What is really happening to jobs in America?

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Thu May 07, 2015 18:20:07PM

Assembly line at Hyundai Motor Company’s car factory.By: Tansiis

"I think there is a world market for maybe five computers." --Thomas Watson, president of IBM, 1943.

Sometimes the future is beyond even a CEO’s power of imagination. Sales of personal computers, tablets and smart phones worldwide in the year 2014 topped 2.4 billion, with 88 percent of sales attributable to tablets and smart phones. The impact that computers have had on jobs in America and the rest of the world is astounding. Millions of jobs have been lost to computerization, but millions of new jobs requiring different skills have also been created around computers and the internet.

In my prior article on the Trans-Pacific Partnership trade agreement, I addressed the issue of jobs related to the TPP and other trade agreements. However, there are so many other factors that, in the aggregate, have a much larger impact on jobs, and in focusing too much on the TPP, we lose sight of the bigger picture and what is really happening to jobs in America. Automation and the advent of faster and smaller computers is certainly the biggest “job changer”, but also implementation of improved productivity measures, market forces and competition, supply and demand of consumer products and services, booms and busts (bubbles), e-commerce and internet shopping, tax policies that reward companies that ship jobs overseas, corporate policies on wages and benefits, government tax and spending programs (e.g. stimulus vs austerity), changing demographics of the work force (e.g. millennials vs baby boomers), retirements, part time work, and, of course, political shenanigans in Congress by the Party of ‘Hell No You Can’t’. I am writing a separate article on the politics of jobs, which should follow this article in a few days.

Recessions are seen as bad for some jobs, but as a part of our capitalist, “survival of the fittest” society, recessions also weed out many of the less competitive and less efficient parts of a business, in some cases resulting in bankruptcy. Many of those jobs are lost forever. The year 2014 is seen by many economists as a banner year for American businesses and job growth, yet some 27,000 of those businesses still filed for bankruptcy in the courts. Thankfully jobs added in the more efficient businesses and new start-ups more than offset the job losses due to bankruptcy lay-offs.

Monthly Jobs Reports: The Bureau of Labor Statistics monthly jobs report has become an eagerly anticipated economic “report card” for those in engaged in administering government programs that affect employment and unemployment numbers, and also those in the media so eager to cast judgment on those programs. Depending on how big the jobs number is, it might make a sensational “breaking news” headline in MSNBC, and if it’s a small number it might make an equally sensational headline in Fox News. Media pundits will read their scripts of “expert” critical commentary to impress their knowledge on their respective tribal segments of the viewing public. The Obama administration will highlight the positive trend (62 straight months and counting) of private sector jobs growth as validation and vindication of Obama’s many initiatives to improve the jobs and welfare of Americans. As much as I delight in participating in that exercise, I fully recognize that not all of the jobs added or lost can be attributed to specific policies or actions of a sitting president, but many of them certainly are. They are just real hard to quantitatively correlate with specific actions, given all the other mitigating factors affecting jobs, many of them generational in time.

We should also be reminded again that the monthly jobs report is the net of jobs added and jobs lost. Every month the economy is shedding jobs and adding jobs for the various reasons stated above, and for the last five years there have been more jobs added than lost each month. The shedding of uncompetitive jobs and adding of new jobs is a fact of life in any capitalist society. I address that point later in this article.

Adapting to Automation: The loss of jobs due to automation is difficult to accept for many, but especially because efforts to retrain workers who lost jobs have often fallen short of goals for various reasons. Automation, especially in the past decade, has resulted in bigger losses for some skill sets and jobs than globalization, and that trend will certainly continue, with or without trade agreements. From an article in Scientific American, Will Automation Take Our Jobs?, Erik Brynjolfsson and Andrew McAfee, both business researchers at the Massachusetts Institute of Technology, argue in their book, The Second Machine Age, that “technological advances are destroying jobs, particularly low-skill jobs, faster than they are creating them.” Routine jobs like bank tellers, machine operators, and dress makers begin to fade away in the 1980s with the advent of computers, and in recent years the trend has accelerated. In fact, the future does not bode well for many of the remaining low skilled jobs in America.

