Posted by on July 4, 2017

After an early return from my secret adventure due to a weird illness and injury[1], I will get back into the swing with some finger exercises.

Automation and Jobs

It’s become a commonplace to worry about the impact of automation on jobs.  It is important to maintain a little perspective here, something that two recent articles provide.

John Cochrane remembers the typing pool and the bookkeeping department, both of which employed swarms of (predominately female) workers in the 1960s and 1970s.  And then:

along came the copier — many of these women are copying documents by typing them over again with a few sheets of carbon paper — the fax machine, the word processor, the PC. And that’s just typing. Accounting involved similar roomfuls of women with adding machines.

The end result?

[The f]emale labor force increased from 20 million to 75 million. The female participation rate increased from below 35% to 60%. Women’s wages relative to men rose — they moved into higher productivity activities than typing the same memo over a hundred times. Businesses expanded. And no, 55 million men are not out on the streets begging for spare change.

Looking forward from 1960/1970 and trying to predict what would happen, how many people would have been pessimistic about the impact of automation on office work, in the same way that they are pessimistic about automation and manufacturing today?  My guess is a lot.

Reason follows up with something similar (behind a paywall here).  The article cites some familiar examples:  In 1800, four out of five Americans worked on a farm; now, it’s one in 50 and the remaining 78% are not panhandling.  In 1910, one in 20 American workers was singing “I’ve Been Working On The Railroad.”  In the late 1940s, ATT alone employed 350,000 telephone operators.  In the 1950s, hundreds of thousands of elevator operators lost their jobs to buttons with floor numbers next to them.  In 2000, well over 100,000 people worked at video stores – they have now been streamed to death.  And on and on.  The argument is familiar.

The article also makes the point another way.  The US has about 160 million civilian jobs.  In an average month, about 1% of these jobs simply vanish.  The jobs figures we see are the net result of job creation and job destruction, with the latter being about 1.6 million in a typical month.  And these are not people quitting their jobs.  These are jobs that disappear through bankruptcy, downsizing, mergers or other staff reductions.

The US economy creatively destroys[2] over 10% of its jobs each year.  And each year it creatively creates even more.  The scare-mongering about technological unemployment should be judged against this background.

Seattle Minimum Wage

Seattle has been a leader in raising the minimum wage.  First to $11 an hour and then more recently to $13 an hour, on its way to the nirvana[3] of $15.

The results of the step to $13 are in and have been analysed in a detailed study commissioned by the city.  They are disastrous.

Hours worked by low-income employees dropped sharply, more than offsetting the increase in wages and producing an average income drop of $125 per month.  The elasticity of the response was higher than shown in some other studies, which typically considered much smaller increases.  Also, as expected, the elasticity increased sharply over time, as companies adjusted to the higher labor costs through reorganization and capital substitution, neither of which happens instantly.

The authors of the study are currently expanding it to include demographic data.  Would anyone care to bet me on whether this additional work will show that the biggest losers were the low-skilled and minorities?  I am offering excellent odds.

All of this has occurred against a background of a booming Seattle economy, where the unemployment rate is 3.1%.  In a weaker economy, or one where the general cost structure was lower, the results would have been even worse.

In other words, Seattle shows that the laws of economics have still not been repealed and demand curves remain downward sloping.  I, for one, am very surprised.

The response of the uber progressive imbeciles who run Seattle is to order another study, this time from “an advocacy group at Berkeley whose previous work on the minimum wage is so consistently one-sided that you can set your watch by it.”  But remember, it’s the Right that is anti-science and anti-data.

Nor has the Fight for $15 been deterred outside of Seattle.  Minneapolis just passed an ordinance for a stepped increased to $15 under economic conditions less favorable than Seattle’s.  California continues with its state-wide increase in the minimum wage to $15 by 2023.  This will be bad enough in high-cost and high-demand areas like Los Angeles, San Diego and the Bay Area, but even a hack like Governor Jerry Brown must realize that this will be an Armageddon for the low skilled in the rest of the state.

The War on Work – And How To End It

This is the title of a recent article (here in written form and with an associated podcast) from the City Journal published by The Manhattan Institute for Policy Research, a right-wing think tank heavily supported by Paul Singer.

