Weekend Economists Remember Wars that Didn't Have to Be November 6-8, 2015

[Demeter]

14. Technology, Competition and the 'Crapification' of Jobs

http://www.oftwominds.com/blog.html

The 'crapification' of jobs is the direct result of the 'crapification' of the economy.

Two recent articles shed light on the 'crapification' of jobs and the rise of income inequality:

Martin Wolf on the Low Labor Participation as the Result of the Crapification of Jobs (Naked Capitalism)

The Measured Worker: The technology that illuminates worker productivity and value also contributes to wage inequality. (Technology Review, via John S.P.)

While both articles offer valuable insights into the secular trend of stagnating employment and wages, I think both miss a couple of key dynamics. As a general starting point: if you want to understand the 'crapification' of jobs and wages, we have to look at the 'crapification' of the economy from the perspective of those who are doing the hiring: the employers. From the perspective of employees, the 'crapification' of jobs boils down to 1) low/stagnant wages for 2) highly structured, boring, repetitive and often difficult work. The decline in the quality, pay and upward mobility of jobs is directly related to the dynamics of globalization, financialization, and the surplus of ordinary labor and capital:

1. Increased competition suppresses wages as employers seek to cut expenses. Rents, taxes, healthcare, government fees, etc. all rise like clockwork; that leaves labor as the largest component that can be trimmed.

2. Cheap capital incentivizes replacing labor with new software/technology. With the cost of capital at all-time lows, the pressure to replace costly labor with new software, robotics, etc. is intense. Software, robotics and related technologies are dropping in price even as their productivity increases.


The reality is that humans can only be pushed to produce more if the tools they're using become more productive.

The second reality is that for many enterprises, these global pressures boil down to automate or die, with the purpose of automating being to reduce labor costs and boost productivity, as both are required to survive competition and stagnating sales.


3. The total compensation costs of employees is rising even if wages are flat. Employees (and the vast majority of pundits, most of whom have never hired a single employee with their own money) tend to overlook the overhead costs paid by employers: workers compensation insurance (soaring), healthcare insurance (soaring), disability insurance, unemployment insurance, 401K or pension contributions, etc.


Total compensation costs = wages + labor overhead. If labor overhead costs are climbing, the employer is paying more per employee even though the employees aren't getting a dime more in wages.


4. As system costs rise, those with stagnant incomes have less to spend. We can't say no to higher taxes, higher healthcare costs, higher junk fees, higher fees imposed by monopolies, etc. and so the share of income that is truly disposable is declining as the big-ticket expenses continue rising.

This means stretched consumers are foregoing expenses that they once paid for without thinking: the $350 blood test for the ailing pet, the broken air conditioner in the car ($500+ to repair), the after-school enrichment class, the Friday dinner out, etc., etc., etc.

The net result of stagnating income for 90% of the households is stagnant sales. The cheerleaders on propaganda-TV never mention that the rising corporate profits they are trumpeting are typically accompanied by declining sales and declining same-store sales. In other words, the "profits" are accounting gimmicks, not true profits earned on rising sales.



5. It is increasingly difficult to generate a profit in this environment unless you own/operate a monopoly or quasi-monopoly. Those focusing on the 'crapification' of jobs tend to look at global corporations--those with thousands of low-paying jobs or those doing extremely well (Google, Facebook, Apple, etc.)-- while everyone from Mom and Pop small businesses to mid-sized corporations are generally being squeezed by slumping sales and higher total compensation costs.

If the management of public companies don't meet Wall Street's grandiose profit expectations, they'll be fired. If small businesses lose money, the owners are forced to either close the business or go bankrupt. So everyone in the managerial food chain hoping to avoid the crapified employment market below their current job (i.e. those trying not to get fired) must crapify every job they manage to wring enough productivity and profit out of stagnant sales to keep their job.

The 'crapification' of jobs is the direct result of the 'crapification' of the economy.