SMOKINCHOICES (and other musings)

January 29, 2013

Why our Workforce struggles.

DAVE MARTIN ASSOCIATED PRESS A robot paints brake drums at Webb Wheel Products in Cullman, Ala. Despite no new workers in three years, production is up 25 percent.

Technology taking toll on work force

Many middle-class jobs gone for good

By Bernard Condon and Paul Wiseman ASSOCIATED PRESS

NEW YORK — Five years after the start of the Great Recession, the toll is terrifyingly clear: Millions of middle-class jobs have been lost in developed countries the world over.

Even worse, most of the jobs never will return, and millions more likely will vanish, labor experts say. What’s more, these jobs aren’t just being lost to China and other developing countries, and they aren’t just factory work. Increasingly, jobs are disappearing in the service sector, home to two-thirds of all workers.

They’re being obliterated by technology.

Year after year, the software that runs computers and other machines and devices becomes more sophisticated and powerful and capable of doing more efficiently many tasks that people always have done. For decades, science fiction warned of a time when we would be architects of our own obsolescence, replaced by our machines; an Associated Press analysis finds that time has arrived.

  • “The jobs that are going away aren’t coming back,” says Andrew McAfee, principal research scientist at the Center for Digital Business at the Massachusetts Institute of Technology and co-author of Race Against the Machine. ‘‘I have never seen a period where computers demonstrated as many skills and abilities as they have over the past seven years.”
JAE C. HONG ASSOCIATED PRESS Jerald Vance waits to talk to a job counselor at a career center in Las Vegas as the recession was ending in April 2009. Since then, labor economists say 70 percent of the 3.5 million jobs gained have been low-paying ones.

The global economy is being reshaped by machines that generate and analyze vast amounts of data; by devices such as smart-phones and tablet computers that let people work just about anywhere; by smarter, nimbler robots; and by services that let businesses rent computing power when they need it, instead of installing expensive equipment and hiring IT staffs to run it. Whole employment categories are disappearing.

“There’s no sector of the economy that’s going to get a pass,” says Martin Ford, who runs a software company and wrote The Lights in the Tunnel, a book predicting widespread job losses. “It’s everywhere.”

  • The numbers startle even labor economists. In the United States, half of the 7.5 million jobs lost during the Great Recession paid middle-class wages, ranging from $37,000 to $68,000. But only 2 percent of the 3.5 million jobs gained since the recession ended in June 2009 are midpay. Nearly 70 percent are low-paying jobs; 29 percent pay well.

In the 17 European countries that use the euro, the numbers are even worse. Almost 4.3 million low-pay jobs have been gained since mid-2009, but the loss of midpay jobs has not stopped. A total of 7.6 million disappeared from January 2008 through this past June.

Experts warn that this “hollowing out” of the middle-class work force is far from over. They predict the loss of millions more jobs as technology becomes even more sophisticated. Maarten Goos, an economist at the University of Leuven in Belgium, says Europe could double its middle-class job losses.

Some occupations are beneficiaries of the march of technology, such as software engineers and app designers for smartphones and tablet computers. But, overall, technology is eliminating far more jobs than it’s creating.

To understand the impact technology is having on middle-class jobs in developed countries, the AP analyzed employment data from 20 countries; tracked changes in hiring by industry, pay and task; compared job losses and gains during recessions and expansions over the past four decades; and interviewed economists, technology experts, robot manufacturers, software developers, entrepreneurs and people in the labor force who ranged from CEOs to the unemployed.

The key findings:

• During the past 50 years, technology has drastically reduced the number of manufacturing jobs. Robots and other machines controlled by computer programs work faster and make fewer mistakes than humans. Now, that same efficiency is being unleashed in the service economy, which employs more than 80 percent of the work force in developed countries. Technology is eliminating jobs in office buildings, retail establishments and other businesses that consumers deal with every day.

• Technology is being adopted by every kind of organization that employs people. It’s replacing workers in large corporations and small businesses, established companies and start-ups. It’s being used by schools, colleges and universities; hospitals and other medical facilities; nonprofit organizations and the military.