The article is by the great Edward Glaeser, an economist trained at the University of Chicago who is currently bringing some enlightenment to Harvard Yard.  Glaeser focuses on one statistic: from 1945 to 1968, only about 5% of men between the ages of 25 and 54 – “prime-age males” – were out of work.  Since then, the figure has ballooned with each economic downturn, reaching 20% in the Great Recession and only falling to 15% after seven years of the Puny Recovery.

For Glaeser, this is the result of a “war on work” that has prioritized equality over employment, a puzzling choice since “social scientists have consistently found that unemployment is the greater evil.”

Being out of work is associated with much greater decreases in happiness than reductions in income, which can arise from many causes.  Sometimes it is fatal: a recent estimate is that unemployment is responsible for 45,000 suicides per year globally.  Jobless husbands have a 50% higher divorce rate than ones with jobs.  Unlike unemployed females, who often find meaningful work at home, unemployed males sleep more and spend an extra 100 minutes a day in front of the idiot box.[4]  The unemployed are also much more likely to use drugs, including the opioids that are sweeping many depressed areas.

Glaeser has a number of suggestions to reverse this dynamic.  The first and most important is upping the level of skills, especially with a focus on vocational training (which is the subject of another excellent City Journal article) and stronger basic skills in K-12 education.

There are a huge number of jobs, many high-paying, that go begging due to a lack of skilled labor.  Contrary to the current thinking in the Democratic Party, the solution is not to shovel more money into the gaping maw of failed public education or to expand further the college diploma mills.  The solution is bottom-up, competitive market innovation in education, much of it in close coordination with business.

Regulatory barriers to entrepreneurship should also be lowered.  Glaeser points out that, disgracefully, America “tends to regulate the entrepreneurship of the poor much more stringently than it does the rich.  You can begin an Internet company in Silicon Valley with little regulatory oversight; you need more than ten permits to open a grocery store in the Bronx.”

Occupational licensing is another area calling for reform.  Studies show that 5% of occupations required a licence in the 1950s, which increased to 29% in 2008, including for such threats to public safety as interior designers, tree trimmers and florists.  This crony capitalism harms the poor and excluded for the benefit of politically favored incumbents.

The huge number of programs for the poor need to be consolidated and rationalized, particularly to eliminate the “poverty traps” that make it uneconomic for beneficiaries to seek out work.  Glaeser wants to expand the Earned Income Tax Credit or, even better, replace it with a simple wage supplement, to be paid for by eliminating other programs and generally toughening eligibility criteria to encourage more work.  As Glaeser says: “Elementary economics tells us that paying people to be or stay jobless will increase joblessness.”[5]

Strangely for an economist whose specialization is land use, Glaeser neglects to mention another obvious area for improvement: increased labor mobility.  The only solution for an area like Appalachia is a U-Haul trailer.  Greater skills, less occupational licensing, more intelligent and “portable” government benefits, and fewer regulations will enhance mobility.  But people will still need an affordable place to live, something that NIMBYism in many of the most economically buoyant places makes impossible.

Bernie Sanders and Jeremy Corbyn

One of the participants in my recent escapade was a young woman who was a big fan of Bernie Sanders and Jeremy Corbyn.  Once again, I was struck by the irony of the Millennial love affair with Sanders (75-years old) and Corbyn (68-years old), both of them peddling re-hashed and discredited policies from the 1960s and 1970s.

Many commentators have noted that Trump supporters are motivated by a desire to turn back the clock.  How many have observed that the progressive Left is also in the thrall of nostalgia?

McEnroe, Becker and the Feminazis

After my enforced news blackout, I came back to the controversy over McEnroe’s outrageous BGO that Serena Williams would be shellacked in men’s tennis[6], something that she freely acknowledged back in 2013:

If I were to play Andy Murray, I would lose 6-0, 6-0 in five to six minutes, maybe 10 minutes. No, it’s true. It’s a completely different sport. The men are a lot faster and they serve harder, they hit harder, it’s just a different game.

Kudos to McEnroe for not debasing himself, and the truth, by retracting his statement when offered the chance to kneel before the feminazis.  But shame on Williams for not coming to McEnroe’s defence.  And shame also on Martina Navratilova whose recommendation was a cowardly evasion   – “You just don’t go there.  You don’t go there. You just don’t gooooo there!” – ignoring the fact that McEnroe never spontaneously went anywhere and was only responding to badgering questions from an NPR ignoramus who clearly knows the square root of fuck all about tennis.

Whereas McEnroe got a lot of coverage, much less was devoted to the recent bankruptcy of another tennis legend, Boris Becker.  Yet it also tells a tale.

