In his State of the Union address, Obama planned to say he’ll sign an executive order to raise the minimum wage from $7.25 to $10.10 per hour for employees involved in future government contracts as a way to lower turnover, boost morale and increase productivity.
We really need $15 per hour minimum wage. The demand for low skilled labor will start dropping and automation will accelerate.
I say this to automation engineers: support a higher minimum wage as a way to boost demand for your skills.
As for Obama: He joins a long line of US presidents working to expand the power of the imperial presidency. Neoreactionary monarchists should applaud. This helps create the conditions for rule by a caudillo who leaves the constitution behind as an obsolete relic. The people will become more accustomed by rule by a strongman as Presidents increasingly rule by executive order.
But my challenge for the monarchists: How to assure that a suitable guy will be the one who puts an end to democratic rule? How do you know that monarchy will work better than dictatorship of the elected?
Retail store footage to shrink in half in 10 years? Target layoffs, Macy's layoffs, J.C. Penney's layoffs, Sam's Club layoffs and most of these companies are closing stores.
Aside from grocery stores I rarely go to physical stores. A drug store on occasion. Last time I went to a drug store the clerk thanked me for stopping by. I suspect my customer card is tied to a computer system that told him to say that. They know I do not come in as often as I used to.
Online purchases enable more automation because warehouses are easier to automate than stores. The jobs lost in stores aren't getting made up for in warehouses. Once we get robotic delivery vehicles employment related to buying stuff is going to collapse. Imagine a pizza delivery vehicle that pulls into your driveway, you wave your cell phone at it to exchange electronic info, and out pops your pizza that you pick up and carry inside. Throw in some robots in the fast food restaurant kitchens and there's not much left in terms of jobs for teenagers and young adults.
Take away restaurants and retail. Then what are the less skilled people going to do?
McDonalds says their customers are getting hit by hard times and not buying as many McBurgers. Should we be worried for Ronald McDonald? Maybe the Big Mac is putting a misleading spin on the situation. Could it be some of the poor get enough SNAP foodstamp aid to afford Chilis, Hardees, Red Lobster, Applebees, Red Robin, and Olive Garden?
Perhaps some members of the lower classes are embracing the automation that eliminates their jobs and they are racing to Applebee's and Chili's to get waited on by tablet computers. Could it be?
I want robotic wait service. I was disappointed during a recent visit at Red Robin that they didn't have tablets on the tables. Where can you get a tablet waiter or tablet waitress? I'm thinking Hooters should have amply endowed women on really ordering tablets at each table.
Here is an idea: People on welfare should be waited on by robots and computers to a much greater extent than the rest of us. That way they'll be less of a burden on the rest of us and they can help push the cutting edge of technology. The first robotic restaurants should only accept payments in the form of SNAP foodstamps spending cards. Also, stores that have auto-checkout should require it for people spending with welfare prepaid money cards.
Seriously, we either need to automate the care and servicing of the poor or cut the welfare state and find ways to make the poor go back to work.
During the last five years, the SNAP program grew by 36.8%, from $58,223,790,000 in 2009 to $79,641,880,000 in 2013
My modest proposal: No food subsidies for fat people.
BOISE • One in five Idahoans receive welfare benefits, almost double the level 10 years ago.
Let this be a reminder: if you aren't going up you are going down.
“We have become a low-income state,” Armstrong said.
More revealing is the fact that, in 2007, before the onset of the recession, California’s 1.2 million recipients of traditional welfare comprised about 28 percent of the nation’s total welfare caseload in a state with 12 percent of the nation’s population. In 2013, California had a full third of America’s welfare cases, 33 percent.
Meanwhile open borders within Europe are causing people from poorer countries to flood into the countries with the best welfare benefits. Some Euro countries are changing their policies in response. But the cuts and restrictions do not go far enough.
Maybe robotic workers will generate enough wealth to fund massive growth in the welfare state. Then again, maybe the robot owners will move them to places with lower taxes.
