Posted by: dstieglitz | April 27, 2012


In a perfect world, jobs would be abundant, pay well, and produce value that justifies their cost. Unfortunately, few jobs have all three characteristics. Medical, finance and engineering jobs pay well and produce value, but they aren’t abundant. On the other hand, jobs in restaurants, construction and retail are abundant and produce value but pay relatively low wages. Manufacturing jobs once were abundant and paid well, but automation and high wages have left U.S. workers non-competitive in global markets.

Automation Eliminates Jobs.  Automation is eliminating white-collar jobs as well as manufacturing jobs. The jobs are gone forever because they can be done faster and virtually error-free by machines and computers. Industries affected by automation don’t disappear, they just provide dramatically fewer jobs. For example, in 1900 farming employed 41% of the U.S. workforce (31 million people) to produce 10% percent of the U.S. GDP ($21 billion). In 2000, 1.9% of the U.S. workforce (two million people) aided by millions of tractors produced 0.7% of the U.S. GDP ($700 billion) on farms. The same trend is happening in manufacturing. The U.S. is still among the world’s largest exporters of farm and manufactured goods – it just produces them more efficiently as measured by output per worker.

Is Human Labor Obsolete? Interestingly, when machines replaced workers in the industrial age, more workers were hired, not less. But they weren’t hired for their physical strength and endurance as they had been in farming. Instead, humans were needed for their dexterity, creativity and problem-solving skills. Throughout the Industrial Revolution economists forecasted that abundant new jobs would be created to replace those that were lost – and they were right. Despite massive industrialization and automation, the U.S. consistently created more jobs than it lost. However, the statistics obscure two ugly realities: (1) there is no guarantee that people who lose a job will have the skills needed to find a new one, or (2) that the new job will pay wages as high as the old job.

Technological Unemployment. Economists call this technological unemployment. Technological advances enable goods and services to be mass-produced and drive down wages. It’s happening more often in more industries than ever before, and is eroding middle-class jobs. The popular political response is to protect jobs and redistribute income through tax policies, unemployment insurance, and increases in the minimum wage. Redistribution eases the short-term social impacts of technological unemployment – which is necessary and good – but it does nothing to help unemployed workers gain the skills they need to earn a fair wage and sometimes even accelerates job losses.

Pay for Creativity.  The basic notion of a job is changing, and creativity is a survival skill. People always have and always will be employed to produce what other people want and are willing to pay for. Today’s jobs are less about showing up in a factory or office at a specified time, and more about doing creative work. Communication technologies make it increasingly easy for knowledge workers to perform complex tasks remotely from coffee shops and home offices. Therefore, workers must redefine job security. The new norm is for people to prosper by working concurrent jobs as free-lancers, temps or consultants. The U.S. Department of Labor estimates that independent workers makeup are nearly a third of today’s workforce.

Stitching Together a Job Quilt. In the Industrial Age, a career was a staircase of positions within one organization. For example, my dad worked at MetLife for 35 years. Every five to ten years he was promoted and eventually retired as a MetLife executive. My career was more like a trellis than a staircase – promotions came by changing companies. Many baby-boomers have had similar careers. They work in a company five to ten years, then switch to find a better opportunity. By contrast, today’s workers are likely to have a career path like a quilt. They stitch jobs together – usually several at one time – in different fields to support their lifestyle.

Policies to Support the Job Quilt. Technological unemployment is affecting more and more workers. Instead of trying to protect jobs that are economically unsustainable, the key to job growth is not to compete with computers – that’s a losing battle – but rather partner with them. Face it, computers and machines are more reliable and faster than humans at repetitive tasks, but they lack ingenuity and don’t have a clue what to do when a task is outside their sweet spot. On the other hand, when encouraged to be creative and taught appropriate skills, humans are effective exactly where computers are weak. Therefore, governments should mitigate technological unemployment by implementing policies and programs that:

  • Provide basic and continuing education that gives workers the skills to participate in an automated economy, and
  • Stimulate private-sector innovation by rewarding risk-takers who create jobs.

Unfortunately, the U.S. economy titters on the edge of bankruptcy while Congress and the White House do neither.

Turnaround Strategy. When businesses face hard times, inexperienced executives mindlessly slash costs – does that soulnd like Congress and the Federal budget. Seasoned leaders, on the other hand, know that prudent cuts are essential but investments unlock future growth. They listen to and implement the recommendations of turnaround experts. USA Inc.’s turnaround experts (e.g., the Simpson-Bowles panel) put fixing Social Security, Medicare and the tax system at the top of the priority list. They also recommended education, infrastructure and R&D investments to enable USA Inc. to compete favorably against China Inc., South Korea Inc., and India Inc. Any CEO will tell you it’s impossible to compete with an outclassed workforce, an infrastructure that’s falling apart, and yesterday’s product lines. Unfortunately, the recovery will continue to be jobless until the White House ceases its attacks on successful companies who generate jobs, and Congress takes bold action to improve education and stimulate long-term growth.


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