The Inevitable Labor Tightening is Coming

[doghouse]

http://www.wsj.com/articles/pay-rises-for-workers-at-the-bottom-of-the-ladder-1471944604?mod=e2tw

The demographic aberration that was the past 30 years has started showing it's first signs of abatement.

 

[Grand Potentate]

The demographic aberration that was the past 30 years has started showing it's first signs of abatement.

i don't want to jump out in front of your mental train here, so why do you think this is?

 

[doghouse]

i don't want to jump out in front of your mental train here, so why do you think this is?

I'm not sure I am exactly sure what you are asking. Why do I feel it's abating?

I did have a hilarious mental image of a runaway train plowing through someone dramatically flinging themselves in front though. Makes me wish I was better at photoshop or making gifs.

 

[John Lee Pettimore III]

Isn't automation, combined with analytics, going to get rid of a ton of jobs? We're pushing through an IT project at my work that should trim our necessary workers statewide by about 8%. And we're a government agency. Can't imagine what a forward-thinking, labor-flexible private corporation gets to do.

 

[Grand Potentate]

I'm not sure I am exactly sure what you are asking. Why do I feel it's abating?

yes, why is that that you feel its changing now and what do you feel business have to do with it?

 

[doghouse]

yes, why is that that you feel its changing now and what do you feel business have to do with it?

It's definitely changing as this labor glut is subsiding, I think what we are seeing now is the first inkling of its effects. The world has been in a completely abnormal labor market for about 30 years, with Baby Boomer population explosion coupled with Chinese labor coming on line that drove the value of labor way down. This isn't something that will ever be replicated again, and is not without huge risk if not managed properly. China in particular is a demographic time bomb.

People who actually understand this effect have been saying (unsuccessfully) for years that the anti traders are idiots because this pendulum is going to go back the other way, and viciously, especially in one child policy China. The risk though is if this isn't dealt with properly, growth will hit a brick wall. Japan is grappling with this very phenomenon as we speak and western democracies are sliding over the precipice. There won't be people to fill the jobs to boost output. This also leads to John Lee Pettimore III s post. We better figure out how to automate some shit, or we are fucked. There is a good article out there called something like "If you millenials want to retire, you better have a lot of kids" or something.

Wages are going to go up, the question is can we take the broader economy with it.

 

[Grand Potentate]

there's a lot to unpack here

It's definitely changing as this labor glut is subsiding, I think what we are seeing now is the first inkling of its effects.

the unemployment rate is consistently shrinking but that's due more to the fact that people are taking shittier and shittier jobs just to get by.

The world has been in a completely abnormal labor market for about 30 years, with Baby Boomer population explosion coupled with Chinese labor coming on line that drove the value of labor way down.

yes the introduction of east asian slave labor into the market has been a boon for business. the slow death of unions has been another huge factor in this.

This isn't something that will ever be replicated again, and is not without huge risk if not managed properly. China in particular is a demographic time bomb.

why would we want to have this replicated? globalization has been a trainwreck for the the labor class in this country. i'm not sure why china would be a bigger time bomb than any of the other asian markets. i'm also not sure china cares.

People who actually understand this effect have been saying (unsuccessfully) for years that the anti traders are idiots because this pendulum is going to go back the other way, and viciously, especially in one child policy China.

what are "anti-traders"? I don't think i've ever heard that term used before. and what do these people have to do with the one child policy in china?

The risk though is if this isn't dealt with properly, growth will hit a brick wall.

you kind of lost me here. what is it we're trying to deal with in this situation, the aging of the labor force, wage stagnation, production, etc..?

Japan is grappling with this very phenomenon as we speak and western democracies are sliding over the precipice.

actually, Japan is doing well under Abenomics if you consider employment and GDP

http://cepr.net/blogs/beat-the-press/the-success-of-abenomics

This short piece on Japan's GDP growth reminded me that I wanted to post a graph showing the rise in Japan's employment rate under Abe. Here's the basic picture showing the employment-to-population ratio (EPOP) for people between the ages of 16 and 64 since 2000.

As can seen, Japan's EPOP fell following the 2001 recession. It had made up lost ground by 2005 and continued to rise until 2007. It stagnated for roughly two years and then rose somewhat before starting to drop again in 2011. It was falling when Abe took over in December of 2012.

Since then the EPOP has risen by 2.5 percentage points. This is a huge gain that would be equivalent to another 6.2 million jobs in the United States. Japan's growth has certainly not be inspiring under Abe, but this increase in employment is quite impressive. By this measure, Abenomics has been very successful.

There won't be people to fill the jobs to boost output.

there's plenty of people to fill job vacancies. i don't understand why this is a concern of yours. employment is on the rise and the mass of underemployed would be ready and willing to step in to more demanding positions.

