and had a keen eye for operating ratios (and often bruises from not
    watching them closely enough)].

    In Management 101 you learn DO NOT GROW COST DEPARTMENTS. Cost units would be
    your corporation’s lawyers or janitors, for example, workers who do not produce
    earnings. They are simply a cost you have preferred to employ rather than pay
    to outsiders. The ratio of productive (earning) to overhead (non-earning)
    workers is a key one because the only source of money for the non-productive
    workers is the productive ones. A company with 60 employees including an overhead
    lawyer, secretary and janitor has 19 workers earning the money (in excess of
    their own salaries) to cover the compensation of the three non-earners. Replace
    just seven earners with non-earners and suddenly instead of 19 to one you are
    looking at a much more precarious and constrictive five to one as your key
    ratio.

    That is precisely what we have done as a nation, only worse. Public-sector
    workers very much fit the definition of non-productive (including those
    agencies known as “zero-cost” because fines and most fees are not ordinarily
    construed as productive income). Yes, they feel the tax bite, but, because all
    of their compensation derives from tax revenue, no new money enters the system.
    The best case you can make is that their tax money cycles in place. For my
    rough-calc purposes, I tend to zero them out because it is an extra expense to
    add as many new workers as we have been annually. Here’s how all of this plays
    out and why it is such a crisis-level constraint on the economy.

    In 1960, a public worker averaged 80 percent of the compensation of a private
    one. Over the entire last fifty years, we have averaged around 40 percent of
    income in total taxes. In other words, the taxes of two average taxpayers
    covers the compensation of the public worker. If you consider the public
    worker’s taxes as cycling in place, that leaves the taxes of 17 out of every 19
    taxpayers to go toward everything else. If you use my device of zeroing out the
    public worker, then 16 of 19 taxpayers’ taxes were available for the highway
    program, the space program, new schools for us Boomers, an occasional nuclear
    sub and all the other things we desire and expect from government.

    Now public workers average 120 percent of private
    ones (not counting some increasingly lavish bennies that only make this tale of
    woe that much more precipitous). So, it takes three taxpayers now to cover a
    public worker, but we only have four for each public worker. That means,
    depending on how you want to look at it, the taxes of somewhere between one and two taxpayers in five of us are available to go to the stuff we want from government
    rather than to the people who spend our money for the stuff we want.

    Guess what. That cannot be made to work anywhere in the world. It is the
    formula that accounts for our rapidly increasing reliance on debt, quantitative
    easing and vampire taxation. To show you how ridiculous it is, in 1960 with a
    ratio of two or three in every 19 contributing to worker compensation, that
    meant that taxpayers had to pay someone between 11 cents and 16 cents of every
    dollar spent on our behalf, or about 12 to 19 cents per dollar—right in line
    with most efficient corporations. Now it costs between 60 and 80 cents of each
    dollar. Given the formula for putting it on a per-dollar basis (cost divided by
    amount spent) that yields a cost to spend a dollar on our behalf between $1.50
    and $4.00!!! This is insanity and the reason that no stimulus, no tax cut, no
    tax increase, no priming, no nothing can move our economy. In nautical terms,
    we are all ballast with very little sail left. All ballast, no sail means we may be getting more productive at cranking the windlasses and hauling up the yardarms, but we’re not leaving a wake… we ain’t goin’ nowhere.

    You well know how we got here, I’m guessing. In 1960, Wisconsin approved
    public-employee unions, something even FDR had said could never be allowed.
    JFK, appreciating the boon that represented for his party, followed up two
    years later with an EO permitting federal unions. This crisis results from
    nothing more than fifty years of progressives sitting down with other
    progressives to negotiate staffing levels, hiring and compensation while
    Republicans failed to recognize there was any cause for alarm whatsoever. Yes,
    part of it was World War II psychology that government had produced prodigies
    and was a net positive, but in wartime, government is much more a line
    operation, less a staff operation as in peacetime. Doesn’t anyone in Congress
    have an MBA?

    You can see, we have done ourselves and especially our younger generation a
    huge disservice. What can correct the problem? Move the public-to-private
    employment ratios back toward 1960s levels. Tall order but it’s do or die.