Economist Carl Benedikt Frey and information engineer Michael A. Osborne, both at the University of Oxford, estimate that 47 percent of American jobs are high risk of being “computerized out of existence”. Jobs such as “loan officers, tax preparers, cashiers, locomotive engineers, paralegals, roofers, taxi drivers and even animal breeders are all in danger of going the way of the switchboard operator.”

The 47 percent number has a certain political ring to it and therefore has been picked up by several journalists. However, what that scary number taken in isolation doesn’t indicate is the number of offsetting computer related jobs that will be added as a result of the innovative entrepreneurial endeavors of Americans. When jobs are lost to computerization, other jobs are created to run those computers…and whole new industries can emerge.

Humans and machines: The jobs story is not just computers themselves, but also the robots whose motions are driven by a human pressing buttons on a computer controlled consol. Take a look at this YouTube video of one worker operating the Ultimate Wood Cutting Machine as it cuts down trees, strip the bark and cuts it into sections in one continuous action covering less than a minute per tree. Lumberjacks have been critical of the loss of their jobs to trade agreements with countries like Canada, but this gizmo paints a different picture. I’ve watched clips of this “Tree Cutter” in action all over the world, from the rain forests of Papua New Guinea to the Amazon to Canada and the Pacific Northwest. Globalization means more than just the loss of jobs to lower paid workers in other countries. Sometimes that “lower paid worker” is a robot or a machine like this.

Making better automobiles: Here’s another Ford video showing how the automobile industry has been automated by replacing assembly line workers with 250 robots. While automation is bad news for the American worker, is it necessarily bad for America? Global competition forced GM, Ford and Chrysler to make better quality cars. Before the Japanese entered the US market with their Toyotas and Hondas, the American automobile industry pretty much dictated to the consumer what they should buy. And let’s face it, and speaking from personal experience, they built big clunky shitty gas guzzling cars that broke down often, sometimes just days after leaving the dealership. It has taken many years, but I can finally feel that my current union made GM car is almost of comparable quality to the Japanese models. The point I make is that global competition forced American car makers to compete on what the consumer valued. If we had put up protectionist trade barriers to protect the American worker and our products, well maybe we would still be making the kind of American cars you see on the streets of Havana, Cuba.

However, focusing on the competition from foreign companies only tells part of the story. The old adage used to be, “Don’t buy a car made on a Monday.” That’s because the auto workers enjoying their leisure time of the weekend were more prone to make mistakes in building cars on Monday. Now that robots have largely replaced many of those workers, there are fewer fixes needed after leaving the factory. Robots have also helped drive the quality of American cars, and therefore made them more competitive with Japanese, Korean and European cars in the global market place. And that is good for exports and jobs.

Smart Phones: In every facet of life across America, we can see the effects of automation and jobs being “computerized out of existence”, from grocery supermarket checkouts to gasoline pumps to airline check-in counters, but the one device that has perhaps transformed American jobs and our way of life more than any other is the smart phone. For many workers engaged in service jobs that take them out of the office, the smart phone has become an essential tool for doing one’s job efficiently. Blue collar workers in the field use the smart phone to do a quick check of available warehouse inventories or special skills needed for a job to give a customer an on the spot cost estimate and firm date. White collar workers, likewise, use the smart phone to continually check on work related activities while traveling in airports, taxis, trains and some planes…a traveling office so to speak that unfortunately also takes up space and time in the home. It’s made some 9 to 5 jobs into 24/7 jobs. And teenagers…?

Internet Sales: In the last 30 years or so, the advent of “big box stores’ like Walmart, Target, Best Buy, Office Depot and others have driven out the smaller “mom and pop stores” and hence causing net job losses with each new store breaking ground. While the Big Box Stores enjoyed their “hay days” in the last couple of decades, even those stores are now being squeezed by internet sales, and the big elephant in that marketplace is Amazon. Here’s a CNET YouTube video of an Amazon warehouse and robots in action.

