James Joyner points to a chart showing the increasing disconnect between employee productivity and employee compensation and asks what happened in 1972, when the different trajectories were set. The leading candidates are automation and trade.
That makes sense, at least to a degree. When a company invests large amounts of money on capital and the result is that employees are more productive, who deserves the dividends? There are arguments that since such things are out of the control of the employee that they shouldn’t suffer for it, but the most obvious candidate would seem to be the employer that took the risk, bought to capital, and proceeded from there. Which leaves workers in a rather uncomfortable place.
Several years ago, when I was working at Falstaff, I looked at the tools we were using for our job (XML programming) and determined that they could be a lot better. A coworker later took control of the project when I got promoted out of the department. The end results were amazing. Our department productivity increased 86% over the course of a year, per-employee productivity increasing 300%. Training times collapsed from roughly 10 weeks to under four. Once they got wind of our new toolset, the company’s internal tools department threw a fit because they were supposed to be making such tools and not us. They complained all the way up to the COO.
The COO had up to that point been only vaguely aware of how well our division had been doing. Just aware enough that, when there were massive layoffs, they determined that our department could take a huge portion of the hit since we were keeping our head well above water. Internal Tools explained to him that it was their job to create tools and we can’t have other departments doing such things willy-nilly. Our director explained that we’d put in four requests for better tools (with specific recommendations), hadn’t heard anything, and had become tired of waiting. Besides, look at the results. Whatever time we “wasted” outside our job description had been made up for and then some.
The COO ended up creating a “Cash Reward for Ingenuity” and immediately gave my coworker and I said reward. An email went out celebrating our contribution and we got a mention at the next corporate meeting. Oh, and he decided that going forward, new XML programmers would get a 10% pay cut, seeing as how their job had just gotten so much easier. No longer could incoming programmers command the lofty wage of $10/hr, as there was even more money to be saved.
The thing that hurt about that last part is that, from a short-sighted perspective, there was actually some logic to it. Incoming programmers didn’t need as thorough a knowledge of the language anymore. We could hire the prototypical drop-out and they could do the job in a satisfactory fashion. The worst programmers in the department were now outperforming what the best performers were doing two years ago (though, of course, the best were still outperforming the worst). Such expertise was simply less necessary than before.
In the end, I still vehemently disagreed with the decision. By my reckoning, they had failed to understand the value of a good employee. Starting people out lower, identifying the talent, and giving those with talent a big raise would have been okay, too. Performance-based raises, however, were anathema. What you made starting out more-or-less determined your pay trajectory for the next decade (most years we didn’t even get a C-O-L increase, and a lot of promotions didn’t actually come with pay increases). Yet when such short-sightedness becomes common enough, it becomes conventional wisdom.
I don’t know how projectable this story is into the economy-at-large, but I do think that there is a tradeoff mentally between how much an employer invests in capital and how valuable they see their human capital as being. The less reliant employers are on an individual’s capacity and the more leverage an employer has over the individual, in real terms but I think more importantly in psychological terms.
This all gives me great concern for the future. I’m not worried about 40% unemployment as everything gets automated (or sent overseas). Morelike, I’m worried about how the desperation for work will give all but those with the most timely and necessary skills absolutely no leverage. I’m mostly worried because there doesn’t seem to be a clean solution to this. I don’t know how we could legislate this away. We can move money around, but that has its limitations. With it simply come down to mass public employment?
Pretty much, yeah. Or massive financial transfers. Rankles the capitalist mind, I know, but when you can do all the work you need with 10 people, and only 10 people can actually profit from it and make huge sums, what else are you going to do? The economy needs consumers.
Comment by SFG — July 26, 2012 @ 8:19 pm
Whenever I lament my loner omega status and likely lack of progeny, depressing visions of a future like this make me reconsider that it might be a blessing ind disguise (it = lack of progeny, not loner omega status).