    • kriskanya

      Well-put. In California alone, there is something like half a trillion dollars in unfunded liabilities related to government employees. And let’s not even talk about the federal level…

  • koblog

    “If absolute poverty is going to be defeated,…”

    The pipe dream of “defeating absolute poverty” is not going to happen because there is an unlimited supply of poverty.

    And should poverty be lessened, there are political forces in all countries — the Marxists in some, Democrats here, simple envy in others — that *want* people to be in poverty because they will vote for the Santa Claus-government that passes out a pittance. Bread and circuses.

    Difficult to accept, but power is so intoxicating that those that have it will do anything to keep it, even if it means impoverishing the very people they rule over.

  • Freddie Sykes

    RE: Making things worse, huge new fortunes were made both by the landlords
    getting rid of ‘excess’ peasants and the factory owners hiring workers
    (including children) for pennies.

    Prior to the agricultural revolution, 80% of workers were required for the production of food. This percent soon feel to 40% and continued to decline. The number of displaced workers rapidly soared as agricultural productivity increased while the cost of basic food stuffs declined.

    Compare the situations in Ireland, England and France.
    .
    The agricultural revolution in Ireland lead to unneeded peasants leading a hand to mouth existence on the edge of starvation and then into starvation when their subsistence drop failed. Their were no factories to absorb these workers. The population declined and has yet to recover.

    In England, miserable factory jobs were available to siphon off.these displaced farm workers. By Dickens time, standards of living had risen slightly despite decades of costly wars and at the same time when the population doubled. In passe eras, standards of living had always declined when the population rapidly grew..

    In France where the industrial revolution took hold slower and the excess workers were funneled into armies and wars.. Battles which had been limited to thousands or low tens of thousands of troops now were fought by armies containing up to hundreds of thousands.

    Once again we are face with a situation of excess labor. I think one partial solution. would be small businesses set up around producing quality goods to compete with the junk we often import. The big problem with this is that the government has made the environment for small businesses harder and harder with crushing regulations that only major corporations can afford to abide by. The biggest obstacle we face is the government and it cronies.

  • jmod46

    “The key to restoring the link between productivity and wages so that the
    rising tide lifts more boats is to increase the demand for labor”.

    That being the case, how will legalizing over 10M mostly low-skill “undocumented” workers and allowing them to join the job force help? More labor supply means stagnant wages and an increase in income inequality, doesn’t it? Just to be clear, I’m a fan of capitalism and I’m not racist, but every action has consequences, intended or unintended.

    • kriskanya

      It must be remembered that capitalism is not “zero-sum”. The employers value the labor of these workers more than the money in their pocket, and workers value the money over a different job or no job. Like all free-market transactions, it’s win-win. Put another way, they are trading value for value.

      Let’s say a Mexican “illegal” is hired to work on a farm at a wage he will take, but lower than you or I would take (e.g., $4 an hour). Absent coercion from gov’t, the worker is taking a job that will make him better off. The farmer benefits, because $4 an hour happens to be a point at which he can turn a profit, so he’s happy to pay it. The farmer can produce and sell his apples, and with the profit he makes, he can buy a new truck and a new laptop to help him keep his books, which helps Dodge and Dell expand production. And, he can put the rest in the bank and save it, which allows banks to lend it to other people. If the cost of the labor is too high for the farmer to take the risk, none of this will have happened in the first place.

      Illegals are undocumented and can therefore more-easily circumvent gov’t interference in the labor market. The problem is not the illegals themselves; it’s the gov’t intervening in the private contracts between employers and employees. If somebody is willing to take a job at a certain rate that the other is willing to pay (or not pay), the individual has that right—race or language has nothing to do with it. Millions of “unwashed” and unskilled masses came to the shores of the U.S. around the turn of the 20th century and were able to find work and garner skills because gov’t essentially stayed out of the labor market.

      I actually believe the starkest examples are on the higher end of the skills spectrum. We have people coming to school in the U.S., getting STEM masters and PhDs, and then our gov’t is telling them to go back to their country and create wealth whence they came. Even with the poor unemployment market, some estimates indicate that there are a million or more jobs going unfilled in the field of technology alone. Don’t get me wrong—I’m more than happy to trade with these people in other countries (and totally disagree with tariff barriers or domestic protectionism). However, it’s in my self-interest to have more educated, wealthy people in my proximity, with whom I can trade and interact.

