My New Year’s wish for serious policy makers is that they abandon the illusion that the economic problems of the middle class can be fixed by the right jobs program. The simple truth is that technology has wiped out millions of good-paying jobs, and millions more are on the chopping block. Most are not coming back, and those that do will be at a much lower pay rate. The result has been a severe widening of the income gap between workers and investors, between capital and labor. In the space that follows, I will outline the current employment problem and show how it resulted from deep structural economic changes, as opposed to cyclical alterations that might well be modified by a federal job creation effort. Later this week, I will take up the matter of what to do about it.
Our elected leaders are still in deep denial over the seismic structural shift that has profoundly altered the nature of employment in this country. In their view, the job market took a severe jolt from the 2008 recession and a couple bad trade agreements. They see that unemployment is down now and pretend that everything will be fine once we bring those lost jobs back to our shores. As hopeful as the premise is, there is absolutely no evidence to support it.
The Wall Street Journal reported Sunday that manufacturing output is now close to the prerecession level, but 1.5 million factory jobs appear to be lost for good. Compounding the problem is the fact that a large number of the jobs that did come back pay significantly less than they once did. As the Journal put it, automation technology now allows manufacturers to “function, and even thrive with fewer employees than ever before.”
Here is just one example of how this playing out, as reported by the Los Angeles Times: A Michigan company called Ranir moved its electric toothbrush manufacturing plant to China. A few years later, in an attempt to lower labor costs even further, it retuned one-fifth of that production to Grand Rapids. This is precisely the kind of move that Donald Trump has made the cornerstone of his job creation pledge in his effort to make America Great Again. In fact, Ranir is cranking out 13,000 American made toothbrush heads a day for Wal-Mart and other retailers. The work, however, entails only four actual humans whose jobs involve monitoring the computers that control the robots that are doing the actual work. This is the new industrial food chain: from well-paid American workers, to low-paid Chinese workers, to no-pay robots. Clearly, the days of $25-an-hour manufacturing jobs as a mainstay of our economy have ended. The plants may return from off-shore, but the jobs aren’t coming with them.
The nation’s 1.7 million truck drivers, many making $70,000 a year or more with full medical benefits, will likely be the next large group to be replaced by technology. In another decade, perhaps sooner, the trucking industry is banking on having employee-free fleets of driverless vehicles. High on the Bureau of Labor Statistics’ list of jobs endangered by technology is that of mail carrier, once a highly sought lifetime guarantee of economic security. Also vulnerable, says the BLS, are radio announcers and disc jockeys who are being replaced by automated playlists. Same goes for newspaper reporters, a job class already reduced by more than 30% due to the product’s digital platform. The BLS sees further reductions as a result of the ability of computers to generate stories, a process currently in limited use by the Associated Press. Even insurance underwriters are going the way of the dinosaur, replaced by software programs. These, and many more good middle class jobs like them, are heading for extinction, with no apparent successor in sight.
What does that mean for our economy? Try wrapping your head around this statistic: The average annual pre-tax salary for the bottom half of American workers (by income) is $16,197. That’s only $1,000 a year above what a teenager working 40 hours a week at McDonalds makes, based on the current federal minimum wage of $7.25 an hour. In other words, our problem is not an absence of jobs; it’s the lack of jobs that pay well. Unrestrained, free market capitalism has run amok. Corporations are making gigantic profits with minimal labor costs, thanks to mechanized, non-human production.
Statistically, we are now approaching full employment. Yet, the average worker on the bottom half of the income range is paid close to the poverty level, an amount almost identical to what it was 40 years ago. Meanwhile, those in the top 10% of that pay range saw their income increase by 231% over the same period. There isn’t a jobs program proposed by Donald Trump or anyone else that even pretends to close that gap. On Wednesday, I will discuss a potential solution for this dilemma. Please stay tuned.