• The most-vulnerable workers are doing repetitive tasks that programmers can write software for — an accountant checking a list of numbers, an office manager filing forms, a paralegal reviewing documents for key words to help in a case. As software becomes even more sophisticated, victims are expected to include those who juggle tasks, such as supervisors and managers — workers who thought they were protected by a college degree.

• Thanks to technology, companies in the Standard & Poor’s 500 stock index reported one-third more profit the past year than they earned the year before the Great Recession. They’ve also expanded their businesses, but total employment, at 21.1 million, has declined by a half-million.

• Start-ups account for most of the job growth in developed economies but, thanks to software, entrepreneurs are launching businesses with a third fewer employees than in the 1990s. There is less need for administrative support and back-office jobs that handle accounting, payroll and benefits.

• It’s becoming a self-serve world. Instead of relying on someone else in the workplace or our personal lives, we use technology to do tasks ourselves.

Technology is replacing workers in developed countries regardless of their politics, policies and laws. Union rules and labor laws might slow the dismissal of employees, but no country is attempting to prohibit organizations from using technology that allows them to operate more efficiently — and with fewer employees.

The lingering pain of the Great Recession is not entirely a result of technology’s advances. Other factors are keeping companies from hiring — partisan gridlock in the United States, for example, and the debt crisis in Europe, which has led to deep government spending cuts.

                        *                    *                *

.In the United States, the economic recovery that started in June 2009 has been called the third straight “jobless recovery.” But that’s a misnomer. The jobs came back after the first two.

Most recessions since World War II were followed by a surge in new jobs as consumers started spending again and companies hired to meet new demands. In the months after recessions ended in 1991 and 2001, there was no familiar snap-back, but all the jobs had returned in less than three years.

But 42 months after the Great Recession ended, the United States has gained only 3.4 million, or 45 percent, of the 7.5 million jobs that were lost. The 17 countries that use the euro had 3.5 million fewer jobs last June than in December 2007.

  • This truly has been a jobless recovery, and the lack of midpay jobs is almost entirely to blame.

Fifty percent of the U.S. jobs lost were in midpay industries, but Moody’s Analytics, a research firm, says just 2 percent of the 3.4 million jobs gained are in that category. After the four previous recessions, at least 30 percent of jobs created — and as many as 46 percent — were in midpay industries.

Others studies that group jobs differently show a similar drop in middle-class work.

ASSOCIATED PRESS    Steven Herman, left photo, is shown when he was head of the Library of Congress storage facility in 2003. At right is the “bookBot,” the current automated retrieval system in use at the James B. Hunt Jr. Library at North Carolina State University in Raleigh, N.C.

Some of the most-startling studies have focused on mid-skill, mid-pay jobs that require tasks that follow well-defined procedures and are repeated throughout the day. Think travel agents, salespeople in stores, office assistants and back-office workers like benefits managers and payroll clerks, as well as machine operators and other factory jobs. An August 2012 paper by economists Henry Siu of the University of British Columbia and Nir Jaimovich of Duke University found that these kinds of jobs comprise fewer than half of all jobs, yet accounted for nine of 10 of all losses in the Great Recession. And they have kept disappearing in the economic recovery.

  • Webb Wheel Products makes parts for truck brakes, which involves plenty of repetitive work. Its newest employee is the Doosan V550M.  It can drill holes on both sides of a 130-pound brake drum without missing a beat, and it doesn’t take vacations or “complain about anything,” says Dwayne Ricketts, president of the Cullman, Ala., company
  • Webb Wheel hasn’t added a factory worker in three years, though it’s making 300,000 more drums annually, a 25 percent increase.

“Everyone is waiting for the unemployment rate to drop, but I don’t know if it will much,” Ricketts says. “Companies in the recession learned to be more efficient, and they’re not going to go back.”

  • In Europe, companies couldn’t go back even if they wanted to. The 17 countries that use the euro slipped into another recession 14 months ago, in November 2011. The current unemployment rate is a record 11.8 percent.

European companies had been using technology to replace mid-pay workers for years, and now that has accelerated.

“The recessions have amplified the trend,” says Goos. “New jobs are being created, but not the middle-pay ones.”

