Job Creation Falacies - Automation

I recently listen to some experts talk about job creation. I have thought for some time that most of what is offered about job creation is naive nonsense. Here's why.

First a bit of history. Consider farm jobs. Today there are less than half as many farm jobs as there were in 1900. That's fact. Why? It turns out that two factors drove that change. Better farming practices, better seeds, better fertilizer, a better understanding of how to farm had a major impact. The other and more significant driver was automation, better farm machinery. This is an example of jobs where there is no realistic possibility of bringing these jobs back. Farmers are simply not going to abandon the machines that make modern farming work. Those jobs are gone and are not coming back.

The impact of automation can be seen elsewhere in the economy. Consider that over the last 25 years US manufactured goods exports have more quadrupled! Meanwhile the portion manufacturing jobs to all jobs in the US has dropped by more than 50%. Simply put, automation has meant that fewer people produce much more product. Manufacturers are simply not going to abandoned efficient competitive practices to create new jobs. The manufacturing jobs replaced by automation are simply gone and are not coming back. That said it should be noted that manufacturing jobs are in fact growing particularly among small manufacturers as manufactured goods exports continue to grow particularly among free trade partners.

To date, automation has substituted machinery for human labor as in farming or sell structured activity as in assembly lines. We are now starting to see automation impact less well structured jobs. Machine shops are a good example. There are several machine shops near my home that now employ less than half as many machinist as they once did since adopting CNC machine tools that allow a single person to do the work of many even when that work is both highly skilled and less well structured. Those jobs are gone. Work in that segment will require new skills in CNC tool use and growth in the demand for low volume CNC manufacturing.



There is a new and dramatically more disruptive automation on the horizon. Several firms are testing self driving cars. The impact of this technology goes well beyond professional drivers in two ways. First it promises to be disruptive of the transportation infrastructure generally. Why should I take a train when I can use a self driving car to go directly from where I am to where I want to go? For that matter why should I even own a car when one will come for me when I need it?

Second, and more importantly, it is an example of automation of a highly unstructured activity! If you can make a self driving car operating in a mixed ill structured world what then can not be automated?

All of this raises the issue of what happens when there are simply not enough jobs for those that want or need to work?  Society has been organized around work for almost all of human history. What happens when work as an organizing principle is no longer essential?

Strict Arizona immigration law gets Supreme Court blessing - Political Hotsheet - CBS News

Image by hey skinny via FlickrStrict Arizona immigration law gets Supreme Court blessing - Political Hotsheet - CBS News: "The Supreme Court gave its blessing today to one of the strong immigration control laws passed by Arizona, a law that has served as a model for similar measures in other states.

Arizona requires businesses to use the national eVerify system to check workers immigration status. Licenses are revoked when illegal immigrants are intentionally employed.

The Chamber of Commerce and labor groups formed a powerful coalition to challenge the law. They argued it steps on the federal government's broad immigration powers.

Conservatives carried the day in the 5-3 vote. Chief Justice John Roberts said while federal law bars states from imposing civil and criminal penalties for immigration violations, Arizona's license revocation statute doesn't fall into the category."

At last, some common sense from the Supremes. Having struck down state enforcement of federal immigration law and state law to enforce existing federal immigration law by logic that defies common sense, the Supreme Court will allow states to enforce state laws when illegal immigration is an underlying factor. The law at issue allows the state to deny/revoke the business license of those companies that break immigration laws.

Common Sense is concerned about illegal immigration, as we all should be. Immigrants come to the US seeking a better life as did the families of almost all Americans. That's as it should be. But when businesses take advantage of illegal immigrants as they often do subjecting them to low pay and substandard working conditions that's simply wrong. When businesses use illegal workers denying jobs to US workers that's simply wrong. Laws that deny such businesses the right to operate just make good common sense. They help remove one of the principal motivations for illegal immigration and protect jobs for those who are in the US legally.

Related articles

• Is Supreme Court Right to OK Arizona's 'Business Death Penalty'? (usnews.com)
• Supreme Court upholds Arizona illegal-worker law - San Francisco Chronicle (news.google.com)
• Supreme Court upholds Ariz. employer sanctions law (usatoday.com)
• Arizona, Immigration, and Common Sense

Tech and jobs, part two

There's an interesting company, Kiva Systems, that make a very cool robotic shelving system.  Here's a video.



OK, so it's technologically cool.  And, more to the point, it's very efficient.  According to an interview with Wired, it allows a single person to pack three times the number of orders!

Now think about it a bit.  Unless the warehouse needs to pick and ship three times as much product they no longer need as many pickers.  A classic case of technological job destruction in the absence of growth.

But, that's not the only risk associated with this kind of technology.  Consider that when a customer places an order the order can get filled faster.  Faster fulfillment means faster delivery.  Faster delivery means less need for inventory on site.  Don't think so?  Go down to a nearby CVS or other chain drug store.  Walk around the building.  Note that there is NO inventory storage.  Hang out in the store a bit and watch a store employee open a shipping container filled with a variety of products and restock shelves with 3 of this and 5 of that.

Part of what's going on here is, of course, real time inventory control.  Part of it is much more efficient restocking systems.  Now consider what happens if something goes wrong with that wonderfully efficient restocking system.  CVS is out of stock very quickly.  Not much of an issue if it's toothpaste.  Perhaps a bunch of bad breath but no big harm.  But what if it's a patient's medicine?  Now there's a bigger downside.

There's a bit of supply elasticity since there's another CVS in the next town along.  But how long will their inventory last?

Technological efficient systems while wonderfully efficient are not very elastic.  They are not very robust and are often subject to cascading failures.  If something goes wrong with such systems negative consequences occur very rapidly and can cascade to effect many many people.  Don't think so?  Remember the 1965 North East blackout caused by an improperly set relay.  A small human error caused 30 million people to loose electrical power.  Of course, there were a few independent power companies whose customers were blissfully unaware of the problem.

