Friday, July 29, 2016

Back to the Minimum Wage: Two Months of Commentary and Doubt

Along with self-driving cars, ride-sharing companies, robots, and guaranteed income, we will remember 2016 for minimum wage raises, both voted-in and proposed, in the jobs news.  Three months ago I addressed what had been written on this subject, along with a few early results, over the previous two-plus years.  There has been more, especially in May.

On the 5th of that month, Fox Business published a piece calling different views between Florida’s and California’s governors an “epic fight over the $15 minimum wage.”  I don’t know if it was either, but it showed some differences between how California’s Jerry Brown and Florida’s Rick Scott saw the issue.  Essentially, Scott said California would lose 700,000 jobs by the time its $15 became effective in 2022, whereas Brown maintained that his state had recently been gaining many positions anyway.  Although California’s first, $1, increase was greeted by an end to 54 consecutive months of seasonally adjusted employment gains, the two are different.  Florida has many significantly populated areas, throughout its panhandle and scattered throughout its peninsula, with low costs of living and modest employment opportunities.  Except for the southeast, most of the state is economically conservative, with residents, the bulk of whom moved in from elsewhere, enjoying the lack of a state income tax and, due mainly to what is now a $50,000 primary-house homestead exemption, generally low property levies as well.  California, though, a perennial Democratic presidential candidate chooser, has its population concentrated in its unusually liberal cities, so its constituents are more likely to support high taxes.  With living expenses higher than almost any other state, that $15 per hour has vastly more appeal than it would in the likes of Gainesville or Panama City. 

Two articles, “Wendy’s Serves Up Kiosks as Wages Rise, Hits Fast-Food Drive” (Investor’s Business Daily, May 11) and “Fast food workers are becoming obsolete” (Yahoo Finance, May 16) describe restaurant ordering touchscreens.  In Hong Kong in January I saw such things at each McDonalds – they were not the only way customers could order, but, maybe since they could be activated by smart phones as well, many younger customers preferred them.  They are now making landfall here, also at Panera Bread and Wendy’s, and are not only cutting labor costs but are proving to be more convenient for customers, who not only use lists of possible ingredients to request custom-made sandwiches but can store and reorder their favorite combinations.  McDonalds and Wendy’s management both named higher minimum wages as reasons for installing these devices, which, even if they are not made mandatory, seem like improvements as well as cost-savers.

If he didn’t do it before, in back-to-back opinion pieces Forbes contributor Tim Worstall established himself as an opponent of any mandated pay floor, let alone an increased one.  In “Sad But True:  A Higher Minimum Wage Means That Some People Will Be Worse Off, Will Get Lower Wages” (May 14), he showed that some British workers lost shift and holiday differentials when their bottom rates were forced up, and other employers had cut perks and other benefits.  The next day, in “The Minimum Wage Kills Jobs Through Automation Bit By Bit, At The Margin,” he made the point that every required pay increase has potential to make machines more cost-effective.  Boosting hourly rates from $7.25 to $8, for example, will not facilitate introducing machines costing $12 for each equivalent hour of labor, but if they work out to $7.75 instead, businesses may have no choice.  Another important thing to realize here is that these job losses are not instantaneous – it may take management months to agree upon the new equipment, and longer for it to be manufactured, to arrive, and to be actually working.  Therefore, early judgments that a higher minimum has not cost jobs may be premature. 

A third Worstall Forbes contribution, July 26th’s “As I Predicted, Seattle’s Minimum Wage Rise Is Reducing Employment,” cited research showing that while that area has done well since its April 2015 increase, that lift could be charged with 1% lower employment than would otherwise have occurred.  He also made a supply-and-demand point I put forth before, that even if we don’t know the extent, it makes no sense to think that minimum wage enhancements do not cause at least some jobs to go away. 

Although raising the lowest pay rate does not eradicate much poverty, not every article pointing that out is on the right track, as shown by “A Minimum Wage Problem or a Lifestyle Problem?” (Tom Gerdy, Huffpost Business, May 16).  Lines such as “we mistakenly believe that the road to happiness is found in things,” and listings of the prices of smartphones, cable TV, and even the likes of “tattoos and piercings” seem equivalent to those that could have been put together any year since 1945 or before.  We need not conflate goods and services priced for those with middle-class or higher income with those needed for survival to critique forced pay raises – we have plenty of good reasons we can use instead.

