The labor buffer overflow

The article Buffer Overflow: the Ghastly Future of Work by Fred Reed went viral. It is little surprise his article was a hit: automation and its effects on the US economy and society is a topic that is hotly debated by intellectual-types online in recent years, but also offline in regard to Andrew Yang’s 2020 campaign in which automation was a major theme. If there is any criticism, I wish his article were longer. Fred builds all this momentum, and the article abruptly stops just when it hits its stride.

This part at the beginning stood out:

Then child labor laws took kids off the labor market, keeping them from competing with adults. Compulsory high school removed adolescents perfectly capable of doing many jobs of adults. College now keeps millions more in, usually, economically pointless idleness. We have over three million people in prisons. Large numbers live on welfare. The government factors none of these into the unemployment stats. If it did, the unemployment numbers would rise sharply.

Policy makers and governments are finding increasingly clever and inventive ways of warehousing and re-categorizing people should otherwise be working, but despite not working are not classified as unemployed. Millions of people who could be working are incarcerated/institutionalized, in school, on welfare, or have dropped out of society, but are not counted as unemployed. The prison industrial complex, but also halfway homes and other programs, have become institutions for warehousing millions of people who for whatever reason are incapable of functioning or being productive in modern society. The pre-Covid 4% unemployment rate ignores all these people. I agree with Fred that the future of America is one in which a perhaps smaller percentage of Americans are working despite an otherwise low unemployment rate and strong stock market and strong economy.

Covid has accelerated this trend, of an increasingly large share of the US population being rendered economically obsolete or redundant. There is no need for thousands of barely-profitable small and medium-sized businesses that combined hire millions of marginally or negatively productive people, when Amazon can streamline everything and can extract far more productivity from its employees than almost any other company. Nearly three decades since Tim Berners-Lee co-wrote the first browser for the Word Wide Web in 1992, the effects of the internet are still being felt and the full potential of the internet has not been fully realized; in retrospect, policy makers and pundits underestimated its importance. The dotcom bubble in hindsight cannot be dismissed as irrational speculation; it was no so much that the internet was a bubble or a fad, but that no one knew what the future winners of this new technology would be, so everything was bid up indiscriminately. Two decades later and now we know what they are: Amazon, Facebook, Google, and Shopify.

In the past, any able-bodied, reasonably competent person could get a decent middle-class job, but now you need 17 years of schooling (k-12 + 4 years of college) to maybe have a shot of entering the middle class. Add another 2-6 years on top of that for an ‘advanced degree.’ Like above and as discussed a few days ago, I predict Covid will accelerate the trend of increasing credentialism. It is not so much that automation is making jobs obsolete (a restaurant of today is very similar to one of 60 years ago, except that the menu may be displayed on LCD monitors instead of chalkboards, and the cash registers are electronic,) but rather the trend , thanks to Amazon and Walmart, is for low-skilled work to be more efficient, the result being higher profit margins for mega-sized companies such as Walmart and fewer workers needed relative to output. Additionally, the labor market is becoming increasingly bifurcated, with a lot of low-income jobs and relatively few middle and upper-middle class jobs. People who generations ago would have been in the middle-tier are now in the lower-middle or lower-tier. Consequently, Amazon and Walmart are major employers for millions of Americans who lack the credentials and skills for middle-class work, and there is huge demand for such jobs in spite of the low pay and complaints about working conditions.

Wages went down. Some of the decline took the form of loss of benefits, so it didn’t always look like a pay cut. Retirement went away. Workers were turned into “independent contractors” meaning on their own for medical care and so on. Soon it took two people to maintain a family, not one as before. Now people live paycheck to paycheck, maxed out on credit cards, with no savings and little hope. This has produced joblessness, deplorables, Donald Trump, and riots.

Fred is repeating a left-wing media talking point. Poor, low-income people were more likely to vote for Hillary than Trump. The major participants of the BLM riots are not the poor but rather the white-middle-class-left.

Various considerations come into play here, methinks. Software and robots do not buy stuff. Today businesses will automate because the saving in wages raises profits. An aging population buys less stuff than a young one. If the population stabilizes or shrinks, there goes the demand for new houses, suburbs, roads to the, and shopping centers.

I read over and over of the young living in their parents’ basements because they can’t find jobs, or jobs paying enough for them to buy houses and start families, of people who will nevr be able to retire. Humanity being what it is, we won’t see this coming and somehow prepare for it.

In spite of these dire pronouncements, the evidence in terms of actual economic data shows no decline of US consumer spending. Although there are many young people who are struggling and ‘living in their parents’ basements,’ there are also plenty of young people employed in tech and other STEM and finance fields and making good money. Other are making good money on social media, such as on YouTube. It all depends where you look. In terms of consumer spending, the ‘professional class’ composed of high-income wage earners are able to compensate for large swaths of the unemployed and marginally-productive underclass. A millionaire remodeling his home and buying a Tesla, in terms of consumer spending, is equal to probably dozens of low-income people.