Free Trade Not Responsible For Job Loss

Many who blame job loss to foreign imports do not understand the massive job changes brought about by technology. Robots and machines have replaced far more U.S. workers than Mexicans or Chinese. Today, U.S. factories produce twice as much stuff as they did in1984, but with one-third fewer workers. Manufacturing as a share of GDP is virtually unchanged from 1960.

This academic analysis re the impact to Canada of the the potential loss of free trade deals makes the point I've been making in on this website since 2008, "That manufacturing job loss is not due to offshore manufacturing but due to job theft by technology."

As i've argued on this site, the real problem re job loss is that no compensating downward adjustments in worker full-week hours been made 1) To let workers share in the benefits of technology, and 2) To maintain sufficient employment levels to insure adequate middle class consumption necessary for a viable economy.

A reader (business owner) responded to this item as follows---"Wayne D.-- So with one third less workers should they make a 13 hr work week and bring back the other 2/3rd of work force and pay them all good full time wages (typical 40 hour work week ) to work 13 hours /week. Serious question.

And so I responded---Without debating the figures you use Wayne, let me give you a serious answer...."The benefits of technology must be shared with workers through reduced work hours with sufficient compensating hires to keep up prior employment levels. 
Pay should be tied to increased productivity resulting from technology rather than hours worked. 
Presently all the benefits of technology are pocketed by employers, resulting in record profits (shown by record executive salaries, record stock market highs, record dividends, record levels of dead cash in corporate accounts, and an obscene concentration of wealth in the hands of a few). 
Presently, workers are paying all the costs of technology implementation through job losses with all short-term benefits accruing to employers. 
Every job loss leads to less consumption which will in the end result in a downward spiral of fewer jobs and less consumption with fewer and fewer people frequenting businesses like yours, Wayne, which will result in widespread bankruptcies as technology steals most jobs leaving few workers and little consumption in the economy. 
Both businesses and workers lose in the longer term through employer’s shortsighted greed. 
And by the way Wayne, the full full work week has not been reduced from 37.5 hours per week for the last 60 years. Now that we have computerized technology to do most of the work, don't you think it's about time we adjusted work week hours?

A Model For Wealth Sharing When Few Work?

Is this the way the wealth of our society will be shared to insure consumption and the lifeblood of our economy when technology steals most of our jobs and few people work?  Mincome Program, Dauphine Manitoba, cancelled by Conservatives on change of government 35 years ago!

Don't blame American job losses on China!

Trump, and many workers, should blame technology, not trade, for our job losses - a point I've been making on this site since 2008.

And this displacement of workers by technology is creating record returns for companies and investors and giant bonuses and salaries for the executive classes.

Without change, this practice will continue robbing the economy of consumption leading to revolution by working classes, increasing crime, and failure of our economy as companies go bankrupt through loss of sales because the population has few consumption dollars for anything beyond basic needs.

The early signs of revolution?  The "Occupy" Movement of a few years ago and now the surprising political support for Bernie Sanders and Donald Trump!

Voters are fed up with the greed, corruption, and concentration of wealth in the hands of Corporate America and they demand change!  

Workers should share in the benefits of technology through decreasing work hours to keep up employment with ever-increasing wages.   

Because of these two historical adjustments, the pre-industrial revolution world has progressed from a 100 hour work week for every man, woman, and child to the present 37.5 hr work week with the highest standard of living in recorded history---but that work week has not changed for the last 60 years despite all of the computerized technology that is stealing the jobs.

Trump should blame technology, not trade, for factory job losses

Despite Trump’s and Clinton’s claims, automation has eliminated much lower-skilled work while productivity soars

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THIS POST ON FACEBOOK LED TO THE FOLLOWING INTERESTING EXCHANGE OF QUERIES AND RESPONSES!

Don't blame American job losses on China!

THE ITEM ABOVE POSTED ON FACEBOOK LED TO THE FOLOWING INTERCHANGE OF QUERIES AND ANSWERS

R.K.----And what of the impact of moving jobs to Mexico, China, and other low-wage countries, Bill? Technology is a factor for sure, but it's not the whole story.

MY RESPONSE--- R.K. --Manufacturing worldwide is being taken over by machines. Undoubtedly many of those machines are manufactured in the west and sold as part of our export trade---machines for trinkets. We are being left with non-transferable service jobs that are also being replaced by technology---eg BMO $1B 2nd qtr profit that was reduced due to more technology purchases that will replace more than the 1850 workers currently announced....but dividends are increasing as will executive salaries and bonuses....only the "controllers" of the economy are benefitting from the technology---not the workers or the economy. I have written extensively on this topic since 2008 on this site.

