5/21/2011

Are Lost Jobs Really Gone For Good?

In a post by Matt Patterson, he tries to make the case for jobs that have been lost during this deep recession never returning. While it may be true that some types jobs may be gone forever, it is not inevitable that the total number of jobs will decline from here on out. Through the process of “creative destruction”, one kind of job was replaced by a different one. But as Patterson writes, at least one economist thinks this pattern will no longer be true.

In his penetrating new book The Great Stagnation, economist Tyler Cowen warns that this may have been a temporary and anomalous phenomenon. Cowen calls the period from roughly the early 19th to the mid-20th centuries the era of “low hanging fruit.” According to Cowen, technological advances in this period were relatively easy to produce and exploit, resulting in a staggering explosion of living standards.

But by around 1970, most of this low hanging fruit had been plucked and growth rates began to slow. Indeed, growth rates are “lower today than before 1973, no matter what exact numbers you settle on for the absolute living standard.” Cowen sees this fact directly tied to the innovation plateau that was reached around the same time: “The United States produced more patents in 1966 (54,600) than in 1993 (53,200),” he notes. “Meaningful innovation has become harder, and so we must spend more money to accomplish real innovations, which means a lower and declining rate of return on technology.”

--snip--

This digital depressant trickles all the way down to old fashioned companies. McDonald’s recently announced it will do away with cashiers in many of its European restaurants, replacing them with touch-screen ordering systems. This innovation may (or may not) make ordering your Big Mac a faster experience, but it will definitely eliminate countless opportunities for young and low-skilled workers.

On his last point, couldn't it be the cost of labor in Europe is artificially high due to government mandates and labor laws that replacing expensive humans with less expensive technology makes economic sense? When government and labor laws make it more expensive to hire people for what would otherwise be minimum wage jobs, then how can it be a surprise to anyone that businesses like McDonald's won't hire them? (It's not all that different than what we see happening here every time the Leftists in Congress beholden to the labor unions raise the minimum wage. Each time that happens, joblessness among those seeking entry level jobs goes up because small businesses have a tougher time justifying the added expense, particularly during times of economic hardship.)

One commenter hit the nail on the head, detailing why Cowen's claim about the decline of the American economy is inevitable is absurd.

We are inventing more things, faster than ever before. The past innovations “destroyed jobs” — and made society wealthier and created new jobs, different jobs, to replace those that had gone before. This is nothing but the song of the Luddites.

HOWEVER…

For that process of creative destruction to work, it is necessary to ALLOW the new jobs and new industries to be created. And THAT, not some illusory “low hanging fruit”, is what has been changing over the last generation or two. The regulatory burden on new industries has climbed ever higher.

Right now, in laboratories around the U.S. people are working on fusion power, cheap space travel, synthetic fuel from algae, sensors for automated medical diagnosis, and so on, and on, and on.

And if we lived in a free country, sooner than you think, some of those would be part of our everyday lives. The decision to decline is a CHOICE — not a fate.

Unfortunately or fate is in the hands of people within government who really don't like America all that much and are working as hard as they can to cripple its innovative and robust economy in an effort to make it more egalitarian (at least by their definition). Unfortunately we've seen the results of such socio-economic experiments before, and they've always turned out poorly for everyone involved...except the ruling class, of course. (And even then, some have seen their fiefdoms crumble away and leave them as destitute as the rest of their fellow countrymen.)

Unless we can break the government imposed malaise on our economy, we will indeed see those jobs lost over the past few years gone for good, with no new jobs to replace them, and we will indeed decline as a nation.