Developing economies have been spared the technological onslaught — for now. Countries like Brazil and China still are growing middle-class jobs because they’re shifting from export-driven to consumer-based economies. But even they are beginning to use more machines in manufacturing.

  • One example is Sunbird Engineering, a Hong Kong firm that makes mirror frames for heavy trucks at a factory in southern China. Salaries at its plant in Dong-guan have nearly tripled from $80 a month in 2005 to $225 today. “Automation is the obvious next step,” says Bill Pike, the company’s managing director.

“By automating, we can outlive the labor-cost increases inevitable in China,” Pike says. “Those who automate in China will win the battle of increased costs.”

       *                     *                *

Candidates for U.S. president last year never tired of telling Americans how jobs were being shipped overseas. But many jobs cut in the United States and Europe weren’t moved. They vanished.

“It doesn’t have political appeal to say the reason we have a problem is we’re so successful in technology,” says Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University. “There’s no enemy there.”

      *                    *                  *

What hope is there for the future?

Historically, new companies and new industries have been the incubator of new jobs.   Start-up companies no more than 5 years old are big sources of jobs in developed economies.  In the United States, they accounted for 99 percent of new private-sector jobs in 2005, according to a study by the University of Maryland’s John Haltiwanger and two other economists.

But even these companies are hiring fewer people. The average new business employed 4.7 workers when it opened its doors in 2011, down from 7.6 in the 1990s, according to a Labor Department study released last March.

  • Technology probably is to blame, wrote the report’s authors, Eleanor Choi and James Spletzer. Entrepreneurs no longer need people to do clerical and administrative tasks to help them get their businesses off the ground.

(Jan’s comment: 

I bet many would agree that this article is a real downer.  It  leaves me wagging my head and concerned about the fates of our upcoming “citizens”   What kind of shot at fulfilling their dreams are even somewhat realistic?   And further – what has gone so wrong?  

As it states a few lines up – “there is no enemy there.”  .  .  .  so this says to me that my instinctive reaction is all wrong.  History suggests that ‘Americans’ dig down, go deeper and get creative.  That’s how we survived, grew stronger and became a truly great nation.  I have showcased companies who have survived, kept their businesses afloat because they cared much about their people – employees.  They cut different corners than what we are reading about here.  Why?  Because they chose not to out-source or lay off people who had become like family to them.  So less profit was the way to do it.   “Stayin’ Alive”  That’s kinda more the small town attitude rather than WALL STREET where the ‘smart money’ lives and breathes.  It’s doubtful that I am alone in that kind of admiration.   

This story is telling us that entrepreneurial “Start-ups”  are what accounted for  large percentages of new jobs in U.S. Maybe there is more ‘bang for the buck’ in that concept than appears on the surface.  Example;  I have personally had an idea about something which I would love to do regarding starting a company –  a  business.  I truly dig the concept of recognizing a need and filling that, because that IS how good stuff happens.  .  .  e.g. if there is something you want and it’s not “out there”. . . .well maybe somebody aught to try to get it out there  him/her self or myself.  If I really want this thing – others do too.   .  .  .  just sayin’.  .    There is start up money to be had, especially if you’re a woman (pardon my sexism).  In my case, I have let my age hold me back.  I’m too old to be xxxxxxxxxxxxx doing that, there’s not enough time. . .but what if I lived to be 102 and still had my wits about me?   How cool is that?   This idea was a handcrafted product done by craftsmen; would have needed a smallish workforce.   Have always preferred handmade or custom made over synthetic anything done overseas.   But that’s just me.   

And our brilliant American technicians – where are they now?  Anytime one needs a little help from the ISP or Cable company – your phone call is answered in the Philippines or elsewhere.  We really have to start demanding “Made in America” if we are to keep our sanity.   My 3 week ordeal in December and early January  dealing with just that sort of thing (changing companies) nearly landed me in the hospital.  And I intensely dislike that!).   Just trying to suggest that most of us would rather deal with our friends and neighbors rather than an overseas, non-English speaking stranger. And where we can manage it – – we should strive to make it count by means of our wallets.    

Get creative – – why not see what you can make “grow”.  .  .  Jan


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