*Not Working: Where Have All the Good Jobs Gone?*

That is the new and forthcoming book by David G. Blanchflower, here is one excerpt:

The high-paying union private-sector jobs for the less educated are long gone.  Real weekly wages in April 2018 in the United States were around 10 percent below their 1973 peak for private-sector production and non-supervisory workers in constant 1982-84 dollars.  In the UK real wages in 2018 are 6 percent below their 2008 level.


In the post-recession period underemployment has replaced unemployment as the main indicator of labor market slack.

This is a very good book for anyone wishing to rethink what is going on in labor markets today.  In his view there is plenty more slack, as evidence by sluggish wage behavior.  You can pre-order here, due out in June.


How do they make 90% of what they were making 45 years ago (obviously they're different people) by not working? We would all like to see wage gains but a 10% wage loss is hard to square with the idea of unemployment.

Beware of headline writers.

Then I farted. Oops! Sorry!

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Who said anything about not working?

Monopsonies do a pretty good job explaining the slack and low wages concurrently.

Econ 101 teaches that when monopolists set the price above market rate we should expect less market clearing transactions. Same thing happens when monopsonies set the price/wage below the market rate.

What monopsony? What slack? What low wages?

+1. Monopsony power is the problem. Unfortunately our esteemed hosts, with due respect, and their sponsors tend be both pro-monopoly and pro-monopsony so good luck getting this issue to even be acknowledged. Expect a torrent of facts, figures, and data and a lot of half-baked explanations that all miss the point-that-must-be-named. Not long ago, this site claimed productivity growth was the reason for lower wages but a simple chart shows wages failing to track productivity 40 years ago. See Slate Star Codex's piece on wage stagnation.


Moar unskilled immigrants, please!!

If you stopped all unskilled immigration today, crappy paying jobs yesterday will still be crappy paying jobs today except with more machines.

No. More machines increases productivity per unit labor.

How exactly are you disagreeing with him?

Crappy paying jobs of yesterday are taken over by machines.

I doubt you'll ever find a better quote about automation replacing immigrant workers than this one coming from a diary farmer in the state of NY:

“The only reason why we don’t have migrant labor is we started out with the robotics.” https://www.agweb.com/article/more-us-milk-will-be-coming-from-robots-blmg/

So, machines don't make unskilled workers more productive. Machines replace the unskilled/low payed workers and make the farmer more productive =)

Right...may I please borrow your lawn mower? I am trying to mow my lawn with a pair of scissors.

You mean my robotic lawn mower?

Of course, mowing your own grass with a gas powered lawn mover is more productive than doing it with a pair of scissors. People chose gas powered movers when they became widely available on the 1960s.

Today is Feb 26, 2019 and you can buy a robot or lease one from a company that takes care of it. The robot does not make the friendly immigrant more productive, it replaces him.

"The robot does not make the friendly immigrant more productive, it replaces him."

Don't oversell robotics here. Robotic lawnmower kind of suck (do you really want you lawn mowed slowly, in random walk pattern, with a few missed shaggy bits here and there?) and that's the ONLY lawn-care job that robots can do at all (they don't plant flowers, sweep patios, pull weeds, trim bushes, rake leaves, or do edging). Most of my neighbors have lawn services. The crews use plenty of labor-saving power tools and work hard and quickly, but nothing is automated -- or is likely to be anytime soon).

No...no....I want to see a robotic lawnmower chase an immigrant about my lawn. Break out beer and pretzels. Wrrrrrrrrr.

There is no great stagnation.

"Hey Miguel, while you're here, could you give me a hand with this carpentry project? I'll pay you extra for your time."

"Sorry dude, I'm a robot."

"machines don't make unskilled workers more productive."
At the Home Depot I went to recently, there was one cashier who watched over 4 self-checkout machines. How is that not more productive?

It replaced unskilled 4 cashiers (who need to call the manager over for the override) with 1, more-skilled cashier (who has the override card) that can manage 4 self-checkout lanes by themselves.

How is that not more productive?

if the cashiering is done by the customers
instead of the workers is that really an increase in productivity?

Viewed as a whole it's less. A cashier can scan more items and move customers along more quickly than the customer can on their own in almost every case (exceptions being extremely low item counts--1 or 2 items). That's WITHOUT needing to wait for the cashier to come over and do an over-ride code.

It's a matter of shifting cost. It's cheaper for the company to shift the costs to repairing machines (which get no health insurance) and time for the customer (which they don't have to pay for).

Ah - but if 4 x added customer time cost < full cost of 3 cashiers, its still a net economic win, and the spoils can be divided, Coasean fashion.

"if the cashiering is done by the customers
instead of the workers is that really an increase in productivity?"

