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Kicking Out the Coders Is Not a Good Way to Reform Immigration – Article by Jeffrey A. Tucker

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Categories: Business, Politics, Tags: , , , , , , , , , , , , ,

The New Renaissance HatJeffrey A. Tucker
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Coding is a job you just can’t fake. Your stuff either works or it doesn’t. You can either do the job or you can’t. So ranking people according to skill is much easier. It’s a profession that is intensely competitive, and clearly not for everyone.

I can remember so well sitting around the lunch table with some employees at Google’s headquarters. Forty-five minutes in, everyone started getting antsy to get back to work. In the blink of an eye, they disappeared to get back to their desks. They are profoundly aware that performance is everything, and other great performers are ready to displace them at anytime.

Because the US is the world center of digital tech development, the demand for high-level coders has never been higher. Companies who employ workers don’t give a flying fig about your nationality. They want your talent now, from wherever you hail.

The Way In

US immigration policy has long accommodated this demand through a program called the H1-B, which pertains to skilled workers. The program permits 65,000 people with a college degree, and 20,000 with higher-level training, to work in the US for three years, during which time they can apply for green-card status. It is a harrowing life for those chosen, but it is better than being on the rejection list.

Each year more than a quarter of a million people from abroad file applications, some as thick as six inches. The chances of getting picked are good enough to keep hopes high but bad enough so that no one banks on getting in. And guess who picks the winners? It’s a lottery. A computer.

The whole system is ridiculously irrational, cruel, and self defeating, even if you believe in an America First immigration policy. Denying talented people jobs, infringing on the rights of businesses to hire whom they want, is an innovation killer. It causes the US to lose its competitive advantage, lowers economic growth, and denies all of us access to cool innovations that would otherwise make our lives better.

Even for the many critics of immigration, this program should pass muster. These people are not security risks. They aren’t going on welfare. They have the strongest possible incentive to acculturate, obey the law, and contribute mightily to American enterprise. What’s not to like?

The Way Out

So, yes, the program needs dramatic reform: it should be expanded many times over. However, the worst way to reform it is to restrict the program. In fact that seems unthinkable. And yet, we are learning with the Trump administration that nothing is unthinkable. Restricting the number of coders who have access to the H1-B program is exactly what the government is doing right now.

In recent days, immigration authorities announced a seemingly small change in what applications will be considered valid. No longer will coding be considered a “specialty occupation.” Further, the Justice Department announced that it will be conducting close investigations of tech companies that rely on the H1-B program for its coders. They are looking to make sure that companies are not denying Americans jobs in the search for quality candidates.

On the first point, this is a completely arbitrary administrative change, enacted without any Congressional vote or public comment. It’s the very embodiment of an independent bureaucracy run amok and acquiescing to political pressure from the regime in power. As for the investigations, here is a clear example of a hard truth: restrictions on immigration ultimately give more power to the state to oppress its own citizens.

What’s especially bizarre here is that this program has absolutely nothing to do with the nightmare scenarios of teeming masses of pillaging, raping terrorists pouring in across leaky borders that formed the basis of Trump’s anti-immigration rhetoric during the election. He did criticize the H1-B program in passing but most observers figured that he was once again out on his usual limb, speaking on issues about which he knew nothing.

What’s more, there is not even a job displacement issue here. If Google wants to hire a programmer from abroad, it can do so with the H1-B program or simply by contracting abroad (which is not currently restricted, thank the Lord). As an American citizen coder, with whom do you want to compete? A foreign resident making $200K or a foreign worker paid $100 an hour? The former represents a much higher cost to American business, so the arrangement gives the greatest possible advantage to existing citizens. (Special thank you to FEE president Lawrence Reed for making that point to me.)

In the first months of the Trump presidency, we’ve yet to see any action on health care or taxes, two issues that drove millions to the polls to vote for him. But on immigration, there’s been plenty of action. The bureaucracy is on overdrive, denying visas, keeping out qualified workers, instituting new forms of country exit controls, and even mandating forms of extreme vetting that could compromise your own communications with your friends in Europe and the UK.

On this topic, there seems to be absolute focus. But to what end? Success will only lead American business to be less competitive, less innovative, less able to forge a brilliant future for all of us. What is the goal here? Just to keep people out? How can anyone truly believe that this objective alone is a path toward greatness?

Even for critics of immigration policy, the H1-B program represents the right kind of immigration. It is about skills, invitation, and the right of business to employ the most talented people. Something has gone very wrong with an administration that seeks to dismantle something that should obviously be dramatically expanded.

Here’s a final issue that irks me. Government is demanding the most extreme forms of vetting, investigation, and compliance on the part of business, even as no one is more affected by labor choices than business itself. But as for itself, the government is completely satisfied with the most random system of all for selecting who gets in and who is kept out. Government has outsourced its job to a pair of dice.

Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books. He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. Read the original article.

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The Good News They’re Not Telling You – Article by Thomas E. Woods, Jr.

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Categories: Economics, Technology, Transhumanism, Tags: , , , , , , , , , , , , , ,

The New Renaissance HatThomas E. Woods, Jr.
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As we look at things that impress us technologically we also have a certain trepidation, because we’re told that robots are going to take our jobs. “Yes, the internet is wonderful,” we may say, “but robots, I don’t want those.”

I don’t mean to make light of this because robots are going to take a lot of jobs. They’re going to take a lot of blue collar jobs, and they’re going to take a lot of white collar jobs you don’t think they can take. Already there are robots that can dispense pills at pharmacies. That’s being done in California. They have not made one mistake. You can’t say that about human pharmacists, who are now free to be up front talking to you while the robot fills the prescription.

Much of this is discussed by author Kevin Kelly in his new book The Inevitable, with the subtitle Understanding the 12 Technological Forces that Will Shape Our Future. It’s incredible what robots can do and what they will be able to do.

Automation Really Is Taking Our Jobs

To me, just the fact that one of Google’s newest computers can caption a photo perfectly — it can figure out what’s happening in the photo and give a perfect caption — is amazing. Just when you think “a machine can’t do my job,” maybe it can.

What kind of world is this we’re moving into? I understand the fear about that. But, at the same time, let’s think, first of all, about what happened in the past.

In the past, most people worked on farms, and automation took away 99 percent of those jobs. Literally 99 percent. They’re gone. People wound up with brand new jobs they could never have anticipated. And in pursuing those jobs we might even argue that we became more human. Because we diversified. Because we found a niche for ourselves that was unique to us. Automation is going to make it possible for human beings to do work that is more fulfilling.

How is that? Well, first let’s think about the kinds of jobs that automation and robots do that we couldn’t do even if we tried. Making computer chips, there’s no one in this room who could do that. We don’t have the precision and the control to do that. We can’t inspect every square millimeter of a CAT scan to look for cancer cells. These are all points Kevin Kelly is trying to make to us. We can’t inflate molten glass into the shape of a bottle.

So, there are many tasks that are done by robots, through automation that are tasks we physically could not do at all, and would not get done otherwise.

Automation Creates Luxuries We Didn’t Know Were Possible

But also automation creates jobs we didn’t even know we wanted done. Kelly gives this example:

Before we invented automobiles, air-conditioning, flat-screen video displays, and animated cartoons, no one living in ancient Rome wished they could watch pictures move while riding to Athens in climate-controlled comfort. … When robots and automation do our most basic work, making it relatively easy for us to be fed, clothed, and sheltered, then we are free to ask, “What are humans for?”