Employment Again Rises Sharply in July
Dean Baker:

Employment Again Rises Sharply in July: The Labor Department reported the economy added 255,000 jobs in July. With the June number revised up to 292,000, the average for the last three months now stands at 190,000. The household survey also showed a positive picture, with employment rising by 420,000. With new people entering the labor force, the employment-to-population ratio (EPOP) edged up by 0.1 percentage point to 59.7 percent, while the unemployment rate remained unchanged at 4.9 percent.The job gains in the establishment survey were broadly based. ...Other news in the establishment survey was also positive. The length of the average workweek edged up by 0.1 hours leading to an increase in the index of aggregate weekly hours of 0.5 percent. There also is some evidence of more rapid wage growth. The year-over-year increase in the average hourly wage was 2.6 percent. The annual rate comparing the average for the last three months with the prior three months was 2.8 percent. If this continues, workers will be able to get back some of the share lost to profits in the downturn.While the household survey is mostly positive, there are some aspects that continue to suggest labor market weakness. The duration measures of unemployment all increased in July, with the average duration of unemployment spells rising from 27.7 weeks to 28.1 weeks and the median from 10.3 weeks to 11.6 weeks. These durations are more consistent with a recession than a strong labor market.Similarly, the number of people involuntarily working part-time rose slightly to 5.94 million. This followed a sharp drop in June, but it is nonetheless quite high for a labor market with an unemployment rate of 4.9 percent. Also, the percentage of unemployment due to voluntary job leavers remained at 10.7 percent. This compares with peaks of more than 12.0 percent before the recession and over 15.0 percent back in 2000.One interesting note is that the least educated workers appear to be the biggest beneficiaries of recent job growth. The EPOP ratio for workers without high school degrees rose by 2.1 percentage points for the month and is 1.6 percentage points above its year ago level. The unemployment rate for this group is 1.9 percentage points below the year ago level. By contrast, the EPOP ratio for college grads is down by 0.5 percentage points from its year ago level while the unemployment rate is unchanged. The unemployment rate for workers with just a high school degree fell by 0.5 percentage points over the last year.One positive item in this report is a sharp drop in black teen unemployment from 31.2 percent to 25.7 percent. These data are highly erratic, but the June level was a sharp reported rise from a low of 23.3 percent in February.This is mostly a very positive report. In addition to the strong growth in jobs in the establishment survey, the household survey also showed a large jump in employment. The increase in hours, coupled with some evidence of more rapid wage growth, add to the positive picture. The labor market still has some way to go to fully recover, but it is making progress.

This also leads to John Lee Pettimore III s post. We better figure out how to automate some shit, or we are fucked. There is a good article out there called something like "If you millenials want to retire, you better have a lot of kids" or something.

Wages are going to go up, the question is can we take the broader economy with it.

again, i don't understand what automation has to do with either population aging or wage growth in this situation. i'm assuming the article is proposing social security is going to run out of money. is that a worry of yours?

as far as the broader economy, why wouldn't rising wages improve the economy? higher incomes lead to more purchasing power which leads to more business being done. more business being done leads to more employment which leads further business spending as business are able to expand.

 

[doghouse]

there's a lot to unpack here


the unemployment rate is consistently shrinking but that's due more to the fact that people are taking shittier and shittier jobs just to get by.


yes the introduction of east asian slave labor into the market has been a boon for business. the slow death of unions has been another huge factor in this.


why would we want to have this replicated? globalization has been a trainwreck for the the labor class in this country. i'm not sure why china would be a bigger time bomb than any of the other asian markets. i'm also not sure china cares.


what are "anti-traders"? I don't think i've ever heard that term used before. and what do these people have to do with the one child policy in china?


you kind of lost me here. what is it we're trying to deal with in this situation, the aging of the labor force, wage stagnation, production, etc..?


actually, Japan is doing well under Abenomics if you consider employment and GDP

http://cepr.net/blogs/beat-the-press/the-success-of-abenomics

This short piece on Japan's GDP growth reminded me that I wanted to post a graph showing the rise in Japan's employment rate under Abe. Here's the basic picture showing the employment-to-population ratio (EPOP) for people between the ages of 16 and 64 since 2000.

As can seen, Japan's EPOP fell following the 2001 recession. It had made up lost ground by 2005 and continued to rise until 2007. It stagnated for roughly two years and then rose somewhat before starting to drop again in 2011. It was falling when Abe took over in December of 2012.

Since then the EPOP has risen by 2.5 percentage points. This is a huge gain that would be equivalent to another 6.2 million jobs in the United States. Japan's growth has certainly not be inspiring under Abe, but this increase in employment is quite impressive. By this measure, Abenomics has been very successful.


there's plenty of people to fill job vacancies. i don't understand why this is a concern of yours. employment is on the rise and the mass of underemployed would be ready and willing to step in to more demanding positions.