In Ars Technica on May 24th, Sam Machkovech recapped how former McDonalds CEO Ed Rensi expected higher fast-food minimum wages to open doors to a wide range of machines, some of which, such as “a $35,000 robotic arm” cost less than “to hire an employee who’s inefficient making $15 an hour bagging French fries.”  Rensi’s point is the same as Worstall’s second one, that technology, which can improve given enough incentive provided by increasing the cost of humans, will become more worthwhile. 

Finally, The Economist got into the act, with “Maximin” (June 25th), presenting various data on 15 American cities with minimum wages above the still-current $7.25 national rate.  It made arguments for and against those increases, with perhaps its most salient in the last paragraph:  “The Fight for $15 campaign is often guilty of a bait-and-switch, justifying much higher minimum wages with reference only to food-service giants like McDonalds, but then endorsing them across the whole economy.” 

These points, namely differences in geographic areas, employers cutting benefits and differentials, technological replacements being delayed but permanent, and the gulf between huge national employers and weak local ones, are all valid.  They will all play roles in how our higher minimum wages work out.  Just how, and when, we will see. 

Friday, July 22, 2016

Robots: Misinformation Still Coming Out

One of the several jobs-related topics getting gobs of press this year has been robots.  I could write a post every week on only the stories released, even if I just hit their high and low points.  However, in the interest of writing on other topics as well I have restrained myself to two, on January 15th and May 2nd, unless you count my March 25 artificial intelligence issue. 

On May 2 I named nine points for universal agreement, on robots’ lack of actual intelligence, their need for controlled environments, their one-way progress, their potential to do any algorithmic task, the value of projecting where they are going, their productivity gains always involving job takeovers, their uncertain acceptance, and the dangers of their being programmed amorally.  These aren’t really controversial, and everyone from Luddites to Ray Kurzweil should buy into them.  However, too many otherwise good recent articles have included clearly incorrect statements.  What are they, and why are they wrong?

“March of the machines” (The Economist, June 25th) cited artificial intelligence (AI) researcher Andrew Ng as saying that worrying about a general AI breaking free of human controls “is like worrying about overpopulation on Mars before colonists have even set foot there.”  While I have not taken what is now called AI as seriously as most, since to me it seems only incrementally more advanced than simple if-then computer programming, if we can teach systems how to learn and how to set their own goals we must consider what they might do, as their actions could be far less controllable than regulating the number of people moving to or even living on an extraterrestrial base.

In Harvard Business Review’s June 23rd “Knowledge Jobs Most Likely to Be Automated,” authors Julia Kirby and Thomas H. Davenport noted the trend for robots and other automating features to take over parts of jobs, which they say prevents naming areas where people should avoid jobs and careers.  That is false, since as I documented in 2013’s Choosing a Lasting Career, jobs in the 25 U.S. Department of Labor career groups vary vastly in how susceptible they are to not only automation, but globalization, efficiency, and 18 other current or anticipatable trends.  Whether you agree or disagree with my findings, the mass of which are still current, there is no reason for employers to minimize automation gains by maintaining the same numbers of pertinent workers.  As well, the authors’ statement that machines will be “freeing up humans to work on more value-creating projects” is erroneous, at least in the huge majority of fields with good job candidates not being hired as it is.

In “Industrial robot sales hit record” (Financial Times, June 22), Michael Pooler quoted a company robotics head as saying that “people today don’t want to do dull, dirty, dangerous and delicate jobs any more.”  I could introduce this man to tens of thousands of Americans in my state alone who would gladly do all of those things – if the pay were right.  Almost all skills shortages are really training and pay shortages; while those are the free choices of the companies involved, and they are entitled to position them as workers’ shortcomings instead, we have the final option in what we will believe.