Kelly continues:

Industrialization did more than just extend the average human lifespan. It led a greater percentage of the population to decide that humans were meant to be ballerinas, full-time musicians, mathematicians, athletes, fashion designers, yoga masters, fan-fiction authors, and folks with one-of-a kind titles on their business cards.

The same is true of automation today. We will look back and be ashamed that human beings ever had to do some of the jobs they do today.

Turning Instead to Art, Science, and More

Now here’s something controversial. Kelly observes that there’s a sense in which we want jobs in which productivity is not the most important thing. When we think about productivity and efficiency, robots have that all over us. When it comes to “who can do this thing faster,” they can do it faster. So let them do jobs like that. It’s just a matter of — so to speak — robotically doing the same thing over and over again as fast as possible. We can’t compete there. Why bother?

Where can we compete? Well, we can compete in all the areas that are gloriously inefficient. Science is gloriously inefficient because of all the failures that are involved along the way. The same is true with innovation. The same is true of any kind of art. It is grotesquely inefficient from the point of view of the running of a pin factory. Being creative is inefficient because you go down a lot of dead ends. Healthcare and nursing: these things revolve around relationships and human experiences. They are not about efficiency.

So, let efficiency go to the robots. We’ll take the things that aren’t so focused on efficiency and productivity, where we excel, and we’ll focus on relationships, creativity, human contact, things that make us human. We focus on those things.

Automation Really Does Make Us Richer

Now, with extraordinary efficiency comes fantastic abundance. And with fantastic abundance comes greater purchasing power, because of the pushing down of prices through competition. So even if we earn less in nominal terms, our paychecks will stretch much further. That’s how people became wealthy during and after the Industrial Revolution. It was that we could suddenly produce so many more goods that competitive pressures put downward pressure on prices. That will continue to be the case. So, even if I have a job that pays me relatively little — in terms of how many of the incredibly abundant goods I’ll be able to acquire — it will be a salary the likes of which I can hardly imagine.

Now, I can anticipate an objection. This is an objection I’ll hear from leftists and also from some traditionalist conservatives. They’ll sniff that consumption and greater material abundance don’t improve us spiritually; they are actually impoverishing for us.

Well, for one thing, there’s actually much more materialism under socialism. When you’re barely scraping enough together to survive, you are obsessed with material things. But, second, let’s consider what we have been allowed to do by these forces. First, by industrialization alone. I’ve shared this before, but on my show I had Deirdre McCloskey once and she pointed out that in Burgundy, as recently as the 1840s, the men who worked the vineyards — after the crop was in, in the fall — they would go to bed and they would sleep huddled together, and they basically hibernated like that for months because they couldn’t afford the heat otherwise, or the food they would need to eat if they were expending energy by walking around. Now that is unhuman. And they don’t have to live that way anymore because they have these “terrible material things that are impoverishing them spiritually.”

The world average in terms of daily income has gone from $3 a day a couple hundred years ago to $33 a day. And, in the advanced countries, to $100 a day.
Yes, true, people can fritter that away on frivolous things, but there will always be frivolous people.

Meanwhile, we have the leisure to do things like participate in an American Kennel Club show, or go to an antiques show, or a square-dancing convention, or be a bird watcher, or host a book club in your home. These are things that would have been unthinkable to anyone just a few hundred years ago.

The material liberation has liberated our spirits and has allowed us to live more fulfilling lives than before. So, I don’t want to hear the “money can’t give you happiness” thing. If this doesn’t make you happy — that people are free to do these things and pursue things they love — then there ain’t no satisfying you.

Tom Woods, a senior fellow of the Mises Institute, is the author of a dozen books, most recently Real Dissent: A Libertarian Sets Fire to the Index Card of Allowable Opinion. Tom’s articles have appeared in dozens of popular and scholarly periodicals, and his books have been translated into a dozen languages. Tom hosts the Tom Woods Show, a libertarian podcast that releases a new episode every weekday. With Bob Murphy, he co-hosts Contra Krugman, a weekly podcast that refutes Paul Krugman’s New York Times column.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

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Our Economic Malaise Is Impacting Young Workers the Most – Article by Ryan McMaken

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Categories: Economics, Tags: , , , , , , , , , , , , ,

The New Renaissance Hat
Ryan McMaken
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In the wake of the 2007-2009 recession, 78 months passed before employment returned to where it had been before the crisis. This was, by far, the longest period needed to recover from job losses in decades. The second-longest period needed to recover jobs occurred after the 2002 recession when about 50 months were needed to recover lost jobs:

economic_malaise_young_people_1

Moreover, we see that in recent cycles, job growth during each recovery has been getting weaker and weaker over time:

economic_malaise_young_people_2

Some observers of the rose-colored-glasses-wearing variety have attempted to explain away the most recent malaise in job gains by claiming that fewer jobs are needed because so many Baby Boomers are aging out of the work force, and because people are so much wealthier, they argue, workers are leaving the labor force for non-economic reasons. That is, people are leaving the labor force for reasons other than being discouraged workers.

These claims are plausible, but the empirical data we have does not support them.

Keep in mind that ever since the 2007-2009 recession, the U-6 unemployment rate, which includes underemployed workers (i.e., involuntary part timers) and discourage workers, has reached multi-decade highs in recent years, and even now, is only at levels seen during the worst of the last recession:

economic_malaise_young_people_3

This is not simply a matter of fewer jobs being created because workers are going away.

To get a sense of the situation, we have to first look at the demographics of the working age population and the labor force.

(This demographic data on the working-age population is only currently available through the first quarter of 2015, so the time series ends in early 2015.)

economic_malaise_young_people_4

The top line is the total working age population (ages 15-65) published by the OECD and the World Bank. According to this measure, there is no decline in the working age population.

If people were aging out of the work force in droves to the point of driving a net exodus, we would see a downturn in the blue line. We don’t see that. In fact, from the beginning of the last recession at the end of 2007 to the first quarter of 2015, the working age population increased by 7.5 million people.

During that same period, the US economy added 801,000 jobs. That is, after the initial loss of 10 million jobs, the US economy began to add jobs again, but after more than seven full years, had only added a net of 801,000 jobs.

But maybe only 801,000 jobs were added because very few of those 7.5 million people wanted to be in the work force.

Well, it’s a safe bet that not all of them wanted to be in the work force, but we do know that using the standard BLS measure for the work force that 2.4 million people entered the work force during the period when only 801,000 jobs were added. (See the green line above.) That means over that time period, you had 1.6 million new people in the labor force while half that many jobs were added.

And this labor force measure only takes into account active job seekers and employed people. It ignores discouraged workers and involuntary part timers.

So we find that both the official labor force and the working age population were increasing at levels substantially above the employment levels.

Indeed, the only way we can find a number that suggests more jobs were added than workers is to look at the working-age population for ages between 25 and 54. That is, if we exclude all potential workers under 25 and all above 54, then yes, the working age population did decline by 1 million jobs. (See the red line above.)

In real life, though, the work force includes quite a few people who are, say, 22 years old, and quite a few who are 60 years old. If those people are included, the working age population is growing considerably.