Employment Again Rises Sharply in July
Dean Baker:

Employment Again Rises Sharply in July: The Labor Department reported the economy added 255,000 jobs in July. With the June number revised up to 292,000, the average for the last three months now stands at 190,000. The household survey also showed a positive picture, with employment rising by 420,000. With new people entering the labor force, the employment-to-population ratio (EPOP) edged up by 0.1 percentage point to 59.7 percent, while the unemployment rate remained unchanged at 4.9 percent.The job gains in the establishment survey were broadly based. ...Other news in the establishment survey was also positive. The length of the average workweek edged up by 0.1 hours leading to an increase in the index of aggregate weekly hours of 0.5 percent. There also is some evidence of more rapid wage growth. The year-over-year increase in the average hourly wage was 2.6 percent. The annual rate comparing the average for the last three months with the prior three months was 2.8 percent. If this continues, workers will be able to get back some of the share lost to profits in the downturn.While the household survey is mostly positive, there are some aspects that continue to suggest labor market weakness. The duration measures of unemployment all increased in July, with the average duration of unemployment spells rising from 27.7 weeks to 28.1 weeks and the median from 10.3 weeks to 11.6 weeks. These durations are more consistent with a recession than a strong labor market.Similarly, the number of people involuntarily working part-time rose slightly to 5.94 million. This followed a sharp drop in June, but it is nonetheless quite high for a labor market with an unemployment rate of 4.9 percent. Also, the percentage of unemployment due to voluntary job leavers remained at 10.7 percent. This compares with peaks of more than 12.0 percent before the recession and over 15.0 percent back in 2000.One interesting note is that the least educated workers appear to be the biggest beneficiaries of recent job growth. The EPOP ratio for workers without high school degrees rose by 2.1 percentage points for the month and is 1.6 percentage points above its year ago level. The unemployment rate for this group is 1.9 percentage points below the year ago level. By contrast, the EPOP ratio for college grads is down by 0.5 percentage points from its year ago level while the unemployment rate is unchanged. The unemployment rate for workers with just a high school degree fell by 0.5 percentage points over the last year.One positive item in this report is a sharp drop in black teen unemployment from 31.2 percent to 25.7 percent. These data are highly erratic, but the June level was a sharp reported rise from a low of 23.3 percent in February.This is mostly a very positive report. In addition to the strong growth in jobs in the establishment survey, the household survey also showed a large jump in employment. The increase in hours, coupled with some evidence of more rapid wage growth, add to the positive picture. The labor market still has some way to go to fully recover, but it is making progress.



again, i don't understand what automation has to do with either population aging or wage growth in this situation. i'm assuming the article is proposing social security is going to run out of money. is that a worry of yours?

as far as the broader economy, why wouldn't rising wages improve the economy? higher incomes lead to more purchasing power which leads to more business being done. more business being done leads to more employment which leads further business spending as business are able to expand.

You must cast your net wider grasshopper, you are missing the forest for the trees.

Edit: Just a suggestion, while I got a little chuckle out of anyone trying to make the Japanese economy out to be anything other than the biggest poster child for secular stagnation ever, it's probably not going to help counter the fact that secular stagnation writ large is coming to the world if something isn't done.

 

[Grand Potentate]

You must cast your net wider grasshopper, you are missing the forest for the trees.

please, o wise one, inform your humble student in the ways of economics.

 

[doghouse]

please, o wise one, inform your humble student in the ways of economics.

I make no claims to being the sage of economics, but am always ready with pithy sayings.

You are focusing on short term details and missing what I am saying. There is looming output shortfall caused by demographic changes. Why would China care you say? Because they are the worst case scenario. I'm not sure it's possible for them to innovate fast enough to stave off the impending doom. Actually, I'm quite sure they can't. Japan is the test case for what is getting ready to be global. Decades of no economic growth. Inflation without productivity increases. Very bad things.

The past 30 years of income flattening in the small band of the global economy was caused by a one of event of a labor glut. It's something that can never be replicated unless you convince China to turn into a hermit again, then re-enter the world stage, which isn't going to happen. You can't take those people offline, and basically the whole world is one ecosystem now. That's the good news, and it's a lot bigger deal than quibbling over things like tax policy and unions (which are important on a personal level, but not as a macro trend). The bad news is that China's one child policy is disastrous and the US isn't in rosy shape itself, with the workforce getting ready to age out. Without a technological revolution, there will be no growth going forward. There is an interesting ongoing debate by Robert Gordon that the early 20th century productivity increases won't be able to be replicated anyway. I happen to disagree for various reasons I won't go into here, but it may be that slow growth is all there is. In which case expectations are going to have to be tempered. Larry Summers couches it pretty well as "Inverse Say's Law". There are some good articles about the demographic phenomenon by Greg Ip and others. This is happening.

Now, contrary to popular opinion I'm not saying round up the white working class and be done with them, rather I have said all along our biggest failing is not transitioning the working class to the new economy, you can go search the forum for confirmation if you don't believe me. We absolutely must, must, must ditch the low tech manufacturing mindset that is a total drag on our future and train people with new skill sets. High tech manufacturing is a key place to start along with trade schools as we are unequivocally seeing lost economic output due to a shortage of skilled labor. Anyone who is saying otherwise is just parroting Luddite talking points, and history has shown them to be very, very wrong.

Plus we need more bartenders, though I'd only estimate that 1% of the people behind the bar in America are actually bartenders. But I digress...

 

[prince nez]

Please ask DieWanker for the Political Economic take on all this.

Oh wait, no need, the answer is Socialism.

 

[Monkeyface]

please, o wise one, inform your humble student in the ways of economics.

Olololol, using Japan as a shining example of monetary/fiscal policy.

You're better off concerning yourself with things closer to home, seeing as you're living in America's favourite retirement community. Let us worry about the rest of the world.