If you think this scenario is even a possiblity, why not aim high for your future child’s education? People with Ivy League connections who own and run things will be better positioned than worker bees, whose skills are in the process of being devalued. For example, did your COO take a pay cut? I suspect that the owners and managers will still come out ahead even ifforced to redistribute much of their earnings to the impoverished masses. I certainly wouldn’t want to end up among the latter lot.
Comment by Ω — July 26, 2012 @ 10:48 pm
No job is secure. It never has been and never will be. However, so long as people keep coming up with new products and services, there will be a need for people to help build those businesses. What “worker bees” need to do is have the imitative to retrain and acquire new skills. Those who don’t, just like those who didn’t 20, 50, or 100 years ago, will find jobs harder and harder to get.
Mass public unemployment will only arise when the government makes it too expensive to hire people or nearly impossible to fire them. See Spain for a contemporary example.
Comment by Abel Keogh — July 27, 2012 @ 8:55 am
Of course no job has ever been completely secure. I never claimed that. But the pace at which automation is reducing the number of people needed to achieve equivalent outputs is accelerating, and that is true in the in-demand fields in which people would retrain as well. The ex-manufacturing employee may have worked for a company that employed hundreds of thousands of people. Even the giant information technology firms where he might be able to work employ one-tenth that number with current technology. And didn’t trumwill supply an example where even people with in-demand skills got shafted?
Comment by Ω — July 27, 2012 @ 10:14 am
SFG, here’s the rub: How do you convince the people who actually have the money to engage is massive transfers? With a big enough gap, they can relocate to Bermuda. I’m increasingly coming around to the idea that, at some point, we’re going to need to more formally differentiate between how much a job is worth and how much one gets paid to be working.
Comment by trumwill — July 27, 2012 @ 10:27 am
Omega,
The COO jumped ship, actually, not long after. But yeah, I think he came out of it okay. He didn’t go to the Ivy Leagues, though, he went to Deseret State University. I’m actually less worried about where the educated end up. Unless of course, heaven forbid, everyone becomes “educated”. So, I’m pessimistic, but I don’t think as pessimistic as you are.
Comment by trumwill — July 27, 2012 @ 10:30 am
Abel,
There will always be work to do. The question is whether that work will be enough or not be enough. The fewer jobs that are needed, the more wages get drawn down. I mean, I might prefer a maid because a maid is preferable to Roomba, but the existence of Roomba means that a maid is not as essential if my standards are not particularly high. So, to make it worth my money, a maid will have to be willing to work for cheaper. Eventually, they’re working for so little that they can’t pay their own way into what we would collectively consider a life of sufficient dignity.
That’s my concern.
Comment by trumwill — July 27, 2012 @ 10:34 am
Small Firms Seek Skilled Workers but Can’t Find Any
It isn’t the just big manufacturers, oil companies and railroad operators that are struggling to hire skilled workers.
The “Help Wanted” sign is also a regular fixture at small firms such as Group One Safety & Security in Stuart, Fla., despite the high national unemployment rate, which was 8.2% in June.
“We could grow a lot faster if we could find the right people,” says Kevin Madden, president of Group One, which installs alarms and video surveillance in homes and commercial properties. He says he frequently declines new work because he doesn’t want to jeopardize his company’s customer service due to lack of sufficient support staff.
The 16-employee company currently has two unfilled job openings—for fire-alarm and burglar-alarm technicians. The jobs have been open for nearly 18 months
he skills gap is a big topic among economists because of its policy implications. If companies aren’t hiring due to an inability to find skilled workers, then part of the remedy for high unemployment might be training to help workers develop the required skills, rather than, say, lower taxes or lower interest rates.
Comment by Abel Keogh — July 27, 2012 @ 10:58 am
More . . .
Mr. Madden of Group One offers $18 to $30 an hour for fire-alarm technicians and $16 to $22 an hour for security-alarm technicians, depending on their experience and skills. If qualified candidates ask for more, he is open to negotiating, he says. On one occasion he offered the candidate overtime work, such as cleaning the warehouse.