Generally, the self check out lanes have a checkout open all the time. At a cashier, I wait in line longer than it takes to checkout. So, for the most part, it's quicker for me and takes less paid labor for the cashier.

so your sayin the increased productivity
is due to the customer and the scanner
and not so much increased productivity from the employee

In the office space, We used to have secretaries, or office admins perform admin tasks like filing, travel booking, expense reporting, etc. Nowadays, these functions are "automated" in the sense that each individual is responsible for filling out their expense reports, booking their own travel through the company automated booking system etc. The net effect is that it downsized the secretaries, while at the same time increased the amount of time the office workers spent of admin tasks, however, that time is not expected to be charged to "admin", the worker is just supposed to eat it.

Does this make the remaining secretaries/admins more productive? or has the costs simply been shifted?

Admins are FAR more efficient than they used to be. Microsoft Office allows me to see, in real time, the calendars of all of my coworkers and schedule meeting rooms basically instantaneously.

Compare that to 1970 when someone had to manually compile the calendars of each individual and call up each secretary individually in order to figure out when everyone was available.

It probably didn't replace four people. I can't ever remember going into Home Depot when there were more than 3 checkouts open, and often it was just 2. Nowadays there's always one manual check out (many items can't be rung up at the auto checks due to size and bulk) . What they've done is streamline the checkout process which allows them to serve more customers.

And w/o the unskilled immigrant.

It should be criminal to reference wages and not compensation. I give him a pass for using production and non-supervisory workers only since he is trying to make a particular point about the less educated. But the "wages" thing is a blatant attempt to deceive (which usually succeeds)

"Weekly wages" is also weaselish. If people are working a lot less and getting paid about the same, that may be a tradeoff they prefer or even have facilitated

Your comment should explain the deception so we can learn from your example. I'm guessing the compensation not reflected in wages is related to health care?

It is mostly healthcare. But to be fair, if you don’t count healthcare in compensation, you should also remove it from the inflation index, thus causing the inflation index to be lower and real wages to be higher.

haven't wage taxes rates -social security and medicare also increased quite a bit since 1973

Income taxes have fallen as payroll taxes have risen. The typical federal income tax rate paid by a middle income family of four has fallen from 12% in 1980 to barely 5% today. https://www.cbpp.org/research/federal-income-taxes-on-middle-income-families-remain-near-historic-lows

but state & local sales taxes have gone from 4% to over 8% in my state
in the last 50 years and property taxes have about doubled

Is that Ohio?

It is an impersonator.

We just had a series of posts filled with lots of kvetching about Amazon and the stock options it granted its employees. Those wouldn't be captured in wage numbers, either. Obviously, minimum wage earners aren't taking those home, but I'll bet that there are plenty of skilled laborers who have the option of participating in some kind of ESOP that I don't think would get captured, either. Not sure how big the effect might be, though.

I flatly reject the validity of comparing real wages across 45 years. That may have made sense when technological progress was slow, but it is thoroughly incoherent today.

Surely what we call "adjusted for inflation" is a close proxy for those changes. And no matter how slick the phone, a worker's costs are still dominated by rent.

Inflation is a "proxy", but small differences add up over 45 years. CPI increased 5.0% over the 45 years in question, but PCE was up only 4.4% and the GDP deflator 4.3%. Change the inflation definition, change the story. Uncertainty around measuring inflation makes it hard to compare today to 45 years ago.

We do know that average hours worked are down about 6% during the period in question, and that non-wage compensation costs have increased.

And of course, 1973 was a "peak" year, so all caveats around cherry picking apply.

The story is misleading.

Does anyone know an "hours to cover rent" number for "private-sector production and non-supervisory workers?"

That might cut to the chase.

This looks close to what I'm asking for:


I think this is all workers, but the series stopped in 2014:


My hunch is that production and non-supervisory worker hours are more volatile but have a more pronounced downward trend.

Oops... that wasn't what you were asking. I'm sure the wages/median home prices thing has a yuge regional component.

Mish says "Making matters worse, rent prices accelerated in 2011 and far outstrip wage growth."

What would really disprove that, for "most workers?"

Probably the same thing that would prove it?

Try following the link.

Only for urban consumers and production/non-supervisory employees. Next.

"Rent what" is also a relevant question. The working-class apartment complexes surrounding every city, with heated, air-conditioned apartments with a gym and a swimming pool and probably two bathrooms, beat the furnished room with a bath down the hall that my father rented when he was just starting out 80 years ago.

Why don't these ex-union guys apply for the 40,000 jobs worth $27 billion that Bezos said he was creating? That's got to be better than working a McJob and begging Democrats to raise the minimum wage.

Why aren't other states falling over themselves to offer Amazon $3 billion dollars to make $27 billion? Seems obvious to me.

Did you go to school with AOC.? NY offered to lower thier very high tax burden so that they would be competitive with other locations. Other locations don’t tax at such high rates so it is difficult to offer such generous tax cuts. NY wasn’t offering money, they were offering a tax rate similar to other locations.

Don't offer a tax cut? Take a $3 billion bond and give 100% of the cash to Jeff Bezos. For $27 billion its a 10 to 1 return on investment like the NY budget director said. Some people will be upset but they will get over it when it pays for itself in 2 years. I still can't believe no one is doing it. And no I will never be anywhere near a socialist like AOC. As a capitalist, ROI is more important to me.