 

[Grand Potentate]

Olololol, using Japan as a shining example of monetary/fiscal policy.

You're better off concerning yourself with things closer to home, seeing as you're living in America's favourite retirement community. Let us worry about the rest of the world.

actually i just used Japan's current economic state to make a single point about employment, not to hold up Japan's economy as some sort of shining beacon of greatness. i'll chalk this error in reading as having to deal with your wisdom teeth trying to jailbreak your gum line.

 

[fxh]

Doggie I'm not sure I can agree with your view that there will be a labour shortage. But I do agree that there is no such thing these days as unskilled work. We have created an underclass not capable of contributing or earning yet we vilify them. The only response has been to over credentialise everything rather than skill up appropriately. Thus we've excluded the underclass by bullshitting.

 

[doghouse]

Unit labor costs at nonfarm businesses rose at a 4.3% annual rate in the second quarter, revised up sharply from an initial estimate of a 2.0% growth rate.

...

“Aside from the quarter-to-quarter particulars, I would argue that as labor markets tighten, hourly wages are going to continue to accelerate and put upward pressure at the margin on inflation,” Amherst Pierpont Securities chief economist Stephen Stanley said in a note to clients.

http://www.wsj.com/articles/u-s-productivity-drop-in-second-quarter-revised-to-0-6-rate-1472733108

 

[doghouse]

Fastest increase in middle class incomes ever recorded by federal government.

https://www.washingtonpost.com/news...st-year-since-the-end-of-the-great-recession/

 

[Grand Potentate]

Fastest increase in middle class incomes ever recorded by federal government.

https://www.washingtonpost.com/news...st-year-since-the-end-of-the-great-recession/

link to the PDF

http://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-256.pdf

The real money shot:

....but 1.6 percent lower than the median in 2007, the year before the most recent recession, and 2.4 percent lower than the median household income peak that occurred in 1999.

 

[doghouse]

Yes, and at this pace it will surpass those number in six months. That's the point. The 30 year aberration is coming to a close.

Thanks Obama!

 

[Grand Potentate]

Yes, and at this pace it will surpass those number in six months. That's the point. The 30 year aberration is coming to a close.

Thanks Obama!

just like the stock market its bound to keep going up forever. then we'll be back at the point we were at in 1999. that's progress for ya.

 

[Grand Potentate]

job market

 

[doghouse]

https://www.washingtonpost.com/news...anation-for-americas-economic-mess/?tid=sm_tw

 

[Grand Potentate]

you might find this interesting doghouse

http://www.nakedcapitalism.com/2016...ion-growth-and-prosperity-are-not-linked.html

This site has gone to considerable effort to demonstrate why high population growth (immigration), as advocated by Australia’s major political parties, is very likely lowering the living standards of existing residents.

Since 2003, Australia’s population has grown by a whopping 22% – way faster than other advanced English-speaking nations and 2.5 times the OECD average:

Since the immigration flood gates were jammed open in 2003, Australia’s per capita GDP and disposable income has grown at an anaemic rate compared to the previous corresponding 12-year periods (see below charts).

And this comes despite growth in the terms-of-trade being most favourable across the most recent 12-year period (see next chart).

When viewed alongside qualitative measures like traffic congestion and housing affordability, which have clearly worsened as the population has exploded, there is a strong case to be made that Australia’s high population growth strategy is very likely lowering individual living standards.

Yesterday, I spent many hours crunching OECD macroeconomic data to determine whether there is a link between population growth and economic prosperity.

The first chart below is a scatter chart plotting the change in per capita real GDP against population over the years 2000 to 2015 across the 35 OECD member nations (Australia is shown in red):

As you can see, there is no statistically significant relationship between the growth in the population and per capita real GDP across OECD member nations.

The next charts delve deeper and plot the change in population against measures of productivity. As explainedby the Productivity Commission (PC):

Productivity growth is a key source of long-term economic growth, business competitiveness and real per capita income growth. It is an important determinant of a country’s living standards and wellbeing.

There are two broad measures of productivity:

Labour productivity (output produced per unit of labour input) measures efficiency in the use of labour. Growth of labour productivity is the growth of output over and above the growth of labour input — it not only measures change in the efficiency of labour but also captures the value added from growth in capital (and more advanced technology intrinsic in the new investment) that supports increased output without increasing labour.

Multifactor productivity (output produced per unit of combined inputs of labour and capital) is the measure that comes closest to the underlying concept of productivity — efficiency of producers in producing output using both labour and capital. Growth of multifactor productivity is the growth of output over and above the growth of combined labour and capital.

The first chart shows the relationship between population growth and labour productivity growth across the 35 OECD member nations over the period 2000 to 2015 (Australia shown in red):


The second chart shows the relationship between population growth and multifactor productivity growth across 20 OECD member nations (where data is available) over the period 2000 to 2014 (Australia shown in red):

In both cases, there is no statistically significant relationship between population growth and productivity across OECD member nations.

Further, despite experiencing some of the highest population growth in the OECD, Australia’s productivity growth has been lackluster by comparison. While this does not by itself suggest that Australia’s high immigration program has lowered productivity, it is nigh impossible to argue that it has raised it either.

