THE NEW WORK ERA
a. Jobs vs. Work
The U.S. economy has lost millions of jobs in the recent recession, more than eight million since July 2007. The social and economic repercussions of such a huge exodus from the workforce – and the associated losses of income – are enormous. A central goal of the government’s stimulus plan was to create, or at least retain, jobs. The government uses a mathematical formula for calculating the impact of stimulus money, equating a certain amount of spending with a certain number of jobs “created.” By their logic and calculations, to spend enough money means that the unemployment crisis will be averted. Depending on what figure is used for total stimulus spending, the solution to the unemployment crisis could be just around the corner.
But let’s look inside what’s happening here and see if we’re getting what we’ve bargained for. First, let’s clarify what we mean by the word “job.” Seems simple enough, doesn’t it? Work. For an employer. For pay and benefits. But let’s go a little further.
When we hear the word “job,” we tend to think of working for a company or organization that pays us a wage for something like 40 hours of work per week. Often, this arrangement includes health and other benefits, and there are some associated workplace rights and responsibilities. Many of us consider this type of work arrangement be long-term, even permanent – in short, a “career.” When we hear the President or other elected officials speak of “creating jobs,” we tend to assume that what they truly mean is that they want to create permanent, full-time, long-term jobs for their constituents. That is a very worthwhile goal.
But there are nuanced differences between the terms “job,” “work,” and career,” even though we tend to think of them as synonyms. There are tremendous differences in what they really mean.
Jesus Didn’t Have a Job There. Got your attention? Good. No, in fact, Jesus didn’t have a job. Nor did his disciples. “Of course they did,” you might respond. “Jesus was a carpenter. Simon Peter was a fisherman. They all worked.”
AHA! That’s the difference. They all worked – fishing, building, farming, or one of any number of worthwhile pursuits – but they didn’t have “jobs.” Most were self-employed or unofficial contract-for-hire workers. It wasn’t until the onset of the Industrial Revolution that workers left the farms en masse and became “employees” with “jobs” at industrial sites such as factories. The “job” has tended to serve humanity well over the last 150-200 years. It has generally provided a steady household income to millions of workers, and has tempered wild swings in the variability of a life based on farming and pre-industrial labor, while simultaneously serving industry well by providing a reliable and committed workforce. Still, it is a recent development. It fits into an economic cycle. And like anything that is cyclical, it’s subject to change. That is the trend we have been following and those trend developments will have nearly as great an impact on members of the workforce as economic conditions themselves.
Daniel Pink, in his seminal book Free Agent Nation, asserts that there has been a massive voluntary migration from the corporate world to that of the self-employed, contract laborer. Now companies are returning the favor by replacing the productivity previously provided by employees with contract workers and technology.
Heard about the prospect of a “jobless recovery” in the economy? If the economy is truly recovering, as it very well may be, the number of jobs that have accompanied the recovery have been nowhere near commensurate with the level of increase in economic activity. It may be “jobless” for more reasons than the obvious. (And because of the rally in the stock market over the last year (which has nearly doubled since Obama’s first inauguration), there is grand talk that the U.S. economic recovery is nearly complete.) As many out-of-work Americans have confirmed over the last four years, looking for a “job” in this new, different economy may prove one of the least fruitful exercises a person can undergo. A new paradigm brings a new way of thinking – bringing about an entirely different way of fitting into the workplace. The consequences for education, wages, and the entire structure of business are enormous. Those concepts need to be on the table in front of all our government and business organizations if we are to effectively deal with these issues.
Companies that have made it through the Great Recession are more attuned than ever to what threatens their business. They can’t always control sales and revenue, but they can do their best to control costs. In the future, workplace productivity will be watched more closely than ever. Companies have seen their bloated payrolls shrink to the bottom line. To avoid a repeat performance, they will be very reluctant to hire any people beyond those necessary to produce. Put another way, companies will be reluctant to create jobs. I can't emphasize that enough. Companies will be reluctant to create jobs.
The reason is that companies procure productivity tools to provide output when there is demand for it (sales, inventory, etc.). Technology, design improvements, and shifts in behavior often reduce demand for human labor.
Companies have figured out that (depending on the task) their hierarchy of productivity tools looks something like this: • Additional hours from current staff • Temporary Labor • Technology • Contract Labor • (And finally) Permanent Hire
Why is that?
Because people (also known as: employees!) have their health care costs rise 20% per year, ask for raises, threaten to unionize or go on strike, fuss over parking spaces, have workplace rights that keep them from being dismissed, wear too much perfume, annoyingly smack their gum, commit sexual harassment, and then quit when times get better.
There is one expected irony in a poor job market: the claim that there are plenty of jobs out there, but that job seekers don’t have the right:
• Knowledge or degree • Work habits or “ability to work as a member of a team” • Place of residence
MoneyNews reported in August 2012 that the Federal Reserve believes there is a true divergence between employers and the labor market: “About one-third, or 1.5 percentage points, of the jump in unemployment from 5 percent as the economic slump began to its 10 percent peak in October 2009 can be traced to a mismatch between the supply of labor and job openings, according to a study released this month by the Federal Reserve Bank of New York. That leaves the remainder due mainly to a lack of demand.”