Tax people to raise $3 billion, invest in Amazon, then promise that it will all work out. This is capitalism? How do you pay back the $3 billion? By taxing the future Amazon workers, but you exempt non-Amazon workers? How does that work? With Amazon jobs the fixed costs are minimal, no big factories, they can just relocate almost at will. Not to mention they become a voting block and powerful special interest. In what world is that Capitalism?

They are. They did. Did you miss the frenzy when other states and cities were falling all over themselves to offer incentive packages to Amazon?

Maybe you haven't been following in the news, but the newer higher minimum wages have proved a big win.

Are you sure you want to give that win to the Democrats by declaring it "all theirs?"

You could just treat it as pragmatic and evidence-based policy which of the center right can also get behind.

A big win? You’re not even trying anymore.

Do I have to do everything for you? Google "minimum wage study" and flip to "news" view.

So again you have not a shred of evidence.

Seems about right.

Big win, really? How about this study (https://www.nber.org/papers/w25182):

"Seattle’s minimum wage ordinance appears to have delivered higher pay to experienced workers at the cost of reduced opportunity for the inexperienced."
And even then: "Approximately one-quarter of the earnings gains can be attributed to experienced workers making up for lost hours in Seattle with work outside the city limits."

We could start another world war, basically destroy most of Western Europe, make China, Russia and India completely socialist-communist again and we could basically replicate the global marketplace conditions that sustained much of the US labor market 50 years ago....

The idea that some new labor movement is what is needed to raise wages without trade offs while simultaneously ignoring market conditions is insanity....

Oh, come on. What could be more relevant than the union wages of 1973???

A good question to ask people might be:
What would you prefer:
A) The living standards of 1973, with the real wages of 1973, or
B) The real wages of 2019 with the living standards of 2019?

If I could be a park ranger in either time, 1973. There was more clean air and more trees.

If you are going to be on a sofa with a Big Gulp watching TV .. maybe now?

Actually, I think you are wrong on both counts. The air has gotten cleaner and forests have regrown. Check the statistics. The exception is cow, but other measures have improved. There was acid rain in the 70s

More clean air?

This has to be the fake anonymous. In LA one couldn’t even see the mountains In 1973.

OK, but the air is cleaner now and we have more trees.

The guy who is obviously better off in 1973, socially and economically, is the low-skilled laborer.

Be careful. When I say trees I mean wild forest. When modern growth statistics are thrown around they include plantation monoculture.



Then why didn't you say wild forest the first time, you tit?

Because I thought you knew what a "park ranger" was?

He didn't have to breathe downtown air either.

Yeah, I'm sure they've cut down lots of trees in national parks, that's a good point you made. If they had, maybe there wouldn't be so many forest fires. I also love your point about the air in national parks getting worse while the air in cities improves. That makes tons of sense.

Remember, if you can never admit you were wrong even when presented with evidence falsifying your beliefs, then no one can trust anything you say or believe, including yourself.

Clues offered by the context still aren't very helpful when you just flat out misuse words. Idiot. You probably couldn't hack it as a park ranger, either now or then, so your hypothetical is moot.

Amazing that you guys don't recognize when you've given up on even making the argument, and that then you think insult will get you there.

Obviously we have less native, especially old-growth, forest than we ever had ... but still you want to argue and call me names over it.


"Obviously" you are lying

You should know I always have the receipts.

Management solutions are urgently needed to cope with the large number of oak trees that are declining and dying in oak-dominated forests. This problem is referred to as oak decline and has become a chronic problem for the region’s aging oak forests.


You essentially never have the receipts.

A true master in goal shifting.

Even a lot of wild forest has regrown, because a lot of land went out of production as farming got more efficient. Those regrown forests are not all tree farms. They are mostly "wild" regrowth.

Re-wilding is a good thing, but small and at the fringes. Even in national forests regrowth is often managed for fast growing species, all over the world.

Well, those forests aren't sprayed with pesticides to remove weed species or insects, and hence cannot really be called "monocultures".

I think the more you are an indoors person the more you like now vs 50 years ago.

mebbe outdoor people like 1973 better
because their knees were better in 1973?

You got me.

Housing and migration aside, 2019. But housing costs and migration threat are huge deals.

Of course, 1997 over either of them.

But 2019 would be great, despite the lack of "good jobs", if we just had halfway sensible migration and housing policies, and in international politics, halfway loyal elites (who weren't out for "pulling" Chinese, African and Indian peasants out of "poverty", or whatever it is they believe matters for them).

"conditions that sustained much of the US labor market 50 years ago...."

You would also have to force women and blacks out of the work force. Then times would be great for unskilled white male labor.

Lawyers, accountants, engineers, and academics are already facing similar situations, and it will become more evident soon. There are billions of people around the world who are willing to do your job. They might not be quite as good as you, but they will work for a fraction of your salary and have technological tools to help them compensate.