The US military ought to fund research in fast food restaurant automation. Why? Any policy that cuts labor market demand for teenagers boosts the number teenagers who will see military service as their best option. So the US military ought to pursue automation of the jobs that teenagers do.
This observation makes me think that robots are double good for the US military. The robots simultaneously increase the military's labor supply and reduce the military's need for soldiers.
General Robert Cone revealed the news at an Army Aviation symposium last week, noting that the Army is considering reducing the size of a Brigade Combat Team from 4,000 soldiers to 3,000, with robots and drones making up for the lost firepower.
Fast food, retail stores, movie theaters and other places that hire teens are competition for military recruits. Automate those places and the US military won't have to do any recruiting. The applicants will be desperate.
Teenagers need to know their prospects are grim without skills and they need to be given training paths toward becoming useful. Beats a career at Pizza Hut.
Steve points to Tyler on minimum wage and youth unemployment. My hope: The California voters won't care what economists think about minimum wages and the voters will support Ron Unz's ballot initiative to raise the minimum wage to $12 per hour.
Yet another potential side effect of high minimum wages has just dawned on me. Picture yourself a teenager and suppose you know you can't get a job and once you graduate from high school you still won't be able to get a job. What to do?
If teens can not get jobs doesn’t that send them a signal that alters their sense the relative value of different ways to spend their time? Isn't their uselessness a useful signal? Do you see where I'm going with this?
Unemployment sends some teens the very useful signal that they are worthless with their current skill set. Therefore they have a desperate need to come up with a game plan for how to become more productive and capable of creating more value.
What we ought to tell teens: You are going to be a total loser unless you try very hard to get useful skills.
My first reaction to Barack Obama's Promise Zones initiative was that it would draw attention to place you should want to avoid (mainly for personal safety). However, the Los Angeles Times reports that if the Promise Zone in a part of LA succeeds then the poor will be forced out by higher rents. Makes sense.
Therefore we have to divide Promise Zones into at least two types:
Maybe some place can have success without driving out the poor. But it would have to be a more rural promise zone for that to work. Or the new industry will have to pollute enough that the well paid cognitive elite will opt to pass on it.
Let us be real: Few areas can be successful for blue collar workers because blue collar workers are getting displaced by immigrants, robots, and Asian factories.
First off, why should that statistic make someone lose their faith in humanity? 85 peopl aren't very many people by which to judge the rest of humanity. So are we supposed to think humanity is lame because 3.5 billion people can't get it together to make much money? Or are we supposed to think humanity is horrible for not rising up en masse to take the wealth of the billionaires and hand it to the 3.5 billion poorest?
But in order to lose your faith in humanity you need to have faith in humanity in the first place. Well, why have faith in humanity? We've gotten this far mostly due to a fairly small portion of humanity lifting up the rest. For example, just James Watt made steam engine innovations that enabled machines to do far more work than humans could. His innovations enabled the industrial revolution.
I am reminded of a quote by Steven Pinker.
"People are embraced or condemned according to their beliefs, so one function of the mind may be to hold beliefs that bring the belief-holder the greatest number of allies, protectors, or disciples, rather than beliefs that are most likely to be true"
That quote of Pinker comes from a book by Robert Kurzban book on how the mind works and the book seems like a strong case against faith in the human mind.
The disparate impact doctrine is evil. Implement different standards for different races in schools or face the wrath of the US Department of Justice.
“Schools also violate Federal law when they evenhandedly implement facially neutral policies and practices that, although not adopted with the intent to discriminate, nonetheless have an unjustified effect of discriminating against students on the basis of race.
Examples of policies that can raise disparate impact concerns include policies that impose mandatory suspension, expulsion, or citation (e.g., ticketing or other fines or summonses) upon any student who commits a specified offense — such as being tardy to class, being in possession of a cellular phone, being found insubordinate, acting out, or not wearing the proper school uniform.”
The kids, if undisciplined, will act even worse.