Meanwhile, workforce participation has been falling for a number of years, and is now at some of the lowest levels that have been seen in more than 30 years. From 2014 to 2016, work force participation ranged from about 62 percent to 64 percent. That’s the lowest participation rate seen since the the early 1980s.

economic_malaise_young_people_5

Many have assumed this means that many older workers are leaving the work force. Unfortunately, it seems that it is young workers who are most likely to leave the labor force, which is problematic for future productivity. For young workers in the 20-24 age range, work force participation has been falling for more than a decade, and fell off significantly during the last recession:

economic_malaise_young_people_6

Meanwhile, labor force participation for 55-and-older individuals has held steady:

economic_malaise_young_people_7

It appears unlikely that it is now unnecessary to add jobs at a rate comparable to past recoveries because so many older workers are leaving the work force. Nor is it likely that young people are leaving the work force because they are so prosperous. It’s more likely that young people are leaving the work force as discouraged workers.

This supposition is further strengthened by the fact that the unemployment rate in the 16-24 age range has been above 10 percent for the past nine years. It was especially high even before the last recession.

But, unemployment among over-55 workers is among the lowest of all demographic groups, with a rate between 3 percent and 4 percent in recent years.

In other words, older workers are sticking around and doing relatively well. It appears that younger workers, meanwhile, are more likely to be unemployed, underemployed, or even totally out of the workforce as discouraged workers.

One phenomenon that gives us a reason to think this is the fact that the number of young people living with their parents has reached historic highs in the United States. As Pew recently reported:

In 2014, for the first time in more than 130 years, adults ages 18 to 34 were slightly more likely to be living in their parents’ home than they were to be living with a spouse or partner in their own household.

Living at home is more likely for men than for women, but in both cases, more young people are living with their parents than during any other period since World War II:

economic_malaise_young_people_8

Those who attempt to spin the current job numbers as simply the effects of people happily leaving the work force appear to be mistaken in assuming that older workers are leaving, and that younger workers need not work because they’re so unusually productive.

If young workers were so productive, is it too much to believe that they would choose to rent an apartment rather than live with their parents?

Once we look a the demographics behind the current job numbers, we actually find the situation is more alarming that we might have thought otherwise. We seem to be in a situation where younger workers are participating in the work force less, and putting off acquiring essential job skills that will lead to more productivity later.

Older workers are still sticking around in numbers large enough to keep the overall labor force number growing.

However, while both the working age population and the labor force are growing, overall job creation simply is not keeping up.

At some point, those 30-year olds living with their parents are doing to need full-time work, but will they have the job experience necessary (and thus the productivity) necessary to support the lifestyle to which they have become accustomed?

Or, will they simply enter the workforce with few job skills following a decade of part-time work or no work forced on them by our weak economy? When that happens, we’re likely to see a continued decline in the household and personal incomes.

Ryan W. McMaken is the editor of Mises Daily and The Free Market. He has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre. 

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

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How the Education System Destroys Social Networks – Article by Jeffrey A. Tucker

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Categories: Education, Tags: , , , , , , , , , , , , , , , , ,

The New Renaissance HatJeffrey A. Tucker
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I was at a restaurant for lunch and had time to visit with the waitress, who turns out to be a college graduate from a good institution. She has a degree in European languages. Here she is waiting tables with nondegreed people, some five years her junior, some 10 years her elder.

She is making good money, but so are her co-workers. You have to wonder: given her position, what was the professional advantage to her of those four hard years in school and the $100K spent on them? What were the opportunity costs?

This is not another article to disparage the value of a college degree. I would like to raise a more fundamental question. It concerns the strange way in which our education system has overly segmented our lives into a series of episodic upheavals, each of which has little to do with the other, the value of one accomplishment being oddly disconnected from the next stage, and none of them directly connecting to our professional goals except in the unusual case.

From the earliest age until adulthood, we’ve been hurled from institution to institution in a way that eventually sets young people back from developing continuity of plans and a social support system to realize their goals. At the end of it all, people find themselves back where they started: figuring out their market worth and trying to find a buyer for their services.

Instead of drawing down on accumulated capital, they end up starting fresh at age 22. Even after years of building social capital, they are drawing down on a nearly empty account.

There is something seriously wrong with this system. Shouldn’t our investments in our friendship networks extend across and beyond the stages of our development to make more of a difference in our lives?

The post-graduation diaspora

In a couple of months, for example, many millions of high school students will graduate. Celebration! Sort of. It’s great to finish school. But what’s next?

Many students find themselves devastated to lose the only social group and friendship network they’ve ever known. They worked for years to cultivate it, and in an instant, it is blown apart. They are left with a piece of paper, a yearbook of memories, a transcript, and, perhaps a few recommendation letters from teachers — recommendations that do them little good in the marketplace.

“Don’t ever change,” they write in each other’s yearbooks. The sentiment expresses a normal longing to hold on to the investment the students make in each other’s lives, even as everything about the system tries to take that investment from them.

Is this the way it should be?

Then, the same group, or at least many among them, look forward to college, where they are mostly, again, starting from scratch in a social sense. It can be very scary. College students begin their new experience isolated. They work for another four years to develop a network — a robust social group — to find their footing and to establish both a reputation and sense of self. This is the only world they’ve known for years, and they have invested their hearts and souls into the experience.

The social fabric ends up rich and wonderful, with intense friendships based on shared lives.

Finally, after four years, the graduation march plays, the tassel is moved from one side of the cap to the other, and the whole social apparatus goes up in smoke — again. Then, another diaspora.

Once again, students find themselves nearly alone, with few hooks into the world of commerce and employment. They have a degree but few opportunities to monetize it. Their social network is of limited use to them. All they have, yet again, is a piece of paper. Plus they have recommendation letters from professors that still do them little good in the marketplace.

This not always the case. There are workarounds, and digital networking is helping. People join fraternities and social clubs, and those can be useful going forward. But it might take years for these connections to yield results. The more immediate question is this: What do I do now? Lacking a broad sense of the way the world works, and missing any influential hooks into prevailing networks, a college grad can often find herself feeling isolated once again, starting over for the third time.

The failure of the central plan

This is the system that the civic culture has created for us. For the years from the ages of 14 through 22, students’ primary focus of personal investment and social capital building is centered on their peers. But their peers are just the same as they are: hoping for a good future but having few means to get from here to there.

Why does this keep happening? Looking at the big picture, you can start to see a serious problem with the educational system politicians have built for us. It is keeping people “on track” — but is it a track that prepares people for the future?

A core principle of the education system, as owned and controlled by government, is Stay in school and stay with your class. This is the emphasis from the earliest grades all the way through the end of college. The accidents of birth determine your peer group, your primary social influences, and the gang you rely on for social support.

To be “held back” is considered disgraceful, and to be pushed forward a grade is considered dangerous for personal development. Your class rank is your world, the definition of who you are — and it stays with you for decades. Everyone is on a track as defined by a ruling class: here is what you should and must know when. All your peers are with you.

Many factors entrench this reality. The public school system is organized on the assumption of homogeneity, a central plan imposed from the top down. It didn’t happen all at once. It came about slowly over the course of 100-plus years, from the universalization of compulsory schooling, to the prohibition of youth work, to the gradual nationalization of curricula.

In the end, we find the lives of young people strictly segmented by stages that are strangely discontinuous. Where are the professional contacts that result? Where are the friends who can smooth your way into the world of professional work? They aren’t among your former classmates. Your peers are all in the same position you are in.