UBI and other statist ideas are unworkable and oppressive. But if advances in technology and transportation could make housing, healthcare, and other basics of life become as cheap as computing power or digital storage, then underemployment wouldn't matter so much. The urban careerists would suffer a lot though, because their identity and sense of self-worth is so tied up with their jobs and salaries.

"But if advances in technology and transportation could make housing, healthcare, and other basics of life become as cheap as computing power or digital storage, then underemployment wouldn't matter so much."

Then I can use the other two wishes.

Thiago, thanks. What a way to dismiss the idea that housing can be made as cheap as digital storage. That reply is gold =)

Hear, hear! It was one of his best. (Or one of their best - could "Thiago" be a team effort?)

"Or one of their best - could 'Thiago' be a team effort?".


Yes we are, me.

"I am large, I contain multitudes."

ribby is both diverse&multicultural

You are welcome.

What the hell did I just read? How is housing and healthcare like digital storage and cheap computing? Are we so beholden to the cargo cult of technology that we have given up all agency in our lives to imbibe in the kool-aid punchbowl of wishful thinking and superstition rather than address our problems realistically? Housing and healthcare isn't something that can be outsourced to Bangalore or comes out of a container from Shanghai. Its not even apples and oranges but more like apples and asteroids. So no you can't just pretend tech will fix it all because it won't.

Yeah, that was the crux of his argument, wasn't it? A miracle happens and everything will be all cheap. A big wand to wave.

No, there aren’t billions of people with the skills to be a lawyer, accountant, engineer, or academic. One of the main reasons poor countries are poor is low human capital. Thus, plenty of US companies bring their own lawyers, accountants, and engineers over from the US when they do business in developing countries (or hire from the local offices of big international firms, where rates are not much lower than US rates) because of the lack of a local talent pool. Lawyers (especially business transactional ones, who face the most foreign competition) and engineers (especially in the computer field) are experiencing some of the fastest wage growth in the US now.

Of course, in the past, poor human capital was also the reason there were no industry successes outside the West though!

That is, Western factory workers really were more productive on those machines, even adjusted for tariff barriers and wage costs.

Not so true today. First Japanese, then other East Asian, then Bengali, etc. Technological change, change in habits and primary education made it not true, even if a person from 1900 would've had a hard time seeing it happen.

It's a bit ambitious to suppose that AI can "kill all the lawyers" (as in the Shakespearean aspiration), and the accountants, and the engineers, and the writers, but gosh, I hope AI makes enough of an inroad to reduce them to a very much lower condition of bargaining power relative to the capitalist class.

AI already diagnoses more accurately than cardiologists, ophthalmologists and dermatologists and is closing in on radiologists and AI already diagnoses breast cancer more accurately than radiologists under a realistic time-frame.

The real wages of first year associate lawyers did not increase in 2015 and increased just 1 percent in 2016.

You're only looking at the very top of the legal profession. Below them, the vast, manpower-intensive slogs through due diligence and document review that used to be performed by upwardly-mobile new associates are now done by dead-end contract lawyers, and increasingly these tasks are migrating offshore due to digitization.

Exactly, the lawyers and accountants make a lot of their money marking up margins on the lower level work done in the meat grinder. A lot of that can be automated or done by para's

The best way to save on your tax prep bill is to send clean books.

Maybe Americans should not have sent jobs to Asia. Maybe Americans should not be expected to earn their livehoods by giving one another haircuts and making apps. Maybe speculation is not real investment. Maybe Americans sphould build things again.

The United States has a trade surplus with Brazil, so...

If we're only making speculation, why are you buying so much of it from us?

According to Mr. Trump, "If you ask some of the companies, they say Brazil is among the toughest in the world – may be the toughest in the world”.

2) Brazil is hedging its bets. Our trade surplus with Red China is five times our trade deficit with America. We have fine-tuned our system to optimize our trade.

*Not Working: Where Have All the Good Jobs Gone?*

Looking for an anti-hero, are we?

The country has been flooded with record levels of low skilled workers. We have seen record numbers of workers in other countries have their livings standards lifted by free trade. Increasing government intervention in the marketplace has lead to creative ways to avoid labor or at least make it more productive, while Bernie Sanders is calling for more college for everyone, so the state can supply more poorly educated people like AOC, we have a national shortage in the skilled trades. We have a serious drug problem. We have an underclass that engages in an underground economy that prevents long term growth. We have an economy that richly rewards groups that can manipulate their way around or exploit the unintended consequences of government interventions in the economy. Government regulations have become a hurdle for small firms from generating scale to operate. Just a few problems

A headline ripped from the news, the day after they completed the transcontinental railroad

"The country has been flooded with record levels of low skilled workers."
"we have a national shortage in the skilled trades. "

Plumbing, carpentry, roofing, and construction could be done by low skilled workers who then become more skilled. Everybody has to begin somewhere. You also forgot licensing. Shouldn't need a license to be a florist or to work a nail salon.

low skilled workers often become skilled in the trades, but with a large pool of such workers wages are suppressed. Domestic workers don't invest in learning the skills because of the large pool of unskilled workers depressing wages. Not a big fan of unions but without some protection for your investment in learning the skills needed you will see underinvestment. Germany sees more investment in such fields because of labor protection. In this country, we subsidize higher education and produce people like AOC. She is graduated by a respected University and is only employable as a bartender or a Czar for reworking the economy.