However, the Philadelphia Inquirer ran a counter article about the complaints of potential employers unable to find the knowledge and skill sets they need to stand out in today’s applicant pool. In a June 2012 article, they interviewed University of Pennsylvania Wharton management professor Peter Cappelli, who was asked his opinion of these claims. Like me, the professor isn’t convinced by this collective whine. Because he keeps a close eye on Labor Department statistics, he is well aware of the labor situation, and the private sector claims do not seem consistent with his findings.
"There were enough of these [stories] that it got into urban-legend status," Cappelli said in the interview. To highlight the situation, he has written an e-book: “Why Good People Can’t Find Jobs” (Wharton Digital Press).
From the article: “The problem, he learned, was not a lack of educated and talented workers, but a hiring system that has gone terribly wrong.
"I think it’s been exacerbated by the recession," Cappelli said. "Employers feel that they shouldn’t have to pay as much. I think we’ve gotten used to the idea that wages don’t go up."
So what are the issues? Here’s what Cappelli found:
The problem starts with managers who create wildly inflated descriptions of the talents and skills needed for these positions. "They ask for the moon," he said.
The human resources staffs that might ordinarily push back against these unrealistic requirements have been downsized and overworked into submission.
Computer technology makes it easier for job-seekers to apply, but also eliminates many qualified people from consideration when their résumés don’t match complex and mysterious algorithms. Cappelli provides an example of a job-seeker eliminated from the running for an on-point opening because his former title didn’t exactly match the job title for the opening in the company. The wrinkle was that the job title was unique to the company. “The only people who could have qualified for that post were people who had already held the job and left it.”
It’s really odd that these issues are raised during times of high unemployment. It would lead one to believe that there is an orderly, perfect employer/job seeker environment and it occurs only in good times.
b. JOBS! JOBS! JOBS!
Somehow, with all this intense focus on the economy, employment, and jobs, analysts suffer a total blindness to any causative factor other than a traditional recession. And the measures undertaken today to counteract a slowed economy and massive joblessness are little different from the WPA program implemented by Franklin Delano Roosevelt in 1935. The theme plays over and over again: pump enough money (and cheap credit) into the marketplace, and the multiplier effect of the stimulus will reinvigorate the American economy.
Every generation has seen disruptive technology enter the marketplace and disrupt industry sectors, dissolving related jobs. It just seems to be happening faster now (again, the exponential effect of Moore's Law). Masses of telephone operators, secretarial pools, the elevator operator, the full-service gas station attendant, the milkman, home ice delivery, chimney sweeps – all eliminated from the economy by some form of technological advancement (and some operational advances in business that promoted self-service when possible).
A central theme throughout the economic section has been that technology – whether it be robotic, 3-D printing, internet connectivity and retailing, Artificial General Intelligence, advances in medical science, or something else – will be destroy both industry and jobs. History has always confirmed that, as new technologies come along, older ways of doing things (and the associated labor) diminish or disappear. But history has also taught us that as the older classes of jobs disappear, new jobs arise with the new technology that replace – and sometimes even increase – the level of employment. It’s always worked this way, and whenever it seems that technology has overtaken the capacity of humanity and the economy to recover, economists assure us that this round will be like all the others and we’ll be fine. A whole new realm of employment opportunities will appear in the replacement industries, and the economy will move on. And again, it always has. Until now.
Here’s why it’s different now. It all comes back to the aforementioned concepts of Moore’s Law and exponential growth. Linear growth explains things that are on an absolute (or projected) increasing path at the same rate. It can show a rising age or any other numeric progression and generally rises as a straight line at a 30-45 degree angle. That is where we have been throughout history – again, until now. For most of the path of exponential growth, the slope resembles that of linear growth. Then it curves upward, rising from the straight line at a sharper and sharper angle. We are entering the last period of the exponential curve, before its slope becomes almost vertical. This is a phenomenon we have never experienced. This growth in technological advancement – Moore’s Law playing out – changes the game. Today’s economists, pundits, and soothsayers refer to the old paradigm where the next generation of jobs seemingly just materializes at the demise of the old order. Proven right time and again, there is an arrogant confidence that it will happen again. But when computers, robots, AGI, and other technological advancements can self-replicate, self-generate, and create on their own, the game has changed. They no longer need our input into the economy at the levels to which we’ve grown accustomed. There is no “next job” for us to migrate towards; they are already filled by an entity that can do it better, faster, cheaper and more reliably. That is the big difference. Ray Kurzweil’s technological Singularity is playing out.
