Saturday, January 18, 2014

What Are People Good For 2014: This Time It's Different

The working inhabitants of a modern city are people who live inside a machine to be batted around by its wheels. They spend their days in activities which largely boil down to counting and measuring, living in a world of rationalized abstraction which has little relation to or harmony with the great biological rhythms and processes. As a matter of fact, mental activities of this kind can now be done far more efficiently by machines than by men — so much so that in a not too distant future the human brain may be an obsolete mechanism for logical calculation. Already the human computer is widely displaced by mechanical and electrical computers of far greater speed and efficiency. If, then, man’s principal asset and value is his brain and his ability to calculate, he will become an unsaleable commodity in an era when the mechanical operation of reasoning can be done more effectively by machines.
If we are to continue to live for the future, and to make the chief work of the mind prediction and calculation, man must eventually become a parasitic appendage to a mass of clockwork.

Back when I started this blog, however many years ago, the first long original piece I wrote, What Are People Good For? was a lengthy essay on automation. That was prompted my local library and building goods store going to self checkout. I realized that with a few extensions and some logical inferences about where this technology is headed, that this could eliminate many service jobs in our so-called "post-industrial service economy." Living in a deindustrialized rust-belt city, I could clearly see what happens when work disappears with my own eyes. I also combined personal experiences like the changes I have seen my own field of architecture, as well as my own difficulties finding work over the years, and realized that this was a major problem that the mainstream media and academia were simply ignoring. Marshall Brain wrote about this back in the nineties, and Martin Ford published an ebook about automation and jobs called "The Lights in the Tunnel" several years ago, but they are not part of the ordained economics priesthood, so they were largely ignored.

But all that's stared to change. Paul Krugman made some rumblings about automation in his column (which I noted in WAPGF), and MIT economist David Autor, one of the only professional economists to even think about the issue, introduced the idea of "hollowing out" - that routine and mid-range jobs were disappearing. Economists Brynolfsson and McAfee of MIT have just published their second book on the topic, The Second Machine Age (excerpt). George Mason University economist and celebrity blogger Tyler Cowen has aroused a lot of discussion when, following the insights in Brynofsson and McAfee's first book, he published Average is Over, arguing provocatively that automation will cleave society in two - one society of ten to fifteen percent of extraordinarily productive, educated, elite individuals enjoying prosperous lives, and one consisting of an unemployed or underemployed proletariat who enjoy the useful end results of the computer revolution, but who will live in sprawling shantytowns, lack meaningful work, real economic security, basic social benefits such as health care, or upward mobility for them and their children.

So it seems that every January there is a new flurry of articles and posts about these topics for some reason. So, it seems like a good time to once again update the latest in the examination of automation's effects that we've featured here over the years. I'm continually amazed at how this fringe issue is now being taken sincerely by an ever-widening range of people. Of course, it could be just a case of the Baader-Meinhof phenomenon on my part, but I don't think so. For example, here's an article in The Economist:
IN 1930, when the world was “suffering…from a bad attack of economic pessimism”, John Maynard Keynes wrote a broadly optimistic essay, “Economic Possibilities for our Grandchildren”. It imagined a middle way between revolution and stagnation that would leave the said grandchildren a great deal richer than their grandparents. But the path was not without dangers.

One of the worries Keynes admitted was a “new disease”: “technological unemployment…due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.” His readers might not have heard of the problem, he suggested—but they were certain to hear a lot more about it in the years to come.

For the most part, they did not. Nowadays, the majority of economists confidently wave such worries away. By raising productivity, they argue, any automation which economises on the use of labour will increase incomes. That will generate demand for new products and services, which will in turn create new jobs for displaced workers. To think otherwise has meant being tarred a Luddite—the name taken by 19th-century textile workers who smashed the machines taking their jobs.

For much of the 20th century, those arguing that technology brought ever more jobs and prosperity looked to have the better of the debate. Real incomes in Britain scarcely doubled between the beginning of the common era and 1570. They then tripled from 1570 to 1875. And they more than tripled from 1875 to 1975. Industrialisation did not end up eliminating the need for human workers. On the contrary, it created employment opportunities sufficient to soak up the 20th century’s exploding population. Keynes’s vision of everyone in the 2030s being a lot richer is largely achieved. His belief they would work just 15 hours or so a week has not come to pass.

Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently. They start from the observation that, across the rich world, all is far from well in the world of work. The essence of what they see as a work crisis is that in rich countries the wages of the typical worker, adjusted for cost of living, are stagnant. In America the real wage has hardly budged over the past four decades. Even in places like Britain and Germany, where employment is touching new highs, wages have been flat for a decade. Recent research suggests that this is because substituting capital for labour through automation is increasingly attractive; as a result owners of capital have captured ever more of the world’s income since the 1980s, while the share going to labour has fallen.

At the same time, even in relatively egalitarian places like Sweden, inequality among the employed has risen sharply, with the share going to the highest earners soaring. For those not in the elite, argues David Graeber, an anthropologist at the London School of Economics, much of modern labour consists of stultifying “bullshit jobs”—low- and mid-level screen-sitting that serves simply to occupy workers for whom the economy no longer has much use. Keeping them employed, Mr Graeber argues, is not an economic choice; it is something the ruling class does to keep control over the lives of others.