Investing in the semi-skilled or skilled labor that was the source of middle-class incomes doesn't make sense. The jobs are easily moved overseas, face government regulation, or face intense competition from new immigrants. Not to mention that the government subsidizes alternative training which increasingly offers low returns for many.

Trade is based on comparative advantage. Increasingly the comparative advantage of countries like China seems to be in the theft of intellectual property, toleration of pollution, favorable government policy (from a quasi-Communist government no less), and a flexible workforce.

BTW a surplus of unskilled workers leads to underinvestment in the skilled trades, which leads to them seeking other fields, which suppresses wages in those areas, so on up the chain

So you're basically arguing that a surplus of unskilled workers leads to a shortage of skilled workers. Because everyone, I mean literally everyone is going to hold off on learning those skills that are in high demand because they all are going to anticipate that everyone else is going to do it and suppress wages.

Or, in other words, that high demand leads to low supply. I mean, shit I guess Apple should get out of the smartphone business right now because once one person makes a smartphone EVERYONE will make a smartphone and then smartphones will be unprofitable.

No Apple has barriers to entry (for now) in their market that unskilled workers don't. Apple invests in phones because they project that such investments are positive. If Apple thinks that the potential profits have turned negative, they will stop.

Not every person will stop investing in skilled trades. But many will, many have. You are interested in lifetime earnings when you invest in your human capital. An influx of unskilled workers will depress the wages in that sector. Employers can also cheaply higher some of these workers for training programs. Depressing wages in that sector. These workers become cheap substitutes for former domestic workers, they can undercut current wages. Domestic workers see this going on, leave the industry, take pay cuts, or decide not to enter the field. Some higher compensation niches will remain. And some will find full exit difficult but will be underemployed by choice or circumstances. You have the same skill level you had ten years ago but wages have fallen. What do you do? Avoid difficult jobs, choose more leisure, take less physically demanding jobs that may pay less but don't have the risks, join the underground economy, have wait unemployment (waiting for a better offer)

In the meantime the government in subsidizing training in useless degrees. This attracts a surplus of employees in these fields.

Some immigration is positive and the system can easily absorb the extra workers. Currently, we are at record levels, levels not seen in over 100 years. Into an economy that has far more social programs. The last time we had these levels was after a civil war (with many men dead) and a period of rapid industrial growth where labor demands were much greater than today. Long term could it equal out? Long term a lot of people are dead.

There's a shortage of skilled trademen and wages are high right now. if it was so easy to train unskilled workers to do these jobs why hasn't it happened already?

Where did I say it was easy. I argued the opposite. That workers will not make the human capital investment, often years of training, because the wages are being depressed long term. The potential workers are forward-looking and see what is happening today and anticipating the future.

Plumbers, electricians, HVAC technicians, low skilled workers as you describe them, go through multi-year apprentice programs that more than equal college education. Then, in order to work, they are licensed because what they do has a direct effect on the health and safety of the country. Politicians and bureaucrats, on the other hand, require no particular education or testing to ruin the lives of millions of innocents.

The reason there is a shortage in the skilled trades is that potential entrants quickly become aware that their wages for working in the fourth most dangerous occupation in the country are being swallowed up by a drone white collar class that spends the day filling in blanks on forms. While they build the beautiful facilities where white collar workers attend their keyboards, they eat their lunch in the dark and defecate in plastic shacks. The quality of skilled labor is bound to decline because no person of average intelligence or better would care to lay block, weld pipe, cut rafters or run duct work while being treated more poorly than a farm animal.

Despite the fact that "unskilled" construction workers are required to wear protective clothing that includes hard hats, reflective vests, gloves, safety shoes and fall prevention apparatus and engage in daily safety talks, 747 of them were killed in workplace accidents in the US in 2017. That year saw 117 law enforcement officers die during working hours, the majority in traffic accidents. Compensation for construction work isn't commensurate with the danger involved.

When labor demands on a particular project decrease construction workers are laid off and go on a union "bench" until they are needed on another project. If a law enforcement officer or teaching professional loses their job it's a rare local tragedy that ultimately results in arbitration or judicial action.

isn't the problem with comparing raw fatality numbers between law enforcement and construction workers
that there are about ten times as many construction workers in the u.s. as there are police?

I take it you haven't actually worked in construction or a related field.

Modern construction work requires a high degree of skill. We're not talking about gangs of guys mindlessly slinging dirt with shovels; we're talking about technicians doing precision work with multi-ton machinery. Concrete and grout are highly technical chemical products, and the difference of a percent in the mix can make or break some projects. Laying pipe requires all the skills of a land surveyor, an equipment operator, a CDL driver, and an x-ray technician, plus some unique ones.