Ultimately, the only real economic “benefit” that comes from running a high immigration program is via an improvement in Australia’s population pyramid as younger workers lower the average age profile and increase the ratio of working aged to non-working aged. As explained by the PC:

Growth in the population can increase the size of the economy but does not, in itself, increase output or income per capita. Growth of per capita income is determined by changes in participation (referred to as ‘labour utilisation’ in figure 2.2), labour productivity, the terms of trade and in net foreign income…

However, any benefit to labour utilisation is only transitory: as the migrants grow old they too add to the number of retired people, thus requiring ever more immigration and an ever bigger population to keep the age profile stable (classic Ponzi Demography).

Against these transitory benefits are the costs associated with pressures on infrastructure, housing , the environment, and in Australia’s case, the dilution of its fixed mineral endowment, which is a key driver of our wealth and living standards.

In short, the broad macroeconomic data – both domestic and international – does not support the assertion that Australia needs to run a high immigration program in order to drive the economy and increase living standards. In fact, given the significant qualitative costs – for example, the degradation of the environment, the depreciation of natural resources and decline in individuals’ quality of life – there is significant cause to dial Australia’s immigration program right back.

 

[doghouse]

you might find this interesting doghouse

http://www.nakedcapitalism.com/2016...ion-growth-and-prosperity-are-not-linked.html

This site has gone to considerable effort to demonstrate why high population growth (immigration), as advocated by Australia’s major political parties, is very likely lowering the living standards of existing residents.

Since 2003, Australia’s population has grown by a whopping 22% – way faster than other advanced English-speaking nations and 2.5 times the OECD average:

Since the immigration flood gates were jammed open in 2003, Australia’s per capita GDP and disposable income has grown at an anaemic rate compared to the previous corresponding 12-year periods (see below charts).

And this comes despite growth in the terms-of-trade being most favourable across the most recent 12-year period (see next chart).

When viewed alongside qualitative measures like traffic congestion and housing affordability, which have clearly worsened as the population has exploded, there is a strong case to be made that Australia’s high population growth strategy is very likely lowering individual living standards.

Yesterday, I spent many hours crunching OECD macroeconomic data to determine whether there is a link between population growth and economic prosperity.

The first chart below is a scatter chart plotting the change in per capita real GDP against population over the years 2000 to 2015 across the 35 OECD member nations (Australia is shown in red):

As you can see, there is no statistically significant relationship between the growth in the population and per capita real GDP across OECD member nations.

The next charts delve deeper and plot the change in population against measures of productivity. As explainedby the Productivity Commission (PC):

Productivity growth is a key source of long-term economic growth, business competitiveness and real per capita income growth. It is an important determinant of a country’s living standards and wellbeing.

There are two broad measures of productivity:

Labour productivity (output produced per unit of labour input) measures efficiency in the use of labour. Growth of labour productivity is the growth of output over and above the growth of labour input — it not only measures change in the efficiency of labour but also captures the value added from growth in capital (and more advanced technology intrinsic in the new investment) that supports increased output without increasing labour.

Multifactor productivity (output produced per unit of combined inputs of labour and capital) is the measure that comes closest to the underlying concept of productivity — efficiency of producers in producing output using both labour and capital. Growth of multifactor productivity is the growth of output over and above the growth of combined labour and capital.

The first chart shows the relationship between population growth and labour productivity growth across the 35 OECD member nations over the period 2000 to 2015 (Australia shown in red):


The second chart shows the relationship between population growth and multifactor productivity growth across 20 OECD member nations (where data is available) over the period 2000 to 2014 (Australia shown in red):

In both cases, there is no statistically significant relationship between population growth and productivity across OECD member nations.

Further, despite experiencing some of the highest population growth in the OECD, Australia’s productivity growth has been lackluster by comparison. While this does not by itself suggest that Australia’s high immigration program has lowered productivity, it is nigh impossible to argue that it has raised it either.

Ultimately, the only real economic “benefit” that comes from running a high immigration program is via an improvement in Australia’s population pyramid as younger workers lower the average age profile and increase the ratio of working aged to non-working aged. As explained by the PC:

Growth in the population can increase the size of the economy but does not, in itself, increase output or income per capita. Growth of per capita income is determined by changes in participation (referred to as ‘labour utilisation’ in figure 2.2), labour productivity, the terms of trade and in net foreign income…

However, any benefit to labour utilisation is only transitory: as the migrants grow old they too add to the number of retired people, thus requiring ever more immigration and an ever bigger population to keep the age profile stable (classic Ponzi Demography).

Against these transitory benefits are the costs associated with pressures on infrastructure, housing , the environment, and in Australia’s case, the dilution of its fixed mineral endowment, which is a key driver of our wealth and living standards.

In short, the broad macroeconomic data – both domestic and international – does not support the assertion that Australia needs to run a high immigration program in order to drive the economy and increase living standards. In fact, given the significant qualitative costs – for example, the degradation of the environment, the depreciation of natural resources and decline in individuals’ quality of life – there is significant cause to dial Australia’s immigration program right back.

I've been totally swamped lately so haven't been able to keep up with much, but that is an interesting article, and I agree with it too. I'm not a mass immigration proponent.

