The Jobs Crisis: Bigger Than You Think. By Walter Russell Mead.

The Jobs Crisis: Bigger Than You Think. By Walter Russell Mead. Via Meadia, May 10, 2013. Also here.

Mead:

Of the Big Five questions facing America today, the most pressing and urgent is the question of jobs. This is more than the problem of recovering from the last economic slump; it is more than the impact of globalization and automation on manufacturing jobs. The American economy is shedding jobs, especially long-term, well-paying jobs with good benefits, and the jobs that replace them are often less secure and less well paid. The relentless transformation of the American labor market is changing the nature of American life, calling into question some of the basic assumptions and building blocks of the last fifty years, and generating a complex mix of political and social pressures that will shake the country to its foundations.

Essentially, the problem is this: automation and IT are moving routine processing, whether that being processed is information or matter, out of the realm of human work and into the realm of machines. Factory floors are increasingly automated places where fewer and fewer human beings are needed to transform raw materials into finished products; clerical work and many forms of mass employment in business, government and management are also increasingly performed more economically by computers than by trained human beings.

The transformation is only beginning to kick in. Self driving cars and trucks may reduce the need for human beings in the transportation and freight industries.  Information processing is beginning to change the nature of the legal profession and even as law school applications fall by almost 50 percent there is much more change to come. Computer assisted diagnosis is making itself felt in health care. MOOCs are likely to change the way much of higher ed works.

It is impossible to say now how far and how fast this process will move, but more and more Americans are experiencing the kind of upheaval that blue collar workers in manufacturing began to experience in the last generation and white collar workers and journalists have felt more recently. We are seeing the greatest wave of economic transition since the mechanization of agriculture reduced the percentage of the labor force engaged in farming from more than half the American labor force in 1890 to less than two percent today.

The old engines of job growth, especially in manufacturing, aren’t working, and the competition for good jobs keeps getting tighter. With the entry of billions of Asians and others beyond the old industrial economies of North America, Europe and Japan into the modern economy, the competition is global. And if low wage workers can’t do the job cheaper than you, computers and, increasingly, robots mean that you can still lose your job.

Under the circumstances it is not surprising that many American families and workers see bleak prospects before them.  Even workers who are doing relatively well have to work hard to keep their skills sharp and live with anxiety about the future.

At the same time, some industries and some individuals are doing very well. Modern California is something of an image of the post-Fordist world: in Silicon Valley and in Hollywood, there are pockets of vast wealth creation. Across the state health care does very well, supporting large incomes for highly skilled workers and managers. These oases of wealth support professionals and service providers around them: from accountants and plastic surgeons to pool boys and gardeners.

But the state as a whole is not in good shape; even the presence of world beating, high value added industries in Hollywood and Silicon Valley, two of the world’s most concentrated centers of innovation, is not enough to create broad and stable prosperity across the Golden State.

This is an economy that produces inequality very different from what most citizens of the old industrial economies are used to, and the social and political consequences of rising inequality play a growing role in many countries who once prided themselves on their success in building a vast and stable middle class.

Much of the inequality is generational. For many young people, the road to a middle class job is harder than ever before: more years of school, more years of debt, more internships, more years of scrabbling after graduation until that first real, career building job comes through.

But for many workers, and especially for the young, middle class jobs are less stable, less desirable and less secure than they used to be. Young workers typically get less generous benefit plans than older workers in government and corporate environments. The geezers have been grandfathered into pension and pay schedules that the new kids don’t get. Because there is so much competition from the unemployed, and because industries and companies rise and fall so quickly these days, it is harder to keep good jobs once you have them.

The question, and it is not only a question for Americans, is where do we go from here?  Is the new economy locking us into permanent inequality, insecurity, polarization and class conflict? Are we at the early stage of a Great Unraveling that will roll back the clock on the social achievements of the twentieth century and fall back from Blue Model Fordism to Victorian capitalism red in tooth and claw?  People in Italy and France are asking this as much as people in California and Connecticut; these changes in the labor market are stirring huge and justifiable anxieties across the entire developed world.

A cyclical crisis like the recession and slow growth following the financial collapse of 2008 makes everything worse, but the transformation of the American labor market and the threat to the middle class has been gathering force since the 1970s. A robust economic recovery will ease our discomfort, and the rise of well-paid brown jobs in the oil and gas business is going to help. But automation and globalization aren’t going away; in both good times and bad the foundations of the old social order will continue to erode.

While the problems are real, I don’t ultimately buy the pessimist, Great Unraveling case. People once squealed in as much (genuine) pain about the collapse of the old farm economy as they do now about the fall of Blue Fordism. People once bemoaned the collapse of independence and dignity as proud farmers were forced to become factory hands, engaging in mindless repetitive toil at the orders of management. Furthermore, the same fears people now voice about the inability of the new service economy to provide good livings were loudly and repeatedly shared from Maine to California as the farms fell and the factories rose.  Vast inequality, the prophets and the protestors warned, would be the inevitable consequence of the collapse of the egalitarian farm system. America would turn from a middle class society into a society of paupers and plutocrats.

