Curious Capitalist

More Jobs, Less Pay

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Would you rather have an iphone 5 or running water? It might seem like a “well, duh,” kind of question, but it gets to the heart of something important about the jobs and growth debate right now.

As everyone knows by now, last week’s unemployment figures were the best we’ve seen in about 3.5 years. But 7.8 percent unemployment is still much higher than what we’re used to in this country. Meanwhile, wages are stubbornly flat, which is a serious problem in an economy that’s 70 percent dependent on consumer spending. No raise, no shopping spree, no major job growth. And the problem of the shrinking middle still isn’t getting better, either; median household wages are less than what they were in 2009.

Which takes me back to that first question, one that was posed recently by Northwestern professor Robert Gordon, who has an interesting new economics paper, entitled “Is US Economic Growth Over?” which looks at how we may be at a change point in terms of tech-driven productivity and job growth in this country. We all think gadgets are great, and the iPhone 5 has certainly done just about the best retail sales of any product you can think of recently. But does all that add up to real, sustained economic growth for America as a whole? Gordon says not so much. Despite all the hopes pinned on Silicon Valley, and all the politicaltalk about unleashing “innovation” to kick start the economy, there are good reasons to think that the industrial, educational and gender equality changes of the 1950s, 60s and 70s had a bigger impact on income growth and prosperity than the information age has – or will. And, those earlier changes are mostly tapped out.

(MORE: Fewest Americans Since Feb. 2008 Seek Jobless Aid)

Gordon points out that productivity growth (which underlies overall economic growth) was much higher prior to 1970 than after, and that more broad based economic growth has been seen as a result of industrial revolution inventions like electricity, the internal combustion engine and widespread indoor plumbing than from computer chips. Social media? It’s just a drop in the bucket in terms of economic growth. What’s more, technology is making the wage gap worse since it creates so much labor bifurcation – software is eliminating white-collar jobs, and Chinese factory gigs are going to robots.

Where’s this all headed? And what’s to be done? To learn more, check out my Curious Capitalist column in this week’s Time Magazine.

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abettercountry.org
abettercountry.org

One answer to the problem is found at www.abettercountry.org/abc-fund/.  By buying companies and turning them over to their employees, profits are either distributed to the people who created them or are re-invested for future growth.  These employees will not pursue profits at the expense of sending their own jobs overseas, and it will be in their own interests to put the long term stability of the company (via high quality products, good consumer relations, "green" policies) ahead of short term profits.  And since they won't be beholden to Wall Street in any way, there will be no need to compromise on these things.

highlands6000
highlands6000

Did anyone else catch the line, "Corporate profits are at record highs" ?

That seems like the problem...almost like the preceding recession was an exercise in corporate America redrawing the lines. And unfortunately for most of us, it worked! Corporations keep downsizing jobs, benefits, and salaries, while their profits grow bigger.

Does this not sound like the America of a 100 years ago? When oil, railroad and industrial tycoons gobbled up all the profits, leading the country into an economic depression. Sounds like we haven't learned from our history.

If our economy is to improve, big corporations must lead the way. They've profited from government bailouts, and many large military industrial complex organizations are sustained through government spending. Come on corporate America, it's time to pay it forward!

Bea Kath
Bea Kath

There is one key phrase in this article that is very indicative of the U.S. attitude right now: " what we’re used to in this country."

Maybe it's time to realize that the emerging technology-based industry we are creating is (and has been) destroying the manufacturing tradition we had in the 1950s-70s. When we export jobs, we export the jobs that we built this country on.