Ryan Avent -- The wealth of humans
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What we have now and will have more of in the future: (1) There will
be more automation and more replacement of human labor by machines;
it will spread to other jobs and kinds of labor.  (2) Human worker
productivity will increase; the same number of workers will produce
more products and provide more services in the same or fewer number
of hours.  (3) Because of the increase in productivity, we will need
less labor and fewer workers.  There will be a loss of jobs and
employment.  (4) That will result in an excess of workers, i.e., in
Avent's terms, an abundance of labor.  (5) And, there will be even
more pressure for reduced labor costs and reduced wages.

Employers often have a desire to reduce their dependence on (human)
labor, even when there is little or no savings in doing so.  One
thing that delays their attempts to replace labor with automation is
when the cost of labor is cheap enough and employees are manageable
enough (read easy to manipulate, do not make demands for benefits,
do not ask for increased compensation, etc).  If steps are taken
which raise the cost of labor, firms will attempt to replace labor
with machinery, expenditures on capital and equipment, redesigning
products so that they require less labor to produce, and so on.

One thing that Avent does not discuss very much is labor
misallocation.  If I earn my living by dealing blackjack in a
casino, and I work in Las Vegas, Nevada and I make demands on my
employer (e.g. for higher wages), I can be easily replaced, since
there are lots of blackjack dealers in Las Vegas.  However, in
Tonapah, Nevada, perhaps, I'm the only blackjack dealer in town, so
I may be able to demand more pay, at least temporarily.  It makes
sense I suppose, for Avent to ignore this, because the kind of work
that he mostly considers *is* usually in a competitive labor market.
I suppose what he has in mind is work and services that are common
and generic: cleaning hotel rooms, repetitive manufacturing tasks,
driving vehicles (Avent believes that driver-less vehicles will
eliminate the need for drivers).

Avent also seems to be considering work/labor that requires very
little training or experience.  Workers in a fast-food restaurant
feel that they have very little bargaining power possibly because
their employer can train a replacement to cook french fries in an
hour and a half (not sure about this, but certainly it's less time
than it takes to train a school teacher, for example).  The counter
example to this easily replaced employee that Avent gives is that of
taxi drivers in London.  Until recently, at least, working as a taxi
driver in London require extensive training and a good deal of
intelligence, in part because drivers needed to learn the complex
and very irregular road network in London.  But, driver-less cars,
with their automated GPS mapping applications, will likely put an
end to that need; and even now, a mobile phone and a mapping app
reduces that need and reduces the drivers' bargaining power vs.
their employers considerably.

ICT (information and communications technology) is a powerful force
for automation and increased productivity.  I read of one Silicon
Valley venture capitalist being quoted as saying: people in my
profession go around looking for ways to eliminate jobs.  As
software becomes more powerful and as computing hardware becomes
cheaper, the rational for and pressures to reduce dependence on
labor and to reduce labor costs will become even stronger.

ICT also enables and accelerates globalization, global trade, and
economic integration across firms, and countries.  That global trade
is where many corporations make their profits.  They will resist
efforts to control and reduce it.  In order to remain competitive,
they will seek to produce their products wherever it can be done
most cheaply.  This means that workers in one country have to be
willing to work for wages as low as or nearly as low as the cheapest
world-wide producer.  We are seeing the serious effects of this
dynamic in the U.S., now, as much of the manufacturing work formerly
done here is being done in other countries or as the workers in
manufacturing industries and forced to accept lower, competitive
wages.

Digital technology boosts the productivity of some workers, enabling
them, at least temporarily, to demand and receive higher wages and
more benefits.  But, the number of those jobs seems to be dwindling.
And, we are unlikely to be able to train everyone to perform them.

This kind of change also works by de-skilling some kinds of labor
and employment.  Cheaply available technology (smart phones, laptop
computers with easy-to-use applications, etc.) is enabling some
workers with lower skill levels to do work that formerly required
extensive training and experience.  That enables employers to offer
lower pay and still fill their work force.

We have solved the problems of how to increase productivity and how
to increase prosperity.  What we have not solved are the problems
associated with how to distribute the benefits of those increases.
Those are political problems, and our political systems have failed
to solve them, in part because those political systems are
dysfunctional and plagued by partisan extremism.  Additionally,
those political systems are often controlled to heavily by actors on
one side of this struggle, specifically corporations.  We need to
solve the problems that will enable us to create a world in which
the benefits of the digital revolution are shared more broadly and
more equitably.