Again, the disparate impact doctrine is evil. The Tabula Rasa faith remains undiminished among the Cathedral believers. The Cathedral is a cancer eating at the body politic.
This Obama Administration policy is extremely destructive. Edward Lazear, an economist at the Stanford Graduate School of Business, has pointed out that a small number of disruptive kids cause a huge reduction in teaching and learning time in class rooms.
The results are striking. If each student behaves well 99 percent of the time, learning takes place 78 percent of the time in a class of 25; if good behavior drops to 98 percent, learning takes place only 60 percent of the time; at 97 percent, learning drops to a mere 47 percent of the time.
The black and Hispanic kids who who do not get removed from classes due to their behavior will worsen the already slow learning rates of those kids of the lower classes who aren't disruptive. This is unfair and really quite cruel.
People with the money to move to a school district will less disruptive kids will try to move or will avoid moving to districts with unruly schools. Parents will try even harder to choose places to live based on their secret beliefs while they pretend otherwise.
This policy will cause an even bigger drive by white and Asian parents to flee from school districts whose administrators are afraid to maintain discipline. The upper middle class and upper class are best equipped to carry out this flight. But even the shrinking middle will flee as well.
A Lebanese restaurant in Kabul was attacked by a suicide bomber (I think outside) and then gun men. Lots of NGO and UN workers died. A United Nations press release: "Four UN personnel among those killed in Afghan suicide bombing"
18 January 2014 – Top United Nations officials and the Security Council have strongly condemned a suicide attack at a restaurant in the Afghan capital, Kabul, on Friday evening that killed 21 people, including four UN staff members, and injured many more.
Secretary-General Ban Ki-moon described as “horrific” the attack against the Lebanese restaurant, for which the Taliban has reportedly claimed responsibility.
“Such targeted attacks against civilians are completely unacceptable and are in flagrant breach of international humanitarian law. They must stop immediately,” Mr. Ban’s spokesperson said in a statement.
Thanks for that information. Did you know that targeted attacks by hard core tribal Muslims against civilians are completely unacceptable? I'm picturing Taliban celebrating the suicide bombing and the 2 gunners who killed the people in the Lebanese restaurant. Then someone pulls up the UN press release and reads it aloud. The immediate reaction: "Really? We had no idea. Whoops. Well, you should have told us in advance. Aw shucks, now look at our red embarrassed faces. We really thought this sort of thing was cricket. No? Sorry about that. Our bad."
Plus, what they did was a breach of international law! That's serious. But what about attacking root causes? This is just a sign of lack of education. Why doesn't the UN hold international law classes for the Pashtun tribal leaders? Maybe set up an international law school in Kabul free for all holy warriors. Think that would work?
Oh my bad. Of course not. The problem starts early. The tribes fall behind at an early stage. You know the solution: Early childhood education. We need UN international law preschools in all the tribal areas so that tribal kids won't fall behind before kindergarten, never able to ever catch up. Bad environments. Parents probably don't use big legal words in the household when the kids are 3 and 4 years old. I think the spokesperson and Ban Ki-moon should check their privilege at the door and accept that they are to blame for these bombings. Not enough UNESCO early childhood education.
Can these killings stop? The Sec-Gen's spokesperson said they must stop immediately. Huffing and puffing that isn't even enough to knock down a straw house.
But wait, there is more.
Basra Hassan and Nasrin Jamal worked with the UN Children’s Fund (UNICEF) in Afghanistan. “The depth of our shock and sorrow at receiving this news – and the magnitude of our outrage over this senseless violence – is difficult to measure,” the agency said in a statement.
It helps to have recourse to a dictionary when reading elite statement. So I look up "senseless" and find:
senseless: without discernible meaning or purpose.
Okay, privileged UN people wake up. The Taliban have a clear purpose:to get your influence and your competing values out of Afghanistan. They've got their reasons. They understand the meaning of what you believe. They see the consequences. They oppose the consequences.
