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Discussion: (10 comments)

  1. Call me skeptical. Machines have been replacing human labor since the beginning of the industrial revolution. Often in large numbers than what we see today. How many laborers with shovels does one bulldozer replace?

    Sure, new inventions and technologies displace workers, but this has been the trend for over a century and the private sector has created new products and jobs to keep pace.

    What McAffee’s charts don’t show are troubling trends in government spending, education and the growing welfare state.

    The latest GDP numbers show how government spending and borrowing can compensate for stagnant private sector activity. An government-made GDP number does not indicate a healthy economy.

  2. What I’d lie to see is the decoupling of public pension plans from taxpayer funding, at least a 50-50 share.

  3. Intergallactic Surveyor

    …to the point where economically rational employers prefer buying more technology over hiring more workers.

    This statement would be correct if only it had the right preface. Something along the lines of

    As government regulations incessantly drive up the cost of hiring workers, we eventually get….

    Just to pick one example, I am not aware of there being any requirement to pay any ObamaCare costs for a computer or a robot.

  4. Todd Mason

    Persistent high unemployment is in fact a secular turn as well as a cyclical one. And as much as AEI would like cure it with supply strategies, the answer lies in increasing demand through investment in human capital. The job creators who sell things for a living should be alarmed by the fever line in the chart above tracking stagnant median household income.

    You have to read to the end of this story to truly appreciate the life and ultimate fate of an Amazon warehouse worker. http://money.cnn.com/2012/07/23/technology/amazon-career-choice-program/index.htm

    Bear in mind that Amazon has already made retail clerks, cashiers and stockers redundant by the tens of thousands. The unskilled laborer soon will have no where to go.

  5. SeattleSam

    Besides displacing people, technology tends to widen the productivity differential between the highly skilled and the less skilled. Take this simplified example:

    Tom and Bob work in a pre-tech office using paper and pencil and telephone to do their work. Because Tom is much brighter and has more math skills than Bob, he can accomplish twice as much as Bob can. Now the boss buys computers for the office. Bob’s productivity doubles! But Tom has the ability to REALLY take advantage of computing power, and his productivity triples. Now Tom is doing three times as much as Bob. Tom’s value has increased disproportionately because of the addition of technology.

  6. Thomas Sullivan

    Where is all the money going? Into the maw of the vote-buying machine. Government spending (fed, state, local) was 3% of GDP in 1900, about 24% in 1950, and now is 40% of GDP. Regulations have mushroomed. Currently, the total cost of government consumes well over half the GDP. “The rich” are not stifling the rest of us, nor is productivity. Big government is. We are not simply slowing economic growth, we are headed squarely at national bankruptcy.

  7. Steven Hales

    McAfee did not adjust for changing household size through time and he mixed reals with nominals, real gdp with nominal HH income. He also did not account for non-cash compensation (benefits) nor did he look at government social benefits to persons both of which have grown faster than has cash compensation. Nor does he adequately explain why he doesn’t include government employees in total employment growth. If he had done that he would find the recession caused the more recent decoupling there. The only decoupling I see is a decoupling of the data from sound analysis.

  8. Another factor, it seems to me, is that government has been consistently making it more expensive to employ people, so that the cost goes up for the employer but is not reflected in wages. OSHA, ADA, Affirmative Action, Family Leave, etc., lawsuits for not hiring the right person, lawsuits for firing the wrong person, lawsuits over everything. The list of added costs is huge, but rarely tallied. This added cost makes replacing people with machines an attractive option.

  9. I work in technology where wages are decent but they have been stagnant for the last ten years. IMO, we need to create more high paying jobs in order to experience a true expansion of the economy. What the chart above indicates to me is that technology is enabling workers to do more with less. The person above who said that the bright person would take advantage of technology more so than his dimwitted colleague, thereby resulting in his tripling his output, got it wrong. Technology equalizes the two of them which brings the dimwit up to the same level as the smart guy. If you are their employer you might reason that it is easier to under-pay a dimwit.

    Which brings me to the crux of the issue. As long as employers seek to make more money by forcing labor costs down thru union busting, offshoring, H-1 B’s and so on the gap in the graph is only going to get bigger. Ultimately it will ruin us all except for a select few, who will continue to demand tax cuts for themselves.

    The true job creators are not on Wall Street but on Main Street. Rich people will invest regardless of the tax rate as long as there is a chance to make profit. Demand is what creates jobs and opportunity and that comes from the rank and file having disposable income.

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