[Sixstrings]

Sixstrings said:
"...AUTOMATION is why we're now past peak employment."

Low wages, high productivity, decent quality, and a really cheap currency all have a part of it, but automation does not. The only way the US was able to be close to competitive for a long time was the level of automation here, and when Asia caught up with us in automation, the US took a licking for the above reasons.

I agree those issues are a majority of the problem. But I think peak productivity is the other half of the problem.. when you combine all these forces, the American middle class is utterly doomed.

[Sixstrings]

Let me add the idea that while there cannot be infinite demand for nails or any other item, there can simply be more items.

Yes, but demand for "more and more items" is ultimately finite -- consumers still only have 24 hours in a day to do all this consuming.

Let's say McDonald's develops new automation tech that enables them to eliminate half their restaurant staff. Using your "just create more items" example, you'd have to double the number of all fast food restaurants to end up with the same number employed as before. The problem here though is that demand is finite -- as fat as consumers may be, they still can only eat so much within a 24 hour period. So if restaurants figure out a way to cut out half their workforce, those jobs are just gone forever -- because demand is finite, and at least in the US we're pretty well saturated with fast food joints.

The point I'm trying to make here is that the current paradigm demands that every industry and service become more efficient year after year, always needing fewer employees than before, while at the same time serving even more consumers than before. But THIS HAS TO END SOMEWHERE, there is a finite number of people on the planet who have a finite number of hours in which to consume goods and services.

Just as infinite growth is unsustainable, infinite productivity is unsustainable.

[Ibon]

Let's say McDonald's develops new automation tech that enables them to eliminate half their restaurant staff. Using your "just create more items" example, you'd have to double the number of all fast food restaurants to end up with the same number employed as before. The problem here though is that demand is finite -- as fat as consumers may be, they still can only eat so much within a 24 hour period. So if restaurants figure out a way to cut out half their workforce, those jobs are just gone forever -- because demand is finite, and at least in the US we're pretty well saturated with fast food joints.

I agree with you totally about your point of peak productivity especially if there are no longer any disruptive technologies that can create new markets and jobs. But this example of McDonald's could point to a progression say toward the replacement of these fast food industry jobs and a move toward say what Italy, France or Thailand have as examples of countries who dedicate a lot of their economies to the "slow food" industry of growing locally fresh produce, harvesting and selling them daily, preparing meals that take time. If American culture adapted to say these values imposed somewhat by further recession and the constraints of the fossil fuel costs in maintaining the fast food industry, then you have to wonder how many people this could employ?

[Ibon]

a study by the Kaufman Foundation[/url] found that new business formation is remarkably constant over time, so even though the movie rental place and the equipment rental place in our little town have gone belly up in the last couple of months, some new businesses will open more in tune with the times, maybe a real bakery, maybe a new greenhouse, maybe a Weatherization Supply Outlet, who knows?

.

Here is a picture taken by Berenice Abbot of a Hardware Store in Manhatten in the 1930's. This could be the new and upcoming storefront business you refer to Pop. Adding to the items on the photo could be some recycled computers, solar cells and spare parts for repairing wind generators, digital gadgets to distribute energy efficiently etc.



Sixstrings got me thinking about this peak productivity. How much consumption would there be if we were less efficient? Not only from the point that we would produce less but also have less time to consume.

I think increased efficiency at this point is maladaptive.

[Sixstrings]

I agree with you totally about your point of peak productivity especially if there are no longer any disruptive technologies that can create new markets and jobs. But this example of McDonald's could point to a progression say toward the replacement of these fast food industry jobs and a move toward say what Italy, France or Thailand have as examples of countries who dedicate a lot of their economies to the "slow food" industry of growing locally fresh produce, harvesting and selling them daily, preparing meals that take time.

Here's a Japanese robot that can make pancakes:


So even if tastes shift towards higher quality, it's not beyond the realm of possibility that even that could be automated. But I don't want to get tied up in the food industry example, my whole point is that the "produce more goods while employing less people" model applies to EVERY industry.

Take retail, for example.. for quite a while, my local Walmart laid off half their cashiers in favor of customer self-checkouts. They finally stopped it because people were stealing too much. But believe me, as soon as it becomes cheap enough to put a security tag on every food item, they won't hesitate to eliminate those cashier jobs in favor of the much cheaper automation.

[Ibon]

Maybe I am going off track with this thread but my intuition tells me it is somehow related. So anyway yesterdays NY times had two articles that caught my eye that seem to somehow be relevant to this topic. The front page article was on how disruptive to social and family life all the digital media can be and then on page three was an article on the suicide rate of Chinese factory workers who are overworked and underpaid.