Be that as it may, drudgery may soon enough give way to frank unemployment. There is already a long-term trend towards lower levels of employment in some rich countries. The proportion of American adults participating in the labour force recently hit its lowest level since 1978, and although some of that is due to the effects of ageing, some is not. In a recent speech that was modelled in part on Keynes’s “Possibilities”, Larry Summers, a former American treasury secretary, looked at employment trends among American men between 25 and 54. In the 1960s only one in 20 of those men was not working. According to Mr Summers’s extrapolations, in ten years the number could be one in seven.

This is one indication, Mr Summers says, that technical change is increasingly taking the form of “capital that effectively substitutes for labour”. There may be a lot more for such capital to do in the near future. A 2013 paper by Carl Benedikt Frey and Michael Osborne, of the University of Oxford, argued that jobs are at high risk of being automated in 47% of the occupational categories into which work is customarily sorted. That includes accountancy, legal work, technical writing and a lot of other white-collar occupations.
The future of jobs: The onrushing wave (The Economist) The Economist, you'll note, is the staid and conservative British publication that has served as one of the stenographers and defenders of capitalism since the eighteenth century (including infamously defending the ideas which created the Irish Great Famine). So you can imagine the significance of this article appearing here, as well as the fact that it even mentions David Graeber's theory of bullshit jobs!

This next section, about the history of modern employment, is very important. It shows that it was the need for large amounts of labor in factories that drove the need for mass education, and it was the need for a mass market that drove higher living standards. Yet despite this, the living standards and wages for workers actually fell during the actual period of industrialization, one catching up decades later after the fact!
In 1500 an estimated 75% of the British labour force toiled in agriculture. By 1800 that figure had fallen to 35%. When the shift to manufacturing got under way during the 18th century it was overwhelmingly done at small scale, either within the home or in a small workshop; employment in a large factory was a rarity. By the end of the 19th century huge plants in massive industrial cities were the norm. The great shift was made possible by automation and steam engines.

Industrial firms combined human labour with big, expensive capital equipment. To maximise the output of that costly machinery, factory owners reorganised the processes of production. Workers were given one or a few repetitive tasks, often making components of finished products rather than whole pieces. Bosses imposed a tight schedule and strict worker discipline to keep up the productive pace. The Industrial Revolution was not simply a matter of replacing muscle with steam; it was a matter of reshaping jobs themselves into the sort of precisely defined components that steam-driven machinery needed—cogs in a factory system.

The way old jobs were done changed; new jobs were created. Joel Mokyr, an economic historian at Northwestern University in Illinois, argues that the more intricate machines, techniques and supply chains of the period all required careful tending. The workers who provided that care were well rewarded. As research by Lawrence Katz, of Harvard University, and Robert Margo, of Boston University, shows, employment in manufacturing “hollowed out”. As employment grew for highly skilled workers and unskilled workers, craft workers lost out. This was the loss to which the Luddites, understandably if not effectively, took exception.

With the low-skilled workers far more numerous, at least to begin with, the lot of the average worker during the early part of this great industrial and social upheaval was not a happy one. As Mr Mokyr notes, “life did not improve all that much between 1750 and 1850.” For 60 years, from 1770 to 1830, growth in British wages, adjusted for inflation, was imperceptible because productivity growth was restricted to a few industries. Not until the late 19th century, when the gains had spread across the whole economy, did wages at last perform in line with productivity.

Along with social reforms and new political movements that gave voice to the workers, this faster wage growth helped spread the benefits of industrialisation across wider segments of the population. New investments in education provided a supply of workers for the more skilled jobs that were by then being created in ever greater numbers. This shift continued into the 20th century as post-secondary education became increasingly common.

Claudia Goldin, an economist at Harvard University, and Mr Katz have written that workers were in a “race between education and technology” during this period, and for the most part they won. Even so, it was not until the “golden age” after the second world war that workers in the rich world secured real prosperity, and a large, property-owning middle class came to dominate politics. At the same time communism, a legacy of industrialisation’s harsh early era, kept hundreds of millions of people around the world in poverty, and the effects of the imperialism driven by European industrialisation continued to be felt by billions.

The impacts of technological change take their time appearing. They also vary hugely from industry to industry. Although in many simple economic models technology pairs neatly with capital and labour to produce output, in practice technological changes do not affect all workers the same way. Some find that their skills are complementary to new technologies. Others find themselves out of work.

Take computers. In the early 20th century a “computer” was a worker, or a room of workers, doing mathematical calculations by hand, often with the end point of one person’s work the starting point for the next. The development of mechanical and electronic computing rendered these arrangements obsolete. But in time it greatly increased the productivity of those who used the new computers in their work.

Many other technical innovations had similar effects. New machinery displaced handicraft producers across numerous industries, from textiles to metalworking. At the same time it enabled vastly more output per person than craft producers could ever manage.
Let's take a pause here. First, I'd have to correct that reference to Communism above. Communism, for all of its faults and abuses, did manage to take a backward, largely agrarian country (serfdom was abolished in Russia in 1861) and transform it into an industrial powerhouse that defeated Nazi Germany and competed successfully against the United States, including in the space program (note that I am in no way condoning its methods, just pointing out the facts). The proper comparison of poverty in Communist countries would be with other countries during industrialization.