 

[doghouse]

 

[doghouse]

America’s Growing Labor Shortage
Lack of workers in ag and construction is hurting the economy.

A farm worker picks grapes at Saintsbury winery in Napa, Calif. Photo: Associated Press
March 29, 2017 7:14 p.m. ET

President Trump approved the Keystone XL pipeline on Friday, and good for him, but will there be enough workers to build it? That’s a serious question. Many American employers, especially in construction and agriculture, are facing labor shortages that would be exacerbated by restrictionist immigration policies.

Demographic trends coupled with a skills mismatch have resulted in a frustrating economic paradox: Millions of workers are underemployed even as millions of jobs go unfilled. The U.S. workforce is also graying, presenting a challenge for industries that entail manual labor.

Construction is ground zero in the worker shortage. Many hard-hats who lost their jobs during the recession left the labor force. Some found high-paying work in fossil fuels during the fracking boom and then migrated to renewables when oil prices tumbled. While construction has rebounded, many employed in the industry a decade ago are no longer there.

According to the Bureau of Labor Statistics, there are nearly 150,000 unfilled construction jobs across the country, nearly double the number five years ago. The shortage is particularly acute in metro areas like Miami, Dallas and Denver, and the worker shortage is delaying projects and raising costs.

A January survey by the Associated General Contractors of America found that 73% of firms had a hard time finding qualified workers. More firms identified worker shortages as a big concern (55%) than any other issue including federal regulations (41%) and lack of infrastructure investment (18%). Demand and salaries for subcontractors (e.g., carpentry and bricklaying) are going through the roof.

On the current demographic course, the shortage will worsen. The average age of construction equipment operators and highway maintenance workers is 46. When middle-aged workers retire, there won’t be many young bodies to replace them. Most high schools have dropped vocational training, and more young people are enrolling in colleges that don’t teach technical skills.

The farm labor shortage is also growing, which has caused tens of millions of dollars worth of crops to rot in the fields. Farmers can’t get enough H-2A visas for foreign guest workers, some of whom have migrated to higher-paying occupations. Workers also often arrive late due to visa processing delays by the Labor Department. The undocumented workforce has shrunk as more Mexicans have left the country than have arrived in recent years.

The Western Growers Association reports that crews are running 20% short on average. Boosting wages and benefits—many employers pay $15 an hour with 401(k)s and paid vacation—has been little help. Instead, employers are cannibalizing one another’s farms. In 2015 the country’s largest lemon grower Limoneira raised wages to $16 per hour, boosted retirement benefits by 20% and offered subsidized housing. But now vineyards in Napa are poaching workers from growers in California’s Central Valley by paying even more.

Some restrictionists claim that cheap foreign labor is hurting low-skilled U.S. workers, but there’s little evidence for that. One Napa grower recently told the Los Angeles Times that paying even $20 an hour wasn’t enough to keep native workers on the farm.

A new paper for the National Bureau of Economic Research concludes that terminating the Bracero program, which admitted seasonal farm workers from Mexico during the 1940s and ’50s, did not raise wages of domestic workers. Meantime, a 2014 study found that Arizona’s E-Verify mandate on employers reduced “employment opportunities among some low-skilled legal workers.”

This isn’t surprising since producers have responded to the worker shortage by shifting to higher-value crops that require less labor. As a result, imports of some fruits and vegetables, especially processed and canned varieties, have increased. Tomato sauce imports increased by about a quarter in the last three years. Since the 1990s, imported frozen vegetables—particularly asparagus, broccoli and cauliflower that require high levels of labor to pick and cut—have more than tripled.

Dairies and slaughterhouses are also facing stiff competition from Canada and Mexico. And consumers are paying more for products that can’t be substituted by imports (often for seasonal reasons). So the worker shortage is hurting U.S. employers, low-skilled workers and consumers.

President Trump would compound the problem by reducing legal immigration or deporting unauthorized immigrants whose only crime is working without legal documentation. Low-skilled immigrants (those with 12 years of education or less) are estimated to account for nearly a third of the hours worked in agriculture and 20% in construction.

If President Trump wants employers to produce and build more in America, the U.S. will need to improve education and skills in manufacturing and IT. But the economy will also need more foreign workers, and better guest worker programs to bring them in legally.

 

[doghouse]

Robots Aren’t Destroying Enough Jobs
Economic predictions of massive job losses to automation are missing indicators that show just the opposite


By
Greg Ip
Updated May 10, 2017 1:51 p.m. ET

From Silicon Valley to Davos, pundits have been warning that millions of individuals will be thrown out of work by the rapid advance of automation and artificial intelligence. As economic forecasts go, this idea of a robot apocalypse is certainly chilling. It’s also baffling and misguided.

Baffling because it’s starkly at odds with the evidence, and misguided because it completely misses the problem: robots aren’t destroying enough jobs. Too many sectors, such as health care or personal services, are so resistant to automation that they are holding back the entire country’s standard of living.

“Robot” is shorthand for any device or algorithm that does what humans once did, from mechanical combines and thermostats to dishwashers and airfare search sites. In the long run these advancements are good. By enabling society to produce more with the same workers, automation is a major driver of rising standards of living.


