In a recent post I discussed the
potential for long-term, structural unemployment, the possibility that some of what we are seeing in the unemployment picture will not be
resolved by an economic upturn. The focus of the post was on how
robots and computers are increasingly replacing labor as a factor of
production. One question, though, is why should we see this strongly manifest
in the labor market now. The move toward robotics might be
inexorable, but it also is gradual. So certainly it should not be the source of sky
rocketing unemployment in the wake of the 2008 crisis. This gets to
other effects of the crisis on the labor market.
The Great Labor Reset
The most opportune time to do a
structural home renovation is after a fire has gutted the house. The
crisis of 2008 did the same for the labor market. As much as anything
else, the 2008 crisis provided the cover for making changes in the
labor market that would have been fraught with institutional
push-back in a normal environment. There are institutional barriers
to outsourcing labor, reducing benefits and wages, and moving full
time workers to part time, even if a purely neoclassical analysis
suggests these changes can be absorbed by the supply and demand
equations of the labor market. So some of what we have seen in terms
of shifts in the labor market is not simply a reduction in hiring,
but a change in the labor-employer contract that would not have sat
well outside of the fog of war coming from the 2008 crisis.
Labor Laundering
One change in the labor market is what
I call labor laundering. Many employers need to protect good will
with their customers and cannot be seen as bullying workers. So they
outsource their labor pool to contractors, most commonly operating in
other countries, but also domestically through what are basically
next-generation temp agencies. For example, warehouse
packing is the sweatshop job of our time. The article “I
Was a Warehouse Slave”
gives a day-in-the-life view of these workers, effectively paid for
piece-work, without benefits, with one-day notice job security, in
physically grueling conditions. More than 20 percent of the American
workforce is now “contingent” – temporary workers, as well as
contractors and independent consultants.
Labor
laundering only works if the workers are far removed from the
customers, so that the consumers don't see how the sausage is being
made. Which means it works better for remote, on-line retailing than
when the workers are in the neighborhood store. Thus labor laundering
gives the on-line retailers an advantage as far as labor is
concerned.
Everything
else equal, it is more efficient to do production domestically rather
than outsourcing it abroad. The use of robots and the rising costs of
labor in the principle outsourcing countries are both eliminating the
advantages of outsourced labor. Labor laundering is meeting these
rising labor costs from the other directions, reducing the costs of
domestic labor. So although manufacturing is moving back to our
shores, for labor and employment the picture is not as pretty as it
might seems.
Self-Sourcing
In my recent post on this topic I
focused on robots taking over many labor-intensive tasks, some of
which were considered beyond the reach of such automation. When there
is labor involved, often the role of the robot is taken on by the
consumer; we are outsourcing to ourselves. It is not very subtle
stuff: self-checkout, self-ticketing, managing our own calendars,
correspondence and travel arrangements. On net, even if the total
time required for these tasks ends up being greater than in the days
of cashiers, ticket agents, and secretaries, the cost to the producer
is reduced because the labor is us. The same is true for a lot of our
entertainment; Facebook and web surfing being good examples. The
nature of this consumption leads us to do a lot of the work.
Workers of the World – Goodnight!
What do all of these unemployed and
underemployed going to do?
I don't have a ready answer to this,
but I have toyed with a thought experiment, one that – as most
thought experiments do – takes things to the extreme: What if an
alien race came to earth and said that if we allowed them to live in
the desert sand of the Sahara and Gobi and left them alone, they
would generally (if times were good) provide us with most of our
consumption needs – food, housing, energy, transportation. What if
they told us they would gave us all experience machines to keep us
happy, (I wrote about this a while ago; it is aconcept most closely
tied to the late 20th century philosopher Robert Nozick.
Think of taking aspects of our virtual world a few iterations
further, so that we can plug games, realty shows and other aspects of
our non-work lives into our brains so that we are pretty much living
a world of our own design), so that our demand for consumption was
readily sated. What is the social contract that would be drawn up
between us and the aliens? I might try to follow up on this question
in a later post.
"A Demon Of Our Own Design"
"The End Of Theory"