He says he believes that “every kid in this country has been raised to go to college and they don’t want to do the trade, construction, blue-collar work.”
He estimates that about 80% of his applicants misrepresent or overestimate their skill sets. The rest may be qualified but don’t take his offer because they seek higher pay or they are looking for easier work, he says.
Over the past two years, there have been about 10 instances where prospective hires with no skills asked Mr. Madden for a job. He provided them with a low-level burglar-alarm manual, he says, and asked them to come back and show they could operate the alarm panel. “None have come back,” he says.
He is also hoping to eventually find a fire alarm inspector, an installer and a service manager. “If I can find five” of the right candidates “I will take them on,” he says.
Small Firms Seek Skilled Workers but Can’t Find Any
Comment by Abel Keogh — July 27, 2012 @ 11:09 am
It’s an interesting article, Abel. So ok, there are some openings at small firms. If I were an out-of-work factory worker and read about that, I might try to retrain in fire alarm or burglar alarm installation. But we’re talking about millions of unemployed people. I’m skeptical that small businesses can absorb all of them or that all of the unemployed have the combination of intelligence and drive to retrain successfully.
Comment by Ω — July 27, 2012 @ 12:17 pm
As it stands, the burden of training and retraining falls onto the employee themselves. Given that you can pay for the training and then end up right back out on the street again in comparatively short order, that’s not always going to be a tough sell.
Not that there isn’t a problem here. There is, and it’s worth addressing (though I think it’s going to involve government). It’s analogous to the North Dakota Problem. In a period of high unemployment, they can’t get people to staff the wells. We fill every job there and we still have an unemployment problem. We do, however, get beneficial multipliers (it’s a drag on the economy when jobs go unfilled).
In the larger perspective, however, it’s not clear the extent to which these jobs will always be with us. Smart economists say they always will, but in many cases the companies will figure out ways to do without, and once they have, it’s more that’s likely gone.
When we look at the state of the economy, we’re not just looking at unemployment numbers but also wages. The comparatively low wages of a lot of the jobs that are available are indicative of a lopsided job market. One that I fear (I don’t know and may not even predict, but fear) will not be getting better as time progresses.
Comment by trumwill — July 27, 2012 @ 12:23 pm
We can move money around, but that has its limitations. With it simply come down to mass public employment?
There is no practical difference between paying out welfare and paying public employees.
How do you convince the people who actually have the money to engage is massive transfers?
By taking it against their will.
Comment by Scarlet Knight — July 27, 2012 @ 1:16 pm
If someone wants a good paying job then one needs to 1) learn what he/she is good at, 2) what kind of skills are in demand that are their your alley, 3) figure out the best way to acquire those skills, and 4) work their ass off. Then don’t be afraid to retrain again and again as necessary. Getting a good paying job isn’t rocket science–it’s a lot of hard work.
If people can’t figure this out or don’t have the initiative to, say, figure out how to read an instruction book on how work a basic alarm, they have no one to blame but themselves for their lousy $10 an hour job.
It doesn’t require a government solution to make this happen. Rather, it requires getting the government out of the way so businesses have the incentive to hire and train good workers.
Comment by Abel Keogh — July 27, 2012 @ 3:02 pm
There is no practical difference between paying out welfare and paying public employees.
I dunno about that. Having someone behind the counter at the DMV is better than not having someone behind the counter at the DMV.
By taking it against their will.
They have a track record of working around that.
Comment by trumwill — July 27, 2012 @ 4:29 pm
Abel, this is where we have a problem both of the collective action sort and the government-industry sort. Employers seem disinclined to train, period. They’re used to the training being done for them. Somehow, I think, at the least we need to guide people towards training. Or we need to stop funding higher education and simply force employers to carry the burden. That’s where the collective action problem comes in. When they train someone, he can just jump-hop-and-skip over to another employer that can afford to pay him more because they don’t have to train him. For whatever reason, and that could be government interference (minimum wage laws) or government non-interference (a reluctance to enforce non-compete contracts), we don’t really do “You must work for us for one year” contracts. We can blame this on government, business, or employees, but it’s a problem any which way.
