Thursday, July 19, 2012

The Hollowing Out

Long, in-depth piece by Thomas Edsall in the New York Times: The Hollowing Out (NYT):
It has become a campaign ritual. Immediately after the release of unemployment figures on the first Friday of every month, Democratic and Republican spin shifts into high gear.

“Our mission is not just to get back to where we were before the crisis. We’ve got to deal with what’s been happening over the last decade, the last 15 years — manufacturing leaving our shores, incomes flat-lining — all those things are what we’ve got to struggle and fight for,” Obama declared at the Dobbins School in Poland, Ohio.

Romney took the opposite tack in Wolfeboro, N.H.: “This is a time for America to choose whether they want more of the same; whether unemployment above 8 percent month after month after month is satisfactory or not. It doesn’t have to be this way. America can do better and this kick in the gut has got to end.”

Both candidates are only tinkering at the edges of the most important issue facing the United States: the hollowing out of the employment marketplace, the disappearance of mid-level jobs.

The issue of the disappearing middle is not new, but credible economists have added a more threatening twist to the argument: the possibility that a well-functioning, efficient modern market economy, driven by exponential growth in the rate of technological innovation, can simultaneously produce economic growth and eliminate millions of middle-class jobs.
This informative chart is included:

On his blog, McAfee explains the graphic:
Since the Great Recession officially ended in June of 2009 G.D.P., equipment investment, and total corporate profits have rebounded, and are now at their all-time highs. The employment ratio, meanwhile, has only shrunk and is now at its lowest level since the early 1980s when women had not yet entered the workforce in significant numbers. So current labor force woes are not because the economy isn’t growing, and they’re not because companies aren’t making money or spending money on equipment. They’re because these trends have become increasingly decoupled from hiring — from needing more human workers. As computers race ahead, acquiring more and more skills in pattern matching, communication, perception, and so on, I expect that this decoupling will continue, and maybe even accelerate.

This view is controversial — especially McAfee’s argument that the decoupling of jobs from other positive economic developments “will continue, and maybe even accelerate.” In other words, the downward employment and jobs spiral will keep going, driven by structural forces. Policies to ameliorate the process – a shorter work week, a massive investment in education (for example, at the community college level), the disaggregation of complex tasks into simple functions that could be executed by mid-skill workers — may only slow the decline, not stop it. This is a deeply pessimistic vision.
The article continues:
On July 5, McAfee held the attention of an audience of young researchers and prospective entrepreneurs here at Singularity University. For over an hour after his lecture, students met with McAfee to explore the consequences of his argument.

The students’ questions:

How much can wealth accumulate for a small slice of the population at the top, while large numbers of people are forced to work for ever lower pay or to drop out of the workforce altogether? For such a future society to function, would wealth need to be (coercively) redistributed from the top to those below, in order for the mass of the jobless population to survive? Who would have power and how would tax and spending policies be determined in such a radically bifurcated, automated, workless society?

… Brynjolfsson, who is more optimistic, said in an interview with The Times, “we are hopeful that that (job growth) will happen, but there is no guarantee of it. There is no economic law that says everyone benefits from technological improvement.” He also pointed out that the surge in inequality driven by rising incomes at the very top of the distribution suggests strongly that the benefits of digitization have not been widely spread.

“The problem is not tech stagnation,” as some have argued, “but the opposite,” Brynjolfsson contends.

“Technology is rushing ahead faster than humans can adapt.” The difficulty of human adaptation is, in turn, likely to get worse, he added, because technological innovation — as in Moore’s Law (predicting a doubling of computer capacity roughly every two years) — grows exponentially in scope. The total number of non-farm jobs in the country is now 5 million less than in January, 2008. The 3.7 million jobs added to the economy have not been enough to make up for the 8.7 million jobs lost in 2008-9.
“We are hopeful job growth will happen.”  Isn’t it nice to base an economy on hope? At least they have a clue unlike the other economists cited in the piece, who believe that things in the future will always be like the past. Nice “science” huh? Note that male unemployment has never recovered, as they continue to be displaced from the jobforce by women:


What this chart shows is that male unemployment has never recovered from recessions! Gee, do you think this might have something to do with single mothers and declining marriage rates? Oh that's right, men and women are the same, aren't they? That also squares with the overall labor force participation rate:


Other aspects of the job situation are accurately described in a recent  New Yorker piece summarized by Dave Pollard:
This week’s (July 9/16) New Yorker has a terrific one-page summary by James Surowiecki of why so many job vacancies are left unfilled “for want of any sufficiently qualified candidates” while so many people (especially young people with university degrees) are unable to find work. It’s behind a pay wall, so here’s a synopsis:

•Unemployment is high not because businesses are shedding jobs but because no one is hiring (in one case cited, a company had 25,000 applicants for a standard engineering job, and rejected all of them).

•The idea of a “skills gap” (the unemployed don’t have the skills hirers are looking for) is a myth. The truth is that companies want to hire the most experienced and successful people already working at competing companies, so they’ll hit the ground running, so there’s no training cost, and so there’s no risk they won’t work out. “When companies complain they can’t find people with the right ‘skills’”, Surowiecki writes, “they often just mean they can’t find people with the right experience”.

•This is a direct consequence of the fact that large corporations have slashed internal training budgets as a short-sighted means of cost cutting. The argument, says Surowiecki, is that “job tenure has shrunk, so why spend time and money training somebody who may soon go to work for your competitor”. With the loss of benefits and the disinterest of employers in investing in their employees, employee loyalty has understandably plummeted, creating a vicious cycle that big corporations themselves are to blame for.