Eduardo Porter’s June 7 New York Times piece, “Jobs Threatened by Machines:  A Once ‘Stupid’ Concern Gains Respect,” looked at some invalid thinking on work and automation across the years, in response to Wassily Leontief’s pithy and prescient response to those doubting machines could take over jobs, “They replaced horses, didn’t they?”  It included another economist, Kenneth S. Rogoff, saying that “it seems unlikely that millions of workers are headed to the glue factory like discarded horses” (why not, and why doesn’t that simile fit?), and a comment from a young Lawrence H. Summers that productivity gains from technology would create so many jobs from people having more money to spend that employment would stay at least the same (sure, if there were no products like software where cost per item drops almost as fast as the number of items sold goes up, and if companies paid workers according to productivity instead of on supply and demand).   It is common in economics to see even eminent practitioners saying things that, on further analysis, simply don’t make sense – I suspect political biases for some, but don’t understand its other causes.

On June 1, The Washington Post published Robert J. Samuelson’s “The robot invasion that isn’t yet here.”  Samuelson, who has written much fine material, took a remarkably anti-job-loss stance here, saying that since our country had added 14 million jobs in six-plus years “there’s little evidence that robots have yet had much effect on job creation in the current recovery.”  That does not follow to me.  He also wrote that according to a University of Michigan study “only 16 percent of respondents wanted self-driving vehicles” (there were 260 million registered in the U.S. in 2014, which works out to “only” 41.6 million).  At the end of the piece, he fell into the common trap of saying that “workers may become scarce” when “baby boomers age and retire” (as I have documented in no fewer than three books, most in the baby boom generation will not voluntarily retire, and despite 10,000 Americans turning 65 every day, latent demand for work is stronger, in relation to official unemployment, than it has ever been.) 

Lilah Raptopoulos’s April 8 Financial Times compilation “Robots:  friend or foe?  You told us” presented readers’ comments on robotics, with most chosen ones being excellent.  One responder said that he asked his 17-year-old son if he thought his “future profession already exists.”  That is not an error, but brings up an important distinction.  Even though many specific job tasks are completely new from five or ten years before, the overall positions change remarkably little.  Martin Ford, in The Lights in the Tunnel, documented how, in 2006, not a single American job area, except for the subset of restaurant work labeled “fast food,” with at least one million workers was nonexistent in 1930.  Obviously that could change, but we know of no reason why it should.

Finally, an old area of automata reappeared, by Maija Palmer on May 4th, also in Financial Times:  sexbots.  Maybe my recollection is wrong, but it seemed a foregone conclusion two decades ago that not-quite-human sex partners would be common by mid-century if not sooner, and I have read almost nothing since.  This story, “Prospect of sexual relationships with robots poses moral dilemmas,” started almost from the beginning, with cinematic references, currently available sex dolls with semi-robotic features, and one commentator’s thought that “female sex robots will dehumanise women” since “creating objects that closely resemble human females… leads men to regard women as objects.”   Well, if they don’t resemble human females, they won’t be too popular, so I expect the mainstream view on such things to take two parts:  one, and more than anything else, apathy; and two, seeing such things as economic inferior goods like bottom-grade beer.  

On that not really titillating note, I wrap up.  Be assured, no matter what, that robots will take over plenty more jobs somewhere and somehow – maybe not huge amounts today or tomorrow, but during, if you are lucky, your lifetime.  Let’s think straight about them.      

Friday, July 15, 2016

Checking In With Work’s New Age Issues in the News, May-June 2016

Four and a half years ago I released a book with the thesis that the jobs crisis was permanent.  I still stand by that, as although the official unemployment at press time was about double what it is now, other metrics have trailed.  Some have even got worse, such as the labor force participation rate, down from 64.0% in December 2011 to 62.7% last month.  The American Job Shortage Number or AJSN, which I invented in September 2012, has fallen since then only from 20.7 million to 17.6 million, with the portion of latent demand from people beyond those technically jobless up from 10.2 million to 10.8 million.  As even the most partisan Obama and Democratic-administration supporters agree that despite that 4.9% unemployment all is hardly well with the economy, it is to the credit of those interpreting the monthly Bureau of Labor Statistics data that net job growth has replaced the unemployment rate as the headline figure.  Accordingly, over the past several months, there has been a jump in publicized views on concerns I identified and evaluated in Work’s New Age.

