Job Displacement Blues

Warehouse robots at Amazon

 

While artificial intelligence will displace as many white-collar jobs as it decimates the remaining blue-collar workforce, the here and now of job displacement has been felt primarily by the latter. The first big slam, now pretty much “over” as the big issue – except in Trumpland where the President has declared trade wars against the “evils of globalization” – is foreign cheap labor and immigration taking away U.S. jobs. It was the story of the 1990s up to about 2010, when that “cheap labor” got paid a lot better – particularly in China – and since, robotic automation has pretty much eclipsed “cheap labor” on an accelerating basis.

There is a smart robot, developed in part with DARPA money, that can manufacture a line of denim blue jeans, many fits and sizes, for less than the cheapest sweatshop in Bangladesh. While we are seeing sophisticated analytics, financial planning, legal drafting and research and even some basic surgery replaced by smart “machines,” so far the big hit in job displacement has slammed blue-collar workers in ways far beyond the decimation that “globalization and outsourcing” imposed in that 1990s-2010 era.

Driven by the Great Recession, the emphasis for American private business was the eradication of collective bargaining (only 6.7% of the private workforce is unionized today) with concomitant wage suppression, the shift from labor intensive to capital intensive resource extraction and manufacturing, all based on automation driven by self-learning artificially intelligence robots and data processing systems. As oil prices plunged, drill rig workers were rapidly replaced by automatic equipment in droves. It was the only way the oil business could continue. Layoffs were massive.

The coal industry was already fading, as global demand for coal was no longer expanding (dirty coal was no one’s first choice for energy anymore), and despite Trump’s pledges to the contrary, even without life-giving clean air regulations, coal mines continued to shut down for lack of demand.

Long shoved out of the labor market, those blue-collar workers who were globalized out of their jobs a decade and a half ago, their plight dramatically ignored by the incumbent administrations of both parties, were still “excluded” when their populist cry elected Donald Trump. That the globalization was no longer that relevant fell on their deaf ears; that was why they were ousted “back then,” and they simply assumed that was why there were very few blue-collar jobs left that paid well. They just didn’t get that automation, not globalization, was the bugaboo now.

That blue-collar middle class is almost gone. There are a still few jobs at the top of the blue-collar heap (longshoremen operating those big cranes make serious six figure incomes), and while there is a shortage of truck drivers who can do well, the time of driverless trucks is on the near-term horizon.

But there are other jobs, less obvious and lower down the blue-collar economic ladder that are beginning to fade and feeling the pain as well (as to available work or relative pay scales). The September 17^th Washington Post provides these six examples: “[In the entertainment industry, online] piracy laid waste to the music industry. We can blame it for the ‘lion’s share’ of the revenue lost during the era we examined, according to a 2017 Journal of Economic Perspectives paper from University of Minnesota economist Joel Waldfogel, author of ‘Digital Renaissance: What Data and Economics Tell Us about the Future of Popular Culture.’

“But there’s another, less apocalyptic reason the digital revolution has slashed music and movie wages…. Digitization made music and movies far cheaper to produce, distribute and promote, Waldfogel wrote. It broke the stranglehold of movie studios and music labels, which were once the only institutions that could afford the $1-million cost of bringing an album to market in 2010 or the $106 million it cost to produce a major film in 2007. As a result, he said, ‘the number of new movies and sound recordings has skyrocketed in the past few years.’ Most of those new products are coming from independent labels and smaller studios.

“At the same time, employment in the music and motion-picture industries has expanded. The new jobs pay less than when gatekeepers ruled the earth, but Waldfogel found that as a whole, the industry is producing an ever-increasing number of well-reviewed movies and albums.

“The major labels and studios took a hit, Waldfogel wrote, but because ‘consumers are now awash in products that they find desirable,’ it appears that ‘digitization has ushered in a golden age of music, movies, books, and television programming.’

“[When it comes to repair work], of all repair workers, those who fix, install and maintain refrigerators, chain saws, televisions and assorted household goods have seen their wages fall the quickest… The internet is a likely culprit, but the disruption is different from how technology transformed the music and warehouse industries. The Wall Street Journal reported in 2015 that repair workers were being squeezed by frugal customers and the rise of a YouTube-enabled ‘do-it-yourself’ repair ethic. The trend appears to be continuing: Home Depot’s latest earnings hit an all-time high.

