Friday, July 16, 2010

The Great Restructuring

This is not just the Great Recession. It's the Great Restructuring.





As growth resumes, millions of people will find that their old jobs are gone forever. The jobless recovery is one symptom.



I think one of the causes is a fundamental reorganization of work catalyzed by information technology.

Posted by Erik Brynjolfsson at 4:50 PM
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13 comments:

  1. Daniel MacDonaldJul 17, 2010 10:01 AM
    This comment has been removed by the author.
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  2. AnonymousJul 17, 2010 12:47 PM
    This would be more valuable if you tied domestic employment to specific sectors to profit in those sectors, rather than compare overall employment to overall corporate profits. In comparing overall employment to overall corporate profits, for example, corporate profits include profits of multinationals and their earnings, which may no relationship to domestic employment, or even domestic profits.
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  3. AnonymousJul 17, 2010 01:38 PM
    "The Great Restructuring" conclusion drawn from these plots seems a bit hard to believe. What if it turns out, a year or to later, that the plots look like this instead?

    http://dl.dropbox.com/u/118481/restructuring.jpg

    Do we have reason to believe they won't? Maybe employment just has a big lag.
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  4. Daniel MacDonaldJul 17, 2010 01:45 PM
    This comment has been removed by the author.
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  5. mikeJul 17, 2010 08:16 PM
    Um... I think I see a batch of people being shoved out the door possibly because they aren't that productive in their jobs, and possibly because their health insurance premiums and pension/401K costs are making their continued employment unprofitable for their employers. And if Joe Blow at 55 or 60 or 65 has become an undesirable employee for Corporation X, then 2 months or 2 years of unemployment is not going to make him a desirable new employee for Corporation Y.

    For a lot of people, unemployment is going to lead to nothing better than waiting to qualify for early retirement on Social Security.

    I don't think we're really reorganizing work structure due to the spread of IT, in other words. I think it's age and cost that matter -- however, employers can't legally lay off on the basis of age, while they can lay off easily on the basis of "lack of qualification" and "inability to understand and utilize office equipment".

    And yes, I think we're going to see a lot of laid off workers in their late 50's, early 60's who never find full time jobs again.
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  6. AnonymousJul 17, 2010 08:46 PM
    Right, researchers, designers, inventors, innovators are not productive. New product manufacturing teams are not productive.

    Productivity and revenue comes only after investment, and all labor involved in investment is unproductive, unless you could the investment as productivity, but the clear mindset today is investment is unproductive in private and public sectors.

    The controlling power in private and public sectors is saying "let China do the investing or pay for the innovation, and we will happily transfer it all to them for the short term profit."

    Oh a hot day in this very hot summer, look at that A/C and think about how that American innovation is nearly totally owned by Asia. Think of the origins of Haier. They were a contract manufacturer to the inventors of A/C in the US, with their customers transferring to them everything GE and Frigidaire knew about designing and making them until Haier no longer needed the US firms.

    And hey, we can just import what we need and can't produce in the US because the bankers will figure out how to give us money for nothing again. Won't they?

    Or we could go back to farming. When the roads and bridges and cities fail from decay of the infrastructure, continuing the past three decades of lack of investment in depreciating infrastructure, we won't be able to obtain food from the ends of the earth, and will be forced to use our idle time growing food. That will require the unproductive labor of learning how. But that is where the illegal immigrants can help - many came here because US factory food drove them off the farms. But remember the US farm factory is highly subsidized...
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  7. gregJul 17, 2010 09:36 PM
    Check out Martin Ford over at http://econfuture.wordpress.com

    {The problem, of course, is that machines are going to get more autonomous. You can see this in the graph at the point where the dotted line (conventional wisdom) and the solid line diverge. As more machines begin to run themselves, the value that the average worker adds begins to decline.}

    And when machines become fully autonomous,(can program themselves, etc.) value added by the average worker plunges to zero.

    He also makes the point that information technology problems are the ones that machines are best able to handle, thus the jobs that are most at risk, in the longer run.


    As for the current recession, aside from deleveraging of the consumer, it is largely brought about by the trade imbalance with China. China isn't having a recession. We are. Could there be a correlation? Even a causation? Could mercantilist policies actually work? Could they, by taking money out of our economy, and hoarding it, and pumping goods in, be inflicting deflationary pressures? Could the resulting depresion in the US price level make it pointless for US industries to invest in domestic production? Could this result in massive US unemployment? But see:

    http://anamecon.blogspot.com/2010/04/effects-of-unbalanced-trade.html
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  8. Doc MerlinJul 18, 2010 02:27 AM
    WoW, Anonymous is pretty clueless.

    1. Illegal immigrants in the US often work on US farms.
    2. The US has the highest industrial output in the world, of any country. Unless you count the EU as a single country, but then we still beat them in per capita terms.
    3. The US is 6th in the world in terms of agriculture output. This is despite subsidies that are designed to keep output low (such as paying farmers to keep land fallow).
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  9. Russ NelsonJul 18, 2010 11:13 PM
    greg, you're a clueless idiot. Computer programmers don't program. They tell the computer how to program itself. Have done so since the early 60's. Computer programmers understand the problem, and put it into terms a computer can understand. Until computers become humans, this process will be necessary.

    I think about half of the economics professors need to go out and shoot themselves, starting with Krugman. That would immediately raise the standards of the profession by about tenfold. Cuz certainly what they're teaching to people doesn't even begin to quality as economics.

    Doc, thanks for dealing with the anonymous loser (if you aren't willing to put your name -- any name -- to your words, you don't deserve to have an opinion).
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  10. gregJul 19, 2010 12:06 PM
    Russ Nelson said:

    {greg, you're a clueless idiot. Computer programmers don't program... }

    Thanks, Russ. I suppose that means you're not going to check out Martin Ford. Martin Ford is the founder of a Silicon Valley-based software development firm and the author of the book The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. He has over 25 years experience in the fields of computer design and software development. He holds a computer engineering degree from the University of Michigan, Ann Arbor and a graduate business degree from the University of California, Los Angeles.

    He is much smarter than I am. If I misrepresentated him, my apologies to him.
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  11. AnonymousJul 21, 2010 04:13 PM
    To go back to the first post by "anonymous" on July 17 at 3:47 PM, this data is not sufficient to derive the state conclusions. Because of the enormous discrepancy in the amount of workers employed in the different sectors of the US economy, it is necessary to look at profits per worker to determine if there is an actual significant restructuring of the US economy in terms of production and worker.
    Large profits numbers may be driven by larger corporations and banks. However, classically, most Americans have been employed by smaller companies and employers. Perhaps the finance constraints that have carried over from the recession have hamstrung smaller companies, which, in turn, have not been able to start-up or expand, or hire new or former employees. Such an effect would persist until credit were more widely available to smaller businesses and individuals, in spite of larger profits realized by larger corporations and banks.
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  12. vanderleunJul 21, 2010 05:35 PM
    Ezra Klein at the WaPo ran that top graph the other day with the headline " Why voters are angry in one graph."

    Seeing it here does not make it less stupid.
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  13. save_the_rustbeltJul 22, 2010 01:55 PM
    In my work as a consultant I spend a lot of time talking to middle managers.

    Their theory on employment, based on instructions from their bosses and first hand observation is:

    "work them to death, if they don't like it they can quit."

    This originates with the "cost cutting makes profits" mantra that grips US business.

    If this is true, and I think it is, eventually the workers will get sick of it and turnover will be quite dramatic. It is going to take a long time though.
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