On June 28th, The Atlantic published “Would a Work-Free World Be So Bad?”  It looked beyond the resurgence of guaranteed income commentary I wrote on last month, and considered the human side of near-universal joblessness.  It held that people’s problems could be much like those faced by retirees:  lack of purpose, boredom, malaise, and even depression.  Author Ilana E. Strauss compared this possible future to what all humans experienced up to 10,000 years ago, life as hunter-gatherers without separate concepts of labor and leisure, and to farmers before 1600 who “mixed work and play in their daily lives.”  Per Strauss, recreational patterns may move away from the likes of “beer and TV” catering to “tired workers,” education might also change, and families could be together for far more hours than now.  These thoughts add depth to the now-materializing trend toward futurist Herman Kahn’s concept of unpaid replacements for service jobs he called “quaternary” involvements.

The Economist’s June 25th issue devoted a 16-page insert to artificial intelligence, with rather melodramatic emphasis on whether that could “cause mass unemployment or even destroy mankind.”  It recapped automation concerns as far back as 1964, and documented that jobs likely to be lost would not necessarily be manual but “routine,” or algorithmic.  Both these perceptions, though old, are correct and worthy of repeating, even though artificial intelligence is still limited to identifying and following clearly defined sequences of tasks. 

On May 27th, CNBC had a story on one comprehensive solution to the permanent jobs crisis, shorter working hours.  It concluded that while such an experiment in Sweden last year seemed successful, with higher productivity offsetting at least some of the time shortfall, it might not work in the United States, as “the eight-plus hour workday ethic is embedded too deeply,” and full-time workers are actually on the job an average of 47 per week.  I can’t agree at all, as even a cut to 40 hours would be in the right direction, and that would call for base weekly hours of 30 or so.  I will leave to you to decide what the country would be like if we had not made improvements over the past couple of centuries due to previous practices being “embedded too deeply.”

Patricia Cohen’s May 25th New York Times piece, “Fewer Americans Choose to Move to New Pastures,” addressed why worker mobility is down.  She found some of the reasons, but cited “economists” as saying, as Yogi Berra might have, in effect that people not moving makes it hard for them to move, and also quoted a Notre Dame professor who did not understand that Facebook and LinkedIn are not proving poor substitutes for “personal connections,” but, in 2016, are those connections.  More important than almost any cause Cohen mentioned are four others:  that people don’t leave low-level positions if better ones don’t exist; that everyone will be more hesitant to change cities for opportunities that rate to last for shorter and shorter lengths of time; that the job market simply doesn’t want enough people in their 20s for many to move away from their parents; and, as mentioned by one article commenter, that full relocation packages are almost a thing of the past.

On May 24th, again in The Atlantic, the title of Derek Thompson’s “The Myth That the President Can Save the Economy” was enough to remind us that no candidate can be expected to do it all by himself or herself.  While our 2017 inauguree can push us in the right direction, he or she can’t repeal historic trends, and it is wrong to think that “5 percent growth will suddenly appear if somebody thinks of the right marginal tax rate.”  A good reminder this year.

A May 23rd article asserted that “The U.S is ‘basically at full employment.’”  Even occasional  readers of this blog can guess my view on that, which author Heather Long unwittingly reinforces by naming as still-remaining problems income inequality (a product of the hardly-over jobs crisis) and wages not increasing much (too large a supply of workers, whether officially jobless or not).  The AJSN shows that latent demand for work is comparable to times with 6 or 7 percent unemployment, and it may reach record levels with the next recession.

Finally, in on May 19th Daniel Altman took on giddiness about globalization in “Economics Has Failed America.”  He made many of the same points I raised over four years ago but without noting the cause of scalability, the post-industrial capacity to produce a million copies of a product for barely more in money or workers than a thousand.  Altman correctly noted that “job destruction” is not “healthy” as others have said but is one of the worst results of international trade, and that while “globalization reduces inequality among countries” it raises it within them.  None of this is justification for protectionism, but we still need to be fully conscious of these challenges. 