Now, Boris is definitely an idiot and has no one more than himself to blame for blowing the £100 million he is estimated to have made from his sporting and commentary career.  But he had more than a little help from a family law system that is blatantly biased against men.[7]

Like the £20 million he has cumulatively paid to the mother of his love child, including an initial payment of £2 million and “child support” of £25,000 a month.  The sex was mutually consensual, but after sperm meets egg, the law gives pretty much all decisions to the woman[8] and all the financial responsibility to the man.

Or the £11 million, plus the family home, that he had to give to his former wife in the resulting divorce, despite the fact that this sum bears no relationship to her opportunity cost of the marriage.

According to the feminazis, we live in a “patriarchy.”  Tell that to Boris Becker.

The He Who Must Not Be Named

All I can say to my friends and readers who are chortling about Donnie’s latest wrestling antics is: Sure, it’s funny until someone loses a country.  To Elizabeth Warren.

Stuff like this makes it much harder to enact the Republican agenda.  Failures to enact the agenda directly increase the risk of a 2018/2020 drubbing.  Donnie is playing directly into the hands of Pelosi and Schumer.

And Now One For The Geeks

The libertarian world is up in arms about a book entitled Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America by Nancy MacLean, a leftist history professor from Duke University.

The book makes a case for a right-wing conspiracy, involving money from the evil Koch brothers – of course! – and centered on Noble Laureate economist James Buchanan, the father of “public choice” economics.[9]  Accusations of racism[10] and other sinister agendas abound.  So, apparently, do shoddy reasoning, total misunderstandings, incomplete scholarship (including in the face of readily available but ignored source material, much of it on the same campus) and shit that the author just makes up!

Here is a lengthy review of the book by a Duke colleague from the economics and public policy department.  It just drips with well-deserved contempt.

Roger Barris

Weybridge, United Kingdom

[1] Don’t ask.  I am depressed enough.

[2] To use the famous phrase of economist Joseph Schumpeter.

[3] Note the allusion to Seattle’s most famous rock band, whose lead guitarist and co-founder, Krist Novoselic, is a hard-core libertarian and a very cool dude.

[4] Advocates of a Universal Basic Income, who think that it will be a “liberating” and “empowering” experience, take note.

[5] For those who doubt that these types of incentives matter, they need to explain why multiple studies show, for example, that the unemployed are much more likely to find a job shortly before their benefits expire.

[6] McEnroe said that Serena would lose to any of the top 700 male players.  This is slightly higher than my longstanding estimate of the top 500, but I am willing to defer to McEnroe’s greater expertise.  My tennis coach, who reached the top 800 in men’s doubles, thinks that he would give Williams a good match.

[7] If I am generous, I could claim that the bias has been against the higher earner in the couple, which has typically meant the man, but I also suspiciously note that women dominate among the lawyers and judges responsible for execution of family law.

[8] Why should a woman’s unilateral decision to continue with a pregnancy be allowed to impose financial burdens, particularly disproportionate ones, on the man?  I can understand objections to this standard, but what about women who have a demonstrated indifference to this, such as through earlier terminations of a pregnancy?  And why should the father’s standard of living and earnings be relevant factors?  Why should the man be required to provide more than reasonable support, particularly when unreasonable support can be easily diverted to the benefit of the mother?

[9] The essence of “public choice” economics is the observation that people do not suddenly become angels when they enter public service and that bureaucrats and politicians have their own incentives and agendas.

[10] If I adhered to MacClean’s standards of intellectual integrity and rigor, I could suggest that her accusations of racism were motivated by Buchanan’s origins in the South.  But I won’t.

Read Offline:

Comments

  1. David
    July 4, 2017

    Leave a Reply

    Regarding the current mayhem in the labor market, the past is not always a great way to forecast the future. I lived through the disappearance of secretarial pools, I do not understand how their redeployment went so relatively effortlessly. But, this doesn’t mean what is going on today will be processed through as painlessly.

    • Roger
      July 5, 2017

      Leave a Reply

      I agree that the past may not be an accurate predictor of the future in all cases, but it is certainly a cautionary tale to consider that the disruption we are currently experiencing is not unique. My point is that, given history’s lessons, we should approach the current situation with a good deal of skepticism. For example, there are some who are pushing UBI as a solution to a problem that may not exist, on the basis of the historical record. This is massively jumping the gun.

Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>