MY FURTHER RESPONSE--- R.K.---TImes are always changing and we'll always have some luddites resistant to change. There is no question that changing ideas about work and "earnings" have to accompany the changing realities and about how we look at work, what is fair and necessary in a society to ensure consumption to keep a vibrant economy afloat, and how to fairly share the fruits of the economy when few are working.  Our practise now is to deprecate those who are given survival money for not working (welfare---a bad word!)---but what do you call it when machines do virtually all work and few people work? This will be the future norm---few workers and how to fairly provide most of society with a living stipend to provide everyone with a decent living standard and sufficient consumption to keep the economy alive. This may happen in the next 20-30 years and is a pressing problem.  In the meantime, we should get used to the idea of job sharing through a decrease in working hours, with pay based on machine productivity rather than on human hours of labour, as we transition to the future of virtually no work....a day when machines read vital signs over your smartphone and take over medicine, a day when machines build machines and buildings (3D printing!), a day of all automated vehicles, a day when machines generate all computer code, a day when voice commands direct machines to deliver your every whim and fancy----a day of 100% leisure for all when the biggest problem for humankind will be figuring out how to productively, stimulatingly, and interestingly utilize our time---maybe a major problem facing humanity---but a problem successfully met in many undeveloped regions where art, music, and social interaction flourishes....Africa, Caribbean Islands, and pockets of the American unemployed particularly among the inner-city black populations who have been cultural leaders in the development of music, dance, language, fashion, sport, etc.

R.K. ----What's your solution, Bill?

MY RESPONSE--- Solution? As stated above----up until about 60 years ago, we've been following a consistent post industrial revolution pattern--decreasing work hours and increasing pay commensurate with increasing productivity!...With the accelerated takeover of work by technology and robotics, we'll have to once again resume a cut in work week hours while maintaining a growing fair share of the fruits of our economy, with pay based on productivity of our machines rather than human work hours, as we transition to days of little human work----coming in the next 20-30 years. We have to start envisioning a new world which will have new rules than the world we've known. Those who can't/won't accept the changes will be left behind. People have to look ahead and not behind. I remember giving a lecture to Chinese students in 1998 criticizing China for its overriding worship of China's glorious history and accomplishments. I summarized with the analogy that any person (country) that walks forward looking backward over their shoulder is bound to walk into a brick wall. Old problems, old questions, old attudes,  old answers, old ideas, old skills, old insights, old habits, and old ways of doing things while looking at the new world in old ways just won't work for the new problems, new questions, and new challenges we will face in our rapidly changing world where...knowledge is advancing exponentially and doubling in rapidly compressing periods of time. As Alice in Wonderland said, "I have to run as fast as I can just to keep up!

Interestingly, when machines take over all work, machine labour will cost the same everywhere and most production will migrate back to consumming countries or resouce-producing countries as transportation of goods and materials will become the determining issue. 

 R.K.---(drum roll please...) I agree with you, Bill. :)

R.K.---Not sure it will be as short a time frame as 20-30 years, but the world industrialized economies are evolving into a scenario where the masses will find it increasingly difficult to find meaningful, full time work based on the changes you elaborated on above.

My question to some free-market capitalists in an online debate group I participate in was, "What will happen to the tax rate on the affluent citizens if the range of traditional middle-class industrial and commercial worker jobs keep getting replaced by robotics and out-sourcing to low-wage, Third World countries? Who will pay all the tax revenue needed by the current-style, size and scope of Western Democracies?"

No one ventured a solid, solutions-based answer.

When I asked about a UBI (Universal Basic Income)? No answer besides, "Where would the money come from?"

What's your answer Bill?

MY RESPONSE---Ah ha, the tax rate!  Let's be fair!  In a utopian sharing world, everyone would realize that we are all on this boat together and there is no room for anyone whose insatiable greed wants to sink us all.  Those who benefit more from the society should pay more---basic!

In these days of soaring executive salaries, soaring stock markets as a result of record dividends payouts, burgeoning corporate bank accounts of dead cash, and  the resulting record concentration of wealth in the hands of a few, all facilitated by a race to the bottom in corporate tax rates granted by right wing governments, I have no sympathy for corporations or the wealthy who continually call for tax breaks, only as likely to hide their surplus cash in offshore tax dodges.

In the case of taxes required to sustain governments, i suspect they'd be fewer in the idyllic and inclusive "new world" that brought everyone fairly into the economy---with I'd suspect, less war, less crime, less jails, and less poverty, erasing the costliest functions of governments and reducing the size and massive costs of our bureaucracy to fund and carry out these programs.

But, carrying on the "boat analogy," there is a need for leadership on that boat by a captain and his lieutenants.  But, no matter how smart or skillful the captain, he is unlikely to save a leaking boat.  Boat safety, in large measure, rests on factors external to the captain---just as in an economy where profitability is often more a factor of world and national economic climate, which are factors external to company leadership.