"There is no possible justification for this attack, which has killed innocent civilians, including Americans," White House press secretary Jay Carney said in a prepared statement. "We call again on the Taliban to put down their arms and begin peace talks, which is the surest way to end the conflict in a peaceful manner.
I'm sure the Taliban feel very justified. They do not see those UN workers as innocent. They see them as warriors fighting against the Pashtun culture and Islam. Those workers really are fighting against the culture that is trying (quite successfully) to drive them out of Afghanistan.
The unemployment rate used to be a reliable measure of how well the economy is doing. But since the last recession ended in 2009 almost all the decline in unemployment rate is due to millions of people giving up looking for jobs. Furthermore, the US economy still employs fewer people than it did before the recession started. Since the economy has to expand due to rising population if the number employed stays the same the number not employed will grow ever year. That's what's happening.
The big drop in labor force participation rate is not just due to an aging population. It cuts across age groups. So what are people doing instead of working? Disability insurance is the biggest way the welfare state expands the number of beneficiaries below retirement age.
The proportion of those outside the labor force and attending school has risen by 0.9 percent (2.1 million), the proportion collecting disability insurance has risen by 0.7 percent (1.8 million), and the proportion of retirees increased by 0.8 percent (1.9 million). There were small changes in the proportion of those outside the labor force and spending time with family (–0.2 percent), while the proportion of those not working due to illness or outside the labor force for “other” reasons did not change.
From 2007 to 2012 of those aged 25 to 54 1.6% of them left the labor force. By contrast over the time time period 1.9% of those 55 and over joined the labor force. The old folks are discovering they are too old to retire. So they are headed back to work.
The decline in labor force participation rates makes a US government sovereign debt crisis more likely. Fewer getting paid means less taxes collected on wages and more qualifying for entitlements programs.
My standard advice: Develop more skills. Try harder. Gone is the era when the economy expanded quickly every year and a rising tide lifted all boats. You have to try to go up or you will go down.
Someone in their 70s today grew up and lived for decades in a rising American and global economy. In the US they would have experienced booming domestic industries producing for World War II and then good times for decades after. Rising living standards were the yearly experience for the vast majority in America and Europe. It seemed inevitable that this would continue. Most of that generation retired with excellent retirement benefits. Financially their lives were, by chance, perfectly timed.
Many people will be forced to work well past the traditional retirement age of 65 - to 70 or even longer. Living standards will fall, and poverty rates will rise for the elderly in wealthy countries that built safety nets for seniors after World War II.
Why? So many big causes are coming together that the outcome is over determined. Governments are running large deficits. Their promised old age entitlements far exceed their ability to pay. Defined benefit pension plans have become rare. The average age of the population is rising and too few work for the number who are retired. The cost of health care continues to outpace inflation. Plus, high unemployment rates, slow economic growth, and stagnant (or worse) living standards make people less able to save.
The party is still on for some retirees. But for the next generation and generations after it the deal will be much worse.
"France is a retirees' paradise now," says Richard Jackson, senior fellow at the Center for Strategic and International Studies. "You're not going to want to retire there in 20 to 25 years."
The European periphery is in worse shape than America because the sovereign debts are so high and some countries are in outright economic depressions with unemployment rates well over 20%. With sovereign debt interest rates declining in Europe one might be tempted to conclude (mistakenly) that the crisis there has passed and Europe has avoided a financial disaster. Nope. Government debt as a percentage of GDP has continued to rise for Greece, Portugal, Ireland, Spain, and Italy. Of those 5 only Spain has debt of less than 100% GDP. The European Central Bank is loaning to banks in each country and those banks are lending to their governments. So many of the banks in Europe are either going to get bailed out at some point or collapse.
The French government just increased by 1.5 years how long one has to work to get full pension. But slow economic growth or another financial crisis could easily make it necessary to add 5 or more years to the total number of years worked.
Many blue collar workers can not afford to retire. People over 55 are a rising fraction of the total American work force.
The group comprised 12.4 percent of the workforce in 1998. The share jumped to 18.1 percent in 2008 and is expected to be almost 25 percent by 2018.