That's without getting into regulatory compliance. On most jobs there is a team dedicated to ensuring that quality standards are met--and that includes complying with some of the most onerous regulations of any industry (OSHA, CERCLA, TSCA, RCRA, licensing, etc).

The turnover rate is tremendous, too. My company had a 90% turnover rate for folks in their first 3 years. The physical and mental stress are tremendous.

The idea that construction and associated fields are work that anyone can do, or that they require little training, has been outdated for at least a generation.

Weekly wages hides a lot. Even if jobs are the same, maybe people are choosing more leisure time today because the leisure options today are a lot better than what existed in 1973. Sure, if wages went up sufficiently maybe more people would forgo leisure for work, but that doesn’t mean the jobs today are not as good as the ones in the past.

Moreover, even assuming the author’s statistic is valid, would giving everyone a 10% raise back to 1973 levels suddenly turn all the jobs today back into good jobs? I don’t think so. People should not look on the past with rose-colored glasses; there is little evidence that it was better than today even for blue-collar workers.

Why not make it less expensive to hire people?

When I consider how much it actually costs my employer to hire me (not just what I see on my paycheck - various benefits like health insurance, employer "matches", unemployment insurance taxes, etc.), I'm quite nervous about my job security.

As a hobby, I would suggest that all prognosticators go to their library in the attic and reread some of the books that described what was going happen in the future.

Am currently reading a 1983 collection of industry studies contained in a book entitled: American Industry in International Competition: Government Policies and Corporate Strategies edited by Zysman and Tyson.

What interested me was how historically olipologistic industries did not innovate, which led to their demise and request for tariff or other government handouts:

1) thel US steel industry's decision not to adopt new technology in the late fifty's and early sixties when Japan did, leading to protectionism of inefficient plants, which we still have today;

2. The US color television industry, which decided to focus on high end color televisions, with tubes!, leaving the low end stuff to the Japanese, and, again, the protectionism that followed;

3) Japanese protectionism and barriers on semiconductors, which were evaded by US firms situating themselves in Asia in order to avoid tariffs placed on US semiconductors;

4) Futile protectionism and decline in the US apparel and textile industries;

5) Protectionism in the US footwear industry, followed by outsourcing of manufacturing while retaining design and marketing in the US;

6) The US auto industry and its protectionism

All are fascinating industry studies. You can see that while you may talk about employment, what is driving this is either a failure to innovate (or compete) in some oligopolistic industries, leading to eventual decline, or the futility of preserving low wage assembly jobs in internationally low wage industries.

What was also interesting is that the computer industry leaders did not include Apple, but did include mini-computer manufacturers.

Bill wrong again
A worldwide glut in steel production made the investment in new steel mills a loser. With high fixed cost, the US firms just kept production going as they disinvested. It just died very slowly.

The US television outsourced components to Asia early on. The Japanese then automated and made higher quality, cheaper products. Profit margins shrunk to the point that domestic production, and investment in, wasn't worthwhile. US firms shifted production overseas. Tariffs on Japanese TVs just moved production sites around the world. Flat screen TV's take massive upfront investments with low marginal costs. This means often low margins that don't attract domestic investments.

Third world countries had a comparative advantage in the labor-intensive apparel industry. US textile firms still produce textiles in highly automated plants that supply these foreign assembly plants.

Much the same for footwear.

The auto industry had a glut of production plants. The US plants started with some monopoly profits which they shared with their employees. As competition increased those monopoly profits were competed away. But the US firms had huge legacy costs and higher labor costs they couldn't shed. Profits were not invested in the firms but to pay unsustainable wages and benefits. Management investments in automation were a waste of money. They could have bought Toyota for less than what they spent on failed efforts. Management sucked. Calls for protectionism could not overcome poor management and high legacy costs. Foreign competitors could move plants to the US and around the world. Increased competition and lower profit margins made it harder to attract investment and top talent. Plus changes in Detroit made it harder to attract international talent.

The top 100 firms are very different every 50 years. Markets are dynamic and change. If an industry is making profits, other firms enter. Barriers to entry are almost impossible in the long run without attempts at government intervention. Even then firms just find ways around the barriers. The question is why is labor so sticky that it is unable to adapt to dynamic markets.

Dan, I won't use personal statements about you, but let's look at the facts, please.

1. "Worldwide glut made steel a loser." Well, dah, if you are inefficient, your marginal costs are higher than anyone else. If you choose not to get the costs lower by using the best technology, of course you will die, unless, you get some good ole tariff protections.

2. RE televisions: I suggest you read the chapter, and look at the history of the industry. Remember Motorola and GE TVs?

3. Evidently you didn't read my comments on footwear and apparel, as you appear to agreeing with me that they were doomed.