If you haven’t seen these robots in action before, your jaw may drop. Amazon didn’t have these robots when they first started out, but an in-house analysis of their work efficiencies showed that their stocking employees were walking miles a day amongst the stock shelves. Now the robots do the walking for them moving entire shelves to them. Job lost? Some, and for those employees remaining, they’re not getting the on-the-job walking exercise.

Cyber Security: I have highlighted a few examples above of how computer technology is redefining the skills sets needed to do a job and enhancing productivity. Those computers have given rise to a whole new industries. For example, thirty years ago the words like, “hacked”, “virus” and “spam” had entirely different meanings, but today they are the basis for a whole new industry called cyber security. According to the Bureau of Labor Statistics, jobs as “network systems and information security professionals are expected to grow by 53 percent through 2018.” And these are good paying jobs commanding average salaries of $116,000 per year. If that seems high, just ask Target how much the breach of their computer system cost them in lost sales when their systems were hacked and customers’ credit card information was stolen.

Yet despite these attractive salaries, according to a survey by Raytheon, “only 24 percent of millennials have any interest in cybersecurity as a career.” On the other hand, 40 percent want to be a TV or movie entertainer and 26 percent want to be a lawyer.

This brings me to the next point.

Developing and Investing in workers: As we get lost in the partisan bickering and assigning blame, whether it is trade agreements, CEO versus worker compensation, unfair tax codes, fear mongering and casting “the other” as demagogues, we lose sight of the bigger picture and the many opportunities for capitalizing on technology to influence and drive consumer demand. Successful companies drive technological innovation, rather than react to change or resist change. Successful corporations understand that technology and innovation is the key to success, and as such they regularly send their employees to schools for “continuous improvement”. The unsuccessful companies, on the other hand, are those that treat employee development as a cost rather than an investment and resist change rather than adapt to change. Many languish or go bankrupt.

Nevertheless, as I watched an interview of the causes of the underlying problems driving the Baltimore riots, jobs retraining programs were discussed as being less than successful because people were being retrained for jobs that didn’t exist when they finished their training. I don’t know the specifics of Baltimore, but what is evident is that in any education program, whether it be job retraining for former workers who have lost jobs, or free community college for young people wanting a career, there needs to be a reality check of the jobs market place before any retraining or schooling commences.

President Obama has certainly been a strong advocate of government funded job retraining to help those Americans whose job skills have been made redundant by trade agreements and automation. His numerous initiatives include education from preschool to college, including free community college; political will and partisanship is all that is standing in the way.

The Future: The successful countries that emerge in the 21st Century will be those that are flexible and adaptive to change and that value a collaborative effort between government, companies, workers and worker unions. As it stands, we have much to learn in that regard, but we cannot afford status quo. This extract from an April 2015 article by McKinsey and Company is revealing: The four global forces breaking all trends:

Accelerated adoption invites accelerated innovation. In 2009, two years after the iPhone’s launch, developers had created around 150,000 applications. By 2014, that number had hit 1.2 million, and users had downloaded more than 75 billion total apps, more than ten for every person on the planet. As fast as innovation has multiplied and spread in recent years, it is poised to change and grow at an exponential speed beyond the power of human intuition to anticipate.”

Think critically about those numbers and what they mean for the future. The question is, when it comes to jobs, do we want to continue to be a part of the technological revolution and adapt? Or resort to fear mongering, finger pointing and outright resistance? “Team America” needs more cooperation and less “what’s in it for me”.

“America isn't Congress. America isn't Washington. America is the striving immigrant who starts a business, or the mom who works two low-wage jobs to give her kid a better life. America is the union leader and the CEO who put aside their differences to make the economy stronger.” – Barack Obama

Yes we can.

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It's an interesting distinction to make: the job market is going through a massive change, and everyone's success in it for the future will depend on how well we can all adapt with the changing technological times.