Are these articles good or bad for our job situation?  Except for possibly the regressive piece, all are positive.  As they will sooner or later require solutions, the issues here are well worth our attention now.  At times, the state of American jobs has seemed out of sight and out of mind – that is not the case anymore, and that is good for our country.   

Friday, July 8, 2016

Calm, Rebounding June Jobs Data Almost Offsets May’s: AJSN Says We’re Now 18.1 Million Jobs Short

This morning, I was ready to declare a Pee-wee’s Playhouse era of federal employment reports – in other words, we’ll never know who or what we’ll see.  This month, though, came in at almost exactly what would be expected after May’s wild data, if we decided were not expecting a recession.  Official joblessness rebounded upwards to 4.9%.  We gained 287,000 net new nonfarm positions, up from the previous 38,000.  Those looking for 27 weeks or longer gave back half of last month’s improvement to reach 2.0 million.  The count of those working part-time for economic reasons, or holding on to less than full-time jobs while wanting and not finding one of those, more than erased its huge worsening, losing back not only the 468,000 it gained in May but another 121,000.  The two measures showing best how likely it is for Americans to be working, the labor force participation rate and the employment-population ratio, were split, with the former regaining half of the 0.2% it fell last time to reach 62.7%, and the latter down 0.1% on higher official joblessness to 59.6%.  Unadjusted unemployment was up beyond the seasonal effect of more people working in May than in June, going from 4.5% to 5.1%.  Average wages rose a little something, 2 cents per hour, to $25.61. 

The American Job Shortage Number or AJSN, showing in one number our latent demand for additional positions, gained over 550,000, as the officially unemployed, up 937,000, can now absorb almost 6.5 million new jobs.  About one quarter of that was offset by a 269,000 fall in the count of those wanting to work but not looking for a year or more; the numbers of those temporarily unable to take jobs, and those saying they did not want them at all, were also down significantly.  Overall, the AJSN came in as follows:

Compared with a year before, the AJSN is down just over 700,000, with lower official unemployment, but also fewer discouraged and fewer not looking for a year or more.  The year-over-year improvements are shrinking but are still large, meaning that prospects for Americans to find jobs continue to get better.

If we spread out May’s nuttiness by taking the last two months together, where are we?  The headline unemployment rate is down from 5.0% to 4.9%, net new nonfarm jobs gained an average of 162,500 per month, and the long-term jobless and those working part-time for economic reasons each fell almost 200,000, but the two key percentages each worsened 0.1%.  Pay was up 4 cents per month, roughly equal to inflation.  Accordingly, we are still slightly improving, though the lower employment-population ratio and labor force participation rate remain causes for concern.  In six months, will we be plumbing new depths, or will we be higher than we have been for years?  Probably neither.  In the meantime, the turtle took a good step forward.     

Friday, July 1, 2016

Driverless Cars in America and Beyond: Levels of Autonomy, Implementation Years, and Job Losses

Last week I wrote about the fast pace of developments in autonomous vehicles, and looked at why the technology itself will be well ahead of other factors determining when it can be put into service.  This week, we’ll see what steps there are on the way to total automation, and when substantial numbers of vehicles will be on each.

The U.S. National Highway Traffic Safety Administration recognizes four automation stages, but the first three are tied to specific innovations in cars which require active drivers.  The difference between this organization’s level 3 and level 4 is a chasm, moving from technology dependent on human takeover to, as a May 8th Fox Business piece put it, “a fully autonomous car.”  When we realize that there are a significant number of intermediate steps between these two, and when we want to put self-driving technology in groups characteristic of these phases, we can see a need for another scheme.  Accordingly, here is one. 

We are now primarily at Plane 1.  Vehicles there, as I define it, require drivers to be at the controls essentially continuously.  They can still have a variety of robotic or semi-robotic facilities, such as parallel parking capability, but such features do not remove the need for human attention.  At this level, most automated tools must be explicitly activated by the driver, who must stay in his or her seat.  Plane 1 does not require anything more from the road system or elsewhere in the driving environment than what is there now, and the current, visual-only “Check Engine” lights are perfectly appropriate ways of communicating possible mechanical problems.

