We’re going to be hearing a lot about jobs in the coming days. We should have been hearing about it more, a whole lot more, but there have been too many fires to put out. And the bad news is they are not out. They are not contained.
(I intend this metaphorically, but at this precise moment, here in Texas, there are literally too many fires to put out).
I have already put the new Tom Freidman and Michael Mandelbaum book, That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back, into my schedule for the First Friday Book Synopsis. It is about a lot, but especially about “where will the jobs be?” — beginning with: “where have the jobs gone?” (Listen to in interview with Freidman, just under 8 minutes, with transcript provided, here.)
And just last night I presented my synopsis of The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, And Will (Eventually) Feel Better by Tyler Cowen. A short, brilliant book, Cowen asserts that:
All of these problems have a single little-noticed root cause: We have been living off low-hanging fruit for at least three hundred years. We have built social and economic institutions on the expectation of a lot of low-hanging fruit, but that fruit is mostly gone.
Low-hanging fruit since at least the seventeenth century: free land, lots of immigrant labor, powerful new technologies… Yet during the last forty years, that low-hanging fruit started disappearing, and we started pretending it was still there. We have failed to recognize that we are at a technological plateau and the trees are more bare than we would like to think.
That’s it. That is what has gone wrong. (emphasis added).
In other words, we’ve been riding off the past…
And in the book, he deals with the “problem” of the internet – a brilliant “invention,” yet one that may not ever create enough jobs. Some more highlights from the book:
The internet is wonderful, but it’s not saving the revenue-generating sector of the economy.
More and more, “production’ – that word my fellow economists have been using for generations – has become interior to the human mind rather than set on a factory floor… In other words, the new low-hanging fruit is in our minds and in our laptops and not so much in the revenue-generating sector of the economy.
…the big technological gains are coming in revenue-deficient sectors. “To put it simply, only after 500 million members, and in very recent times, did the debate stop over whether Facebook can make a lot of money.”
• the arrival of the automobile = millions of jobs
• Facebook = users do the work; a relative miniscule number of jobs created
Online Industry Employment Levels
Google – 20,000
Facebook – 1,700+
eBay – 16,400
Twitter – 300
At the gathering last night, where I presented my synopsis of The Great Stagnation, a very sharp, very successful gentleman, walked up afterwords, and said this (paraphrased, from memory): “I have looked and looked at this, and I simply do not see an answer.” Of all the issues I have written about on our blog through our few brief years, the question that has kept me up at night more often than any other is this: where will the jobs be?
Here’s Friedman’s answer (from the interview):
There’s kind of a hankering today, when is Ford going to put in that 50,000-worker factory in my city again? When is Intel going to come, Paul Otellini? Folks, it’s not going to happen because those factories now are all incredibly roboticized(ph), automated, and they are capital-intensive, not labor-intensive. We’re not going to have a 50,000-person factory in your town. What we need are 50,000 people, a thousand of whom are starting jobs for 10 people, 50 of whom for 100, 100 of whom for 30 – that everybody needs to be starting something.
Yes, of course, he is right. We need to start a lot, a whole lot, of new start-ups… But, look at Facebook – a pretty successful “start-up.” And, look at how many people Facebook employs. Not.that.many!
And, besides, it takes a special kind of person to start something that is successful enough to employ others over a long haul. This is not all that easy!
But, we may have no other choice. Because, where else will the jobs be?
That question has not gone away – it only keeps getting louder, more urgent…
If you read the news, if you pay attention to the changes in society, if you keep up with what’s happening, you know that we really do have a few very different worlds out there – maybe more pronounced than ever before.
I’m speaking especially about the world of jobs, and the search for jobs. For example, for the college graduates, especially the new college graduates, the news is a little on the grim side. That Bachelor’s Degree, which feels so valuable because of all the work that went into earning it, is simply not quite enough. Not anymore. In the article The Master’s as the New Bachelor’s by Laura Pappano (N Y Times), here are the warnings:
Browse professional job listings and it’s “bachelor’s required, master’s preferred.”
Colleges are turning out more graduates than the market can bear, and a master’s is essential for job seekers to stand out — that, or a diploma from an elite undergraduate college, says Richard K. Vedder, professor of economics at Ohio University and director of the Center for College Affordability and Productivity.
And the article begins this way:
William Klein’s story may sound familiar to his fellow graduates. After earning his bachelor’s in history from the College at Brockport, he found himself living in his parents’ Buffalo home, working the same $7.25-an-hour waiter job he had in high school.
The article is worth reading, as she delineates the specific “new” functions/purposes of a modern Master’s Degree.