The BBC has been running a wonderful series of articles on the major cities of Europe in 1914 on the eve of World War 1. They are well worth reading to see what life was like in that period. But, in reference to the above, I was struck by this section in their article about Berlin on the eve of the war:
Mark Twain stayed in Berlin and likened it to Chicago in its dizzying growth and thirst for the new and modern. By the turn of the century, Berlin had 10 long-distance railway stations, including the cathedral which was and is Friedrichstrasse. In 1905, a bus line was started, integrating the public transport system - though the Kaiser had his own Daimler, complete with a horn which played the thunder theme from Das Rheingold. Dah-da-dah-de-dah. He needed that horn - in 1913, there were already so many private cars on the streets that policemen had to direct the traffic at junctions.

And people, people, everywhere. Officialdom, perhaps in a very German way, counts things and on 1 October 1900, it recorded 87,266 crossing Potsdamer Platz, the hub of pre-war Berlin. By 1908, the hourly traffic had risen to 174,000. Above all, Berlin before the war was a city of electricity and light - "Elektropolis", Berliners themselves called it. Searchlights picked out the new Zeppelin airship above, and picked out the adverts along its side.
But this wasn't the real marvel of Berlin. For my money, Siemensstadt was the real symbol of the pre-war city. This was, and is, a whole district of Berlin devoted to one company. Siemensstadt means Siemens City, so-called because Siemens, the giant electrical company, occupied the whole district. The red-brick factories are still there, four and five storeys high, running along the straight roads for hundreds of metres. In 1913, a human inventory was done - 7,000 people in one factory, 3,000 toiling in the electric-motor works, 3,000 people in the cable works. This was clearly a city of the future, a city of modernity and power, electric power.

Industry sucked in immigrants who lived cheek-by-jowl in new blocks which became known as "rental barracks". Fugitives from the poverty of the primitive countryside and the pogroms of the East jostled with those already here.

On the eve of the war, 63% of the four million people in Berlin worked for wages, that is in what you might call modern industry. One questionnaire in 1910 elicited replies from Berliners like: "making mass-produced articles repulses me" and "I feel like a machine".

Women were becoming essential to the Berlin economy, in the factories for wages to some extent, but also as seamstresses working at home for a pittance in the proletarian districts on the outskirts. In 1906, the Christian Home Workers' Association drew attention to their conditions with an exhibition. The poster designed by the Berlin artist Kaethe Kollwitz - memorialised today in Kollwitzplatz - depicted a woman with sunken, exhausted eyes. The Kaiser's wife, Empress Augusta, declined to attend. The poster was too depressing, she said. Industrial Berlin was a place of deep class tensions.

And gender tensions. One newspaper article of the time, entitled The Effect of Sewing Machine Work on the Female Genital Organs, concluded that long hours hunched over the Singer sewing machine could result in women not being able to conceive children.

Others (invariably male) worried about women who increasingly worked in factories near men who were not their husbands. Where might this lead? An august committee of the Reichstag opined that a woman's proper place was "at the cradle of her child". Not that it mattered. The vibrant, pre-war economy needed hands and hands were what it got, male and female.

Writing in 1910, the sociologist Max Weber described the city and captured the tensions and the excitement of what he called its "wild dance of impressions of sound and colour". There were tramways, underground railways, electric lights, display windows, concert halls and cafes, smokestacks, masses of stone.

And above this city of strife and contrast and flux was the Kaiser, unsympathetic, to say the least, to any proletarian ambitions except those involving the wearing of uniforms and aggrandisement of Germany, at the time barely 40 years old as a nation. When tram-workers went on strike in 1910, the troops were called out and Kaiser said he hoped that "five hundred of the strikers might be gunned down".

It wasn't only economic grievances that brought workers out on strike. They struck, too, to widen the franchise. Again, the Kaiser was resistant. The Left was strong in Berlin. In the Reichstag elections of 1912, 75% of Berlin's votes went to the socialists - but the Kaiser wished them away, calling the Social Democrats a passing phase. He was wrong.
Berlin 1914: A city of ambition and self-doubt (BBC) Note the rapid growth in industrialization and the almost bottomless need for factory workers (however unpleasant that work may be). It's very similar to modern-day China, almost eerily so. But how different are conditions in the old industrial economies today? Back to the article:
Even when machine capabilities are rapidly improving, it can make sense instead to seek out ever cheaper supplies of increasingly skilled labour. Thus since the 1980s (a time when, in America, the trend towards post-secondary education levelled off) workers there and elsewhere have found themselves facing increased competition from both machines and cheap emerging-market workers.

Such processes have steadily and relentlessly squeezed labour out of the manufacturing sector in most rich economies. The share of American employment in manufacturing has declined sharply since the 1950s, from almost 30% to less than 10%. At the same time, jobs in services soared, from less than 50% of employment to almost 70%. It was inevitable, therefore, that firms would start to apply the same experimentation and reorganisation to service industries.

A new wave of technological progress may dramatically accelerate this automation of brain-work. Evidence is mounting that rapid technological progress, which accounted for the long era of rapid productivity growth from the 19th century to the 1970s, is back. The sort of advances that allow people to put in their pocket a computer that is not only more powerful than any in the world 20 years ago, but also has far better software and far greater access to useful data, as well as to other people and machines, have implications for all sorts of work.