4. Autos "glut" is due to cheaper rivals and more efficient plants producing efficient autos when a gas crisis arises.

All in all Dan, you make it appear that I am saying something I am not. As for labor being so sticky, part of the equation is investing in technology and not relying on protection or playing the oligopoly games of the 50's and 60's.

A friend of mine was the former Chief Economist of the FTC. I once asked him how he had changed over time. His response: I've become more Schumpeterian.

Think about Apple and IBM. Apple had no future after Newton unless it innovated.

A lot of countries decided to get into the steel business. Not always for sound economic reasons. That lead to far more steel being produced in the world. The US steel mills were losing money but stayed in business because they had high fixed costs and low marginal costs. They lost even more money by shutting down. But additional investments made no sense given the world price for steel then and into the future. Building bigger more efficient plants would have just contributed to the glut on world markets. The NPV of improvements would have been negative. The political reality was that some foreign governments would have subsidized their plants even as the world price fell. US steel manufactures followed the only path open to them short of a government takeover.

And the marginal costs is important because the price (MR) stayed above MC so they continued to operate even as they were losing money, had zero or negative economic profits, until the fixed costs of the plant go away. They operated and disinvested in their plants as the best they could do given world markets.

The competition became so intense in the TV industry that margins shrank to the point of zero economic profits. At that point, the least efficient producers have left and new entrants have no incentive to invest. At that point, Motorola, GE, Zenith and the rest would have received a higher risk-adjusted return investing in Treasury Bills.

The US firms could not compete on smaller cheaper cars. Ford lost money on ever Escort they sold. But because of CAFE standards etc. they kept building them. Competition in the auto industry became too intense for US firms. Too many models, too many dealerships. Simply production had exceeded demand and prices and profits fell. The gas crisis helped open the door wider for Japanese imports but it isn't the reason Detroit was beaten. The US imposed quotas on Japanese imports and it did nothing to decrease the long term desire for imports. Given the bloated structure of the US industry, the higher legacy costs reflected in labor contracts, could not overcome massive investments by domestic firms. Not to mention increasing regulatory costs.

The domestic automotive industry did not fail because they failed to invest in technology, plants or equipment. They were investing in some silly things because of government regulations. They had a cost structure that was a hangover from a period of monopoly profits and could not aggressively confront those issues. etc etc etc

To be honest, you seem to know almost nothing about the auto industry.

To be honest, Dan, you have no sources and I do.

Read a book. Or, industry studies. Start with Caves and go through Porter, and maybe some Harvard Business School case studies.

I second Bill's suggestion of reading old books. You find out either things aren't so different today as pundits suggest or that many forecasts don't come to pass.

I have forgotten the details, but it was a tarriff that created the SUV industry. As I recall now, the tariff was on two-door SUVs built on pickup truck chassis. The Japanese responded with the four door SUV.

This was preceded by the chicken tax war, which created the light truck industry in the first place.

So you could actually say that in a way, tariffs spawn innovation.

The SUV segment was created by the demand for such vehicles and the potential profits from their production. They were exempted from car CAFE standards that made them more profitable. Light trucks were subject to the Chicken Tax, but inventive ways were found around it. In 1989, two door SUVs were reclassified as light trucks and production of such trucks moved to NAFTA covered countries. SUVs and light trucks are very different

I believe that SUVs were originally essentially two-door and then four-door enclosed bodies built on pickup truck chassis.

i also distinctly remember the Japanese being first to market leadership on four door SUVs - Pathfinder, Montero, and Fourrunner in particular.

"Good jobs" didn't go anywhere, what changed was the skills in demand in the labor market. Wages are a function of supply and demand - there are tons of jobs in the tech sector at every level that are going unfilled, which also pay well as a consequence. The problem is there aren't enough people with those skills, and there are too many people with outdated skills in manual factory work type labor. The tech jobs I'm talking about don't necessarily require a college education either - many programmers are self-taught, and there are grunt-level jobs in tech support doing low-skilled work like taking calls on help lines and running through troubleshooting scripts.

There are also jobs that havn't been invented for the new demands that have opened up because other people have more money to spend. Jobs like "professional organizer" - basically going through people's closets and organizing them and helping them get rid of their useless junk. Almost a glorified kind of maid service work, really. That doesn't take any skills other than knowing how to fold clothes neatly and put things in bins.

In fact I would theorize that there is never any shortage of jobs, because there's always someone out there with money to spend - you just have to figure out what new thing that person wants. It's exactly like comparative advantage. It doesn't matter if everyone else is better at everything - there's always something else they could use and a bunch of labor sitting around unused that could do that thing. And everything at that point is just supply and demand.

Ah yes good old tech support jobs. Hirings are robust...in India.

A person in India doesn't have physical access to your machine and can't change out and clone a hard drive.

Shifting goalposts are neat: "taking calls on help lines and running through troubleshooting scripts."

There's a variety of jobs in tech support. That was just an example.

Benny is correct - tech support has been largely outsourced.

Also, tech support is not necessarily low- skilled, not in software.