At Plane 2, vehicles would only need partial human driving, with something like an aircraft autopilot taking over for long amounts of time.  (Indeed, a similar feature already available on Tesla cars, which was announced yesterday to have been involved in what may be remembered as the first self-driving death, is named “Autopilot.”)  Drivers here would handle the less routine trip parts, such as their beginning, their end, unusually heavy and complex city traffic, and turning and merging onto expressways.  As this phase progresses it would require upgrades to the environment, particularly continuously available Wi-Fi, very detailed GPS, or both.  Licensed drivers would still be needed in each vehicle, but they could leave their seats for as long as hours on end.  Almost all automated systems could be manually overridden.  Vehicles overall would have about as much autonomy as jetliners do today. 

Plane 3 still calls for someone in the vehicle able to control it, along with a steering wheel and such, but that person would be more properly called a supervisor instead of a driver.  They could still drive, but that would be unusual, mainly for emergency or extreme weather situations, for which the vehicle’s software would provide algorithmically-based notifications.  This stage would require robust Wi-Fi or other satellite communication at the start, with further capabilities following as the phase progressed.  As in Plane 2, a visual Check Engine light would need to be replaced by something auditory.  The general autonomy level of Plane 3 vehicles would resemble that of washing machines or dryers today, with few problems once they are powered on and activated.
The next phase, Plane 4, would remove the need for anyone controlling from inside.  The main characteristic here would be autonomous vehicles remotely supervised.  One person could monitor, as the stage progressed, from one to dozens of them.  As this phase became more established, the need for any kind of physical onboard controls, such as steering wheels and brake pedals, would go away.  Passengers, who could now be in any seat, could set the destinations and some other factors, as could supervisors, who would be notified about mechanical failures electronically through systems that could also stop the vehicles or redirect them to a garage or other place where their problems could be solved.  Supervisors would also initiate refueling in the same manner.  Plane 4 vehicles would have the general autonomy level of today’s large computer system hardware.

The next phase, Plane 5, is where means of transportation would be totally autonomous, with no direct human monitoring.  Passengers, police, or owners could set their directions, and compartments could look more like living rooms than the insides of today’s cars.  Algorithms would determine when and where they would take on fuel, a process which would not need to involve humans.  All trips would be automatically logged with their data uploaded, and precise vehicle locations would be available continuously.  The amount of human intervention Plane 5 cars required would approximate that of a refrigerator. 

Given these phases, the rapid progress of self-driving technology in general, and the resistance factors I named last week, when might we see which levels of progress around the world?  Taking our best guesses that taxis will be one of the first applications at each stage, but that trucks will much more slowly reach them due to fear holding back their legal approval, how long will it take for jobs driving both to go away?  Here is how all that might look:

To give some examples to explain this chart, I project that by 2018, 20% of the vehicles in the countries that prove to be the most advanced at driverless vehicle implementation, possibly the likes of Switzerland and Qatar, would be operating at Plane 2 as described above.  The United States will have half of its vehicles fully autonomous by 2033.  In 2021, there will be about as many Americans driving cabs as there are today, but by 2037 there will be 95% less.  

Here is more about the future of self-driving vehicles as I see it.  They will be produced not by software, automotive, ride-sharing, or electronic-technology companies alone, but by consortiums of at least three of these four.  While that sounds like an easy opportunity for investors, in reality the industry will turn out to be a wild place to put money, with massive winners and total losers as happened with their driver-requiring versions a century before.  Electric cars will probably not succeed even as taxicabs, as they have been pushed as viable alternatives or even replacements for hydrocarbon-powered ones since the 1960s and, despite heavy subsidies and even when grouped with electricity-gasoline hybrids, still have only 2% of United States passenger-car sales, with no new reasons for fundamental improvement.  Mercedes-Benz has announced several Plane 2 features, including what they call “Drive Pilot” and “Active Brake Assist,” for some 2017 models.  And, once again, invisible prosperity will improve while employment will worsen, continuing what looks like the main story of the 21st century.