The case for a highly disruptive period of economic growth is made by Erik Brynjolfsson and Andrew McAfee, professors at MIT, in “The Second Machine Age”, a book to be published later this month. Like the first great era of industrialisation, they argue, it should deliver enormous benefits—but not without a period of disorienting and uncomfortable change. Their argument rests on an underappreciated aspect of the exponential growth in chip processing speed, memory capacity and other computer metrics: that the amount of progress computers will make in the next few years is always equal to the progress they have made since the very beginning. Mr Brynjolfsson and Mr McAfee reckon that the main bottleneck on innovation is the time it takes society to sort through the many combinations and permutations of new technologies and business models.

The machines are not just cleverer, they also have access to far more data. The combination of big data and smart machines will take over some occupations wholesale; in others it will allow firms to do more with fewer workers. Text-mining programs will displace professional jobs in legal services. Biopsies will be analysed more efficiently by image-processing software than lab technicians. Accountants may follow travel agents and tellers into the unemployment line as tax software improves. Machines are already turning basic sports results and financial data into good-enough news stories.

Jobs that are not easily automated may still be transformed. New data-processing technology could break “cognitive” jobs down into smaller and smaller tasks. As well as opening the way to eventual automation this could reduce the satisfaction from such work, just as the satisfaction of making things was reduced by deskilling and interchangeable parts in the 19th century. If such jobs persist, they may engage Mr Graeber’s “bullshit” detector.

Being newly able to do brain work will not stop computers from doing ever more formerly manual labour; it will make them better at it. The designers of the latest generation of industrial robots talk about their creations as helping workers rather than replacing them; but there is little doubt that the technology will be able to do a bit of both—probably more than a bit. A taxi driver will be a rarity in many places by the 2030s or 2040s. That sounds like bad news for journalists who rely on that most reliable source of local knowledge and prejudice—but will there be many journalists left to care? Will there be airline pilots? Or traffic cops? Or soldiers?

There will still be jobs. Even Mr Frey and Mr Osborne, whose research speaks of 47% of job categories being open to automation within two decades, accept that some jobs—especially those currently associated with high levels of education and high wages—will survive. Tyler Cowen, an economist at George Mason University and a much-read blogger, writes in his most recent book, “Average is Over”, that rich economies seem to be bifurcating into a small group of workers with skills highly complementary with machine intelligence, for whom he has high hopes, and the rest, for whom not so much.
Do read the whole article, interesting throughout.  However, as usual, the answers are not so forthcoming, aside from saying eventually this will all work itself out just like it did in the past. The best rejoinder to this is John Maynard Keynes' famous retort to people who believed that the Great Depression would work itself out in the long run - "in the long run, we're all dead."
Another way in which previous adaptation is not necessarily a good guide to future employment is the existence of welfare. The alternative to joining the 19th-century industrial proletariat was malnourished deprivation. Today, because of measures introduced in response to, and to some extent on the proceeds of, industrialisation, people in the developed world are provided with unemployment benefits, disability allowances and other forms of welfare.
Er, those would be all of the things that governments around the world are eliminating in the name of "austerity," wouldn't they? How well were African Americans treated when their jobs went away? In the United States, anyone not able to get a job is disparaged and demonized as a unproductive, a taker, a parasite, a loser. Does that sound like a society that's adjusting to the new reality? In fact, in an atypically pointed blog post, Paul Krugman tracks the rise of the term "loser" in disparaging workers, and finds it has risen quite substantially:
The other day someone — I don’t remember who or where — asked an interesting question: when did it become so common to disparage anyone who hasn’t made it big, hasn’t gotten rich, as a “loser”? Well, that’s actually a question we can answer, using Google Ngrams, which track the frequency with which words or phrases are used in books:
Seems to parallel the workforce participation rate, doesn't it?
Sure enough, the term “losers” has become much more common since the 1960s. And I think this word usage reflects something real — a growing contempt for the little people.

This contempt surely isn’t limited to Republican politicians. Still, it’s striking how unable they are to show any empathy for people who are just doing their best to make a modest living. The most famous example, of course, is Mitt Romney, who didn’t just disparage 47 percent of the nation; he urged everyone to borrow money from their parents and start a business. I still think the most revealing example to date was Eric Cantor, who marked Labor Day by tweeting:

    Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success.

But Marco Rubio’s latest speech deserves at least honorable mention, for the airy way he dismissed the idea of raising the minimum wage: “Raising the minimum wage may poll well, but having a job that pays $10 an hour is not the American dream.”

In a sense, he’s right: if the American dream means getting rich, then $10 an hour isn’t living that dream. But most people aren’t and won’t get rich. Raising the minimum wage would mean higher incomes for around 27 million people; in many cases the gains would amount to thousands of dollars a year, which is really a lot in low-income families. So what are all these people, chopped liver? Well, yes, at least in the eyes of the GOP — or maybe make that chopped losers.
You’re All Losers (New York Times)

This coincides with the rise of Social Darwinism and eugenics that we're seeing embraced by America's right wing/libertarians. Anyone who can't claw themselves into the globalized "cognitive elite" (even if they must go heavily into debt to do so), simply deserves to die. Somehow I doubt automation is going to lead to better living standards for all in a society like that. It's going to lead to social chaos.