On one end the human slavery and on the other the willfully enslaved with their digital gadgets. The Chinese worker leaves the agrarian province to toil in sweat shops with the promise of economic gain and the bored modern consumer buys an IPad to add to their digital arsenal believing this will put them more "in touch".

Related to this peak of productivity there is also a peak as to how far we can go with this consumer producer paradigm when the sacrifices made on either end are not worth the rewards promised.

When 75% of the consumers in the coffee shop who apparently went there for some sense of common space are all looking into their labtops then at what point do they look up and say WTF am I doing?

Can this really go on for an extended period of time still?

[Pretorian]

that an even bigger destroyer of jobs has been automation.

If you own a small shop making nails. And it takes you 1 hour to make one nail. Now you buy a little machine and you now make 2 nails per hour. Your productivity just doubled. Essentially without competition you can now maintain the same standard of living with only half the amount of work. Or you can work the same as before and your income doubles. Of course you will also need to LEARN how to use the machine. And that's the key. You need to educate yourself for a changing job market, because with automation the jobs don't disapear, but they change. Instead of welders and machinist you now need operators, computer programmers, network specialists and so on. Uneducated and unskilled labours are plentyful and that's why they are cheap.

The biggest destroyer of jobs is slacking and letting the competition get ahead of you.

sorry but thats a load of wash. Just because you learned how to make 2 nails an hour with that little machine of yours does not mean that the demand appears out of nowhere for your extra nail. So somebody is getting nailed one way or another (perhaps, with his very own nail). If automation wasnt killing real jobs we wouldnt have 90% of population occupied in luxury items and services and pretending to be busy at governmental jobs. We would not have to invent millions of different job titles just so people feel good about themselves and their usefullness and think they really earned their bread.

[dsula]

So this is what I mean by technology reaping ever more massive levels of productivity. And yet, demand is finite. As fabulously productive as Netflix is (1,000 employees producing almost two billion in annual revenue).

You're right and wrong at the same time. Your example with Netflix:
Since netflix can do the same job with only 1000 people they are fabously more efficient and therefore cheaper. As a consumer you now have spare change left after paying for netflix. With this spare change you're going out to McDonald and can afford a hamburger. And since mcdonald just applied serious automation they only do with half the staff. Therefore their burger is no only 49cents instead of 99. So you still got spare change left and you spend it ultimately on some computer game or some other item. So instead of supporting 10 employees of blockbuster you ended up supporting 1 at netflix, 1 at mcdonalds, 1 at some other store and so on.
THere is NO limit to consumption. If you COULD you would buy a new car every week, a new house every half year, have the best health insurance there is. Buy more more more. A trip to the moon, 7 differently colored ipods, one for each week. There is NO limit to consumption. THE END GOAL OF A CONSUMER SOCIETY IS TO CONSUME AN INFINITE AMOUNT OF GOODS IN A INFINITE SHORT AMOUNT OF TIME.

Whereas the US was ahead of the world by ages in respect to technology and inovation it is not anymore. And that is the reason why salaries in the US start to slip. Do you honestly think that the work of an uneducated chineese assembly line worker is of lesser value than the a high school drop out in the US?

[dsula]

sorry but thats a load of wash. Just because you learned how to make 2 nails an hour with that little machine of yours does not mean that the demand appears out of nowhere for your extra nail.

That's correct. But if demand is not picking up you now have half of your time off while still maintaining the same standard of living. Isn't that nice? By the way that is the foundation of industrialization. Be very very productive with machine and automation so you have a lot of spare time to do other fun stuff in life, such as 40 hour weeks, paid vacation, spare cash for more than just housing and food. All because of productivity and automation.

Try your life without any automation (that includes ANY tool) for a while and report back how you're doing. How's the plowing go? The hunting? The wood chopping? Keep in mind, automation is nothing else than a sophisticated tool, nothing more than a smart axe, or a clever hammer.

[Sixstrings]

You're right and wrong at the same time. Your example with Netflix:
Since netflix can do the same job with only 1000 people they are fabously more efficient and therefore cheaper. As a consumer you now have spare change left after paying for netflix. With this spare change you're going out to McDonald and can afford a hamburger.

Well, I actually spend more on Netflix than I ever did at the video store. Prior to Netflix I probably averaged out to one rental a month. I'd go months sometimes without ever going to the video store, whereas now I pay Netflix every month (around $15) whether I rent a movie or not. I like it though, just for the convenience and selection. But cost wise, I'm not spending less there I'm spending more.