The captain has a grave responsibility as best as he can, for looking after all others on the boat and thus may deserve a finer bed than the rest of us....but 10 beds or 50 beds on this crowded ship---NO WAY!  No one on the ship should be thrown overboard because the captain wants more room.  Similarly, it is unethical for self-interested and greedy CEO's to throw workers overboard to cut costs to justify their own increased salary and bonuses.  It is a privilege to run a business in this country and that comes with costs---taxes and social responsibility!

In point of fact, executive pay levels continue to climb, no matter the financial or business performance of the company.  CEO's are often awarded healthy increases despite slumping sales, profits, and stock market performance, even while laying off hundreds or thousands of workers. 

I have little concern for tax rates on the affluent.  According to Forbes Magazine, the 85 wealthiest in the world have as much wealth as the 3.5 million poorest, and in the USA, the wealthiest 1% captured 96% of all posi-financial crisis growth since 2009, while the bottom 90% became poorer.

According to Oxfam's "Working For The Few" Report, wealth controls government policymaking causing the rules to bend in favor of the rich, to the detriment of everyone else.   In the report, Supreme Court Justice Louis Brandeis, is quoted with the observation ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’

In the above illustration, I've demonstrated that I believe in a variance of economic rewards within ethical and reasonable limits.  The question is what is a reasonable and fair variance...and actual practice varies widely around the world.   While the Swiss will vote on capping CEO salaries at 12 times the pay of their lowest paid workers (which is a huge incentive for them to raise these minimum wages), the 2012 average of S&P 500 US companies was $12.3M, or 354 times the salary of the average worker (or in perspective, the CEO makes his worker's annual salary in 6 hours), and in Japan, the large cap CEO makes 67 times the salary of his average worker who makes approximately the same as his counterpart USA worker.   It is interesting to compare how many hours top paid Canadian CEO's have to work to earn your annual income.


In the case of the giant wads of taxpayer cash provided to "save" GM, this appears to be the corporation calling "wolf" to get cash to add to their bottom line.  The $12B didn't produce one job, create one unit of increased productivity, create one new sale, or save jobs in Canada.  It showed in the financial statement "bottom line" as increased profitability supporting executive bonuses and salary increases and increased dividends for the investor class. The corporate world is always complaining of high costs and high taxes yet executive salaries and bonuses, the soaring stock market, and burgeoning corporate bank accounts are all at record highs so things cannot be too bleak for the corporate world....tag days need not be arranged for them anytime soon.  And Corporate tax rates, on monies not hidden offshore, have fallen to record lows and far smaller marginal tax rates than you and I footing the bills. Corporations operating here have to be held far more responsible for their ethics, honesty, and social responsibility---and paying their fair share of taxes.

10 Questions on the Future of Work

This futurist/philosopher/author (Don't Throw Stones At The Google Bus) was on the Steve Paikin TVO program (The Agenda) recently discussing the future of work...interestingly he discusses 2 key issues that I often comment on in this blog---1) the need to ration work to make sure there is enough to go around as automation "steals" most of the jobs which I've expressed as the need to transition to a world of little work through a phasing in of reduced hours in a full work week to keep up employment, and 2) the problem of how to fairly distribute the fruits of the economy in the future when machines do all the work

                   

What Jobs Are You Training For Now

Change is the only constant in the world...The fate of all present industries and ALL present jobs, and the way of doing virtually all things in the world, will be eliminated in short order.

As change accelerates, all industries and all knowledge will have a shortened life.

Think of this!  Consider the following example of an industry giant’s demise and apply the lesson to everything you know, do, and learn.

In 1998, Kodak had 170,000 employees and sold 85% of all photo paper worldwide.

Within just a few years, their business model disappeared and they went bankrupt.

What happened to Kodak will happen in a lot of industries in the next 10 year - and most people won't see it coming.

Did you think in 1968, for example, that in 3 short years, you’d never take pictures on paper film again?.

In the future, real nostalia will be derived from remembering the artifacts of the last few years. Think I'll go hug my few antique typewriters from the 1890's as I think of the disappearance of everything I know in this accelerating world!

MORE ON THIS FROM A FUTURIST!

What happened to Kodak will happen in a lot of industries in the next 10 years.  Digital cameras were invented with poor picture resolution in 1975, but as with all exponential technologies, development quickly followed Moore's law, and picture resolution became  superior in a few short years. The same will now happen with Artificial Intelligence, health, autonomous and electric cars, education, 3D printing, agriculture and jobs. Welcome to the 4th Industrial Revolution. Welcome to the Exponential Age.

Software will disrupt most traditional industries in the next 5-10 years.

Uber is just a software tool, they don't own any cars, and are now the biggest taxi company in the world. Airbnb is now the biggest hotel company in the world, although they don't own any properties.