The common assumption is that automation will cause massive economic growth. Thus, the workers "freed up" by automation will have plenty of buyers for their labor power. But let's take a look at where the government itself estimates there will be the most job growth. Here's Slate's Matt Yglesias:
Thinking about the long-term future of the American economy often seems to me to be dominated by two worries. On the one hand there's the concern that mechanization will make human labor useless—robots take our jobs. On the other hand there's the worry that the cost of supporting an aging population will crush the economy. What people often don't seem to realize is that these worries are largely contradictory.
Actually, this column by Dean Baker (also posted by a reader in the comments to a previous article) makes exactly that point: Robots and Economic Luddites: They Aren't Taking Our Jobs Quickly Enough and Robots and the Demographic Crisis (Beat the Press):
Do you remember back when we were worried that robots will take all of the jobs? There will be no work for any of us because we will have all been replaced by robots.

It turns out that we have even more to worry about. AP says that because of declining birth rates and increasing life expectancies, we face a huge demographic crunch. We will have hordes of retirees and no one to to do the work. Now that sounds really scary, at the same time we have no jobs because the robots took them we must also struggle with the fact that we have no one to do the work because everyone is old and retired.

Yes, these are the complete opposite arguments. It is possible for one or the other to be true, but only in Washington can both be problems simultaneously.
Anyway, back to Yglesias:
But consider the new edition of the Occupational Outlook Handbook from the Bureau of Labor Statistics, hot off the presses yesterday. Its No. 1 occupational category that it thinks will add the most jobs over the next 10 years is personal care aides. It says there will be 580,800 of them. At No. 2 is a better-paying profession—registered nurses. Home health aides is No. 4, and nursing assistants is No. 6.

Now is this really going to happen? I have no idea. But this is the scenario in which population aging puts financial pressure on the economy—a world in which we need to do lots of labor-intensive elder care. The other scenario is one in which robo-nurses make a large share of this labor-intensive elder care irrelevant. In that case we might have an unemployment problem, but we won't have a demographically induced growth problem.

One happy outcome is a scenario in which we have neither problem. That's a world in which automation-driven efficiencies outside of the care-giving sector make it relatively easy for us to employ lots and lots of people teaching children and taking care of the elderly. But what certainly won't happen is a world in which we somehow simultaneously can't afford to care for the elderly and also can't come up with anything for able-bodied people to do with their time. If aging is expensive, the expense will specifically take the form of large-scale employment in elder care.
So if, say, you don't want to empty bed pans or change diapers for a living, well, I guess, fuck you.  What's interesting about a lot of the jobs is that the pay and conditions are fucking awful, especially in light of current Republican efforts to repeal the weekend. But aren't most of these jobs already done by unpaid family members?

What I don't understand about this is, where is the money for these workers going to come from? Someone sick enough to require a home health aide by definition is not out there earning a lot of money. When people worked in factories it was obvious where the money was coming from - the fabrication, sales and manufacture of value-added goods in the retail market. But nursing assistants and home health aides? Inserting catheters and dispensing handfuls of pills is not nearly as profitable as manufacturing cars or computer chips, however necessary we think it may be. There is no value added, and these services are "nontradeable." Are these the kind of jobs that automation is "freeing" us to do? Yet this is what the government itself is projecting as the job growth of the future! This is what Kevin Drum, another journalist who has been doing a good job covering this issue, called "our bedpan and canasta future."

And if we're saying that this is where our employment is coming from, how does that square with the GOP agenda to eliminate or defund any sort of "socialized medicine" and create a world where the market decides everything. I'm guessing taking care of sick people forever is not going to be profitable without massive government subsidies. Are they going away? And how does that square with the desire to shrink government and government revenue? If that goes away, how will these jobs appear? and if they don't, what jobs will appear? As one commenter pointed out:
 Home health aides don't produce anything which can be resold or maintained.  Their work loses all value after completion.  The work of home health aides doesn't have much indirect impact on the rest of the economy.

So Mr. Yglesias is wrong, unsurprisingly.  If robots are taking away jobs by producing and maintaining items for sale, the number of home health aides can increase to match the number of lost - manufacturing - jobs and the total number of jobs would still decrease.
Maybe we can become financial advisors? Think again - No, You Don't Actually Need To Hire A Financial Advisor (Forbes) Online services are cheaper and more effective.

Surely we can all get jobs programming the robots, right? Well, let's look at the fate of those who already do that sort of work, electrical engineers:
It’s almost ironic. We’re living in a time when engineering has never been more important. From communications devices in the hands of most people on the planet to the intelligence that is being embedded into manufactured goods at an unprecedented scale, engineering solutions have never been in higher demand.

Yet market dynamics are seemingly conspiring to undermine the ability of many engineers to make a decent living. Many engineers find themselves unemployed. Those who are employed are seeing their compensation erode even as they put in long hours.

Many factors are contributing to this somber situation. Globalization is placing downward pressure on wages. Advances increasingly seem to deliver incremental outcomes, rather than transformative ones. And there just isn’t enough oxygen in the economy to fuel the kind of recovery that would really heat up the engineering job market.

So this year when we surveyed the experiences and views of nearly 3000 U.S. engineering professionals, we had to take a look at some very sobering realities. We hope the resulting insights will be of value to you, even if it’s only to let you know that you are not alone in your struggles—and that these are indeed pressure-packed times for the engineering profession.

 The unemployment rate for electrical and electronics engineers increased sharply in 2013. According to data from the U.S. Labor Department Bureau of LaborStatistics (BLS), engineering jobs in the first quarter of 2013 declined by 40,000 and the unemployment rate for engineers rose to 6.5%. The industry lost another 3000 jobs during the second quarter, although the unemployment rate dropped somewhat to 4.5% in Q2 for technical reasons.                