> there are tons of jobs in the tech sector at every level that are going
> unfilled, which also pay well as a consequence. The problem is there
> aren't enough people with those skills,

Go read some reddit threads on ageism in tech if you want to know what is actually happening.

If there is agism in tech then older workers could compete by accepting a lower salary, and some enterprising entrepreneur could pick a million dollar bill off the sidewalk.

Isn't this basically the argument that many people make for why there can't possibly be racism anymore?

Not that I'm saying there's no agism, but it's more likely to show up as a wage differential than as unemployment. The unemployment rate for black men is still only 5.9% right now. They just make less money.

It’s not ageism.

A 50 year old is stuck in his ways, his skills will be out of date, and is going to be extremely unsatisfied with taking a large pay cut just to work.

There’s no “money on the sidewalk” because the dudes reservation wage is higher than the company’s willingness to pay.

Exactly. The problem is skills mismatch, bot a lack of "good jobs".
When your skills go out of demand (i.e. become obsolete), your wage goes down. Sorry, but that's life. The good news is that accepting a pay cut to keep working gives you the opportunity to learn some new skills on the job. And if there is skills mismatch that means somewhere there are jobs that demand the new skills are aren't getting filled. There is not an intantaneous supply of workers with the new skill.

Gee, maybe employers should be upgrading their employees' skills. Can you say "training"? And the slur that 50 year olds are "stuck in their ways" belongs with claims that women are too temperamental for management roles, and black folk all love watermelon.

Why says they aren't? You're right about 50 year olds too. But this is all in response to people claiming that 50 year olds are pushed out of the workforce due to agism. You don't get pushed out of the workforce if you can (a) learn new skills, and (b) take a pay cut, if only temporarily.

Don't forget that older workers
1) Are a health problem waiting to happen, plus having parents in their 80s is a potential double whammy);
2) Remind younger workers of their own eventual decline and mortality.

Except that the competition is often working abroad for wages that are a minor fraction of US wages for the same work. And you can't take a pay cut that leaves you homeless and unable to live at US prices. That's as ludicrous as demanding that US gas stations should all sell gas at the same price the Saudis sell it for (0.54 per gallon recently). Gas stations in the US would all go out of business under that pricing regime. An all too often ignored ommon sense maxim is that you can't expect producers to sell (apart from brief promotions) at prices less than than the cost of production. Usually the Left ignores that fact. But on wages tbe Right seems to be pretty stupid too.

Federal regulations against discrimination make it riskier to hire people from protected groups. If you make a mistake and hire a bad employee from these groups, you leave yourself open to litigation at termination. More firms just avoid the hassle.

Any HR person worth their own salary knows how to maintain a litigation proof paper trail when it's necessary to fire a bad employee. Such suits very rarely succeed, and most never even see the inside of a court room when the plaintiff's lawyer learns that there's a fat dossier of employment incidents involving their client.

I'm not sure I would agree that the observation of a lower real pay between then and now does indicate under employment. The relative value of skills certainly would have changed over almost 50 years.

Drats. Amazon was THIS CLOSE to fixing that

I like your last sentence. The economics profession completely underestimated the reserve labor pool in this country, and is thus surprised at the continued strong jobs growth nine years into a recovery.

Flexibility moving in and out of the labor force and modulating hours worked are not sufficiently appreciated, but continued sluggish wage growth should have been a clue.

Somewhat related, Scott Alexander has a great long-form blog post on Wage Stagnation, different productivity & inflation measures. Still digesting it, worth a read.


Dude puts economists to shame.

Scott's great, but MR's comment section is punchier. Like Tarantino vs. C-Span

Re: "In the post-recession period underemployment has replaced unemployment as the main indicator of labor market slack."

Says an academic, 30 years late to the underemployment party.

It's almost as if employers figured out that leaving people fully unemployed, on the dole, in the stats, standing in bread lines as it were, made for bad optics and angry masses.

BUT, rendering huge swaths of people partially employed, just above the survival level (with the help of payday loans), never sure how long their job will last and how many hours they will get, that made these people dissappear.

And thousands of good new jobs destroy a community!

Yes, some people seem to think that what I described above qualifies as "good"


It is so annoying that this refutation of markets is repeated so often. Underemployment means either their is an oversupply of workers with a skill or the workers have credentials but not the skills for some job title.

Outside government and academia, employment is based on the ability to do something useful for the employer, not magic pieces of parchment. Yes, highly bureaucratic, and inefficient, large corporations do trend toward paper credentials for "management" but at some level they have to focus on skills rather than seat-time.

A large "underemployment" problem is more likely the result of inefficient overproduction of college graduates in a market that needs more practical, less academic, skills. The intrinsic-valued Liberal Arts degree is, by definition, unlikely to be directly applicable to later employment resulting in the misleading label "underemployment".

The intrinsic-valued Liberal Arts degree is, by definition, unlikely to be directly applicable to later employment resulting in the misleading label "underemployment".


You want fries with that?

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