•In a weak economy, “companies worry less about getting every possible dollar of new business than they do about keeping costs down”. The unwillingness of big corporations to invest in genuine domestic production (in lieu of outsourcing and offshoring every possible job) is a direct contributor to that weak economy. But it also reflects the fact that big corporation CEOs realize the economy is on the verge of collapse, and they’re hoarding cash and slashing costs to prepare for that eventuality.
So we see, workers will continue to blamed for their own plight. The "workers don't have the right skills" meme, the "need more education" meme, the "they're having babies before marriage" meme and the "there are plenty of jobs in North Dakota" meme have all been trotted out to explain how the deterioration of capitalism is the workers' fault. Sigh.

And see Dean Baker in The Guardian: Technology doesn't cause inequality – deliberate policy change does. In fact, it's both working in tandem. And as for the much-touted, "service economy," well, here's Yglesias again:
According to the BLS, about 2 million more people were working last month than were working a year ago. But we have 10,000 fewer people working in general merchandise stores. We have 20,000 fewer people working in electronics and appliance stores. We have 17,000 fewer people working in "sporting goods, hobby, book, and music stores." Now the overall BLS retail trade category includes other stuff including things like health and personal care stores that seem healthy. But the point is that over the course of a year in which the level of economic activity has clearly risen, certain major categories of big box retail have shed jobs. Given a few months in a row of torrid overall growth, presumably some of that would stabilize. But I think you have to see this as a part of the economy that's facing a persistent decline driven by e-commerce, a decline that should only accelerate since a ton of people are going to get their first smartphone in the next 12-18 months.
 The End Of Retail (Slate)

And the outlook for the next generation is grim:
A recent report published by the Young Invincibles think tank investigated the levels of youth unemployment. The results portray a dark future for young workers and students.

The report, titled “No End In Sight,” begins by stating that unless “trends change dramatically, there is a real danger that the youth labor market will never recover from the recession’s blow.” This is not mere idle speculation. Youth unemployment in the United States had still not fully recovered from the 2001 dot-com crash at the time of the financial meltdown. Since 2007, youth unemployment has skyrocketed by 141 percent and shows no signs of abating. In 2010, the Bureau of Labor Statistics reported that youth employment would never regain its 2007 level. The bureau estimates that even by 2020, there will be two million fewer jobs available for young people than before the crash.

Today, the official unemployment rate for individuals between the ages of 16 and 24 remains at 17 percent. For individuals between the ages of 16 and 19, the rate is 21 percent. The rate for youth minority groups is also considerably higher than the overall figure—approximately 20.5 percent of Latino and 30 percent of African American youth are currently unemployed. In major cities the situation is even worse. The youth unemployment rate in New York City, for example, has remained above 30 percent for three years in a row.
Widespread coverage on the report by major news sources suggests a growing fear within the American ruling class of social upheaval like that which has erupted in Egypt, Spain, Greece, Chile and numerous other countries since the onset of the crisis.
Globally, the epidemic of youth unemployment is mounting. On July 10, the Organization for Economic Cooperation and Development (OECD) warned that the high jobless rate threatened a permanent “scarring effect” on the prospects of the young generations as they come into adulthood with a long gap in their work history and training. In the 34 countries of the OECD, 18.6 percent of young people were neither in school nor employed. As these youth age and raise their own children, the impoverishment created by their early loss of work may pin them as well as their future offspring to low wages, unemployment and all the social miseries bound up with financial distress.
Report details desperate conditions confronting US youth (WSWS)

Of course, they may be the lucky ones: Job Insecurity: It's the Disease of the 21st Century -- And It's Killing Us (Alternet)
Across America, freaked-out employees are coping with sweat-drenched nights and heart-pounding days. They’re reaching for the Xanax and piling on the work of two or three people. They’re running the risk of short-term collapse and long-term disease.

The hell created by three grinding years of 8 percent-plus unemployment brings us plenty of stories of what people suffer when they lose their jobs. But what about the untold millions who live in chronic fear that tomorrow’s paycheck will be their last?

Research shows that the purgatory of job insecurity may be even worse for you than unemployment. And it's turning the American Dream into a sleepwalking nightmare. From young temporary workers to middle-aged career veterans, Americans are being pushed to their physical and psychological limits in what has the makings of a major national public health crisis. 
So it seems you're choices are to be unemployed of stressed out, both of these taking a toll on your health. Welcome to the world of labor in the twenty-first century. And this dystopian vision is being echoed by more and more experts every day. The last word goes to Damien Perrotin:
It is no wonder either that everybody’s political programs focus on how to create jobs. The communists want to create jobs by making everyone a civil servant of sorts. The socialists want to create jobs by subsidizing them, but they presently can’t because they don’t have the money. The moderate right wants to give more money to those who already have a lot of it in the hope that it will somehow trickle down, not that it matters very much if it doesn’t. The National Front wants to hunker down behind barbed wires, which should somehow create jobs. Muslim people need not apply.

As for the Greens, they want to create green jobs, a lot of them, preferably through generous state subsidies. Make no mistake, those green jobs do not involve growing green things. The group the Greens represent, namely the enlightened upper middle class, wants reasonably well paid and prestigious jobs, and herding sheep in central Brittany definitely doesn’t qualify.

Jobs are remarkably close to niches in a non-human ecosystem, which is hardly surprising since human societies basically work like simplified ecosystems in which the dominant species, as well as some of its parasites/symbionts/commensals, can assume a high number of roles.

And as you know, the maximum number of niches a given ecosystem can support depends upon the energy inflow it gets from its environment...
(There ain’t no) green jobs (EB)

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