The doomsayers say this time is different, that technological change is so profound and so fast that millions of workers will end up on the dole or consigned to menial, minimum-wage mobs.

The pessimism would be more plausible if the evidence weren’t moving in exactly the opposite direction. The U.S. has many problems, but job creation isn’t one of them. In April, nonfarm private employment rose for the 86th straight month, the longest such streak on record.

Monthly job creation has averaged 185,000 this year, more than double what the U.S. can sustain given its demographics. This has driven unemployment down to 4.4%, a 10-year low and below most estimates of “full employment.” Growing labor shortages have boosted the typical worker’s annual wage gain to more than 3% now from 2% in 2012, according to the Federal Reserve Bank of Atlanta.

If automation were rapidly displacing workers, the productivity of the remaining workers ought to be growing rapidly. Instead, growth in productivity—worker output per hour—has been dismal in almost every sector, including manufacturing.

In a compelling study released this week, the Information Technology and Innovation Foundation demonstrates that the supposed gale of technology-driven job destruction a myth.

Rob Atkinson, president of the industry-supported think tank, and researcher John Wu examined government data back to 1850 to measure jobs lost in slow-growing occupations and jobs created in fast-growing occupations, their proxy for job creation and destruction driven by technology and other forces. By this measure, churn relative to total employment is the lowest on record.

How can this be? An era that includes the shock of trade with China and the financial crisis ought to have rapidly shuffled workers throughout the employment deck. But we’ve forgotten how convulsive the past was. The authors note how in the 1800s and 1900s, agriculture, at the time the largest employer, was radically transformed by the end of slavery, the opening of the West, mechanization, and consolidation of small family-owned farms. In the 1960s, the expansion of office work created 885,000 janitor jobs, rising health-care consumption created 700,000 nursing aides and the baby boom led to the hiring of 600,000 more high-school teachers.

Technology is still destroying jobs—just more slowly. In part that’s because American consumption is gravitating toward goods and services whose production isn’t easily automated. William Baumol, an economist who died last week at the age of 95, long ago observed that societies would devote a growing share of their income to consumption in sectors where productivity was stagnant. Think of a Mozart string quartet. Four musicians must still be paid to perform it, implying a two-century productivity growth rate of zero. As the share of output grew in stagnant sectors, overall productivity growth would slow.

Dietrich Vollrath, an economist specializing in growth at the University of Houston, estimates “Baumol’s cost disease” has stripped half a percentage point off U.S. productivity growth since the 1980s.

“Robots can replace a lot fewer things that go into GDP than we think,” he says. Medical breakthroughs have mostly gone toward new and more expensive treatments, not to making existing treatments less expensive. Children may sit in front of better screens than they did in the 1950s, but working parents won’t leave their children in the care of a robot, so child-care workers doubled to almost 2 million between 1990 and 2010, according to the ITIF study.

Since 2007, low productivity sectors such as education, health care, social assistance, leisure and hospitality have added nearly 7 million jobs. Meantime, information and finance, where value added per worker is five to 10 times higher, have cut or barely added jobs.

This calls for a change in priorities. Instead of worrying about robots destroying jobs, business leaders need to figure out how to use them more, especially in low-productivity sectors. Someday robots may replace truck drivers, but it’s much more urgent to make existing drivers, who are in short supply, more efficient. Clean energy advocates boast about how many people work in solar power when they should be trying to reduce the labor, and thus cost, involved.

The alternative is a tightening labor market that forces companies to pay ever higher wages that must be passed on as inflation, which usually ends with recession.

That is a more imminent threat than an army of androids.

 

[Monkeyface]

I don't think anyone has said that automation was going to impact the next month's NFPs, but if you look at the NFP in a decade from now, it'll probably be a different picture. Everyone says imminent, but they mean in the next 10-20 years.

 

[formby]

Good article...

 

[OfficePants]

I don't think anyone has said that automation was going to impact the next month's NFPs, but if you look at the NFP in a decade from now, it'll probably be a different picture. Everyone says imminent, but they mean in the next 10-20 years.

I think American corporations will outsource more jobs than a robot will ever replace in the next decade. Thank god for D John.

 

[doghouse]

I don't think anyone has said that automation was going to impact the next month's NFPs, but if you look at the NFP in a decade from now, it'll probably be a different picture. Everyone says imminent, but they mean in the next 10-20 years.

While I'm inclined to agree, I think the interesting point in the article is how do we get there from here. Some things we don't yet have the ability to automate. Everyone can see a robot on a factory floor doing menial stuff, but not in skilled interpersonal interactive fields. It can't be taken for granted.

The other point, which I have been saying for awhile is we are in deep shit if we don't figure out how to get some productivity gains.

 

[formby]

While I'm inclined to agree, I think the interesting point in the article is how do we get there from here. Some things we don't yet have the ability to automate. Everyone can see a robot on a factory floor doing menial stuff, but not in skilled interpersonal interactive fields. It can't be taken for granted.

The other point, which I have been saying for awhile is we are in deep shit if we don't figure out how to get some productivity gains.