By comparison, in both 2011 and 2012 the unemployment rate for EEs was just 3.4%. Last year there were 335,000 EEs counted in the workforce. At the midway point this year, the number was estimated at just 292,000.

The IEEE-USA sees the unemployment rate for engineers getting worse if the proposals to increase H-1B visas now making their way through Congress are successful. The organization has long opposed efforts to raise the H-1B cap.

Speaking before the House Judiciary Committee Subcommittee on Immigration and Border Security earlier this year, IEEE-USA representative Bruce Morrison testified in support of permanent employment-based visas for science, technology, engineering, and mathematics (STEM) professionals but criticized proposals to increase America’s reliance on H-1B temporary visas.

“We hear all the time that this is a nation of immigrants,” Morrison said. “No one has ever said this is a nation of guest workers.”

 According to the BLS, five years from now nearly all of the 30 fastest-growing occupations will require quantitative skills and technical STEM knowledge. Supporters of the bipartisan legislation—including Google, Microsoft, IBM, Facebook, and other major tech companies—insist businesses cannot find the skills they require in the domestic labor market and need access to a bigger, global pool of STEM workers. Their hope is that companies will be able to attract more of the world’s bright minds in engineering and technology by permitting these workers to stay in the U.S.

But others argue that there are plenty of engineers already in the U.S. who can do the job and that H-1B workers don’t come with special skills, just lower wages.“Companies complain about ‘no workers available’ but are laying off experienced workers and replacing them with H-1B and offshore workers,” one engineer lamented in a response to our survey. “The people who are hiring are paying entry-level wages or are demanding 60-hour workweeks.”
2013 Engineering Salary Survey: Pressure Up, Salaries Down (Electronic Design)

Yeah, a "golden age" for knowledge workers, all right. And these guys are the lucky ones! For years we've been told that "more education" will make unemployment disappear. Today, that seems like a cruel joke. In inner-city ghettos, employment has never come back, only incarceration and hopelessness. And now that's heading for the nation as a whole.

Here's a take from a right/libertarian writer:
In much of the industrial world, it seems to be increasingly difficult for people to earn a decent living without a fairly elite set of skills--or an elite set of credentials that mimic skills, like a BA in English Literature from an Ivy League institution. The ability to earn a decent living, either yourself or as part of a family, is one of the basic criteria for a decent life.  (And yes, before you ask: I think trust funds can be just as toxic as lifetime welfare benefits.)

It's impossible to look at what's happening to the bottom half of American society and not worry.  Some of the breakdown is cultural--a fraying of the basic ties that keep people connected and cared for.  Some of it is economic, the disappearance of steady employment that allows people to do the bourgeois work of planning for the future.  And in some ways, those trends are reinforcing each other.  A community cannot insist that its members work hard and plan for the future if there are no jobs available; the resulting erosion of work and education ethics makes unemployment worse. 

The problem is that all the proposed solutions ring hollow.  Until roughly the last five years, it was possible to believe that education would be the solution: send more kids to school, retrain people for new jobs.  But college graduates aren't finding it so easy to obtain solid employment either.  It's true that having a college diploma is still much better than not having a college diploma, but that doesn't mean that by sending more kids to school, we're actually making the workforce more productive, much less mitigating the problem of economic change; we may just be forcing people to jump over a higher bar to gain access to a shrinking number of jobs.  Paul Krugman points out that these days, highly educated workers still have to fear having their job disrupted. 

And retraining only works to a point.  For my forthcoming book, I interviewed a Danish photographer facing a career crisis.  Could he take advantage of Denmark's generous retraining programs, I asked?  He was glum.  Your forties are a bit late to be tackling a whole new career; the payoff to investing years in education is simply inherently lower than it is in your twenties.  Besides, he had a new baby.  What would he and his wife live on while he spent a few years in training? 

Paul Krugman's solution, a stronger safety net, is equally unsatisfying.  I'm not arguing for or against a safety net here; I'm just pointing out that it won't do as an actual substitute for the majority of the population having jobs.

For starters, it is politically difficult to imagine a really large class of people who simply permanently live off the state.  The safety net is rooted in human instincts about reciprocal exchange.  Of course, it isn't all that reciprocal--the majority of people who are net taxpayers are extremely unlikely to collect much in the way of food stamps, TANF, or even unemployment insurance.  Nonetheless, the moral arguments are founded in the premise that these benefits are for emergencies, and anyone can have an emergency.  They will lose political support if you have one group of people paying taxes, and a different group of people who can expect to live their entire life on the dole. 

Such an arrangement would also be socially toxic.  Being out of work is astonishingly bad for your state of mind, your social relations, and even basic skills like math and reading.  Various theorists have imagined unleashing a wave of creativity as people invest their time in non-market production, but it seems to me that these people are inferring far too much from their circle of acquaintance.  Given that these people are mostly public intellectuals of some sort, that circle is filled with strongly self-motivated people with ferocious work ethics and fierce competitive instincts.  This does not describe most of the population, who after all have more leisure time than they used to, but fewer hobbies or socially oriented activities.  Most of the extra time will be filled by watching television or fiddling around on the internet.
When Work Disappears (The Daily Beast)

As much as I hate to admit it, McArdle may be right. But it is ironic coming from someone whose job it is to fiddle around on the internet. The fact is, good-paying jobs will go to well-connected insider elites like Ms. McCardle, who will simply cluck their tongues and shake their heads at those who are unable to get the kind of plumb opportunity-hoarding jobs she and her compatriots are able to acquire (while telling themselves that they acquired them through their own inherent superiority).