But, at the other end of the spectrum, we find this: the national high school graduation rate is right at 71%. That means that for every 100 people hitting age 19 or so, 29 of them have not even graduated from high school. (And most of these never will graduate from high school, and will certainly not graduate form college).
So, to put this in perspective:
• the people who used to get the jobs that were available with a Bachelor’s Degree now need a Master’s Degree.
• thus, the people with a Bachelor’s Degree now work at jobs that used to be filled by people who only graduated (or did not even graduate) from high school.
• Thus, the people who only graduated from high school (or did not even graduate from high school) will work…where?
There are many who say “jobs, jobs, jobs; this should be the concern of our political leaders.” Yes, it should. But, the question that I worry about is this: where will people work — especially those who have dropped out of high school?
Here’s a title that I might, or might not, read. I’m just not sure.
The book is Eat People And Other Unapologetic Rules for Game-Changing Entrepreneurs, and Andy Kessler is trying to make sense of this current employment climate even as he argues for bold entrepreneurship. On the Amazon page, we read this:
The era of easy money and easy jobs is officially over. Today, we’re all entrepreneurs, and the tides of change threaten to capsize anyone who plays it safe.
And in his op-ed piece in the Wall Street Journal, Is Your Job an Endangered Species? Technology is eating jobs—and not just obvious ones like toll takers and phone operators. Lawyers and doctors are at risk as well, Kessler summarizes his main points.
Technology is eating jobs—and not just toll takers.
Tellers, phone operators, stock brokers, stock traders: These jobs are nearly extinct. Since 2007, the New York Stock Exchange has eliminated 1,000 jobs. And when was the last time you spoke to a travel agent? Nearly all of them have been displaced by technology and the Web. Librarians can’t find 36,000 results in 0.14 seconds, as Google can. And a snappily dressed postal worker can’t instantly deliver a 140-character tweet from a plane at 36,000 feet.
So which jobs will be destroyed next? Figure that out and you’ll solve the puzzle of where new jobs will appear.
Forget blue-collar and white- collar. There are two types of workers in our economy: creators and servers. Creators are the ones driving productivity—writing code, designing chips, creating drugs, running search engines. Servers, on the other hand, service these creators (and other servers) by building homes, providing food, offering legal advice, and working at the Department of Motor Vehicles. Many servers will be replaced by machines, by computers and by changes in how business operates. It’s no coincidence that Google announced it plans to hire 6,000 workers in 2011.
I think I agree with his accusation labeling technology as the culprit regarding the loss of many jobs. My complaint is that he somehow thinks less regulation is the answer to creating more jobs. Maybe he is right – but what I suspect is something else. We simply don’t know where the future kinds of jobs are going to come from. And since we don’t know, we need some-place/some-one to blame for the loss of so very many jobs.
I, for one, don’t believe that the blame should be placed at the feet of regulation, or government intrusion. Yes, place plenty of the blame on technology… too much that has been done by human beings, in product making and process systems, can now be done, is being done, or soon will be done by some form of technological advance. The number of people needed to do what used to be done by many, many, many more people will keep dwindling.
And then (the question rises again), where will the jobs be?
If you have read my posts over the last few months, you know that I am concerned about this question maybe more than any and all others: Where will the jobs be?
There seems to be no good answer to this question. For the “blue collar” workers, those jobs are simply disappearing – literally disappearing. Technology plus outsourcing plus many economic factors have created the perfect storm of bad news for this category of worker.
But the evidence is growing that even for the best educated, the situation is looking gloomy. For example, a recent report shows that finance jobs declined by 262,000 in 2010. But the article worth reading carefully is the one most e-mailed this morning from the New York Times: Is Law School a Losing Game? by David Segal. Basically, it says that there are too many law school graduates looking for too few jobs.
And in the article is a hint that the Law Schools themselves (you know – schools that supposedly uphold the highest ethical standards) “fudge” their numbers to achieve or maintain high rankings in the annual U. S. News and World Report Law School rankings. One trick: they find ways for their graduates to “work,” while paying them themselves in some form of “placement” or “make-work” jobs. Because, if they do not demonstate that their graudates have work, then their rankings go down.
Here are a few paragraphs from the article:
(speaking of a graduate who cannot find work) He spent it on a law degree. And from every angle, this now looks like a catastrophic investment.
Well, every angle except one: the view from law schools. To judge from data that law schools collect, and which is published in the closely parsed U.S. News and World Report annual rankings, the prospects of young doctors of jurisprudence are downright rosy.
In reality, and based on every other source of information, Mr. Wallerstein and a generation of J.D.’s face the grimmest job market in decades. Since 2008, some 15,000 attorney and legal-staff jobs at large firms have vanished, according to a Northwestern Law study. Associates have been laid off, partners nudged out the door and recruitment programs have been scaled back or eliminated.