The thing with machines is that humans have never invented one that didn't need maintenance, and more often than not, lots of it.

Take a look at the history of automation in the auto industry for example. Transfer machines in particular.

 

[doghouse]

The thing with machines is that humans have never invented one that didn't need maintenance, and more often than not, lots of it.

Take a look at the history of automation in the auto industry for example. Transfer machines in particular.

Tell me about it. It's the one thing my suppliers know when they try and sell me machines; you better be on the ball supporting them. I've given the local Caterpillar dealer the boot because they treat me like they are doing me a favor by allow me to pay them to work on stuff they sold me.

 

[Monkeyface]

I think American corporations will outsource more jobs than a robot will ever replace in the next decade. Thank god for D John.

No, if globalisation continues, wages will increase too much in other countries for outsourcing to make sense. For example, China is already getting too expensive for some industries. It'll take a while for the whole world to catch up with the western world in terms of labour cost, but eventually it'll happen.

 

[Lord Buckley]

China is now focusing on engineering equipment and some of the lower end manufacturing is going to Thailand and Vietnam. We now see it is about comparable to employ an engineering graduate in China as it is in Spain or Italy. Of course, graduate salaries in these EU countries are quite low.

We also see in certain disciplines the cost in China and India is comparable with Europe.

But, these costs don't include quality factors and more efficient and effective processes that are in the West. As an example, the project I worked on in Brazil, it would have been delivered much faster and more cost effectively if it had been manufactured in the UK and shipped to Brazil. Local content dictated that this was not an option.

You also need to factor in the endemic corruption in places like Brazil and India.

An associate of mine who works for one of the oil companies here did a case study for relocating the engineering organisation to India. This is a trend amongst many of our clients. He said that the savings were actually limited, when you factored in the true costs of inefficient working practices, several workers doing one task, etc. The chief benefit was that you can sack/get rid of the Indian workforce far easier. They decided not to relocate there.

 

[Monkeyface]

China is now focusing on engineering equipment and some of the lower end manufacturing is going to Thailand and Vietnam. We now see it is about comparable to employ an engineering graduate in China as it is in Spain or Italy. Of course, graduate salaries in these EU countries are quite low.

We also see in certain disciplines the cost in China and India is comparable with Europe.

But, these costs don't include quality factors and more efficient and effective processes that are in the West. As an example, the project I worked on in Brazil, it would have been delivered much faster and more cost effectively if it had been manufactured in the UK and shipped to Brazil. Local content dictated that this was not an option.

You also need to factor in the endemic corruption in places like Brazil and India.

An associate of mine who works for one of the oil companies here did a case study for relocating the engineering organisation to India. This is a trend amongst many of our clients. He said that the savings were actually limited, when you factored in the true costs of inefficient working practices, several workers doing one task, etc. The chief benefit was that you can sack/get rid of the Indian workforce far easier. They decided not to relocate there.

Well yeah, delvopment implies that productivity/efficiency will increase as well and corruption will decrease. It's just a very long term trend. Think it took Japan about 30-40yrs to catch up. If globalisation continues, there might come a time where it doesn't matter where you employ someone, as it'll cost about the same, and borders won't matter much anymore. Perhaps the only thing that can't be changed is climate, so locations with more favourable climates might be preferable.

It makes sense that the elite is turning its back on globalisation, as they'd like to keep their cheap labour.

 

[John Lee Pettimore III]

No, if globalisation continues, wages will increase too much in other countries for outsourcing to make sense. For example, China is already getting too expensive for some industries. It'll take a while for the whole world to catch up with the western world in terms of labour cost, but eventually it'll happen.

But by then our own labor costs will be higher and what is currently a middle class lifestyle will be deemed poverty.

 

[Monkeyface]

But by then our own labor costs will be higher and what is currently a middle class lifestyle will be deemed poverty.

Depends on inflation

 

[Lord Buckley]

Well yeah, delvopment implies that productivity/efficiency will increase as well and corruption will decrease. It's just a very long term trend. Think it took Japan about 30-40yrs to catch up. If globalisation continues, there might come a time where it doesn't matter where you employ someone, as it'll cost about the same, and borders won't matter much anymore. Perhaps the only thing that can't be changed is climate, so locations with more favourable climates might be preferable.

It makes sense that the elite is turning its back on globalisation, as they'd like to keep their cheap labour.

But development is not necessarily uniform or constant. Look at some South American countries in the early 20th century and where they are now. South Korea and Nigeria were comparable nations after WWII in terms of population and GDP. They are quite different countries today.

Corruption once ingrained is difficult to remove. I do not believe that corruption will inevitably decrease. Far from it, I believe it is increasing.

 

[doghouse]

As an example, the project I worked on in Brazil, it would have been delivered much faster and more cost effectively if it had been manufactured in the UK and shipped to Brazil.

Glad you have finally come to see how globalization is superior.

 

[Lord Buckley]

This present globalization is a form of socialism by the back door, a system that favours massive corporate sized inefficient Soviet style and corrupt enterprises that takes all on the basis of size and global reach. Entrepreneurs have no place in this world vision. That's why I reject it. This is a one way ticket to moribund societies as the EU is now beginning to realise.