Tuesday, July 10, 2012

Disappearing Jobs ... What It Will Take to Become Globally Competitive versus Locally Competitive ... Going from Stasism to Dynamism

We need more private sector economic growth which in turn will lead to more sustainable employment growth.

But in order to achieve those objectives, we must be "all-in" cost competitive globally, at least for those jobs whose businesses have global competitors. But how do we do that? By embracing a dynamic instead of continuing a stasist approach to growth. Please allow me to explain what I mean by that.

{First, let's compare stasists to dynamists. Stasists fear the future and want to keep things as they are. That's why conservativism as such is not in and of itself a good thing. On the other hand, dynamists embrace change and experimentation. Dynamists are full of excitement about the future and its possibilities. They have a "if you can dream it, you can do it" approach to life. I'm on their side.

If you're at all interested in going deeper into the stasist versus dynamist comparison,Virginia Postrel's 1999 book "The Future and its Enemies" is a great read. Click here for a brief interview with the author.}

But let's move along now.

Why Hairdressers Are Secure: Their Jobs Can't Be Exported makes the necessary distinction between local markets and global competition for jobs and customers:

"Before, during and after the recession, demand for one sort of worker has been persistently stronger: jobs that involve assisting or caring for other people—from fast-food workers to home-health aides to nail polishers.

These occupations have one thing in common: They aren't easily automated or outsourced abroad. "You can't send people to China or India for a haircut," says Israel Kakuriev, 37 years old, who has been cutting hair in midtown Manhattan for the past 20 years. Nor is there, yet, a robot that can cut hair or hold the hand of an elderly woman with Alzheimer's or do all the chores that flight attendants do. . . .

But economists see a couple of longer-term trends. Dividing the workforce into high, medium and lower-skill workers, they note that around the world, demand for the most skilled and educated—from engineers to specialized factory workers—has been relatively strong. But globalization and technology have eroded demand for routine middle-skill, middle-wage jobs: In factories, assembly jobs have been eliminated by automation or moved overseas; in offices, tasks once done by humans are done by computers and voice-response software.

At the same time, Massachusetts Institute of Technology economist David Autor notes an increase in personal-service jobs—the ones that can't be done remotely from overseas and can't easily be done by machines. To measure this, Mr. Autor and MIT's Daron Acemoglu sliced the U.S. workforce into 318 occupations, ranked by skill and education. Between 1989 and 2007—just before the recession—they found a 5% increase in routinized production, machine-operator and clerical jobs—but a 36% increase in personal-service jobs and a 40% increase in top-of-the-pyramid jobs, such as managers, professionals and finance wizards.

This polarization of the job market has persisted. Between 2007 and 2010, the total number of jobs in the U.S. fell by nearly 6%, but the previous pattern held: The number of middle-skill jobs, those most susceptible to automation or offshoring, fell by 12%. The number of high-end, high-education jobs fell by 1%. But despite the recession, there was a 2% increase in personal-service jobs. . . .

More jobs are better than fewer jobs—particularly for those who would otherwise be unemployed. But Mr. Autor cautions: "These aren't going to be high-paying jobs because the skills are quite generic. Anyone can be productive at them in the next day or two. If you had to choose which jobs you'd want to go away, you'd pick these low-wage jobs, not the middle-skill ones." . . .

Before the recession, when unemployment was low and workers relatively scarce, wages for personal-service workers rose while wages for middle-skill jobs sagged. Mr. Autor and colleague David Dorn found a 16% increase in inflation-adjusted average hourly wages between 1980 and 2005 for these service workers and a 30% increase for the professionals, managers and upper-end finance workers. That contrasts with a 6% increase for machine operators and assemblers and a 4% decline for production and craft workers.

But the subsequent recession and sluggish recovery produced a glut of workers for these relatively low-skill, personal-service jobs; wages have been depressed as a consequence, Mr. Autor says. And incomes of barbers and some other personal-care workers were squeezed during the recession and immediately after the recession when many consumers cut back spending on easy-to-skip services such as dining out or delayed getting their hair cut."

Statement of the Problem

And that's why upgrading our educational system and work force must be among our highest priorities as a nation.

For middle-skill work, to the extent it can't be eliminated, most of the rest of the world's workers will happily work for much less than what we in the U.S. consider normal "blue collar" union scale pay. So if it's a globally tradable product or service we're selling, our all-in product costs and selling prices must become globally competitive. Simply put, too many U.S. "middle-skill" workers don't possess greater qualifications than the rest of the world's work force, even though they receive substantially greater compensation.

Thus, we have to both upgrade our work force and realize that we can't pay dramatically higher wages to less than a highly skilled world class work force, at least where global competition is involved.

But here's the twist --- we don't have to match those global compensation levels dollar for dollar. Just the total product costs, including manufacturing, energy and distribution costs. And taxes, too.

For instance, we have lots going for us in North America if we'd just unleash our energy production and delivery potential. Since the energy is already here, and the consumers are here, North American based operations will have a huge advantage over global competition with respect to both energy and distribution costs, inbound and outbound included. That leaves all-in compensation, including productivity. And taxes, too.

We can make all this work if we will only think and act creatively as a nation, as individual companies and as a globally competitive U.S. based national work force.

Since 70% of our U.S. economy is consumer dependent, we must learn to "sell ourselves" sufficient quantities of those "middle-skill" globally manufactured products at globally competitive prices to fully employ U.S. workers.

Looked at broadly, it makes zero sense to import Chinese manufactured products which we pay for by borrowing from the Chinese in order that our uncompetitive and unemployed U.S. workers can purchase those Chinese manufactured products. We have oil. They don't. We have proximity to the consumer. They don't.

That leaves compensation for U.S. workers which we pay for through unemployment and related benefits, even if our workers remain idle.

This U.S. tendency to buy, borrow and have our too highly paid union workers remain unemployed problem can and must be addressed and solved. A little collective and creative thinking would go a long way toward solving this dilemma.

Stasism and Dynamism

And that's exactly the problem --- the lack of creative and innovative thinking and actions by all involved, committed and affected Americans --- companies, workers, and union and government leaders inclusive.

We're still using a U.S. dominant post World War II "intramural" playbook with stasist union rules and wages, indicating a total disregard for the effects of global competition --- all as part of a non-serious half-hearted effort to try to stay in the "middle-skill" based game with others in the world who are playing hard, playing smart and playing to win. It's time for good old fashioned U.S. trial and error dynamism to take center stage as we make our way back to the top of the global competitiveness ladder.

Summing Up

We can definitely win in our own back yard and consumer market by NOT importing our energy needs and by discovering, drilling for, producing and then distributing our own energy requirements to ourselves. What we're doing now by importing one single drop of oil more than absolutely necessary is just plain nuts!

In my view, our nation's economic and employment problems are mostly attributable to our collective stasist ears. We need to replace that "as-is stasist" mindset with a dynamic and serious minded approach to economic and employment growth, as well as a serious upgrade in our educational system. It's really that simple.

To win again in the global competitive and prosperity race wouldn't be all that hard for us to do.

But first all of us must stop defending the status quo, tear up the old "partisan political" playbook and start down an exciting new path leading to renewed prosperity and competitive success.

Our totally ineffective and dysfunctional partisan name calling political system has to come to an end and soon.

Thanks. Bob.

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