Sunday, April 5, 2015

The Changing Job Structure in America


  1. I'm a simple man. To me, the definition of wealth creation is taking dirt and making stuff out of it. Such as, digging ore and producing steel, and then producing tools to make valuable items like pots, pans, cars etc etc.
    Or plowing fields and growing crops, or trees.
    So I see by the graphic that we've quit creating wealth and are now in the business of "servicing" one another, i.e. spreading a fixed amount of wealth around. This does not seem to me to be a plan for future economic well being.
    I know, belaboring the obvious. But when you boil it all down into such a simple synopsis, it begs the question: "How come nobody seems to notice"? Or care??

    1. I believe the error in your thinking is to think only of the physical "stuff" produced as wealth. But the ability to produce services on the market is also wealth.

      Actually, there is a continuum from almost pure "stuff" to almost pure "services". At the one end buying, say, an appliance, is mostly stuff, but will need some service as it wears out. At the other end is, say, a massage service, which uses a little bit of stuff (massage tables, massage oil, etc) to make the service possible. Even the world's oldest service is almost always provided with the aid of some stuff (sexy clothes, makeup, hotel room, etc).

      So a market economy can experience over time an overall shift, with more production and consumption of services that need less stuff. No fixed amount of wealth (stuff plus service capacity) at any time, just changing technologies, tastes, and resources pushing the changing mix.

      Having said that, we must note that the huge increase in the Health Care sector has come about mostly due to interference in those markets, not because of them.

    2. The economy is a powerful force and observing it objectively can be difficult given the constant political rhetoric. I believe the decline in manufacturing employment is heavily influenced by the continued improvement in productivity. Similar to the decline in agricultural employment. The availability of capital investment in these industries have allowed them to build more things with fewer laborers. Even off-shoring requires incredible efficiencies in transportation to get the stuff back to the U.S. The health care and education sectors have seen less capital investment and less improvement in productivity. That seems to be changing and although the government continues to "interfere" I suspect employment will decline in these sectors in the future as more automation is applied to these sectors. Perhaps the most promising sector is Professional and business services (which I think includes software engineers). The challenge is to be adaptable to our changing economic landscape and take advantage of the new employment opportunities.

    3. Well, hmmm.
      I know that value is subjective (Thanks, Mises). So if I hand the masseuse $50 for services, it's a win-win because I value the massage at >$50 and vice-versa. OK, fine, so you could say that's a form of "wealth" in the form of mutual satisfaction.
      Where I have a problem is all this servicing merry go round must wind down after a while without more "stuff".
      For instance, I live on a small island. We buy and sell goods and services to each other all day every day. But it's too rocky to grow much, there's no manufacturing, and half the time it's too windy to fish. So if the mail boat didn't come once a week with more "stuff" from the mainland, we'd probably starve to death.
      And yes, I understand the division of labor. But eventually, you're back to digging "stuff" out of the ground, whether in China or Kansas.

    4. As I recall from some Austrian reading years ago the same thing was once thought about agriculture, that everything outside of it was somehow less important, not as central, superfluous even. Sure we all need to eat. But agriculture has steadily shrunk as increased productivity freed labor and capital (stuff!) to fulfill other wants and needs, some for stuff, some for services, even as Americans have eaten ever better (at least judging by their average weight).

      Similarly, making stuff (manufacturing) will likely continue to shrink as a fraction of the economy even as the overall economy grows (or even if it doesn't). You are not wrong to think that we would suffer if we lived on an island with no way to manufacture anything. But that's not where the economy seems to be headed. It's going in the other direction, with ever more productive manufacturing processes available. The manufacturing sector might approach zero size, but unlike the island it would have limitless productivity.

      Here's a thought experiment: suppose 3-D printing and subsequent technologies make that device from Star Trek possible: give it a request and it makes anything for you on the spot. Now imagine it could make a copy of itself. Questions of raw material aside, what we call the manufacturing sector disappears; everyone has one of these. No more factories, warehouses, shipping companies, retailers, etc. Would there still be an economy? What would Mises say?

    5. point taken.
      I guess my retreat position is my use of the "stuff" term is symbolic, whether out of the ground or out of a replicator.
      But, now that I think about it, it seems you're talking about a jobs measured share of the economy and I'll grant you that. i.e. with massive productivity gains, hardly anybody needs to grow and build stuff. But that doesn't diminish it's importance.
      Sorry, kinda stream of consciousness here, I'm in the middle of trying to write software!!

    6. Hey, that's what I do! As a web developer the "stuff" I produce has become an essential part of the economy though there is almost nothing physical about it. It does take some physical stuff to make it (love my MacBook Air). It gets obsolete quickly, as do my skills, which must be replenished by (sometimes) paying others to teach me. This is the service side of the the economy, getting ever larger. You;re right, we'll always need a certain amount of real stuff, maybe an increasing amount per capita, as houses get larger, we own more things, etc, but as a share of the economy they may shrink.

      Then again, if you include all the stuff made in China, manufacturing and "stuff" making may be as large a percentage as ever!