This idea that we lost our factory jobs to Asia and Latin America and just "adjusted" to a new reality is bunk. Those few journalists who manage to leave the suburbs of Washington D.C. or Manhattan and venture out into flyover country, or return to the picket-fenced hometowns of their youth inevitably find decaying and crime-ridden post-apocalyptic landscapes out of Afghanistan or Somalia. This didn't just happen overnight. This has been going on for forty years! As I argued in The Post-Work Society Is Not A Future State, we have been living in a creeping post-work society for some time now. It's just that it disproportionately affected "those people" - the people whom Americans like to look down upon to reassure themselves of their own superiority.

And in each and every story that these journalists write you hear the exact same story - some large corporate manufacturing employer pulled up and disappeared sometime between 1977 and 1992, leaving behind a hollow shell of poverty and crime across the "heartland." Yet, according to economists, everything was well. Detroit's experience with automobile manufacturing is the most famous case. Here are some other examples:
Not long ago, Camden was everything about America that worked. In 1917, a report counted 365 industries in Camden that employed 51,000 people. Famous warships like the Indianapolis were built in Camden's sprawling shipyards. Campbell's soup was made here. Victor Talking Machine Company, which later became RCA Victor, made its home in Camden, and the city once produced a good portion of the world's phonographs; those cool eight-hole pencil sharpeners you might remember from grade school – they were made in Camden too. The first drive-in movie was shown here, in 1933, and one of the country's first planned communities was built here by the federal government for shipyard workers nearly a century ago.

But then, in a familiar narrative, it all went to hell. RCA, looking, among other things, for an escape from unionized labor, moved many of its Camden jobs to Bloomington, Indiana. New York Shipbuilding closed in the Sixties, taking 7,000 jobs with it. Campbell's stuck it out until the Nineties, when it closed up its last factory, leaving only its corporate headquarters that today is surrounded by gates high and thick enough to keep out a herd of attacking rhinoceroses.
Apocalypse, New Jersey, Matt Taibbi, Rolling Stone
GALLIPOLIS, Ohio — Jodi and Ralph Taylor are public workers whose jobs as a janitor and a sewer manager cover life’s basics. They have moved out of a trailer into a house, do not have to rely on food stamps and sometimes even splurge for the spicy wing specials at the Courtside Bar and Grill.

While that might not seem like much, jobs like theirs, with benefits and higher-than-minimum wages, are considered plum in this depressed corner of southern Ohio. Decades of industrial decline have eroded private-sector jobs here, leaving a thin crust of low-paying service work that makes public-sector jobs look great in comparison.

Now, as Ohio’s legislature moves toward final approval of a bill that would chip away at public-sector unions, those workers say they see it as the opening bell in a race to the bottom. At stake, they say, is what little they have that makes them middle class.
Ohio Town Sees Public Job as Only Route to Middle Class (New York Times)
But like in so many towns across the Midwest, the population is shrinking and getting older. Factories have been closing since the '80s and '90s. One of the best government jobs in town, the state-run home for people with mental disabilities, was closed in 2002. Thousands of people lost their jobs.

Then came the Great Recession. Since then, the few factories that have managed to hang on in Lincoln have tended to hire temporary workers at lower wages with no benefits.

There is one new plant in town: a warehouse and distribution center for food products. But the jobs there are mainly stacking boxes or driving trucks. And the starting wages are $16 to $18 an hour — what economists say is barely a living wage.
Dwindling Middle Class Has Repercussions For Small Towns (NPR)
THERE ARE LOTS of diversions in the Big White Ghetto, the vast moribund matrix of Wonder Bread–hued Appalachian towns and villages stretching from northern Mississippi to southern New York, a slowly dissipating nebula of poverty and misery with its heart in eastern Kentucky, the last redoubt of the Scots-Irish working class that picked up where African slave labor left off, mining and cropping and sawing the raw materials for a modern American economy that would soon run out of profitable uses for the class of people who 500 years ago would have been known, without any derogation, as peasants. Thinking about the future here and its bleak prospects is not much fun at all, so instead you have the pills and the dope, the morning beers, the endless scratch-off lotto cards, healing meetings up on the hill, the federally funded ritual of trading cases of food-stamp Pepsi for packs of Kentucky's Best cigarettes and good old hard currency, tall piles of gas-station nachos, the occasional blast of meth, Narcotics Anonymous meetings, petty crime, the draw, the recreational making and surgical unmaking of teenaged mothers, and death: Life expectancies are short — the typical man here dies well over a decade earlier than does a man in Fairfax County, Va. — and they are getting shorter, women's life expectancy having declined by nearly 1.1 percent from 1987 to 2007.

If the people here weren't 98.5 percent white, we'd call it a reservation.
Appalachia: The big white ghetto (National Review)

But automation, unlike deindustrialization, is now starting to affect educated, middle-class people, so now we're finally starting to pay attention. And automation can be deployed just as easily in New York or Cleveland, in urban areas as well as rural. It can effect accountants as well as truck drivers. It's no longer confined to certain classes, occupations or locations. So now, people are staring to notice that good middle-class jobs are being replaced with McJobs, and getting an education won't save you, despite the fact that it has been happening all along. Maybe those former truck drivers and financial advisers and radiologists aren't going to enjoy emptying bedpans or stocking shelves for a living.

