Posts Tagged ‘jobs’

Rio 16

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Isn't It Exciting?

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automation

Jason Furman (pdf), Chairman of the U.S. Council of Economic Advisors, gave a speech a couple of weeks highlighting the potential for automation to displace many of today’s workers, even as he insists we need more investment in artificial intelligence.

What they did on the Council is take the numbers produced by Carl Benedikt Frey and Michael A. Osborne, who argue that 47 percent of U.S. jobs are at risk of being replaced by automation (a study I discussed here) and then rank them by wages. What they found is that

83 percent of jobs making less than $20 per hour would come under pressure from automation, as compared to 31 percent of jobs making between $20 and $40 per hour and 4 percent of jobs making above $40 per hour

In other words, automation—which, of course, is deployed by private employers to increase profits—threatens to destroy a massive number of jobs currently done by the American working-class. Displaced workers will be jettisoned from the labor force and join the Reserve Army of the Unemployed and Underemployed.

It is true, over the long run (as long as capitalism continues to grow), new jobs will be created, and some of the displaced workers (and their children) will be forced to have the freedom to take them. But only some of them. In the short run (and, remember, the long run is merely made up of a series of short-runs), as Furman argues, “the process of turnover. . .could lead to sustained periods of time with a large fraction of people not working.”

Within the existing economic institutions, automated technologies are therefore likely to decrease the labor force participation rate, expand the ranks of the unemployed and underemployed, and increase already-high levels of inequality (as workers’ wages continue to stagnate and technology-induced profits soar).

To be clear, that’s not an argument against artificial intelligence and automation. Under other circumstances we might welcome them. It is a caution about the effects of deploying new technologies within the current economy—in which workers and their wages are mostly dependent on private employers, who hire them if and only if it is profitable.

“Is this time different?” Not really, outside of the mythical long-run, full-employment equilibrium offered by mainstream economists. Now as in the past, existing workers—on farms and in factories and offices, especially those who make the average wage or less—are forced to endure the consequences of the decisions their employers take to adopt new technologies.

As even Furman admits,

I see little reason to believe that the economic impact of AI will be very different from previous technological advances. But unlike many of the optimists, I do not find that similarity fully comforting, as technological advances in recent decades have brought tremendous benefits but have also contributed to increasing inequality and falling labor force participation.

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David Howell is right: attempts to raise the federal minimum wage in the United States (from the current $7.25 to, say, $12 or $15 an hour) have been stymied by a no-job-losses rule—the idea (promoted by mainstream economists and employers alike) that the minimum wage should be set so that there are no job losses for anyone anywhere in the country.

Determining a suitable federal minimum wage based solely on a zero job loss rule is a public policy straightjacket that would effectively rule out any significant raise of the wage floor above that which already exists. Yet from a historical perspective, strict adherence to such policymaking criteria would have also made it impossible to ban child labor (job losses!), as well as many critical environmental and occupational health and safety regulations. It would also foreclose any consideration of policies like paid family leave, which exists in every other affluent country.

As Howell correctly explains, the possibility of some job losses—for some workers, in some places—as a result of significantly raising the minimum wage can be countered by a combination of “emergency relief” (like extended unemployment benefits) and creating new jobs (e.g., through expansionary fiscal policy and public works programs).

So, what stands in the way? Howell focuses on methodological problems (“because the identification of the wage at which there is expected to be zero job loss must be evidence-based, there is no way to establish the higher nationwide wage floors necessary for empirical tests”) and misplaced priorities (such as forgetting about “the moral, social, economic, and political benefits of a much higher standard of living from work for tens of millions of workers”).

Both are valid points. But I’d point to a third: profits. The fact is, when employers threaten to let workers go (or not hire additional workers) if the minimum wage is increased (or mainstream economists make the argument for them), they’re attempting to protect their bottom line. If they kept their existing workers, so the argument goes, their profits would fall; and if they wanted to maintain their current level of profits, they’d have to fire some of their workers and replace them with one or another form of automation. It’s all about pumping out the maximum profits from their employees.