Laws that lock people out

The workplace might help to mitigate this problem, but it’s incredibly difficult for young people to get a regular job thanks to “child labor” laws that exclude teens from the workforce. For this reason, only one in four high school kids has any real experience outside their peer group. They miss all the opportunities to learn and grow that come from the workplace — learning from examples of personal initiative, responsibility, independence, and accountability.

There are extremely narrow conditions under which a 14-year-old can find legal employment, but few businesses want to bother with the necessary documentation and restrictions. A 16-year-old has a few more opportunities, but, even here, these young people can’t work in kitchens or serve alcohol. The full freedom to engage a larger community outside the segmented class structure doesn’t come until after you graduate high school.

By the time the opportunity comes around to do authentic remunerative work, a student’s life is filled with other interests, mostly social, but also extracurricular. Instead of working a job, people are doing a thousand other things, and there seems to be no time left. It’s not uncommon for people to graduate with no professional experiences whatsoever to draw on. Their peers are their only asset, their only really valuable relationships, but these relationships have little commercial value.

How natural is any of this?

If you look at the social structure of homeschooling co-ops, for example, younger kids and older kids mix it up in integrated social environments, and they learn from each other. Parents of all ages are well integrated too, and it creates a complex social environment. The parents know all the kids and, together, they form a diverse microsociety of mutual interests. This is one reason that homeschooled kids can seem remarkably precocious and poised around people of all ages. They are not being artificially pegged into slots and held there against their will.

A better way

When you read about the experiences of successful people in the late 19th century, they talk of their exciting and broad experiences in life, working in odd jobs, meeting strange people of all ages and classes, performing tasks outside their comfort zone, encountering adult situations in business that taught them important lessons. They didn’t learn these things from sitting in a desk, listening to a teacher, repeating facts on tests, and staying with their class. They discovered the world through mixing it up, having fabulous and sometimes weird experiences, being with people who are not in their age cohort. They drew on these experiences for years following.

The system to which we have become accustomed is not of our choosing, and it certainly isn’t organic to the social order. It has been inflicted on us, one piece of legislation at a time. It is the result of an imposed, rather than evolved, order. Why wait until age 22 to get serious about your life?  Why stick with only one career choice in the course of your appointed 40 years in professional life? Why retire at the young age of 65, just because the federal government wants you to do so?

Think about this the next time you attend a graduation. Are the students shedding only tears of joy? Or, in the sudden mixture of emotions, is there also the dawning realization that they are witnessing the destruction of a social order they worked so hard to cultivate? Are they also overwhelmed with the knowledge that, in short order, they will have to recreate something entirely new again? Where is the continuity? Where is the evidence of an evolved and developing order of improved opportunities?

The most important question is this: What are the alternatives?

Bring back apprenticeships. Bring back remunerative work for the young. Look beyond the central plan, and don’t get trapped. Rethink the claim that staying in school is an unmitigated good. Find other ways to prevent your heavy investments in others from dissipating; ensure instead that they will pay more immediate returns. Our friends should remain in our lives — and yield a lifetime of returns.

Jeffrey Tucker

Jeffrey Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email

This article was originally published on FEE.org. Read the original article.

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Yes, We Still Make Stuff, and It Wouldn’t Matter if We Didn’t – Article by Steven Horwitz

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Categories: Economics, Politics, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,

The New Renaissance HatSteven Horwitz
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One of the perennial complaints about the US economy is that we don’t “make stuff” anymore. You hear this from candidates from both major parties, but especially from Donald Trump and Bernie Sanders. The argument seems to be that our manufacturing sector has collapsed and that all US workers do is to provide services, rather than manufacturing tangible goods.

It turns out that this perception is wrong, as the US manufacturing sector continues to grow and in 2014 manufacturing output was higher than at any point in US history. But even if the perception were correct, it does not matter. The measure of an economy’s health isn’t the quantity of physical stuff it produces, but rather the value that it produces. And value comes in a variety of forms.

Manufacturing is Up

The path to economic growth is not to freeze into place the US economy of the 1950s. Let’s deal with the myth of manufacturing decline first. The one piece of evidence in favor of that perception is that there are fewer manufacturing jobs today than in the past. Total manufacturing employment peaked at around 19 million jobs in the late 1970s. Today, there are about 12.5 million manufacturing jobs in the US.

However, manufacturing output has never been higher. The real value of US manufacturing output in 2014 was over $2 trillion. The real story of the US manufacturing sector is that we have become so much more efficient, that we can produce more and more manufactured goods with less and less labor. These efficiency gains are largely the result of computer technology and automation, especially in the last fifteen years.

The labor that we no longer need in order to produce an ever-increasing amount of stuff is now available to produce a whole variety of other things we value, from phone apps to entertainment to the expanded number and variety of grocery stores and restaurants, to the data analyses that makes all of this growth possible.

Just as the workers in those factories we are so nostalgic for were labor freed from growing food thanks to the growth in agricultural productivity, so are today’s web designers, chefs at the newest hipster café, and digital editors in Hollywood the labor that has been freed from producing “stuff” thanks to greater technological productivity.

Or, put differently: those agricultural, industrial, and computer revolutions collectively have enabled us to have more food, more stuff, and more entertainment, apps, services, and cage-free chicken salads served with kale. The list of human wants is endless, and the less labor we use to satisfy some of them, the more we have to start working on other ones.

But notice something: all of the things that we produce have something in common. Whether it’s food or footwear, or automobiles or apps, or manicures or massages, the point of production is to rearrange capital and labor in ways that better satisfy wants. In the language of economics, the point of production (and exchange) is to increase utility.

When we produce more cars that people wish to buy, it increases utility. When we open a new Asian fusion street food taco stand, it increases utility. When Uber more effectively uses the existing stock of cars, it increases utility. When we exchange dollars for manicures, it increases utility.

Adam Smith helped us to understand that the wealth of nations is not measured by how much gold a country possesses. Modern economics helps us understand that such wealth is not measured by how much physical stuff we manufacture. Increases in wealth happen because we arrange the physical world in ways that people value more.

Neither producing cars nor providing manicures changes the number of atoms in the universe. Both activities just rearrange existing matter in ways that people value more. That is what economic growth is about.

Misplaced Nostalgia

We’re richer because we have allowed markets to produce with fewer workers. When we are fooled into believing that “growth” is synonymous with “stuff,” we are likely to make two serious errors. First, we ignore the fact that the production of services is value-creating and therefore adds to wealth.

Second, we can easily believe that we need to “protect” manufacturing jobs. We don’t. And if we try to do so, we will not only stifle economic growth and thereby impoverish the citizenry, we will be engaging in precisely the sort of special-interest politics that those who buy the myth of manufacturing often rightly complain about in other sectors.

The path to economic growth is not to freeze into place the US economy of the 1950s. We are far richer today than we were back then, and that’s due to the remaining dynamism of an economy that can still shed jobs it no longer needs and create new ones to meet the ever-changing wants of the consumer.

The US still makes plenty of stuff, but we’re richer precisely because we have allowed markets to do so with fewer workers, freeing those people to provide us a whole cornucopia of new things to improve our lives in endless ways. We can only hope that the forces of misplaced nostalgia do not win out over the forces of progress.

Steven_Horwitz

Steven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions.

He is a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.

