2013 May 20 Monday
On The Decline Of the Factory Worker
A Businessweek article outlines the hardball that Caterpillar has played against old industrial unions.
In January 2012, Caterpillar locked out union workers at a locomotive factory in Ontario after they rejected a pay cut of about 50 percent; the company shuttered the plant and moved production to Muncie, Ind., where workers accepted lower wages.
Cat's (probably correct) argument is that they need low labor costs to compete against foreign competitors. What this means for American factory workers: poverty.
This inequity angers Caterpillar workers. John Arnold, a 35-year-old parts auditor at Caterpillar’s Morton (Ill.) distribution facility, says some of his co-workers are on food stamps. “I don’t understand how a company can make billions and billions of dollars in profits and have people on welfare,” says Arnold, who has worked for Caterpillar since 1999 and makes $15.66 an hour.
I know someone who works in a factory who'd be thrilled to get $15 per hour. An operator of a wood cabinet maker pays his most skilled workers $30 per hour as foremen. That's the top. But robots will wipe out most of those jobs in about the next decade.
Employment for the least educated is declining. Check out this NY Times Economix blog post with graph on relative employment changes since December 2007. For college grads employment has risen. Oeople with some college, high school grads, and high school drop-outs are losing the race. The big decline in employment even for high school grads tells me the era of the zero marginal productivity worker has arrived.
Every time I walk into a grocery store I look to see how many self check-out stations it has. Every time I go into a fast food joint (admittedly not often) I look to see if any have yet spun around the ordering panel and given customers the ability type in their orders directly. Haven't seen this yet. Have you? This is happening already in Europe. It will happen in America.
Readers, some of you are living on the margin for becoming steadily less employable. You could get laid off. Then your skills would start to rust. At that point your ability to retrain would decline with increasing poverty. Accept that you are at risk. Aim to develop clearly valuable skills. Insulate yourself from the forces cutting the demand for many kinds of labor.
By Randall Parker at 2013 May 20 09:08 PM
Its a real worry. A large portion of society will be expected to adapt faster than is humanly possible, and that's going to cause major pain for society.
It's an interesting exercise to list the job-types in order of their destruction at the hands of AI - some well earning professions are high on the list. Schools really need to be telling students to choose a field where AI will take the longest time to destroy their jobs. There aren't that many choices that both pay well and AI-safe 30 years into the future.
“I don’t understand how a company can make billions and billions of dollars in profits and have people on welfare,” says Arnold.
Because those profits are being used for share buybacks and dividends, and the shareholders and management are fine with it while you are powerless. It's pretty simple. That little man on the street quote is there because the writer wants to write it himself but needs a puppet so it's not seen as anti-capital propaganda. The dark side of globalization. I remember when globalization was pitched as a way for US made products to find new markets. Thanks Democrat Leadership Council.
And Wall street keeps moving along. Shadow banking and derivative deals are at post 2008 highs.
Something's got to break. Let's hope that it happens soon.
"Every time I go into a fast food joint (admittedly not often) I look to see if any have yet spun around the ordering panel and given customers the ability type in their orders directly."
I was thinking about that recently. Panels aren't even necessary. People can order over wifi with their smartphones.
Automation isn't the problem. Not only does it increase productivity, it also lowers production costs. Which helps American workers compete against cheap foreign labor. Without automation, a lot more factories would have moved overseas. I work in the automation industry and personally know of several factories that remained in the US due to increased automation.
As far as driving down wages to be more competitive, that's the whole point behind immigration/amnesty. Labor costs follow supply & demand curves like everything else. Corporations want to increase the labor supply with more immigrants to drive down EVERYONE'S wages. I tend to support free markets and oppose unions. But dumping millions of foreign workers on the American labor market to drive down wages is where I draw the line. If American workers have to take pay cuts that's one thing. But turning the country into a 3rd world banana republic to do it is another. That's the kind of corrupt capitalism that led to the rise of marxism and fascism in the 1900's.
Look, the solution is simple and obvious. Remove patent protection from these overprivileged corporations from the 18+ years it is currently to, let's say, three hours. Three hours in my mind is plenty of time for a corporation to capitalize on their discovery -- one that was probably researched and developed with government ie taxpayer's money (taxpayers! you know, the one's losing their jobs to all these miraculous inventions that they paid for).
So a corporation can currently lay off its workers without the workers having the wherewithal to compete against their former employers because all the IP is locked in this rent-seeking 18 year patent protection, which is patently unfair.
The local Jack in the Box had a self order station. I tried it out but it did not have the whole menu. It would have been better at a crowded airport location, not an suburban one that never has a long line. I never saw anyone else use it, and after a year it disappeared. It looked like an airport checkin kiosk.
Self checkout is not labor saving, it is labor transferring to the customer, who is slower than a professional. I don't see how the checkout process can be made much more efficient than it is now.
My favorite example of labor saving is the decline in financial industry employment at almost all levels. Stock picking is now done objectively by low cost ETFs and executed by online brokers for $8. Reformed Broker has some articles about the decline of sleazy cold call companies and financial advisors generally. Best of all investment banking employment is in a steady decline.
In the past, many unions took a "hard line" against the companies and thereby won large wage and benefit gains for their employees. Of course, eventually a lot of these companies went bankrupt or moved offshore or to right-to-work states (automobiles, airlines, steel, shipbuilding, etc.), but that's just the way things work. I don't really blame the unions - they are political animals, and union leaders who advocated "restraint" in negotiations would quickly be voted out of office. A fat contract with guaranteed employment and big wage increases is what most union members want - and who can blame them?
Now the shoe is on the other foot, and the unions are getting a dose of their own medicine, so we can expect the usual chorus of whines about how "unfair" it all is. Well' phooey, and welcome to the world of 21st century capitalism. This is, or should be, the job description of every CEO of a for-profit corporation - "Maximize profit and shareholder value without breaking the law." To corporations, labor is just another expense, like raw materials or real estate, to be acquired at as low a price as possible. This statement is ridiculous - “I don’t understand how a company can make billions and billions of dollars in profits and have people on welfare...." Companies have no interest or benefit from paying above-market rates to their workers, nor should they. If the employees don't like what they are earning, they are free to take another job, if they can find one. By the way, it is interesting that Caterpillar moved its Ontario facility to newly right-to-work Indiana. And Illinois had to pay plenty to keep Caterpillar there.
So welcome to 21st century capitalism. If you don't like it, try moving to Venezuela and standing in line for toilet paper.
"Readers, some of you are living on the margin for becoming steadily less employable. You could get laid off. Then your skills would start to rust. At that point your ability to retrain would decline with increasing poverty. Accept that you are at risk. Aim to develop clearly valuable skills. Insulate yourself from the forces cutting the demand for many kinds of labor."
True on an individual level..but it would also make sense for us to band together and tax the surplus off the companies that are making all this money. ;) Live like a capitalist, vote like a socialist.
If we voted to tax companies more heavily the money would not go to us.
Yes, no need for the order panel for a substantial fraction of the population who have smart phones or tablets with them. One could park the car, order from the car, and go in to pick up.
Actually some pizza chains do this. I've done this by putting an order in at Dominoes from my home PC and then walking down to the store to pick it up. I only wish that I found their pizzas tasty.
I think we are going to see more online ordering because it is such an obvious thing to do. Why wait in line to order? Why not order in advance? Just walk in and pick it up.