We all know how it works: Jobs die out. Technology creates new ones. But are there enough good paying jobs to replace the ones that have disappeared? It's an old question sparking new debate and former National Economic Council Director, Larry Summers, came out swinging last week. Summers appeared on a panel for the Hamilton Project at the Brookings Institution—all about the future of jobs in the machine age.
No one was questioning the rise of robotics, but some business leaders and economists argue jobs are going unfilled because the U.S. doesn't have properly-educated workers to fill them, specifically in the fields of manufacturing and health care. Summers says no way. He told the panel, “I am concerned if we allow the idea to take hold, that… there are all these jobs with skills and if we can just train people a bit, then they'll be able to get into them and the whole problem will go away. I think that is fundamentally an evasion of a profound social challenge.”
New York Times Columnist Paul Krugman echoed Summers’ sentiment that education isn’t this magic bullet answer. Krugman wrote, “If my math is right, the ‘90s ended 15 years ago and since then wages of the highly educated have stagnated. Why on earth are we still hearing the same rhetoric about education as the solution to inequality and unemployment?” In January, the unemployment rate of workers who hold at least a bachelor's degree dropped to 2.8%. That’s the lowest level since September 2008.
The unemployment rate for the overall population is 5.7%. And average hourly earnings climbed 0.5 percent in January, a much more encouraging sign after a 0.2 percent drop in December which marked the strongest month for wage growth since November of 2008.
Yahoo Finance’s Henry Blodget says in the accompanying video that he also agrees with Summers' skills gap argument. "It is not about education, it is about pay. Specifically, it’s about the decision we are making as a society to pay folks who work at companies like Wal-Mart (WMT), McDonald’s (MCD), Starbucks (SBUX) and others, so little that even if they work full–time, they are poor,” he says.
“We have gone - over the last thirty years in this economy - from having fat, bloated companies where management soaked up all the cash and shareholders got screwed, to this shareholder religion, Gordon Gekko-inspired, where it’s all about maximizing profit.” Blodget says we need to take those retail service jobs and start paying workers a living wage to do them. That in turn will pump more money into the economy.
MIT professors Erik Brynjolfsson and Andrew McAfee, authors of the best-selling book,“The Second Machine Age,” have called the rise of automation the “biggest single force” in the economy over the last ten years. The pair says over the next decade changes will be bigger for the middle class, but not necessarily worse. Brynjolfsson and McAfee said in an interview with The Washington Post that what the economy needs to combat this change is improvements in education, new businesses, and more high-skilled immigrants.
Blodget says companies need to look at the big picture. “We have the highest profit margins in history because of this profit maximization thing,” he says. “We actually have enough jobs. We need to make the jobs pay better.” And then, he says, “what happens is as those jobs are eliminated by robotics or other technology or advancements or globalization, then we find other things for people to do. And that happens naturally in a free market economy.”
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