Productivity Fairness

Its just about the end of February and while its a bit premature, I feel Spring is almost here. Spring is time for renewal as we see the cycle of nature continue (at least outside the tropics).

Oddly, the Arab world seems to be in the midst of their own renewal, one that doesn't happen every year. Its hard to figure out exactly what the result of all that turmoil will be, but its probably safe to say that it won't result in any new utopias.

Looking around the world we are faced with a dilemna. We have mastered significant technology and can produce goods and services more productively than ever before. This is wonderful news, but it has one major downside. This productivity results in many once productive people becoming, as the British say, redundant.

So as we have improved productivity, the result has been that the benefit has accrued to a smaller number of people and many others find themselves unemployed with no good prospects.

Think about it. In general we produce enough food and have fairly adequate distribution systems. We can't get the food to some people and others simply cannot afford it but the food exists. Similarly for manufactured products, we don't have a shortage. In fact generally we produce too much. Even as some third world countries expand their standards of living, the demand will not requre the employment of all the redundant people.

The only real answer, and one that doens't seem all that likely right now, would be to distribute productivity gains differently, reduce the hours for workers while increasing their hourly wage to compensate. The current distribution goes like this. If a workforce of 100 people has a 10% productivity gain, the company profit increases and 10 people are let go. The 90 remaining people do not directly benefit, except they got to keep their jobs, and likely because of the firings didn't get much in the form of a pay raise. The alternative would be to reduce weekly hours for all by 10% and continue to employ all 100 workers.

Now in this simplistic equation, I have ignored the fact that the competitive marketplace forces some of the gains to be passed along as lower prices, and the reason this tactic is not tenable is that firms who tried it would become non-competitive.

Of course, if all firms operated this way it would level the playing field, but you know someone would undercut the prices.

So how is the world going to employ all the redundant people?

Where we are

If you take a bit of time to consider how we are evolving as a nation, there are a number of trends that are very obvious. The amount of labor required to actually produce goods keeps decreasing as we deploy more and more technology and other productivity improvements. In the product delivery cycle, we need less people to produce just about everything, need to store less of it as we have improved logistics, need less people to sell it as we have improved on-line commerce. Where you used to get significant information from salespeople who might even visit you, now that is becoming unnecessary as more and more information is available on the internet.

The people who we do still need in this cycle need to have more skills than they once did. They need to be machine operators or tech gurus, able to provide value. Those with the right skills are in demand and since I think they will remain that way. Yes we will improve training, but the creative thinking the new society requires has always been in short supply and there is no reason to believe it will become commonplace.

We have also seen the same developments in the service industries which actually account for more jobs in this country than the goods producing industries. Lower skilled service level jobs are disappearing as artifical intelligence get better and better. When I was younger, to open a broderage account required actual interaction with real people, and was a bit time consuming. Further, transactions also required actual interaction to give your order to a broker. Now, we have tools that allow you to open an account, fund it, make trades and get informaion without actually talking to anyone. I assume that at some point a person is involved, but I guarantee one person can handle an exponentially greater number of accounts than in the past. The so called robo signing crisis in the Mortgage industry is simply an example of our judicial system failing to keep up with technology. Inevitably, the laws will adjust to the new way things get processed. And yes, some mistakes will be made, but trust me, there will be fewer mistakes than we used to have using people, although technology does have the capability to make outrageous mistakes that most people would never make.

So, all these trends tell me that we need less, more highly skilled people. What then about the people who simply don't fit. Now don't get me wrong, there will always be some jobs for relatively unskilled people in many areas that don't lend themselves to technology, although think about things like traffic enforcement where we now manage to fine people without actual human intervention using cameras. Creative people will find ways to transform more and more things to be more productive. We clearly will be left with a percentage of the population that simply don't have the skills required to fit.

The only real opportunities for many of these people is become true service providers. I believe we will see, in fact I think we already see it, a world where we find it easier and cheaper to buy services that require little skill but do requrie time. Shopping, cleaning, chores are areas that at one time were handled by servants. Most of us are not going to hire servants per se but you can hire companies that will shop for you, clean your house, do your chores in a sort of on-demand way, making it affordable for many more of us.

Logical Decisions?

One of the things that is clear that when emotions get enflamed people make decisions that are not in their own best interests. As a retired federal employee, I stay in contact with that community. Now let me say that in general, these are people with good guaranteed pensions and assuming they made the right decisions at retirement affordable health care. However, last year, it seemed more and more of them (certainly not all) became emotionally connected with the tea party movement and joined the “get rid of Obama socialism faction”.
Now, however you feel about Obama’s policies or whether they had a socialist tendency, one thing was always abundantly clear. He was going to be better for federal workers and retirees than the alternative. Now, of course if you believe he was going to lead to the total collapse of civilization as we know it, opposition is logical, but I don’t think that was the general belief. So, assuming the expressed opinions of these people reflected their votes, they would have voted for tea party type candidates.
Now they are faced with federal pay freezes and attacks on their benefits and interestingly, despite their votes for exactly those things, they seem surprised. Additionally, they are blaming Obama. Now, while Obama is still the President and has to make tough decisions, does anyone not understand that he is forced to accommodate the new majority in the House?
One is almost face with an inescapable conclusion that the animosity towards him is based on something other than reality.