And with corporations scrutinizing their legal expenses as never before, more entry-level legal work is now outsourced to contract temporary employees, both in the United States and in countries like India. It’s common to hear lawyers fret about the sort of tectonic shift that crushed the domestic steel industry decades ago.
But improbably enough, law schools have concluded that life for newly minted grads is getting sweeter, at least by one crucial measure. In 1997, when U.S. News first published a statistic called “graduates known to be employed nine months after graduation,” law schools reported an average employment rate of 84 percent. In the most recent U.S. News rankings, 93 percent of grads were working — nearly a 10-point jump.
In the Wonderland of these statistics, a remarkable number of law school grads are not just busy — they are raking it in. Many schools, even those that have failed to break into the U.S. News top 40, state that the median starting salary of graduates in the private sector is $160,000. That seems highly unlikely, given that Harvard and Yale, at the top of the pile, list the exact same figure.
How do law schools depict a feast amid so much famine?
“Enron-type accounting standards have become the norm,” says William Henderson of Indiana University, one of many exasperated law professors who are asking the American Bar Association to overhaul the way law schools assess themselves. “Every time I look at this data, I feel dirty.”
It is an open secret, Professor Henderson and others say, that schools finesse survey information in dozens of ways. And the survey’s guidelines, which are established not by U.S. News but by the American Bar Association, in conjunction with an organization called the National Association for Law Placement, all but invite trimming.
A law grad, for instance, counts as “employed after nine months” even if he or she has a job that doesn’t require a law degree. Waiting tables at Applebee’s? You’re employed. Stocking aisles at Home Depot? You’re working, too.
Number-fudging games are endemic, professors and deans say, because the fortunes of law schools rise and fall on rankings, with reputations and huge sums of money hanging in the balance. You may think of law schools as training grounds for new lawyers, but that is just part of it.
They are also cash cows.
I find this practice (“fudging” the numbers) especially disturbing. But I think we should read this article as a snapshot of a bigger problem. If blue collar jobs, and jobs for law school graduates, and jobs for business school graduates, and jobs for…, are all in decline, where will the jobs be?
I have not yet found the book or the essay that gives me much, if any, comfort.
Let’s get more innovative. Let’s get more productive. Productivity – up, up, up! Let’s find a way for each worker to produce more. Let’s find a way for our company to produce more in fewer total work hours. This is good for the company, this is good for our stockholders. This is good, this is always good! And, let’s get even more productive next year, and the year after that, and the year after that…
This is very good — except when it is bad.
The good is obvious. People, companies, are more productive. This is bad because, the more productive each worker is, the fewer workers needed to do the same amount of work. Thus, no new jobs are created, because we can do more with fewer people.
Thus…the perpetual recession.
That is the key line in an article on Bloomberg.com, Bernanke Employment Goal Elusive as Profits Bring No Jobs by Craig Torres and Anthony Feld. And it gives more insight re. the ongoing dilemma of: where will the jobs be? Here are excerpts:
Not far from where Federal Reserve Chairman Ben S. Bernanke grew up, a revolution inside a Campbell Soup Co. plant explains why U.S. corporations are piling up profits — with little need to hire more people.
Workers such as “Big John” Filmore, a 28-year Campbell veteran, huddle every day with management in situation rooms before their shifts to find ways to save money for the company. Rising productivity is helping boost profit margins here in Maxton, North Carolina, where 858 workers turn out a billion meals a year, and at most of the 243 non-financial companies in the Standard & Poor’s 500 Index with rising profit margins.
Companies slashed 8.5 million jobs during the worst recession since the Great Depression, while also slowing capital investment plans. Campbell, the world’s largest soup maker, DuPont Co., the third-biggest U.S. chemical maker, and United Parcel Service Inc., the world’s largest package-delivery business, are asking workers to help save cash by working smarter with existing technology. A potential cost: Efficiency gains reduce the chances recession-casualty jobs will come back.
“When the productivity growth comes, then watch out because that is when companies start not needing so much labor,” Edmund Phelps, a Columbia University economist and Nobel laureate, said in an interview.
Some 142 non-financial companies in the S&P 500 had improvements in operating margins of three percentage points or more from the final three months of 2007, when the previous expansion peaked, compared with the most recent quarter, according to data compiled by Bloomberg as of yesterday.
Firing and Hiring
Yet data released Nov. 18 by the Bureau of Labor Statistics shows that while firing has slowed, hiring hasn’t picked up. Job gains from new or expanding businesses were 6.1 million in the first quarter, the lowest quarterly increase since the recession ended. Job losses from closing or shrinking businesses fell to 6.4 million, the smallest on BLS records going back to 1992.