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Demagoguery vs. Data on Employment in America – Article by Tyler Watts

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Categories: Business, Economics, Politics, Tags: , , , , , , , , , , ,

The New Renaissance Hat
Tyler Watts
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Demagogue politicians love to play on popular fears that low-wage foreigners are “stealing” good-paying American jobs by way of outsourcing and globalization. The claim is made by nativists and protectionists of all political stripes, whether leftists complaining of a “rigged economy” or rightists speaking of other countries “beating us” economically.

A sound economic analysis of the claim about job losses due to international trade should address two questions: First, is it true that the US has lost jobs due to trade (or other factors)? Second, is this phenomenon good or bad overall for the US and world economies?

On the first point, it can appear as though the US has lost jobs. For example, as Figure 1 shows, manufacturing employment in the US has declined by about 2 million from pre-Great Recession levels, and is down by over 7 million, or 37 percent, from the all-time high reached in 1979.

Figure 1: Total Manufacturing Employment, 1940–2016

watts1

The problem, though, is that by looking at manufacturing in terms of jobs, we’re missing the full picture of industrial production.

Nevertheless, the demagogues still argue that, even though high-paying service sector jobs have more than replaced lost factory jobs, “we don’t make things here anymore” and we should lament this. This oft-heard refrain is patently false. We don’t make certain things, such as garments, toys or electronics, because global free trade and technological advances tend to shift America’s output into those industries in which our comparative advantage is greatest. But Americans do indeed make things — quite valuable things.

This can be seen in Figure 2, which shows the US Industrial Production Index for the “de-industrialization” period. After the expected steep decline following the Great Recession of 2008–2009, US manufacturing has slowly bounced back and is now producing more products, in value-added terms, than ever before. Indeed, this index, which consists mainly of manufacturing, has grown by over 100 percent since the 1979 peak in manufacturing employment.

Figure 2: Industrial Production Index for the United States, 1979–2016

watts2

In other words, thanks to productivity gains, we need fewer workers to make more stuff.

From an economic perspective, nothing could be better news. US manufacturing creates 100 percent more value with 37 percent fewer workers. Creating more value with fewer workers means we’re more efficient than ever, or put another way, more productive than ever. These awesome productivity gains have many sources, especially in the form of technological advances in areas like software, robotics, and communications. Globalization and outsourcing have also played a role, as they allow American workers a greater degree of specialization in those sectors where our productivity edge is largest.

The good news gets better, though: not only have we gained jobs on net, but jobs have grown faster than the population over time. Since the 1979 peak in manufacturing employment, the US adult population grew by 53 percent, whereas employment grew by 59 percent, as shown in Figure 3.

Figure 3: Population Growth vs. Employment Growth Since 1979

watts3Source: Federal Reserve Economic Data

Despite these generally positive facts, some still contend that we’ve replaced “good” manufacturing jobs with lousy service sector jobs. Well, of course it must be true that, if we’ve lost manufacturing jobs, but gained jobs overall, then all of the job gains must have come from non-manufacturing sectors. And indeed the service sector, broadly defined, has seen employment growth of 90 percent since our 1979 benchmark. But beware of making hasty earnings assumptions about a sector that employs nearly 124 million people. To see whether the newly-created “service sector” jobs really don’t pay as well as the vaunted manufacturing jobs, we need to drill down into the employment and earnings data. What we’ll find is that a large majority of the new service sector jobs pay just as well or much better than manufacturing jobs.

Table 1 presents Bureau of Labor Statistics data on the 15 largest sectors and sub-sectors of the US economy, which together represent over 96 percent of the total net increase in payroll employment for the post-peak manufacturing jobs era (1979 to 2016). This might come as a surprise to the anti-globalization crowd: despite the loss of 7 million manufacturing jobs (and some mining, logging, and utilities sector jobs), we’ve seen a net increase of nearly 53 million total jobs. Of these net new jobs, fully 62 percent of them feature, as of January 2016, average hourly earnings equal to or greater than current average hourly manufacturing earnings. In other words, most of the 53 million new jobs pay the same or better wages than the demagogues’ benchmark “good” manufacturing jobs. So we lost 7 million good jobs, only to gain about 32 million equal or better-paying jobs, along with about 19 million lower-paying jobs (about 38 percent of net new jobs pay less than manufacturing).

Table 1: Employment Changes and Current Earnings by Sector

watts4Source: Bureau of Labor Statistics

We’ve established that, despite a major decrease in employment in the manufacturing sector, we’ve gained many more jobs than we’ve lost in the past 35 years or so, and that most of these new jobs pay better to boot. Economic changes, while painful in the short run, have brought gains in output and employment not only for the US, but for the rest of the world as well. Overall, this is good news for the US and world economies.

So, as the campaign season heats up, let’s not be misled by baseless arguments about America “losing jobs” or other countries “beating us” at trade. Trade is a positive sum game, and the benefits for both the US and world economies are, shall we say, “yuge.”

Tyler Watts earned his PhD in economics at George Mason University in 2010. He currently teaches economics at East Texas Baptist University and runs the Institute for Economic Education (see YouTube channel here), a public outreach focused on integrating economics with a Biblical worldview and providing unique teaching tools for high school and college economics students.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

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Bernie Sanders’ Anti-Foreign Crankery – Article by Daniel Bier

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Categories: Economics, Politics, Tags: , , , , , , , , , , , , ,

The New Renaissance HatDaniel Bier
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A Vesuvius of Tribalism and Economic Illiteracy

At Sunday’s Democratic presidential debate, Bernie Sanders attacked American trade with Mexicans, Chinese, Vietnamese, and presumably all other foreigners who might try to steal our jobs. Sanders harangued Hillary Clinton,

NAFTA, supported by the Secretary, cost us 800,000 jobs nationwide, tens of thousands of jobs in the Midwest. Permanent normal trade relations with China cost us millions of jobs.

Look, I was on a picket line in early 1990’s against NAFTA because you didn’t need a PhD in economics to understand that American workers should not be forced to compete against people in Mexico making 25 cents an hour.

… And the reason that I was one of the first, not one of the last to be in opposition to the TPP is that American workers … should not be forced to compete against people in Vietnam today making a minimum wage of $0.65 an hour.

Look, what we have got to do is tell corporate America that they cannot continue to shut down. We’ve lost 60,000 factories since 2001. They’re going to start having to, if I’m president, invest in this country — not in China, not in Mexico.

First, let’s note his dodgy job numbers. As Dan Griswold noted in 2011, in response to a similar claim about jobs “lost” from the “trade deficit” with Mexico,

In the first five years after NAFTA’s passage, 1994-98, when we could have expected it to have the most impact, the U.S. economy ADDED a net 15 million new jobs, including 700,000 manufacturing jobs.

Behold, the horror unleashed on US manufacturing jobs by trade with Mexico:nafta-manufacturing

In fact, since NAFTA went into effect in 1994, total US employment has increased by 28 million jobs. Even if we buy the dubious claim that NAFTA “cost us 800,000 jobs” over the last 22 years, this amounts just 36,000 jobs a year.

As Griswold noted, even in good times, 300,000 Americans file for unemployment each week. The US economy creates and destroys more than 15 million jobs every year. This alleged displacement amounts to less than one day’s worth of job losses.

