Near-Term 'Labor Shortages' Are a Sign of Progress
In Rochester, a 58-year-old unemployed former Eastman Kodak employee’s eyes well with tears as he laments the loss of manufacturing jobs in the United States. “There’s nothing made here anymore,” he tells USA Today. "People are suffering, and communities are suffering." It is easy to hear stories like this and believe the economy is losing too many traditional manufacturing jobs. But the truth is, what is needed is not more semi-skill jobs but more highly-skilled workers.
Perhaps our biggest economic problem right now is a mismatch between the skills many people have and the skills today’s marketplace requires. Capitalism is a dynamic process, constantly shedding jobs, industries, and ways of producing wealth - and generating new products, services and ways of providing them. People need to be able to match those changes.
Many look through the wrong end of the microscope. The big shift in work is not from the Midwest to Mexico or China. It is from semi-skilled workers to robots, software, 3D printing and other technologies. The U.S. economy lost about 5.6 million manufacturing jobs between 2000 and 2010, but 85 percent of them were the result of technological change, according to a study by the Center for Business and Economic Research at Ball States University.Manufacturing companies are simply producing more goods with fewer people, as technological progress makes some skills redundant while generating demand for others. At Kodak, for example, a machine now mixes filmmaking ingredients with precision; 10 years ago, it took 14 workers to do the job. When Subaru opened a plant in Lafayette, Indiana, in 1989, most every weld on a car was done by a human being, and the plant produced 88 cars a day. Today, 28 tears later, the welding is performed by robots, and the plant produces 1350 cars a day. We constantly become more productive, but not by working harder. Most people work as hard as possible. We become more productive by leveraging technology.
By efficiently deploying capital, our economy is displacing repetitive semi-skill and low-skill jobs with high-skill jobs that leverage technology, education and training – and increase productivity and economic growth. According to the Department of Labor, there are more than a half-million open technology-related jobs in the United States. Between 2010 and 2020, the department forecasts, the U.S. economy will see a 30 percent increase in jobs for software developers and database administrators, 25 percent for computer systems analysts, and more than 20 percent for information security analysts, web developers and computer network architects.
The biggest economic problem is not a shortage of jobs, but a shortage of people with the skills to fill them. Over the next decade, Deloitte estimated in a 2015 report, 3.4 million workers will be needed to fill manufacturing jobs because of baby boomers’ retirement and economic growth. But 20 percent are likely to be unfilled due to a shortage of workers with the required skills.
The "creative destruction" that characterizes capitalism eliminates manual jobs and creates new ones by deploying technology. It sheds jobs in sunset industries, such as many that used to drive Ohio’s Mahoning Valley – only to generate new ones in sunrise industries, like those found in Silicon Valley. Many are alarmed by the process, but it is not a new one; rather, it is one of the most important ways capitalism fosters change and growth. At the beginning of the 20th century over 40 percent of Americans worked in agriculture. By the end of the century, it was just 2 percent. Many driven by a changing economy from farms to cities no doubt felt threatened. But largely because we no longer require half the population to provide our daily bread, labor is freed up to meet the needs of a modern economy – to build cars and planes, cure the sick, and develop software and invent pharmaceutical drugs. The alternative to a dynamic economy is not a stable one, but a static one in which the way we live is inert from one generation to the next rather than constantly changing and improving.
How we earn our money depends on how we produce the goods and services we wish to buy with it. The more efficiently we produce wealth, the more of it is available to us. Rather than futilely trying to build barricades against economic change, we should adjust to it and make it work for us.