In the U.S., we used to have at least a partial solution to this
redistribution problem: we had reasonably strong labor unions.  They
supported wages and benefits for their members, and that also had a
follow-on effect for other workers.  But, the strength of labor
unions in the U.S. and the number of members in them has been
drastically reduced.

The political classes and the rich donors that support them, favor
the needs and requests of corporations.  Actually, because of the
lobbyists hired by corporations, our government hears the corporate
interests much more loudly than private ones.

Work in exchange for the ability to acquire/purchase the goods and
services that we need and want is an essential and fundamental
institution in our current social and economic structure.  But,
unless we can learn how to make that structure and the capitalist
system that it supports function more equitably, that fundamental
structure may have to change.  If it does not, there are likely to
be serious repercussions.

This time is different in the sense that we may actually be able to
squeeze enough labor out of the production and services processes so
that there is not enough labor to support a broad section of
citizens in anything like a reasonable standard of living.  Can our
government ameliorate that?  And, how?  Could the federal government
put enough people to work at reasonable wages at the tasks of
repairing and building infrastructure or creating tourist facilities
and industry in specific locations in the country?

In the future, there will less work and there will be more people
who want and need it.  That part is inevitable.  The question
becomes: what do we and our governments do in response?  Fund
make-work programs?  Provide access to free training?  Build more
infrastructure?  Some of these are good things to do.  But, their
effectiveness at solving the labor and societal problems is
questionable.

Why this book is especially relevant now -- In the U.S. (and
Britain, too, if we can take Brexit as an indication), the working
classes are rising up against the liberal, globally integrated,
free-trade regime.  And, since neither the Republican party nor the
Democratic party has responded to the demands and needs of these
working classes, we are experiencing an insurgency that is
attempting to replace those two political parties with "a third
way".  That may not be the best attempt at a solution (actually, it
may be one of the worst), but since neither of the two major
political parties has addressed these concerns, this terrible
attempt at a solution at least has the fact that it has not been
proven ineffective in its positive column.

However, Avent seems to be saying that there really is no solution
to this problem.  Increasing automation is inevitable; we cannot
stop it; and the only way to slow it is for workers to accept lower
wages, thus reducing the motivation of employers to automate.

You can add to that what Avent calls supply-chain trade, where a
firm has the components for a product produced in multiple countries
and assembled possibly in yet another country.  So, you have
increasing automation, which is squeezing labor out of the
production process and you also have this supply-chain trade (or
production strategy) which is likely seeking to produce parts of a
product in regions offering the lowest possible wages, and the
result is a production process that does not leave much in the way
of reward or compensation for labor.

I suppose that I could whine about how these kinds of problems are
caused by deregulation run amuck.  But, (1) regulation and
restrictions on the production process would not fix the labor
abundance issues that Avent is explaining and (2) the freedom that
firms have because of deregulation likely contributes to overall
global prosperity, even while some classes of workers are hurt and
suffer in the process.

And, I'd even argue that the standard nostrum (education and
retraining for another kind of work) is not a viable solution.  We
cannot all be retrained and prepared for the high-tech jobs of the
future.  Why? Those jobs are likely to be automated, too; we are not
all capable of doing highly technical work; and there will not be
enough of those high-tech jobs in the near future, let alone in the
more distant future.

As more jobs become high productivity jobs and as increasingly fewer
workers are needed in those positions by corporations, the larger
share of income is shifting from away from labor and toward capital,
upper level management, and ownership.  This means that the economic
inequality that plagues our society now, is likely to get worse in
the future.

Not only will we *not* go back to the 1950's.  We could not reset
wages and working conditions to that era even if the political
classes were to unite in an attempt to do so (which they will not).
The transitions and history of capitalism are often ugly and
unpleasant; lots of workers suffer and are poorly rewarded; often
the larger share of profits goes to capital/ownership and to a few
high value and highly placed individuals within each firm.

I suppose that we could hope that our national governments could at
least do something to ameliorate the suffering and losses of
displaced workers.  But that amelioration is not likely to amount to
much nor to be particularly effective.  We don't want to live a life
without meaningful work and of exiting on the dole, anyway.

11/13/2016

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