It’s true that, in the long-run, manufacturing jobs have been in decline in the United States. But this is not because manufacturing is in decline. The myth (promoted by the other nationalist blowhard in the race) that United States “doesn’t make stuff anymore” is not just wrong — it couldn’t be further from the truth.

Real US manufacturing output is the highest it has ever been. Simply put, the US makes more stuff than ever.

manufacturing-indexHow can this be? Because manufacturing productivity — the amount of value added per hour worked — has gone up dramatically in recent decades. Manufacturing employment is declining because of automation; a US factory worker today can add a lot more value per hour than one in 1970.

manufacturing-employees-output-per-hour

It’s simply not true that trade devastated the US economy and wiped out millions of jobs. Employment has shifted within the US economy, out of industry into service jobs, and manufacturing has shifted around the globe, aligning production with the comparative advantages of each country’s labor and capital markets.

The resentment stoked by nationalists like Trump and Sanders is based on a nonsensical proposition, a mirage of high-paying blue collar jobs stolen by conniving foreigners, which we could reclaim if only we had the will to wage a trade war.

But the machines and global production chains are here to stay, and the jobs being done in Vietnam and China for fifty cents an hour are on the extreme low end of the value-added chain — which should be obvious, when you think about it, since they pay so little. (On the back of every iPhone is a short economics lesson on this point: “Designed by Apple in California. Assembled in China.”)

Do we really want to “bring those jobs back”? Do we envision a future where the American middle class is sewing textiles in sweatshops for a dollar an hour? Of course not. Americans today likely wouldn’t do those jobs at any wage, but especially not at the wages paid to low-skilled workers in developing Asian and Latin American countries. Those jobs only exist at those wages; at higher wages, they are scarcer, higher-skilled, and more capital intensive.

True, we could make t-shirts and Happy Meal toys in the United States, but we’d be doing it with far, far fewer workers and a lot more capital. Instead of 30 workers at fifty cents an hour, it’d be one person with a machine for $20 an hour.

The real difference would be that everyone would be poorer as a result: consumers paying higher prices, foreigners working in worse conditions and for less money, and American resources being diverted away from where they are most productive.

This is where economic ignorance stops being morally neutral and becomes a real threat to the life and well-being of the poor, especially in the developing world.

Not content to merely keep Mexicans from working in the United States (where, thanks to US capital and infrastructure, they could earn three or four times more than they make in Mexico), Bernie Sanders now objects to the right of Mexicans to work in Mexico, if they dare to sell goods and services to Americans — or, God forbid, try to compete with American firms.

For a champion of the poor like Sanders, there’s a double irony here, in that poor Americans are already much wealthier than poor Mexicans, and that tariffs also make goods more expensive for native consumers, disproportionately hurting the poorest Americans. Not only are poor Mexicans made worse off, by losing access to the US market and thus losing jobs, but poor Americans are also made worse off by having less disposable income, which is thus not spent elsewhere in the economy to sustain other American jobs.

And this is just the first order effects of closing off trade with Mexico. When the Mexican government inevitably retaliates, US exports to Mexico (which totaled $236 billion in 2015) will also be devastated and more jobs will be lost. And of course, simply multiply this orders of magnitude for China, Vietnam, and every other country on the nationalistic hit list.

Who gains from this? In the long run, nobody, which is why (after decades of gradual reform) we finally got relatively free trade with our closest neighbors, signed into law by a liberal Democrat. But in the short run, a few US corporations and labor unions would benefit from trade tariffs — at the expense of both poor foreigners and poor Americans as a whole.

(For those keeping score, this makes it an ironic hat trick for Sanders, whose tirades against free trade and open borders are laced with fear-mongering about “corporations.”)

Finally, let us ponder Sanders’ Alice-in-Wonderland solution to the imagined ills of free trade:

Look, what we have got to do is tell corporate America that they cannot continue to shut down. We’ve lost 60,000 factories since 2001. They’re going to start having to, if I’m president, invest in this country — not in China, not in Mexico.

Did I say Alice in Wonderland? I meant Atlas Shrugged. Ayn Rand was justly accused of having unbelievable, one-dimensional stereotypes, but sadly, American politics seems to have the same problem.

It’s anyone’s guess how Sanders imagines he could force factories not to close and order companies to stay in the United States, but the “you can’t shut down” solution is almost directly lifted from “Directive 10-289,” the order that Rand’s antagonists use to try to “stabilize” the economy:

All workers, wage earners and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment… All industrial, commercial, manufacturing and business establishments of any nature whatsoever shall henceforth remain in operation…

Faced with economic decline, the government believed that the only option was to stop the decline, rather allowing people to go where they choose, buy what they choose, and make what they choose. “What it comes down to is that we can manage to exist as and where we are, but we can’t afford to move!” archvillain Wesley Mouch exclaims. “So we’ve got to stand still… We’ve got to make those bastards stand still!”

When Rand first published this in 1957, this was hyperbole about the fear of change, the reductio ad absurdum of the argument for keeping things as they are. Now, it’s an applause line for mainstream presidential candidates.

Daniel Bier is the site editor of FEE.org He writes on issues relating to science, civil liberties, and economic freedom.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

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Low-Skilled Workers Flee the Minimum Wage – Article by Corey Iacono

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The New Renaissance HatCorey Iacono
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What happens when, in a country where workers are free to move, a region raises its minimum wage? Do those with the fewest skills seek out the regions with the highest wage floors?

New minimum wage research by economist Joan Monras of the Paris Institute of Political Studies (Sciences Po) attempts to answer that question. Monras theoretically shows that there should be a close relationship between the employment effects of raising the minimum wage and the migration of low-skilled workers.

When the demand for local low-skilled labor is relatively unresponsive (or inelastic) to wage changes, raising the minimum wage should lead to an influx of low-skilled workers from other states in search of better-paying jobs. On the other hand, if the demand for low-skilled labor is relatively responsive (or elastic), raising the minimum wage will lead low-skilled workers to flee to states where they will more easily find employment.

To test the model empirically, Monras examined data from all the changes in effective state minimum wages over the period 1985 to 2012. Looking at time frames of three years before and after each minimum wage increase, Monras found that

  1. As depicted in the graph below on the left, those who kept their jobs earned more under the minimum wage. No surprise there.
  2. As depicted in the graph below on the right, workers with the fewest skills were having an easier time finding full-time employment prior to the minimum wage increase. But this trend completely reversed as soon as the minimum wage was increased.
  3. A control group of high-skilled workers didn’t experience either of these effects. Those affected by the changing laws were the least skilled and the most vulnerable.

monrasp17a

These results show that the timing of minimum wage increases is not random.

Instead, policy makers tend to raise minimum wages when low-skilled workers’ real wages are declining and employment is rising. Many studies, misled by the assumption that the timing of minimum wage increases is not influenced by local labor demand, have interpreted the lack of falling low-skilled employment following a minimum wage increase as evidence that minimum wage increases have no effect on employment.

When Monras applied this same false assumption to his model, he got the same result. However, to observe the true effect of minimum wage increases on employment, he assumed a counterfactual scenario where, had the minimum wages not been raised, the trend in low-skilled employment growth would have continued as it was.

By making this comparison, Monras was able to estimate that wages increased considerably following a minimum wage hike, but employment also fell considerably. In fact, employment fell more than wages rose. For every 1 percent increase in wages, the share of a state’s population of low-skilled workers in full-time employment fell by 1.2 percent. (The same empirical approach showed that minimum wage increases had no effect on the wages or employment of a control group of high-skilled workers.)