Millions of lives were thrown into upheaval by the decline and fall of the family farm. Two generations of American politics were shaped by the pain of this transition. From William Jennings Bryan and the “Cross of Gold” to John Steinbeck and his Grapes of Wrath, the greatest enrichment in human history was accompanied by a nonstop chorus of a nation’s brightest and most sensitive weeping and wailing about the wave of poverty oversweeping the land. Keening with woe, they bemoaned the dying past and shuddered at the threatening future until the 1950s found the country so prosperous that in order to keep wringing their hands the professional worriers were forced to begin the study of the corrosive social effects of mass affluence. All those nice houses in the suburbs were killing the human spirit!

The blue Fordist utopia that today’s sentimentalists see fading into the past was once the hell they feared.  Everything looks better in the rearview mirror. But the pessimists are wrong today for the same reason they were wrong 100 years ago. Then as now the key reality was that the productivity of the human race was rising and not falling. Then as now the challenge was to manage the consequences of success.  Now as then the new era, while different and in some ways more challenging, will be more prosperous than anything ever seen.

That said, we should not underestimate the magnitude of the vast jobquake now shaking the country. One doesn’t have to be a Marxist to understand that the way people relate to the economy is critical to the way a whole society works. An America dominated by family farmers and small independent business proprietors was a different place culturally and politically than the America of big corporations and employees that dominated the twentieth century. Schools, churches, family structures, political parties: all changed as the country’s economic foundations changed between 1850 and 1950.

Not all of these changes were painless or benign and the psychological changes that individuals underwent as their place in the economic order changed were sometimes the hardest to bear. The shift from being an independent small farmer to being one of ten thousand automobile workers in noisy, dangerous factories was hard. And the life of an industrial worker endlessly performing a single repetitive step on an endless assembly line is in many ways less rich and more alienating than a life working side by side with your spouse and growing family on the homestead where you were born.

The old farm economy really had to die. The small family farms of pioneer America could not produce the amount of food the country needed at a price the country could afford. Less efficient small farmers could not survive with agricultural prices set by the vast production of large scale, mechanized agribusiness everywhere from the Canadian prairies to the pampas of Argentina.

When “reformers” like William Jennings Bryan talked about fixing the economy in the 1890s they were thinking about policies that would make the small farm viable. When they thought about providing for American families, they thought about finding ways for new generations of Americans to farm their own land.

In much the same way today, much of our policymaking is about trying to resuscitate the past. Will “onshoring” revive the manufacturing economy? Yes . . . but it won’t create many jobs. Automation means that a small number of factory workers can produce enough goods for a whole nation, just as a much reduced number of farmers can now feed us.

In the same way, we are going to keep shedding clerical and information processing jobs. There are no policies that can do more than delay the inevitable, just as the host of farm support policies developed during the long transition failed to stop the transformation of agriculture. (These days, farm subsidies developed to help family farmers now mostly fatten the coffers of huge agricultural corporate complexes. More or less the same fate awaits any effort to protect industrial or clerical jobs now: the change won’t stop, and the money will end up in the wrong pockets.)

The old jobs are going away and they aren’t coming back. More, we can’t fix the problem by trying to create new jobs in factories or traditional office bureaucracies to replace the ones going away. We need new kinds of jobs that don’t involve manufacturing or traditional forms of information processing. That leaves the service economy; there is nowhere else to go.

Promoting new ways for people to make a living in this still young century isn’t as simple as getting macroeconomic policy right. And it isn’t about figuring out how to re-industrialize the economy: how to bring the smokestacks back to Buffalo. That door is shut. That day is done.

Solving America’s jobs problem and its consequences—slack demand for workers at many skill levels and the rising consequences for wages, working conditions and inequality—is going to require both policy and cultural shifts. In the 19th century most Americans spent their time working with animals and plants outdoors in the country. In the 20th century most Americans spent their time pushing paper in offices or bashing widgets in factories. In the 21st century most of us are going to work with people, providing services that enhance each others’ lives.

There will have to be cultural changes. We are hearing almost exactly the same laments and breast beatings about this transition that our ancestors so eloquently wailed about the end of the family farm. Manufacturing jobs are “real jobs”; hustling for customers is servile and degrading? 100 years ago, farming was a noble, independent occupation worthy of a man and a citizen; a wage slave was a lowly hireling, and factory work crippled the body and stunted the mind.

We are going to have to discover the inherent dignity of work that is people to people rather than people to things. We are going to have to realize that engaging with other people, understanding their hopes and their needs, and using our own skills, knowledge and talent to give them what they want at a price they can afford is honest work.

A service economy resting on the high productivity agriculture, manufacturing and information processing will be a more affluent and a more human economy than what we have now. Human energy will be liberated from wringing the bare necessities from a reluctant nature; energy and talent will flow into making life more beautiful, more interesting, more entertaining and easier to use. By 1960 few American suburbanites really envied their hardscrabble, uneducated ancestors shivering through the winter in sod huts on the open prairie; one suspects that few Americans in 2060 will be pining for the glorious old days of 9 to 5 at GM.

But the change will come hard. The tax system and the financial system will have to change to promote the rise of a new world of jobs. The educational system will have to change to prepare young people for new kinds of lives. We are going to have to make all kinds of changes as our society comes to embody a new kind of economic logic. The changes won’t be easy but they aren’t optional.

Our jobs problem won’t be solved by macroeconomic policy shifts or money manipulation by the central bankers. It’s not going away anytime soon. Like the nation of family farmers as the industrial revolution took hold, Americans used to blue model Fordism are going to have to move on.