Yet somehow we seem surprised and terribly anxious over this. We even had reminders in pop culture. In a 1964 episode of The Twilight Zone, entitled "The Brain Center at Whipple's," Richard Deacon, (the bald character actor with the heavy-framed glasses who also played Rob Petrie's boss on the Dick Van Dyke show) played the role of Wallace V. Whipple, the CEO of a huge manufacturing corporation under his family’s name. Whipple is mesmerized by technology and, believing in the economic and operational efficiency of a computerized device, decides to replace his huge workforce with the new technology. Once installed, the "X109B14 modified transistorized totally automated machine," allows Whipple to reduce his workforce through tens of thousands of layoffs. His plant manager, Hanley, and other employees try in vain to try to convince him not to close the plants, arguing that the social consequences of the lay-offs need to be taken into account, with so many families dependent on income from jobs there. Their requests unheeded, Whipple goes ahead with the plan to activate the new machine and close the plants. Ultimately, the board of directors deems his obsession with technology to be on the cusp of insanity and forces his retirement. In the last scene, Whipple runs into the equally unemployed Hanley at the bar down the street from the factory and tearfully declares his pain and frustration: "It isn't fair, Hanley! It isn't fair the way they...diminish us!” A robot had been put in charge to run the company.
So, armed with a lifetime of evidence that improvements in technology disrupt industries and jobs – that so many are “diminished” by technology – why do we ignore it now? The displacement of people from the economy by technology and robotics is no surprise. It was being portrayed on television fifty years ago! Perhaps the power of exponential growth really is that difficult to comprehend.
It is shocking to see how poorly government understands the mindset of the private sector. Harder still is figuring out whether government gets its opinion from the citizenry or vice versa, because both groups consistently cite job creation as today’s most important economic and political issue.
So let's set the table. Most reasonable people believe there is good reason to have public sector employees. We believe we should have teachers and firemen, police and the military. The vast majority of our public sector employees fit one of these categories. The cuts to these groups as well as to other public sector employment have had a measurable effect on joblessness in the US.
Most reasonable people also agree that long-term employment – long-term productivity – is centered in the private sector. This is where the vast majority of us should be interacting with the economy. So, politicians and the public are both chanting Jobs! Jobs! Jobs! But they don't seem to see this from a potential employer’s perspective. Politicians keep trying to induce potential employers to take on laborers that they don't want or need, and the public keeps blaming the politicians for not having successfully done so.
Please, do not equate the loudness of speech or the apparent depth of sincerity about addressing unemployment issues with the ability to do so in any politician, business leader or private citizen. I will say it another way: Government has spent out. They don’t have the money to hire directly. Unless and until government – at any level, against the private sector’s will and to the detriment of its bottom line – can force the private sector to hire people, or induce hiring at an outrageous cost , substantial progress to place people in “jobs” will not succeed. And, of course, economists – you know, the ones sitting in the captain’s chairs that completely missed the call on the Great Recession – are chiming in: Jobs! Jobs! Jobs!
“Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much.”
- Ben Bernanke, Princeton Commencement Address, 2013
"… 'Do we economists know anything?' And it is a very legitimate question. Because if you don't know enough to capture the most extraordinary event, economic event, in all of our lifetimes, what in the world do we really know? - Alan Greenspan, on economists. CBS Sunday Morning October 20, 2013
Many theorists admonish local business and government leaders to take an active role in curing local shortcomings in economic development – and this provides all the confirmation that politicians need that they can have a dramatic impact on the economy. Doing “something” is certainly more acceptable than sitting idly by. Too often, in those collective aggressive attempts to do “something” – to have more entrepreneurs, more creative class members or successful industry clusters, more Jobs! – the natural response is to try to induce them through sheer willpower and determination. But pushing the rope of artificially creating entrepreneurship, a creative class and cluster development is not working. The eternally-failing Global TransPark near Kinston, North Carolina is a glaring example of doing “something,” by encouraging the development of a cluster with little thought to the ultimate outcome. As evidenced by that project, over-aggressive efforts to do “something” may lead to bad mistakes and can be very expensive.
To my surprise, former North Carolina Governor Bev Perdue has shown a fuller understanding of the true reality of productivity than most elected officials. At the North Carolina Economic Developers Association conference in March 2009, the newly-inaugurated governor was a featured speaker. She expressed supreme optimism about the areas of the economy that she believed would be central to North Carolina’s economic future: green industry, the military, and aeronautics.
Then she went on to display an understanding of the economy that very few of our leaders possess. (Paraphrasing) “I believe the textile industry in North Carolina can still thrive,” she explained. “They might have to cut the workforce to increase efficiency and profitability, but…” WHOA! She said it! She said what every business in America has said for the last five years. Workers, with their rising healthcare and other costs; workers, who represent a huge percentage of business costs and unproductive overhead during tough times; workers, who are the human measure of these “jobs” elected officials fall all over themselves talking about; workers, who represent the biggest cost to virtually every company; yes, workers may have to be cut in order for the company to survive and prosper. Businesses are charged with making profits (and in this economy, surviving). Their disposition toward creating jobs is: “You’ve gotta be kidding. I’m trying to stay in business.”
I’ll give you an example of what I mean. In your next thoughts about job creation, try a little word exchange. I want you to replace the word “jobs” with the term "payroll expense." Because isn’t payroll expense exactly what those jobs mean to a pote