Comment by trumwill — July 27, 2012 @ 4:34 pm
Having someone behind the counter at the DMV is better than not having someone behind the counter at the DMV.
Someone, yes. Extra someones just to make it seem like you are making people “earn” their government money, no. Besides, anyone who has been to a DMV can see how much the workers “earn” their money. You could fire everyone, replace them with a random assortment of those on unemployment, and improve the quality of the workforce.
They have a track record of working around that.
The US has one of the highest tax compliance rates in the world. We also tax the income of our citizens, no matter where earned. We get our money.
Comment by Scarlet Knight — July 27, 2012 @ 4:46 pm
Someone, yes. Extra someones just to make it seem like you are making people “earn” their government money, no.
I would actually be most happy if Abel were correct about the situation and the situation were to correct itself without government input. However, if the government gets involved in a massive transfer of wealth, I don’t think it’s so clear that make-work jobs are worse than just paying people to be wastrels. If nothing else, the make-work job would keep them occupied and out of trouble. It might also force them to maintain standards of appearance. If they don’t pick up on the pointlessness of the work, it might have a positive psychological effect as well in that it would seem like a purpose in life.
Comment by Ω — July 27, 2012 @ 6:08 pm
“If nothing else, the make-work job would keep them occupied and out of trouble. It might also force them to maintain standards of appearance. If they don’t pick up on the pointlessness of the work, it might have a positive psychological effect as well in that it would seem like a purpose in life.”
That was kind of the whole point behind the make-work of the FDR administration–they’d pay people to work and get the infrastructure rebuilt while they were at it. Why we’re not doing this now I’m not sure–the bridges and such are falling apart. I do recall reading the Democrats had been pressured by feminists to distribute money away from (male) construction workers to (female) hospitals, etc., even though it was the construction workers who were out of work. But I don’t have any nonpartisan sources for that.
Comment by SFG — July 28, 2012 @ 7:21 am
@Trumwill — Current labor laws don’t give employers a reason to train employees. If anything, they disincentivize employers from doing just that.
Comment by Abel Keogh — July 29, 2012 @ 1:59 pm
I forgot to mention that you can’t get away with paying the make-workers less than their legitimate counterparts. By paying them to stay at home, you can get away with paying them less.
Comment by Scarlet Knight — July 31, 2012 @ 5:19 am
I forgot to mention that you can’t get away with paying the make-workers less than their legitimate counterparts.
That is a bit of fly in the ointment. I’ve heard it said that the New Deal could never happen today because of all of the certifications and degree requirements for the exact same jobs. Pay could be an issue, too, since they’d almost immediately be a part of their union.
Comment by trumwill — July 31, 2012 @ 8:59 am
Years ago I read a lengthy article by (IIRC) John Judis about BHO’s stint as a social workder.
According to the story, the agency had a project to encourage industry to move back into the rust-belt region south of Chicago (not “south side of Chicago”) to take advantage of the “highly skilled workers” left unemployed by deindustrialization. Pursuant to this, they sent out their people to conduct interviews and build skills inventories.
What they found was disappointing. These former auto-parts manufacturers would describe their work thusly: “I would take a piece of metal out of bin A and put it into the machine. I would then press a button. Finally, I would take the piece of metal out of the machine and put it into bin B.”
For this they could be paid, in the 1970s, $18/hour.
The point of all this is to say that automation has been with us a long time. And it has always involved some measure of dumbing down the tasks for the workers involved. Yet prior to 1972 (or so), workers still managed to be paid enough to get married and support families.
My sense is that something else happened since then.
Comment by Φ — August 4, 2012 @ 5:49 am
I would say that it’s entirely possible that it simply took employment practices a while to catch up with the logistical realities (the lack of necessity of paying employees well).
Comment by trumwill — August 4, 2012 @ 1:35 pm