And the fact that computers and automation are increasingly driving economic rewards to a smaller and smaller elite is becoming obvious to more and more people:
There are two additional components to [Jaron] Lanier’s thesis. The first is that the digital economy has done as much as any single thing to hollow out the middle class. (When I asked him about the effect of globalization, he said that globalization was “just one form of network efficiency.” See what I mean about a universal theory?) His great example here is Kodak and Instagram. At its height, writes Lanier “Kodak employed more than 140,000 people.” Yes, Kodak made plenty of mistakes, but look at what is replacing it: “When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people.”

Which leads nicely to Lanier’s final big point: that the value of these new companies comes from us. “Instagram isn’t worth a billion dollars just because those 13 employees are extraordinary,” he writes. “Instead, its value comes from the millions of users who contribute to the network without being paid for it.” He adds, “Networks need a great number of people to participate in them to generate significant value. But when they have them, only a small number of people get paid. This has the net effect of centralizing wealth and limiting overall economic growth.” Thus, in Lanier’s view, is income inequality also partly a consequence of the digital economy.
Will Digital Networks Ruin Us? (NYT)

And Tom Friedman gets in on the act in his usual style:
Something very, very big happened over the last decade. It is being felt in every job, factory and school. My own shorthand is that the world went from “connected to hyperconnected” and, as a result, average is over, because employers now have so much easier, cheaper access to above-average software, automation and cheap genius from abroad. Brynjolfsson and McAfee, both at M.I.T., offer a more detailed explanation: We are at the start of  the Second Machine Age.

The First Machine Age, they argue, was the Industrial Revolution that was born along with the steam engine in the late 1700s. This period was “all about power systems to augment human muscle,” explained McAfee in an interview, “and each successive invention in that age delivered more and more power. But they all required humans to make decisions about them.” Therefore, the inventions of this era actually made human control and labor “more valuable and important.” Labor and machines were complementary.

 In the Second Machine Age, though, argues Brynjolfsson, “we are beginning to automate a lot more cognitive tasks, a lot more of the control systems that determine what to use that power for. In many cases today artificially intelligent machines can make better decisions than humans.” So humans and software-driven machines may increasingly be substitutes, not complements. What’s making this possible, the authors argue, are three huge technological advances that just reached their tipping points, advances they describe as “exponential, digital and combinatorial.”
If I Had a Hammer (NYT)
Workforce participation rate: Why are people dropping out of the workforce?
The idea that there is some natural equilibrium between the number of workers and the labor needed in an economy is more myth than fact. If you look at economic history, outside of wartime there has always been a worry about unemployment, even before mass automation. This is continuous throughout the history of industrialization, although the actual size of unemployment has varied. Jeremy Rifkin, in The End of Work, tells the story of how the consumer economy of mass consumption and advertising was created in order to assuage post-war fears of a return to Great Depression levels of unemployment after the war. People had to be relentlessly convinced to buy the massive output coming out of America's factories. And back then, Americans had the highest incomes in the world and could do that. Today it is a very different story.

It's the modern-day equivalent of Say's Law - that supply creates its own demand. In this view, the supply of available workers automatically creates the demand opportunities for those workers to find employment. But this new version of Say's Law is just as erroneous as the original. As a commenter to the Yglesias article put it:
One gets the impression there's an 800 pound gorilla in the room that nobody's talking about. The list of possible future economic issues seem to be only the affect of a much larger/deeper/graver systemic  problem. There's a shadow being cast over the entire economic enterprise. If you listen for the implied subtext behind the words of economists they all seem to be saying "Flee the working class by any means available because the economic ship has been holed below the water line and those passengers locked in steerage are going to drown first."

And now you know why the one percent is so eager to deepen the moats and pull up the drawbridges.


  1. >What I don't understand about this is, where is the money for these workers going to come from?

    I thought you had stopped taking those stupid pills? Running out of money is no more possible than running out of zeroes or the letter "e". We print up a bunch of money, give it to the humans who then give it to the robots in exchange for all the things the robots produce (food, manufactured goods, digital services,etc). McArdles objection to the dole is valid. Most people are too undisciplined to cope with unlimited leisure. So we put the healthy ones to work keeping the sick ones alive for a few more years. There is an INFINITE scope for human labor to be deployed for the purpose of keeping brain-dead old people and defective babies alive for a few more years. Another possibility is to put 10% of the population in prison and another 20% guarding, arresting, prosecuting, counseling that 10%. Alternative A is the health-care industrial-complex economy, and is where we appear to be heading. Alternative B is the prison-industrial complex economy, and is what the Tea-Baggers will try to give us. Both alternatives amount to make-work. Alternative C is for a Katrina like response to a natural disaster to eliminate the excess population. What we will NOT get is rising unemployment. If you understood anything about politics, you'd know that rising unemployment (beyond the current situation) is much less likely than Alternative A and B. (Alternative C is up to Mother Nature.)

  2. Good god.... just get out. "This Ugly Civilization" by Ralph Barsodi is the blueprint. Our world/culture are so dystopic that it's barely worth reading posts like these anymore. It's great analysis, but there are no prescriptions that make sense other than getting the hell out.


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