      • jmod46

        kriskanya

        Your response was logical and well articulated. I agree with you that government interference in employment generally is counterproductive. However, we don’t live in that world. In an example of reductio ad absurdum, why don’t we simply allow open borders? What effect would that have on employment, income inequality, and productivity? I’m sure at some point (years, decades?) some kind of equilibrium would be reached and the overall effect might even be very positive. However, in your wildest dreams, can you imagine the political upheaval which would result from that policy in its initial stage? Not very pretty, I’m sure.

        I’m actually in favor of “immigration reform”, but I’m not confident at all our “public servants” can think beyond the next election. Wait, check. I know they can’t. So given the stakes, we need to think very carefully about how to go about addressing this problem. We don’t need another “crisis” to serve as a basis for political pork, cronyism, and corruption.

        To paraphrase Hayek: We know very little about what we imagine we can design.

  • disqus_w68SSulsX4

    In the public sector productivity must be declining. Can anyone doubt that K-12 education demands ever increasing inputs with ever declining results?

    • kriskanya

      A key point—government schools have been an abject failure at educating kids. In a world where more specialized, high-skill jobs are the surest way to the middle to upper-middle class, these institutions can barely teach kids reading, writing, and ‘rithmetic.

  • cloud_buster

    “if more people are going to be freed from repetitive, meaningless work,
    if humanity is going to have more time for art and culture because it
    spends less time in drudgery and toil, productivity must continue to
    rise.”

    I think Meade has an unreasonably optimistic view of human nature. The vast majority of people “freed” from repetitive, “meaningless” work are not potential artists or consumers of high culture. They’re folk of below average intelligence who are more likely to turn to sloth and cheap titillation.

    • Jim__L

      Online music retailers note that people who go to their site to get pop music find themselves in the classical section on a regular basis, and typically buy something while they’re there.

      Lowest-common-denominator advertising really does drive down the tone of public discourse. A little bit of the time, people are that way. Most of the time, most people aren’t. Their higher aspirations vary wildly, which is frustrating for advertisers, so advertisers just don’t bother anymore.

  • Mike55_Mahoney

    “…we should be thinking about how to manage the change as best we can, and how to accelerate the creation of new jobs in new fields as the old ones fade away. The key to restoring the link between productivity and wages so that the rising tide lifts more boats is to increase the demand for labor.”
    A 30 year old idea with nothing, virtually nothing to show for it. This is a parroted line out of the free trade talking points style sheet. The new jobs that have been createtd are in fields that either never required mass employment or were intrinsically suited to rapid productivity gains via technology. The collapse of economic bubbles, off shoring and outsourcing haven’t helped.
    Before we go around this bend again, let’s rethink the premise WRM is asking us to accept as dogma. Start doing that by accepting that the free trade economic model is the best there is. But don’t stop there. Ask the question: does it exist beyond simple expoundment? I contend it does not. I also contend it cannot. The corrollary is simply what Ludwig vonMises taught, possibly inadvertently, that humans will always endeavor to get an advantage by massaging the levers of government to upset the free trade model. This plain as the nose on your face, fact will always mitigate against these assumptions WRM has had to make to make his case. As a matter of fact, the quote above only functions as the free trade model is truncated in order to “manage the change… accelerate the creation…” He doesn’t even believe himself.

  • teapartydoc

    You want jobs? Start deregulating, and start with health care by ending licensing.

  • lfstevens

    While we can probably put today’s unemployed in developed countries back to work with appropriate monetary policy and structural reforms, it’s not clear that the money they will earn is enough to support their families. Thus, EITC and its less well-designed cousins. The fraction of people needing assistance to get over the self-sufficiency threshold has steadily increased since the Clinton tech crash of 2000. Given that the trend seems unlikely to reverse, what happens next?
    While wage subsidies appeal to my “don’t let bad policy slow growth”, minimum wage-hating side, they have to be paid for. This is a big problem, and I don’t know of a concomitantly big solution.

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