One of the pivotal issues in the presidential election was
the decay of the middle class.
Manufacturing jobs have fled to other countries and automation has taken
its toll. Significant numbers of
desperate voters turned to Trump as a possible savior, believing that his
promises to punish corporations who were shipping jobs overseas and negotiate
new trade agreements with low-wage economies like China and Mexico would
restore American economic prowess and herald a renaissance of middle class
wages and jobs.
Much has been written about how complex trading
relationships are and how an aggressive stance on trade may backfire. At a minimum it seems likely that forcing a
turnaround in our trade deficit would end up making products more expensive in
the U.S. The simple fact is that labor
is cheaper in other nations and if products are made here then they will
ultimately be more expensive.
This in itself would not be a bad thing from my perspective,
but more expensive products would probably reduce overall demand for products
and the net effect might actually be worse than the status quo for the general
population.
But I do not believe that the future holds any real hope for
a return of manufacturing jobs. The true
culprit is not outsourcing but rather automation. Outsourcing accelerated the disappearance of
those jobs, but they are destined to decline because of relentless automation.
A fix for trade deficits and outsourcing is a short-sighted band-aid for the
larger problem.
When automation hit agriculture during the industrial
revolution the impact was dramatic, but agricultural workers flocked to the
cities and found manufacturing or service jobs to replace their work on the
farms. A long, painful process was necessary
to find a new equilibrium (child labor laws, unions, safety regulations, etc.),
and world revolution was narrowly avoided, but eventually a relatively happy
state was achieved.
An optimist might say that the current evolution away from
industrial jobs will also find a new, happy equilibrium. But there are reasons to doubt that such a
pain-free future will unfold.
Automation eliminates jobs. The only way to replace those
jobs with similar manufacturing jobs is to create more products. But at some point there is a saturation
effect. Human beings can only make use
of so many products. We are already
seeing that most of the new jobs in our economy are ‘service’ jobs. Service jobs are generally lower wage jobs
than those in manufacturing.
There is a second factor at work here – the impact of women
working. Since the second world war,
women have joined the workforce in ever greater numbers. Indeed, having two wage earners in a
household is seen as an unavoidable fact of life by most people. The double income family has more earning power
and provides a woman with the possibility of a fulfilling career. But it also puts tremendous pressure on the
family in terms of focus, free time and flexibility. As I pointed out in a previous post, the
double income family also plays a role in increasing the income disparity
between the classes.
One possible solution to increasing automation and a dearth
of higher wage jobs would be to decrease the number of days/hours that are
worked by the average worker. In essence
this would be a form of job sharing and would increase the number of available
jobs. The work week decreased from six days to five in the early years of the twentieth century. Is there any reason it can’t decrease
further?
The argument against this change is that it would result in
lower incomes for families and start a recessionary cycle of decreasing
spending/demand and further loss of jobs.
However, in theory the cost of products should also decrease with
increasing automation, as the labor required to manufacture and even to
distribute products would be lower.
There is a type of optimism that argues that new forms of
labor will replace the industrial labor in this coming post-industrial society. We have already seen that the computer
revolution has produced many new jobs in the so-called ‘knowledge’ industry. It is tempting to imagine an endless array of
‘on-line’ jobs that will become available for displaced industrial workers.
However, there are obstacles to this type of job
growth. Knowledge jobs require much
higher intellects and job skills than industrial jobs. Furthermore, it seems unlikely that the
number of knowledge jobs created could ever compensate for the jobs lost in
manufacturing, textiles and other industries affected by automation.
That leaves service jobs as the only real alternative for
job growth if we cannot accept job sharing or a shorter work week. The move from industrial jobs to service jobs is a phenomenon that we have already begun to experience. But service jobs generally have low salaries
and the income disparity that results is very corrosive in a society. Market forces have generally kept service job
salaries very low, but that may have to change if we are to avoid all of the unpleasant
and potentially dramatic ramifications of our increasingly class riven society.
I am not a pessimist at heart, but I do not see an easy
solution to our current economic travails.
The revered ‘marketplace’ may eventually sort it out, but a little
social engineering may be necessary to preclude a further deterioration of our
civil harmony.
