Workforce Economics and Productivity

[ng_nighthawk]

I'm confused about this. Or maybe woeful is the word.

Why is it that as we get more efficient, instead of getting better livelihoods so many people get left behind? Or is this a problem that's created by the media?

Comments

[ng_nighthawk]

While brushing my teeth I came up with the answer to my own question.

In an efficient system, the savings the restaurant owner made from the dishwashers' salaries would go to a better product or lower prices. If a better product, then there's more work to be done which the dishwashers could potentially do.

If the prices are lower, then the customers can either buy more food there (resulting in more work, so the dishwashers can come back) or they can buy additional goods and services other places (providing work in other areas which the dishwashers could move into).

But if the restaurant is doing well, that's not what happens. The prices are the same, the quality is the same, but the owner pockets more of the money.

In theory competition would push him to pursue one of these other options, but the price of the dishwasher is so high that competition is not quite so fierce--it takes an already successful business to pull it off, or some financing.

So in our economy, as we've automated, while we have freed up people's time to do more, the benefit of that has all risen to the top. The people who can afford to own the automation are the people enjoying the benefits.

If what I'm saying is true, then you'd expect to see a greater disparity between rich and poor as automation and efficiency has increased, and you do indeed see that.

Of course, efforts like capping executive salaries and curbing bonuses are really just playing with the edges of the problem. In capitalist theory, the real solution is to make competition more fierce.

So maybe the answer is to make automation and technical efficiency cheaper and easier?

[srotu27]

I wonder about other things, too. Areas where automation and technical efficiency as a zero sum game might not be the better answer. Farm subsidies, for example. If we grew more of our own food in this country, if we didn't make it so prohibitive to provide food on the local level, would that create opportunity and jobs for people who lack access to the specialized training necessary for other kinds of jobs? I know pitifully little about this, this is definitely an oversimplification, and I know that this is an area you know a lot about, but it seems to me we freed people up to work in cities by moving toward factory farming. Now that we realize that factory farming etc. is not all it's cracked up to be and that a significant subset of people are positioned to and will choose to pay more for food grown and distributed using different models, can we work on swinging the pendulum in a better direction there? I'm not talking about migrant workers and sharecropping, but actually finding a way to make it profitable to run family farms and employ farm workers. Just my two cents.

[ng_nighthawk]

I'm not sure how farm subsidies come into the equation. When we're talking about subsidies, you're talking about corn (ethanol), cotton, and commodities. Commodity farming is a bit different than what you're talking about. Cotton farmers are very unlikely to turn to vegetable farming for local farmer's markets if their subsidies disappeared.

But still, your point is well taken. In my restaurant dishwasher, for example, the former dishwashers could be growing a garden near the restaurant. Or the owner could partner with a local farm, and using that income the local farm could hire the dishwashers.

Perhaps this is our different perspectives, but while subsidies can be ridiculously inefficient and a drag on productivity, I don't think they're directly related to this problem. Or, better said, they're another example of the kind of disincentive to achieve competitive pricing. I think the main thing with productivity increases is that they're used to increase profits, but rarely used to increase quality or lower costs to consumers.

I was pondering this some more and I think it might be that the curve on efficiency and productivity has gotten much more steep. It used to be that the difference between top of the line technology and the lowest technology still in use was not that high. Any enterprising mid-sized business might get the latest technology in, say, 1890.

But now to get the latest technology requires a much more significant investment, meaning that the opportunity to get competition in that space is more limited than it used to be. And the productivity rewards for adopting that expensive technology is much higher--our business in 1890 that was adopting new technology might double its productivity, but today a business adopting the latest technology might have 10x the output per employee over their less technical competitors.

Which means that there's a funnel effect at the top, which lowers competition, which means more centralized profits and more discrepancy between rich and poor.

Subsidies do the same thing, only based on political clout instead of access to investment capital.

[srotu27]

And this is where my ignorance of the area comes into play, and why I thought twice about posting at all. I've heard a lot, especially when I was in Iowa, about farmers being paid not to grow things. And I was amazed that almost all of them grow corn or soy pretty exclusively--- it's not like there's a broad diversity of crops being grown--- as you travel across the state, it's feed corn or soy in every blessed field. But we also face real problems related to our dependence on corn and soy, health problems at very least. It seems like this change from more independent farming (I've heard horror stories about everyone being forced to use the same seed and having crops destroyed or facing penalties if non-approved seed is used, but they're all very anecdotal) to more institutionalized farming (which I associate with subsidies, possibly wrongly), has narrowed opportunity for non-specialized work that has real social value. So when technology replaces workers without specialized training, there are fewer opportunities, even where there is a need. But (a) I'm speaking on a topic I know virtually nothing about, which means I'm probably looking foolish and (b) even if that were not true, it's tangential at best to your point, so I won't keep you going down this path. The "paying people not to grow things" is just a source of frustration for me, to the extent that it's true.