“We’ve seen remarkable productivity gains in the last year or so in the U.S. economy,” Bernanke told Congress’s Joint Economic Committee on April 14. “We don’t anticipate productivity growth will continue at that rate going forward, but if it does, then that may reduce the number of workers that firms need to bring back in order to meet demand.”
Bernanke and fellow Fed policy makers launched a $600- billion second round of Treasury bond purchases November 3 to boost growth and lower unemployment, which has remained above 9 percent throughout the recovery. The jobless rate held at 9.6 percent in October, a sign that companies still have little need to absorb workers who need a job.
The economy grew at a 2.5 percent annual rate in the third quarter. That’s the minimum needed to keep unemployment from rising further, according to estimates by Fed officials this month.
U.S. corporations “live in a perpetual state of recession” because of fierce global competition, said Tom Schneider, chief executive officer of Washington-based consultant Restructuring Associates Inc., which helps boost efficiency at such companies as London and Rotterdam-based Unilever, the world’s second-largest consumer-goods maker. They have “no expectation that this is a short-term blip.”
As we try to figure out the direction of this still fragile recovery, this is the challenge that perplexes so many.
This slump is worse than most; so is the mood. Once demand returns, they say, jobs will come back and, with them, optimism. But Americans are far more apprehensive than usual, and their worries seem to go beyond the short-term debate over stimulus vs. deficit reduction. They fear that we are in the midst of not a cyclical downturn but a structural shift, one that poses huge new challenges to the average American job, pressures the average American wage and endangers the average American Dream. The middle class, many Americans have come to believe, is being hollowed out. I think they are right.
People who get paid a decent wage for skilled but routine work in manufacturing or services are getting squeezed by a pincer movement of technology and globalization.
(Thursday, Oct. 21, 2010, Time, Fareed Zakaria, How to Restore the American Dream)
The news this morning in Dallas is not good. Home sales are down 30% (though prices are slightly up). And though our area is relatively healthy, there is a great sense of unrest in our city. Leaders of nonprofits see requests for basic human needs increasing significantly, and they are finding it harder and harder to raise needed funds. I run into people all the time who are “in transition.” They are looking for a job – increasingly, jobs that are very hard to find. Especially for the “middle-aged” among us. But, also, for the recent college graduates. And older folks, who thought they were about to retire – and can’t.
No group seems immune from the sense of unrest.
I recently spoke to a very sharp group of current MBA students. More than one has a “job lined up” – a company that he/she is starting upon graduation. They might succeed. Or, they might not…
Recently, Brian Whetten posted The Death of Dilbert: Why Your Children Will Need to Love Their Jobs on The Huffington Post. He quotes from both Fareed Zakaria and Thomas Friedman, and he pulls it all together in a simple, clear way. Here’s a lengthy excerpt:
In Time Magazine, Fareed Zakaria pointed out that there are basically three types of jobs in America.
• Unskilled service jobs (such as waiter or security guard)
• Skilled, routine jobs (such as sales, office management and factory workers)
• Managerial, technical and professional jobs (such as executives, entrepreneurs and doctors)
In other words, you can flip burgers, shuffle papers or innovate. And over the last 100 years, our country has been built on the backs of “middle America”; the hard working men and women who worked 9-5 jobs, and did the work they were told to, so they could bring their paychecks home to their families.
The majority of today’s middle class jobs involve skilled but routine work; it can be boring and unfulfilling, but at least is safe and predictable.
Perhaps this is why Dilbert is one of our funniest, most popular cartoons. I mean, who can’t relate to the idiocies and inefficiencies in his world?
But here’s the thing. Dilbert is dying.
While the number of unskilled jobs and professional jobs have both been increasing, even in the face of this recession, the number of skilled, routine jobs — the bread and butter work of the middle class — is falling through the floor.
As Thomas Friedman points out,
Just doing your job in an average way — in this integrated and automated global economy — will lead to below-average wages. Sadly, average is over. We’re in the age of “extra,” and everyone has to figure out what extra they can add to their work to justify being paid more than a computer, a Chinese worker or a day laborer. “People will always need haircuts and health care,” says Katz, “and you can do that with low-wage labor or with people who acquire a lot of skills and pride and bring their imagination to do creative and customized things.” Their work will be more meaningful and their customers more satisfied.
I think we are in the midst of, what the experts call, a structural shift in our economy. And we haven’t figured out just what to do about this.
As I have written quite a few times on this blog, this is the problem that keeps me awake at night: Where will people work? For all of us, we have to keep learning, to keep innovating, to keep being valuable to someone who will hire us, for a job that lasts a while, or assignments that come and go so quickly we barely have time to catch our breath. And for many, simply finding a job is becoming the survival challenge of the era.