Monras’s model predicts that if labor demand is sensitive to wage changes, low-skilled workers should leave states that increase their minimum wages — and that’s exactly what his empirical evidence shows.

According to Monras,

A 1 percent reduction in the share of employed low-skilled workers [following a minimum wage increase] reduces the share of low-skilled population by between .5 and .8 percent. It is worth emphasizing that this is a surprising and remarkable result: workers for whom the [minimum wage] policy was designed leave the states where the policy is implemented.

These new and important findings reinforce the view that minimum wage increases come at a cost to the employment rates of low-skilled workers.

They also pose a difficult question for minimum wage proponents: If minimum wage increases benefit low-skilled workers, why do these workers leave the states that raise their minimum wage?

Corey Iacono is a student at the University of Rhode Island majoring in pharmaceutical science and minoring in economics.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

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Maybe the Hardest Nut for a New Scientist to Crack: Finding a Job – Article by Bryan Gaensler

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Categories: Science, Tags: , , , , , , , , , , ,

The New Renaissance Hat
Bryan Gaensler
March 29, 2015
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The typical biography of a scientist might look something like this.

At a young age, a boy or girl discovers a love for science. Their dream is to become perhaps a geologist, a chemist, or a marine biologist.

At school they work hard at math and science, and they supplement this with everything else they can get their hands on: books, documentaries, public talks and visits to museums. They take all the right courses at college and then embark on a PhD in their chosen field.

After many years of hard effort (including chunks of time racked with doubt and frustration), they complete a solid body of work that contains some genuinely new discoveries. They’ve had the chance to meet some of the big names they read about as a kid, and now actually know some of them on a first-name basis.

The day a young graduate receives his or her science diploma is the most thrilling and satisfying day of their life. They are finally, officially, a scientist.

But there’s one thing that all those years of study and research has not prepared them for: the job market.

Scientist_Telescope
There must be a job out there somewhere…. Michael Salerno, CC BY-NC-SA

Pounding the pavement as a scientist

No matter what your profession, job hunting is not fun. But for scientists and other researchers, it’s a weird world of intense competition, painfully long time scales, and uncertain outcomes.

The strangest thing about a scientific career is that the application deadlines are often ridiculously early. Hoping to find a university position starting in September? If you wait until February or March to begin your job search, you’ve likely left it way too late. The application deadlines for some of the juiciest positions were way back in November and December.

Because of this advanced schedule, only the things that someone accomplishes a year or more before actually needing a new job will matter for their career prospects. Any amazing discoveries made after the application deadline are largely irrelevant.

The problem is that this is not always how science works.

For many important research topics, all the headline results emerge only at the very end. Students whose research is part of a massive longitudinal study or who are members of a big project team suddenly find themselves at a huge disadvantage, because they often can’t provide instant evidence of the quality of their work a whole year before needing a job.

The other daunting thing is the intensity of the competition. For most specialized scientific topics, there are far more PhD degrees than job postings: across all of science, doctoral degrees outnumber faculty positions by a ratio of 12 to one. An advertisement for a fellowship or junior faculty position will routinely draw hundreds of applications, and only 1%-2% of graduates will eventually land a coveted professorship.

How to proceed, when the odds are so stacked against you? Inevitably, the only way to counter the competition is to apply for lots of positions. A budding scientist is expected to apply for a dozen or more jobs, spread all over the world.

This situation immediately creates some challenges and problems.

By increasing the quantity of applications, the quality suffers. In an ideal world, an applicant will provide a carefully wrought narrative, weaving a story as to how their skills and background perfectly dovetail with the interest of the department they hope will hire them. But there’s no time for that. Instead one typically sends out a generic CV and research plan, and then essentially just hopes for the best.

The process is also incredibly inefficient. Professors all over write endless careful letters of recommendation, most of which have little bearing on the outcome. Selection panels spend hundreds of hours reading huge piles of applications, but can only afford a scant 10-15 minutes considering the merits of each candidate.

What’s more, not everyone can freely pursue jobs anywhere the market will take them. Young children, aging parents and other personal circumstances result in a large pool of outstanding scientists with strong geographic constraints, and hence limited options.

Overall, the harsh reality is that many applicants will simply not get any offers. A lifelong dream of being a scientist, combined with an advanced postgraduate degree, is tragically not a guarantee of a scientific career.

Good scientists should be able to find jobs

The frustration, disappointment and disillusionment grow every year. Things need to change.

First, employers need to make much more of an effort to tell applicants what sort of scientist they are looking for. Instead of reducing the job searching process to the scientific equivalent of speed dating, advertisements need to set out a clear and detailed set of selection criteria, with lots of context and background on the role and working environment. By properly telling the community what they’re looking for, labs and research institutes can focus their time on candidates with useful qualifications, and applicants can focus their energy on only those jobs for which they have a realistic chance.

Second, we need to create flexible career paths. Part-time positions, “two body” hires for couples with both members in academia, and accommodation of career interruptions need to become de rigueur, rather than whispered legends we’ve all only ever heard about second- or third-hand.

And finally, a specialist science degree needs to move beyond the expectation that it offers training only in one particular type of science.

A good scientist graduates with passion, vision and brilliance, and also with persistence, organization, rigor, eloquence and clarity. A scientist can incisively separate out truth from falsehoods, and can solve complicated problems with precious little starting information. These are highly desired attributes. The scientific community needs not just accept but celebrate that the skills and values we cherish are the paths to a wide range of stimulating and satisfying careers – both in and out of academia.

Bryan Gaensler is an award-winning astronomer and passionate science communicator, who is internationally recognised for his groundbreaking work on dying stars, interstellar magnets and cosmic explosions. A former Young Australian of the Year, NASA Hubble Fellow, Harvard professor and Australian Laureate Fellow, Gaensler is currently the Director of the Dunlap Institute for Astronomy and Astrophysics at the University of Toronto. He gave the 2001 Australia Day Address to the nation, was awarded the 2011 Pawsey Medal for outstanding research by a physicist aged under 40, and in 2013 was elected as a Fellow of the Australian Academy of Science. His best-selling popular science book Extreme Cosmos was published worldwide in 2012, and has subsequently been translated into four other languages.

This article is republished pursuant to a Creative Commons Attribution No-Derivatives license. It was originally published by The Conversation.

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Ludd vs. Schumpeter: Fear of Robot Labor is Fear of the Free Market – Article by Wendy McElroy

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Categories: Business, Economics, Technology, Transhumanism, Tags: , , , , , , , , , , , , , , , , , , , , , , , , ,

The New Renaissance Hat
Wendy McElroy
September 18, 2014
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Report Suggests Nearly Half of U.S. Jobs Are Vulnerable to Computerization,” screams a headline. The cry of “robots are coming to take our jobs!” is ringing across North America. But the concern reveals nothing so much as a fear—and misunderstanding—of the free market.

In the short term, robotics will cause some job dislocation; in the long term, labor patterns will simply shift. The use of robotics to increase productivity while decreasing costs works basically the same way as past technological advances, like the production line, have worked. Those advances improved the quality of life of billions of people and created new forms of employment that were unimaginable at the time.

Given that reality, the cry that should be heard is, “Beware of monopolies controlling technology through restrictive patents or other government-granted privilege.”