But your point holds true with other things.. my PC died a couple months ago. I was surprised how cheap a new one was.. $500 at Best Buy for the new core i3 processor, 6gb ram, 1tb hard drive. I used my old monitor.. $500 for pretty much top of the line home use wise is darn cheap, that's the same as an iPad.

And with that said, I'm gonna have to stop with all the examples because it's exhausting. Bottom line is that this is a very complex subject, and it would take an economics PhD thesis to even begin to get a handle on whether or not automation is currently giving us a net gain on total jobs. One thing we know for sure is that on net we currently aren't creating private sector jobs in the US. There is a reason for that -- either offshore labor, automation, or a combination of both.

[patience]

Pretorian said:
"If automation wasnt killing real jobs we wouldnt have 90% of population occupied in luxury items and services and pretending to be busy at governmental jobs."

And people are doing those things because? How about because the Chinese have the manufacturing jobs that used to be in the US? Why? Because they can do it cheaper, in dollar terms. The average Chinese factory worker makes significantly less than a US union employee, IIRC. They have no unemployment insurance--if they don't work, they may starve. Real incentive there. No OSHA, no EPA, no minimum wage, no medical insurance, no pension, etc., ad nauseum. Wonder why they can make it all cheaper?

The "service" economy in the US is the last stop before a dead economy. I think we are just about at the saturation point of car washes, nail salons, and burger flipper jobs.
What we are seeing now is a levelling of the standards of living around the globe, or at least, some moves in that direction, because capital will seek the cheapest place to do production. The US, Germany, and other highly paid areas will get paid less in the future, and the poorer areas will make a little more that they used to make, so it sucks to be in the US right now.

[Newfie]

Pops, I could not get your questions so I didn't vote, but here is my long winded answer.

We are going down, never to return. Why?

Peak fossil fuel calories per person has long since passed. Each calorie now has more "buyers", supply and demand will win out.

Peak productivity. We are getting old dude. So while we remain highly productive, on an individual basis, those workers MUST be more and more productive to pay for my Social Security (and your!)

We are running out of water. Pick up the latest National Geographic, and more importantly, the IEEE Spectrum to get a real reality reset.

Lack of food and water in the poor nations opens us to epidemics; medical or terror - pick your poison. We will not be able to dodge that bullet forever. And we are not smart enough to figure out realistic strategies.

So, I feel strongly that you and I have lived through the best that is to be.....in the current model. Others can have great lives after us, but they will need a new normal...which includes honing your adaptive skills.

2¢

[Sixstrings]

The "service" economy in the US is the last stop before a dead economy. I think we are just about at the saturation point of car washes, nail salons, and burger flipper jobs.
What we are seeing now is a levelling of the standards of living around the globe, or at least, some moves in that direction, because capital will seek the cheapest place to do production. The US, Germany, and other highly paid areas will get paid less in the future, and the poorer areas will make a little more that they used to make, so it sucks to be in the US right now.

I agree 100% with all that. When I was looking into these issues, I ran across the automation / efficiency / productivity factors. I know you don't think those are significant factors, but I think that along with the cheap foreign labor issue the productivity angle is just an extra kick in the gut.

What it all comes down to is that jobs are still being created, just not in the US -- they're low wage jobs in India, China, etc.

[Pops]

Another great bunch of comments!

Sorry newfie, the question: are we already moving into a zero growth economy?
yes
uncertain
no
could you repeat the question?

My kneejerk is to agree with patience about the economy, on the other hand, look at the example of me and patience. Both part of the group of older men now experiencing high and prolonged unemployment and guess what? We both have small business of our own and haven't starved yet - he fixes things and I grow some things and provide some services.

The netflix example of increasing efficiency was a good one, thanks. One of the things I like about modern life - if you work things right and don't necessarily want everything and want it now, you can live pretty good without working much. Living on the Edge of the rich world is a good place to be.

[patience]

Sixstrings said:
"....automation / efficiency / productivity factors. I know you don't think those are significant factors, but I think that along with the cheap foreign labor issue the productivity angle is just an extra kick in the gut."

All true. I think we were talking about different points in time. I was saying that the US and Asia were on a competitive footing for automation and productivity 15 to 30 years ago, when the jobs started moving out of the US, primarily because the difference and that time was cheaper labor. Now, US productivity sucks, too.