Why do I keep writing these financial doom posts? I'd like to convince even a small number of people to prepare for what's coming. Don't get despondent or morose. Seriously think about what you can do to improve your career trajectory and preparedness.
Preparation can take many forms. I know someone who is planting lots of fruit and nut trees. You can lower your heating bill by heavily insulating your home. Or you could move closer to work to save on transportation costs. Or increase your 401k savings in each paycheck. Or take some online courses that will enable you transfer into a job that will last longer.
You can take steps to improve your health too. Some of these step are really easy: eat some nuts every day. I just bought a lot of mixed nuts and am grabbing a handful every day. You could start walking somewhere you currently drive to. I've made the habit of walking to the supermarket since I live close enough to one to walk. My neighbors thought it weird to see me walking down the street with grocery bags when I started doing it. One offered to drive me if my car was broke down (really, it is not that far).
Seriously, have any of you made any changes to your life in recent years to prepare for what's coming? If so, and if you do not mind sharing, what did you do? Got more changes planned?
Will the International Association of Machinists union local in Seattle vote down a last offer from Boeing to keep the next 777 design in the Seattle area? They want to remain in the 11% of American workers who still get defined benefit pensions. They also want to remain employed. Good luck with that.
What is at stake nationally? At the national level a slightly slower or faster speed of decline of industrial unions in America. If the union votes down the latest Boeing offer then Boeing will move 777X production to a non-union state. That is less consequential than the local impacts.
What is at stake locally? This is the amusing part: The speed of gentrification of Seattle and the Puget Sound region. Take away work for blue collar workers and their numbers will decline around Seattle. This will open up neighborhoods to be gentrified by knowledge workers. If the attempt by socialist Seattle city council member Kshama Sawant to raise city minimum wage to $15 per hour also succeeds that will even more firmly plant Seattle on the road toward greater gentrification.
The state-level impact: downgrade of Washington State's credit rating. But in the long run I expect decline of Boeing production in Washington State will boost the state's credit rating as blue collar workers move out of the state and get replaced by engineers and software developers.
Some parts of the United States are going to become top 15% zones while others become bottom 85% zones. Seattle seems a likely candidate become one of the top 15% zones, amazingly in spite of all the rain.
Many factors are coming together to enable much greater separation of society into regions of different levels of cognitive function: factory automation, high minimum wages, online buying, automated ordering systems in restaurants, online banking, ATMs, electronic books lower maintenance frequencies on cars, robot vacuum cleaners, cheap fiber optic communications and much more. Anything that reduces the demand for less skilled labor in the towns where the knowledge workers live and work enables the splitting of America (and very likely England and Europe) into separate zones for the highly compensated and the marginally existing.
Anything that reduces the need for someone living in a house to interact with local merchants, local repair shops, local banks, local bookstores, post offices, local restaurant workers, and local clerks cuts the need for less skilled laborers near high skilled laborers. Restaurants are an obvious next candidate for automation with automated order taking with tablets on dining tables and smart phone apps for ordering.
While I think Tyler Cowen's Average Is Over 15%/85% zones make a lot of sense in terms of inevitability I think the 85% deserves a lot more thinking about. Neighborhoods full of 105-115 IQ people can't do rocket science or build machine learning models. But they certainly can control robots to build houses, farm, fell timber and lots of other activities. They can create value at least for themselves and friends. They can maintain clean orderly communities and force their local governments to be competent and uncorrupt. Allowed to separate from the lower classes they'd have few criminals in their ranks as well. They shouldn't have to slip down to the level of slums and shanty towns.
What's going to be critical to the fate of the 50th thru 85th percentiles: How much political power can they get to separate themselves from the segments of society that have very high social pathology? For example, will the elites keep insisting on section 8 housing in their neighborhoods? Classes with a mix of ADHD and well-behaved kids? Can the middle escape elite rule?
What would really help the next generation of the middle: embryo selection using already known genetic markers for intelligence.