The robots are coming!

Actually, they are here already. Technological advance is an inherent aspect of a free market in which innovators seeks to produce more value at a lower cost. Entrepreneurs want a market edge. Computerization, industrial control systems, and robotics have become an integral part of that quest. Many manual jobs, such as factory-line assembly, have been phased out and replaced by others, such jobs related to technology, the Internet, and games. For a number of reasons, however, robots are poised to become villains of unemployment. Two reasons come to mind:

1. Robots are now highly developed and less expensive. Such traits make them an increasingly popular option. The Banque de Luxembourg News offered a snapshot:

The currently-estimated average unit cost of around $50,000 should certainly decrease further with the arrival of “low-cost” robots on the market. This is particularly the case for “Baxter,” the humanoid robot with evolving artificial intelligence from the US company Rethink Robotics, or “Universal 5” from the Danish company Universal Robots, priced at just $22,000 and $34,000 respectively.

Better, faster, and cheaper are the bases of increased productivity.

2. Robots will be interacting more directly with the general public. The fast-food industry is a good example. People may be accustomed to ATMs, but a robotic kiosk that asks, “Do you want fries with that?” will occasion widespread public comment, albeit temporarily.

Comment from displaced fast-food restaurant workers may not be so transient. NBC News recently described a strike by workers in an estimated 150 cities. The workers’ main demand was a $15 minimum wage, but they also called for better working conditions. The protesters, ironically, are speeding up their own unemployment by making themselves expensive and difficult to manage.

Labor costs

Compared to humans, robots are cheaper to employ—partly for natural reasons and partly because of government intervention.

Among the natural costs are training, safety needs, overtime, and personnel problems such as hiring, firing and on-the-job theft. Now, according to Singularity Hub, robots can also be more productive in certain roles. They  “can make a burger in 10 seconds (360/hr). Fast yes, but also superior quality. Because the restaurant is free to spend its savings on better ingredients, it can make gourmet burgers at fast food prices.”

Government-imposed costs include minimum-wage laws and mandated benefits, as well as discrimination, liability, and other employment lawsuits. The employment advisory Workforce explained, “Defending a case through discovery and a ruling on a motion for summary judgment can cost an employer between $75,000 and $125,000. If an employer loses summary judgment—which, much more often than not, is the case—the employer can expect to spend a total of $175,000 to $250,000 to take a case to a jury verdict at trial.”

At some point, human labor will make sense only to restaurants that wish to preserve the “personal touch” or to fill a niche.

The underlying message of robotechnophobia

The tech site Motherboard aptly commented, “The coming age of robot workers chiefly reflects a tension that’s been around since the first common lands were enclosed by landowners who declared them private property: that between labour and the owners of capital. The future of labour in the robot age has everything to do with capitalism.”

Ironically, Motherboard points to one critic of capitalism who defended technological advances in production: none other than Karl Marx. He called machines “fixed capital.” The defense occurs in a segment called “The Fragment on Machines”  in the unfinished but published manuscript Grundrisse der Kritik der Politischen Ökonomie (Outlines of the Critique of Political Economy).

Marx believed the “variable capital” (workers) dislocated by machines would be freed from the exploitation of their “surplus labor,” the difference between their wages and the selling price of a product, which the capitalist pockets as profit. Machines would benefit “emancipated labour” because capitalists would “employ people upon something not directly and immediately productive, e.g. in the erection of machinery.” The relationship change would revolutionize society and hasten the end of capitalism itself.

Never mind that the idea of “surplus labor” is intellectually bankrupt, technology ended up strengthening capitalism. But Marx was right about one thing: Many workers have been emancipated from soul-deadening, repetitive labor. Many who feared technology did so because they viewed society as static. The free market is the opposite. It is a dynamic, quick-response ecosystem of value. Internet pioneer Vint Cerf argues, “Historically, technology has created more jobs than it destroys and there is no reason to think otherwise in this case.”

Forbes pointed out that U.S. unemployment rates have changed little over the past 120 years (1890 to 2014) despite massive advances in workplace technology:

There have been three major spikes in unemployment, all caused by financiers, not by engineers: the railroad and bank failures of the Panic of 1893, the bank failures of the Great Depression, and finally the Great Recession of our era, also stemming from bank failures. And each time, once the bankers and policymakers got their houses in order, businesses, engineers, and entrepreneurs restored growth and employment.

The drive to make society static is powerful obstacle to that restored employment. How does society become static? A key word in the answer is “monopoly.” But we should not equivocate on two forms of monopoly.

A monopoly established by aggressive innovation and excellence will dominate only as long as it produces better or less expensive goods than others can. Monopolies created by crony capitalism are entrenched expressions of privilege that serve elite interests. Crony capitalism is the economic arrangement by which business success depends upon having a close relationship with government, including legal privileges.

Restrictive patents are a basic building block of crony capitalism because they grant a business the “right” to exclude competition. Many libertarians deny the legitimacy of any patents. The nineteenth century classical liberal Eugen von Böhm-Bawerk rejected patents on classically Austrian grounds. He called them “legally compulsive relationships of patronage which are based on a vendor’s exclusive right of sale”: in short, a government-granted privilege that violated every man’s right to compete freely. Modern critics of patents include the Austrian economist Murray Rothbard and intellectual property attorney Stephan Kinsella.

Pharmaceuticals and technology are particularly patent-hungry. The extent of the hunger can be gauged by how much money companies spend to protect their intellectual property rights. In 2011, Apple and Google reportedly spent more on patent lawsuits and purchases than on research and development. A New York Times article addressed the costs imposed on tech companies by “patent trolls”—people who do not produce or supply services based on patents they own but use them only to collect licensing fees and legal settlements. “Litigation costs in the United States related to patent assertion entities [trolls],” the article claimed, “totaled nearly $30 billion in 2011, more than four times the costs in 2005.” These costs and associated ones, like patent infringement insurance, harm a society’s productivity by creating stasis and  preventing competition.

Dean Baker, co-director of the progressive Center for Economic Policy Research, described the difference between robots produced on the marketplace and robots produced by monopoly. Private producers “won’t directly get rich” because “robots will presumably be relatively cheap to make. After all, we can have robots make them. If the owners of robots get really rich it will be because the government has given them patent monopolies so that they can collect lots of money from anyone who wants to buy or build a robot.”  The monopoly “tax” will be passed on to impoverish both consumers and employees.

Conclusion

Ultimately, we should return again to the wisdom of Joseph Schumpeter, who reminds us that technological progress, while it can change the patterns of production, tends to free up resources for new uses, making life better over the long term. In other words, the displacement of workers by robots is just creative destruction in action. Just as the car starter replaced the buggy whip, the robot might replace the burger-flipper. Perhaps the burger-flipper will migrate to a new profession, such as caring for an elderly person or cleaning homes for busy professionals. But there are always new ways to create value.

An increased use of robots will cause labor dislocation, which will be painful for many workers in the near term. But if market forces are allowed to function, the dislocation will be temporary. And if history is a guide, the replacement jobs will require skills that better express what it means to be human: communication, problem-solving, creation, and caregiving.

Wendy McElroy (wendy@wendymcelroy.com) is an author, editor of ifeminists.com, and Research Fellow at The Independent Institute (independent.org).

This article was originally published by The Foundation for Economic Education.

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