The Fed, Scary Robots, And The Puritan Work Ethic
For some reason, frightening labor has done nothing to increase productivity.
Andrew Yang has made Universal Basic Income a central plank in his campaign. He’s telling us that the robots are coming and that he has the data to prove it.
Frankly, his story is a bit chilling, and it is certainly motivating. Yang’s work to promote a policy of a Universal Basic Income got me thinking that when it comes to productivity, nothing is working. Not innovation, not scaring the daylights out of labor, not even monetary policy. Every day, I hear noise about job insecurity, as if that will make us do more for our masters.
Many years ago, while researching and writing an article for my other blog, The Digital Firehose, I found this very interesting testimony from former Federal Reserve Chairman, Alan Greenspan. Here’s an excerpt:
If heightened job insecurity is the most significant explanation of the break with the past in recent years, then it is important to recognize that, as I indicated in last February’s Humphrey-Hawkins testimony, suppressed wage cost growth as a consequence of job insecurity can be carried only so far. At some point, the tradeoff of subdued wage growth for job security has to come to an end. In other words, the relatively modest wage gains we have experienced are a temporary rather than a lasting phenomenon because there is a limit to the value of additional job security people are willing to acquire in exchange for lesser increases in living standards. Even if real wages were to remain permanently on a lower upward track than otherwise as a result of the greater sense of insecurity, the rate of change of wages would revert at some point to a normal relationship with inflation. The unknown is when this transition period will end. — The Federal Reserve’s semiannual monetary policy report
Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate
February 26, 1997 (emphasis mine)
Chairman Greenspan was commenting on how employees were willing to trade wages for job security and that was back in 1997. He’s taken note that employers have been using a wide range of tactics to scare labor into accepting lower wages in order to stay employed. Greenspan also notes that at some point, the willingness of labor to stop conceding wages for greater job security will end. As far as I can tell, that hasn’t happened yet. Even in this Trump economy.
And now we hear about the scary robots. The story that Yang is telling us is that robots will take our jobs and that labor will have nothing to trade in return for shelter, food, and clothing. Yang says he’s a data guy and that he’s looked at the data to reach his conclusions.
Yet, when I hear the story of robots taking our jobs, I hear one more attempt to frighten labor into foregoing yet another raise. I see the meme in my mind of the kiosk at McDonald’s ready to take our order, ready to replace a worker for $15 an hour.
Dean Baker is an economist at the Center for Economic Policy and Research, and he’s not seeing the data to support the idea that robots are taking our jobs. In his article, The Robots Taking the Jobs Industry, after a rather long examination of the available data, he makes the following statement:
In short, nothing about the robots-taking-our-jobs story makes sense. It hasn’t been happening, no major governmental agency or international organization expects it to happen any time soon, and if it did, it should be a good story for workers. If the robots turn out to be generating inequality it will be because of our robot policy, not the robots. (emphasis mine)
Baker can make this statement because productivity growth data doesn’t support the claim that robots are taking our jobs. Since 2006, productivity growth has been about 1.3% a year. Baker compares that to a productivity growth rate of nearly 3.0% from 1947 to 1973, a period of relatively low unemployment and strong wage growth. Baker also points out that if the robots were really taking our jobs, then productivity growth would be much higher than it is today. It’s not.
So despite all this great technology that surrounds us today, productivity growth lumbers along at 1.3% a year. I’m thinking that if employees were really worried about losing their jobs, they’d be working their tails off, generating 3% productivity growth. Or the technology they’re using would just make them more productive. And it should be clear by now that all that fear-mongering about the robots taking our jobs is not making us work harder.
Workers faced with wage stagnation, job insecurity, and scary robots are not working hard enough to pull off a 3% productivity growth year. Not now, not anytime soon. Baker says that there is zero data to support such an increase, though that could still happen.
The puritans among us will remind us that we must suffer for our keep. So we should be losing our sleep, our hair, and our health just to keep our jobs? How many people have to go postal before we figure out that fear doesn’t make people work harder, faster? It seems that we’ve ignored the part of the data where it shows that low unemployment and strong wage growth coincided with far greater productivity growth.
Oh, wait. What is productivity growth again? From Investopedia:
What Is Productivity?
Productivity, in economics, measures output per unit of input, such as labor, capital or any other resource — and is typically calculated for the economy as a whole, as a ratio of gross domestic product (GDP) to hours worked. Labor productivity may be further broken down by sector to examine trends in labor growth, wage levels and technological improvement. Corporate profits and shareholder returns are directly linked to productivity growth. (emphasis mine)
In the press, we’re led to believe that shareholders (you can think of them as “our masters” — for now) haven’t been doing so well. In an article Baker published late last year during the brief bear market of December, he notes:
The long-term average for real returns had been over 7.0 percent prior to 2000. It has been considerably lower in the last two decades, with the recent plunge putting the annual average under 4.5 percent.
The decline in stock returns is consistent with lower productivity growth, isn’t it? Innovation is a factor in productivity growth. When I think of innovation, I think inventions, technology, shop floor knowhow, but mostly, technology since that is what makes our jobs easier. So even now, at the height of humanity, in the richest country in the world, the best we can do is eke out 1.3% productivity growth?
Hmm. I thought we issued patents to encourage innovation. It doesn’t seem to be happening. Um, who owns the most valuable patents? The top 1%. Are they earning their keep? Well, yeah, if you look at how well they’ve been holding down labor costs. Still, if the technology is so great, why is productivity growth so low now compared to the way it used to be?
I have no clue. But I can be fairly sure that scaring the daylights out of labor isn’t working. Rewarding those at the top with even greater profits isn’t working. Ensuring that at least some of the people in American are resigned to a life of grinding poverty isn’t working. They’re suffering, aren’t they? Isn’t that an element of the Puritan Work Ethic? Work so hard to make a quick buck and never get ahead?
If there is a direct relationship between labor and earnings, it’s not readily apparent here. Too many people at the top are trying to game the system rather than actually producing something that we need. You know, like clean air, water, and soil? How about a decent education for our kids so that they can have a better life than we had?
Caitlin Johnstone may be on to something here. She points out, that we need to “fundamentally change the system” first before we dive headlong into a UBI. She’s right about that, not so much about the robots, though. And Dean Baker agrees with her about changing the system that funnels money to the top at the expense of the bottom, though he probably doesn’t know of her. Still, this is a start.
I hope that Andrew Yang has seen and considered the data that contradicts his views. Especially if he does actually get elected as president.