“A growing number of customers are watching how-to repair videos and ordering parts online. If they can’t fix it themselves, they’re more likely to buy one of today’s relatively cheap new appliances rather than call the repair shop. Appliance prices have fallen 21% since 1992, even as consumer prices have risen 62.3% overall, Commerce Department figures show.

“‘[As for the auto industry], long a bedrock of middle-class U.S. jobs, has been hit by two distinct forces: foreign competition and the internet, which dragged down pay across the industry… Companies such as Advance Auto Parts have struggled to keep up with the low prices and convenience of online retailers such as Amazon.com. Advance’s stock peaked in 2015 and has not topped that since as investors worry that brick-and-mortar stores are in long-term decline. Prices for car parts have fallen since the end of 2014, government data show.

“‘I’ve been working at AutoZone for eight years, and I still make just $30,000 a year,’ said Jason Clawson, a 34-year-old from Ohio who recently completed weekend classes to become a truck driver, a job he thinks will double his pay… Used-car prices are at a 13-year high, Edmunds.com says, and sales remain strong, but shoppers who used to go to a car lot are increasingly buying online or at an auction, hurting the commissions used-car dealers once enjoyed.

“[Warehouse jobs are growing number but dropping in pay.] Employment at warehouses has soared, rising from 515,000 in 2000 to 1,032,000 today. Warehouses have become crucial links in the online retail and global supply chains that ship parts from all over the globe to offices and homes. Yet annual pay for warehouse workers (excluding managers) has fallen from a peak of about $42,500 in 2000 to about $38,000 now, adjusted for inflation.

“[Diane] Swonk, the Grant Thornton economist, says it’s the result of a highly paid industrial sector transforming into a business dominated by lower-paying retail firms. The large decline in union jobs and rise of temporary workers have also lowered pay. Companies see workers as easy to replace, she says, so there is little reason to raise pay to keep them…

“[Food manufacturing is taking a hit too.] Food manufacturing is a different industry than it was 20 years ago. There’s a lot more meat involved. And because slaughterhouses tend to pay less than other food work, overall pay has fallen… Jobs in cheese factories and in fruit-and-vegetable canneries or packing plants still pay relatively well. But there are fewer of them. Lower-paying jobs in slaughterhouses, meatpacking plants and, to a lesser extent, bakeries have taken their place.

“Author Lynn Waltz wrote in the newsletter PostEverything this year that slaughterhouse pay has fallen as major manufacturers have moved jobs from urban union strongholds to cheaper rural areas in less union-friendly states. Exploitation of workers in the U.S. illegally has also kept wages down, Waltz said…

“[For lumber-related jobs, the] rise and fall of sawyers and other wood-product factory workers tracks closely to the U.S. housing bubble and subsequent mortgage crisis…. Lumber mills bled jobs and slashed paychecks as the housing market collapsed. Wages are now beginning to recover, but there are far fewer woodworkers around to earn them… U.S. lumber-related industries have been hammered by the cheap Chinese imports that flooded into the United States from 1990 to 2007. Wood products and furniture were at the epicenter of the shock, suffering more than almost any other industries, according to MIT economist David Autor and his collaborators.”

America cannot ignore the plight of workers whose time has passed. Trump has exacerbated the problem by putting the blame on globalization and immigration, where it used to be, and not on automation, where it is now. You can almost layer a map of maximum oxycontin and fentanyl abuse on vast pockets of unemployed rust belt and resource extraction regions and see a match. Trump and his populist pledges cannot deliver what is long gone and not coming back. His trade wars might create a few, very few, old jobs, but the cost to jobs for the rest of us could become catastrophic.

Economic support. Retraining. Rethinking. New jobs created by the government itself or incented with a government push in healthcare, infrastructure, research, environmental technology and education are needed right now. Not tax cuts for the rich with virtually no benefits for the rest of us. Jobs to rebuild and grow America and reengage those otherwise left behind.

I’m Peter Dekom, and that doesn’t mean that in the meantime the rest of the nation shouldn’t care, because if we do not take care of our own… and soon… we will all enjoy the great unraveling of the United States as a viable nation… together.