Common Sense's point is that technology doesn't care about such things.  It is entirely neutral when it comes to jobs, stability, elasticity, and many many other values that most people desire.  Technology isn't good.  It isn't bad.  It just is.  If we exercise common sense when we use technology then we can create a better world.  If we don't, then we can be sure that the results will be a very mixed bag.  It's up to us and such common sense as we can muster.

How much high tech is in your life?

Common Sense has a number of watches.  Actually, I don't really know how many I have.  One of the watches dates to the late 1800s.  Another, a Timex, is now about 50 years old.  Yet another that was purchased for less than $20 is digital and has more computing power than the first computer I worked on.  But each of these watches perform the same essential function.  They each show the time.  While it is certainly true that the inexpensive digital watch is much more accurate than the others and has additional functions, it still is simply a watch that shows the time.

This got Common Sense to wondering, how much high tech is really part of everyday life?  How much of everyday life is really about manufactured goods?  How much high tech is really high tech or just another way of doing something that was previously being done?

By way of full disclosure, Common Sense is a geek!  I like my gadgets and tech toys.  I've got rather more of them than the average person.  I think they are neat. Fun.

So consider Common Sense's day so far.

I woke up this mourning about 7am.  The bed I sleep in is, well, just a bed.  It was manufactured somewhere as, of course, were the sheets, blankets, pillows, and such.  Doubtless there was some high tech involved in the manufacture.  Perhaps some computer control.  Almost certainly computerized accounting of the manufacture process, shipping, etc.  But all said and done, while there may have been some high tech involved I could have the same bed and bedding without it.  High tech content so far - zero.

Time to shower and get dressed for the day.  I live in a nice house with a nice master bath, shower, etc.  But these things are much like my bed and bedding manufactured goods.  High tech content so far - zero.  I dress.  My cloths are much like everything else so far.  High tech was doubtless involved but the cloths are essentially low tech contemporary renditions of the same cloths my father and grandfather wore.  High content so far - zero.

I wake up hungry and so fix myself a bowl of cereal.  High tech content so far - zero.

I check the mourning news.  I have a rather nice Samsung flat screen TV served by a cable service with recording cable box.  This is definitely high tech.  Count the TV as one and the cable box as another.  High tech content so far - 2.

The news is stunningly repetitive so I decide to read a book.  Are books high tech?  I'm not entirely sure.  On one hand they have been around for a few thousand years.  Printed books from around from somewhere around the 1200 to 1500 depending on who you want to credit.  Doesn't seem like they should be thought of as high tech.  High tech content so far - 2.

My day will continue much along these lines.  Most of my life will involve manufactured things.  Most of those will have involved high tech in their manufacture.  Few are essentially high tech.  Most have existed for many, often hundreds or thousands of years. 

The central common sense point here is that while high tech influences our lives, often dramatically, it is for the most part not a significant day to day part of our lives.

This observation has important implications for jobs.  In a consumer oriented society manufactured goods are at the base of economic activity. While high tech is fun and an essential part of efficient manufacturing, it is manufacturing and manufacturing jobs that should be the focus of government activity to promote job growth.  That's just common sense.

The fallacy of high tech jobs

Common Sense wonders are high tech jobs the future for American workers?  Or is all the talk of a high tech job growth wrong?

A year or so ago, Common Sense noted that middle class prosperity was historically based on a strong manufacturing economy.  However, the myth of "high tech economy" is clearly still with us.  Consider the central question: does technology create as many jobs as it destroys?  Does it create more? 

Certainly there are many examples where technology destroyed a great number of jobs in some industry.  Farming comes to mind.  Farm equipment technology dramatically reduced the number of people needed to produce food.  It, in fact, destroyed farming jobs.  Of course, someone had to make that farm equipment.  So many of those farm jobs were replaced by farm equipment manufacturing jobs.  But were they all, or did many displaced farm workers have to do something else? 

In an expanding economy finding something else to do is generally not extremely difficult.  The advent of farm equipment technology coincided with enormous growth in the standard of living and in manufacturing technology generally to support that higher standard of living.  With many more manufacturing jobs available moving from farm work to manufacturing work was relatively easy.  But is it always possible to move from one technology to another?  Is it possible to move if the economy isn't rapidly expanding?

In many ways advanced technology poses a very different job challenge.  It tends to replace much larger numbers of jobs without creating much change in the standard of living.  Consider, what happens when an automobile assembly line worker is replaced by a robot assembler.  That change doesn't necessarily change the cost of the car.  It doesn't much change the number of cars made.  Indeed, it might actually reduce the number of cars made since the cars are of generally higher quality and last longer.  Unfortunately, much advanced technology driven change simply destroys what were previously middle class jobs without creating offsetting economic growth.

Even when technology produces a new an innovative market, those markets are often saturated within only a few years.  Consider cell phones.  The basic technology was invented in the early 1970s.  The FCC licensed the first networks in the 1980s.  Today, some 30 years on, nearly everyone in the US that wants a cell phone has one and cellular providers now compete on features that are often only marginally useful in a frantic effort to maintain market share.  Market saturation for technology is often measured in only a few years or tens of years. 

When markets saturate they are then driven by replacement not growth.  Such markets produce often rapid job growth, then jobs plateau, and then jobs decline to a reasonably stable mature market.  Stable, replacement driven markets generally require fewer workers. 

Common Sense notes that "high tech" isn't some sort of magic incantation.  That it is in some ways inherently job destroying.  That it is in some ways unstable in that high tech jobs are created and vanish rapidly. 

As we think about economic recovery and preserving the middle class we need to keep these notions in mind.  That's just common sense.