Tool and die shops are about dead here. A company down the road that makes frames for the small Ford SUV's, stamps these out of coil strip stock with a huge punch press. Those huge dies used to be made in the US, but now are made in China because the price is about 35% of what it costs to build the dies here. That is all CNC and manual machining and handwork. No difference is methods, hours worked is very close to the same, only lower labor costs. Materials are the same, supplied by the US plant. So, productivity there is not the issue. The quality is crap on the Chinese dies, but Ford doesn't care.

IIRC, Mahindre (sp?) tractors are the ones made in India (400 series , I think it was) from the old drawings, dies, and casting patterns of the International Harvester plant that closed in Louisville in the 1970's after a protracted labor strike. (I narrowly missed going to work there as an engineer just before the strike started!) Again, the quality of the tractors ain't what it was when IH made them, but people buy 'em anyway. Just not as many. So, IH closed a plant and downsized, then merged with Case to stay alive in a tough market.

What has kept IH going is quality and service. You can STILL buy every part for a Farmall Cub made 70 years ago! (And most of them are still running.) But the Wal Mart mentality has won out in most places, so price is the bottom line for most people, and that means that the US is losing.

[Pretorian]

sorry but thats a load of wash. Just because you learned how to make 2 nails an hour with that little machine of yours does not mean that the demand appears out of nowhere for your extra nail.

That's correct. But if demand is not picking up you now have half of your time off while still maintaining the same standard of living. Isn't that nice? By the way that is the foundation of industrialization. Be very very productive with machine and automation so you have a lot of spare time to do other fun stuff in life, such as 40 hour weeks, paid vacation, spare cash for more than just housing and food. All because of productivity and automation.

Try your life without any automation (that includes ANY tool) for a while and report back how you're doing. How's the plowing go? The hunting? The wood chopping? Keep in mind, automation is nothing else than a sophisticated tool, nothing more than a smart axe, or a clever hammer.

hey, i said automation kills jobs, but i didnt say that it is bad.

[Pretorian]

Pretorian said:
"If automation wasnt killing real jobs we wouldnt have 90% of population occupied in luxury items and services and pretending to be busy at governmental jobs."

And people are doing those things because? How about because the Chinese have the manufacturing jobs that used to be in the US? Why? Because they can do it cheaper, in dollar terms. The average Chinese factory worker makes significantly less than a US union employee, IIRC. They have no unemployment insurance--if they don't work, they may starve. Real incentive there. No OSHA, no EPA, no minimum wage, no medical insurance, no pension, etc., ad nauseum. Wonder why they can make it all cheaper?

The "service" economy in the US is the last stop before a dead economy. I think we are just about at the saturation point of car washes, nail salons, and burger flipper jobs.
What we are seeing now is a levelling of the standards of living around the globe, or at least, some moves in that direction, because capital will seek the cheapest place to do production. The US, Germany, and other highly paid areas will get paid less in the future, and the poorer areas will make a little more that they used to make, so it sucks to be in the US right now.

I agree with all that but then how do u explain Germany keeping its productive sector? Labour costs are atrocious there. And all those epa, unemployment, pension, healthcare , ets are there too.

[Sixstrings]

I agree with all that but then how do u explain Germany keeping its productive sector? Labour costs are atrocious there. And all those epa, unemployment, pension, healthcare , ets are there too.

I'm taking a guess here, but shipping wise isn't Europe farther from China than the US is? The US is also closer to cheap manufacturing labor in Mexico and Central America (Costa Rica has a big Intel plant, for example).

So I'd think Germany's kept some advantage just for being closer than China, I imagine it costs more to ship from China to Europe vs. just across the Pacific to the California ports. Or maybe I'm wrong, I guess Europe's China trade goes around India through the Suez and then the Med.

I'd also guess Germany must have placed a much higher priority on protecting their domestic industry. It's not like the Germans to gut themselves hollow, shipping all their equipment to China in exchange for plastic pumpkins. I think maybe the Germans know how important manufacturing is. Maybe Germans are just more patriotic than Americans. In the US, venture capitalists don't give a flying fig about this country, maximized profit is their only motive.

[Pops]

Just for the record, US manufacturing sales have increased 80% in the last 20 years, a far higher increase dollar wise than all countries but China.

We still make a quarter of all the "Stuff" (down a few points from '90) and we still only have 5% of the worlds population.

List

compensation

[efarmer]

Between shifting the manufacturing process to using foreign value added materials, components, and sub assemblies, and also fully exploiting automation, I think the manufacturing dollar growth can be almost decoupled from domestic manufacturing jobs growth.

We are doing an experiment to see if you can make a society without a middle class,
to me this is like taking the insulation from between two high voltage wires.