Artificial Intelligence: Computers become exponentially better in understanding the world. This year, a computer beat the best Go player in the world, 10 years earlier than expected. In the US, young lawyers already don't get jobs. Because of IBM Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans. So if you study law, stop immediately. There will be 90% less lawyers in the future, only specialists will remain.

Watson already helps nurses in diagnosing cancer, 4 time more accurate than human nurses. Facebook now has a pattern recognition software that can recognize faces better than humans. In 2030, computers will become more intelligent than humans.

Autonomous cars: In 2018 the first self-driving cars will appear for the public. Around 2020, the complete industry will start to be disrupted. You don't want to own a car anymore. You will call a car with your phone, it will show up at your location and drive you to your destination. You will not need to park it, you only pay for the driven distance and can be productive while driving. Our kids will never get a driver's licence and will never own a car. It will change the cities, because we will need 90-95% less cars for that. We can transform former parking space into parks. 1,2 million people die each year in car accidents worldwide. We now have one accident every 100,000km, with autonomous driving that will drop to one accident in 10 million km. That will save a million lives each year.

Most car companies might become bankrupt. Traditional car companies try the evolutionary approach and just build a better car, while tech companies (Tesla, Apple, Google) will do the revolutionary approach and build a computer on wheels. The traditional car companes are completely terrified of Tesla.

Insurance companies will have massive trouble because without accidents, the insurance will become 100x cheaper. Their car insurance business model will disappear.

Real estate will change. Because if you can work at home or while you commute, people will move further away to live in a more beautiful neighborhood.

Electric cars will become mainstream until 2020. Cities will be less noisy because all cars will run on electric. Electricity will become incredibly cheap and clean: Solar production has been on an exponential curve for 30 years, but you can only now see the impact. Last year, more solar energy was installed worldwide than fossil. The price for solar will drop so much that all coal companies will be out of business by 2025.

With cheap electricity comes cheap and abundant water. Desalination now only needs 2kWh per cubic meter. We don't have scarce water in most places, we only have scarce drinking water. Imagine what will be possible if anyone can have as much clean water as he wants, for nearly no cost.

Health: The Tricorder X price will be announced this year. There will be companies who will build a medical device (called the "Tricorder" from Star Trek) that works with your phone, which takes your retina scan, you blood sample and you breath into it. It then analyses 54 biomarkers that will identify nearly any disease. It will be cheap, so in a few years everyone on this planet will have access to world class medicine, nearly for free.

3D printing: The price of the cheapest 3D printer will come down from 18,000$ to 400$ within 10 years. In the same time, it will become 100 times faster.  All major shoe companies will start printing 3D shoes. Spare airplane parts are already being 3D printed in remote airports. The space station now has a printer that eliminates the need for the large amount of spare parts they used to have in the past.

At the end of this year, new smart phones will have 3D scanning possibilities. You can then 3D scan your feet and print your perfect shoe at home. In China, they already 3D printed a complete 6-storey office building. By 2027, 10% of everything that's being produced will be 3D printed.

Business opportunities: If you think of a niche you want to go in, ask yourself: "in the future, do you think we will have that?" and if the answer is yes, how can you make that happen sooner? If it doesn't work with your phone, forget the idea. And any idea designed for success in the 20th century is doomed in to failure in the 21st century.

Work: 70-80% of jobs will disappear in the next 20 years. There will be a lot of new jobs, but it is not clear if there will be enough new jobs in such a small time.

Agriculture: There will be a 100$ agricultural robot in the future. Farmers in 3rd world countries can then become managers of their field instead of working all days on their fields. Aeroponics will need much less water. The first petri dish produced veal is now available and will be cheaper than cow produced veal in 2018. Right now, 30% of all agricultural surfaces is used for cows. Imagine if we don't need that space anymore. There are several startups who will bring insect protein to the market shortly. It contains more protein than meat. It will be labeled as "alternative protein source" (because most people still reject the idea of eating insects).

There is an app called "moodies" which can already tell in which mood you are. Until 2020 there will be apps that can tell by your facial expressions if you are lying. Imagine a political debate where it's being displayed when they are telling the truth and when not.

Bitcoin will become mainstream this year and might even become the default reserve currency.

Longevity: Right now, the average life span increases by 3 months per year. Four years ago, the life span used to be 79 years, now it's 80 years. The increase itself is increasing and by 2036, there will be more that one year increase per year. So we all might live for a long long time, probably way more than 100.

Education: The cheapest smart phones are already at 10$ in Africa and Asia. By 2020, 70% of all humans will own a smart phone. That means, everyone will have the same access to world class education. Every child will be able to access world class instruction for everything learned in schools worldwide.

No part of the human condition will remain untouched!