Profits also enter the story in a second way. Private employers see the possibility of compensating for minimum-wage-related job losses—by offering workers public relief and by creating new jobs through public programs—as a challenge to their existing control over workers, jobs, and ultimately profits. That’s the second reason they oppose an increase in minimum wage, because they know full well society has the means to make up for their willingness to eliminate jobs. But then their own role in the economy and the profits that come from that role are called into question.

For both those reasons—the threat to fire workers and the threat to their monopoly as employers—profits are the real obstacle to raising the minimum wage.

There’s no getting around it. We have to challenge the sanctity of private profits, presumed and promoted by both employers and mainstream economists, in order to guarantee American workers a decent minimum wage.

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Joan Robinson famously quipped, “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”

In the United States right now, workers with a college degree, with an unemployment rate of only 2.8 percent, are forced to endure the misery of being exploited by capitalists; while workers with a high-school diploma or less, with an unemployment rate between 5.4 and 8 percent, have it even worse: many of them confront the misery of not being exploited at all.

That’s because, as a new report from Georgetown University’s Center on Education and the Workforce [ht: ja] makes clear, of the 11.6 million jobs created in the United States after the Great Recession, 8.4 million (72 percent) went to those with at least a bachelor’s degree. Those with associate’s degrees or some college education got 3.1 million (27 percent) of the jobs. The remainder, 80,000 jobs (less than 1 percent), were left for workers with a high-school diploma or less.

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Now, it’s true, Americans with only high-school diplomas represent a shrinking share of the workforce. This year, for the first time, college grads made up a larger slice of the labor market than those without higher education, by 36 percent to 34 percent, respectively. Including workers with an Associate’s degree or some college, workers with postsecondary education now make up 65 percent of total employment.

But the divided nature of the current recovery for American workers among themselves is even more stark.

Workers with a graduate degree (Master’s degree or higher) experienced no decline in jobs in the recession and maintained a stable employment growth throughout the recovery. Workers with a Bachelor’s degree struggled until the second half of 2011, but have since seen fast job growth, and in fact have exceeded the gains of graduate degree holders. . .Workers with a graduate degree have gained 3.8 million jobs since January 2010. Over the same period, workers with a Bachelor’s degree have gained 4.6 million jobs.

Workers with some college or an Associate’s degree have experienced a lot of volatility since 2007. They rode the recession to its depths, losing 1.8 million jobs. Those workers have now ridden the recovery back up; the economy recovered all those jobs by mid-2012. Over the next three and a half years, this group of workers experienced decent job growth, with a net gain of 1.3 million jobs since the beginning of the recession. Overall, this group of workers has added 3.1 million jobs since January 2010.

The workers who have suffered the most are those with a high school diploma or less. They lost the most jobs in the recession and have seen almost no growth in the job market during the recovery. They remain 5.5 million jobs short of their pre-recession employment level. Further, the current economic trends fail to provide any sign that those lost jobs will be returning in the near future.

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The growing gap in the job situations of college haves and have-nots is certainly part of a long-term trend, based on structural changes in the U.S. economy beginning especially in the 1980s. But their diverging trajectories since the crash of 2007-08 have only exacerbated the previous trends. That’s due in part to the precipitous decline in the construction and manufacturing sectors of the economy (which have still not recovered) and the fact that workers with college degrees or at least some postsecondary education have taken most of the new jobs at all skill levels: high, middle, and low. For workers with a high school diploma or less, low-skill jobs have been just about the only jobs available—and, even in those occupations, they’ve been forced to compete with workers with higher levels of education.

Here’s the problem: while would-be workers may be able to exercise some choice in obtaining more education (and thus jump over the gap between college haves and have-nots), they still don’t have any say in determining either the quality or quantity of jobs. Those decisions are still in the hands of the small group of employers at the top.

That means all workers—with or without college degrees—are forced to endure a choice between the misery of being exploited by capitalists or the misery of not being exploited at all. And that’s no choice at all.