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Why Unemployment Is Likely To Be Higher Than In The Past 50 years

I hate to burst everybody’s bubble, but the workers of the United States aren’t really any more valuable than the workers in other countries where the labor is 10 times as cheap.

Everybody acts surprised that unemployment is so high, but we’ve had a jobless recover after 911 too.  I’m not going to go into obvious causes of unemployment, if you are interested in those causes, check out this great Wikipedia article on Unemployment, it covers most of the past points quite adequately.  Instead, I’m going to give a shout out to Michael Porter and his list of the reasons that unemployment is still high.  I was fortunate enough to be watching CNBC when he came on and started talking about the reasons that unemployment is so high.  To be honest, CNBC was on as background noise while I was working, but then Harvard economist Michael Porter started listing his reasons why unemployment is still high, and I was floored.  The reasons he listed was practically identical to my thoughts.  I finally found an economist that I agree with!  I had to pinch myself to make sure I was awake!

Young Digerati?
Young Digerati?

Everything the Harvard economist said was spot on, at least in the next 10 to 20 years.  But eventually I think that automation, robotics and other smart machines will tighten employment again in the future (20 years… if not sooner).   I’ve written about job loss to technology before, but I kept it light.  Today I’m going to list the reasons why I think technology will start to eat away at human labor opportunities.

  1. Robots are becoming smarter and faster.  Robots use to be just toys that kids loved (including me).  But these days scientists are working on smart robots… These robots are aware of their surroundings and can adjust accordingly.  Robots (like industrial robots) didn’t have that type of awareness previously.  Cars, and more sophisticated machine will be transporting us without our involvement, at least 90% of the time.  I wonder if in the future, some type of high-speed transportation (that goes 200+ miles per hour) will exist were we just dock our vehicles on the “train” cars and then the “smart train” takes us to our destinations.  I can see it practically being totally automated, including the financial transactions.  The computer automated car (or is it really a smart robot too?), will schedule a position on the train car and the entire process could be automated, including getting off of the train.  Perhaps the train will be in a bubble tunnel or in an underground system of some sort?  Think of fast food restaurants with no humans working at it… Think it’s not possible?  I think it is.  Perhaps in the not to distant future, doctors will be replace by universal doctoring systems, perhaps even surgeries too.  Human doctors are limited by when the currently know, and what they are willing to learn.  A smart robot could tap into some kind of database for all of the newest approaches towards helping people.  Not to mention that they can do testing practically instantly on patients.  I can go on and on about this, but time is limited so I’ll stop here.
  2. People in other countries (especially Asian) are just as smart (if not smarter) than the people in our country, and they work just as hard (if not harder).  Yeah, transportation costs would be a limiting feature of business going overseas for labor if it wasn’t for the trend where labor overseas is considerably cheaper!  How much cheaper, in some cases over 5 and sometimes 10 times as cheap!  So the average worker in the US make $20 per hour, well in China, the overage wage per hour is $2 (and in other places even less).  This is temporary though, because China has come a long way in the past 10 years, and I expect them to continue to prosper and wages to continually increase.  In fact, I’m more worried about automation and robotization taking over future jobs.
  3. Not all people are book smart or have the desire to continually learn new things.  There are a lot of people who don’t want extra education.  The common answer to job security is education for everybody in the US, but some people would rather work with their hands.  I know plenty of people as smart as I am or smarter that work with their hands instead of living in cubicle-ville.
  4. Business need to be competitive or they die.  If you have two businesses, one in the US, and one in China and they both make the same product, if the US company only employs labor in the US, that US company is doomed to fail.  The cost of the product made in China will be much cheaper and bought over the US companies product.  So if the US company doesn’t hire overseas labor, they is a very high chance that they will go out of business.  Look at Walmart and what they sell, and where their products come from.  While Walmart doesn’t have anything against the Chinese, don’t you think that they would prefer to buy cheap products in the US instead?

So while the government does silly little things like raising the minimum wage which will make it harder for my son to get a job in the very near future, the real problem of the United States and our ability to compete with a offshore, highly trained, and very competent labor force will continue to grow ignored.  I guess if they wait long enough, smart robots will bring the jobs back to the United States eventually and the entire matter will be moot by then.

Sorry for the grim take on matters, notice that I didn’t even mention “under” employment!  That will be a conversation for another day.



12 Responses to Why Unemployment Is Likely To Be Higher Than In The Past 50 years

  1. I agree with you, more people from Far East can afford to study in United States. Smart student can get best education from Western University. Competition in the US become very high due to immigration and foreign workforce looking for job in the land of Uncle Sam.

    • It’s not so much a people thing to me as an imbalance of pay thing. Robotics will definitely hurt if it really becomes the threat that it appears to be.

  2. I experienced this firsthand. One of the companies I was working for made the decision to outsource a great deal of the work to India, leaving just a few people in our department. This caused many others, including me, to have to find a different position within the company. Some ended up leaving altogether as a result of this decision.

    • It just makes sense for businesses to do this. The rate of pay is so much cheaper, and the labor and their results is just as good. If companies don’t do it, there is a good chance they will lose to competition that does…

  3. I totally agree with all these reasons. Let’s admit it, because of the modernization of almost everything today, there are many jobs that are automated rather hiring an employee to do those manually.

  4. I’ve been saying a lot of this for the past few years, too, so I agree with you! I think we’re just going to see higher structural unemployment – probably in the neighborhood of 6-7% – until the U.S. workforce and business sector can adapt to the “new” economy.

    • I’ve been thinking of the labor rate of pay inequality for quite a while, and event the reduction of jobs through automation. Shoot, I’ve even written code to automate business logic that has automated manual tasks from my employer. But the new threat to the middle class (and working class) is robotics, smart robotics. IBM’s watson AI computer combined with robotics could really change the current human labor requirements in the country.