These jobs are going and they ain't coming back

Tuesday , July 17, 2012 - 11:58 AM

Michael Vaughan

"Down at the mill they’ve got a new machine. Foreman says it cuts manpower by fifteen." Bernie Taupin and Elton John wrote those lyrics more than 40 years ago, and they were writing of a time long before they were born. Since the beginning of the industrial revolution in the 18th century, people have understood that advances in technology may reduce the need for the labor of certain workers.

The effects of the steam engine, spinning jenny, threshing machine, power loom, cotton gin and countless other inventions were felt almost instantaneously. These devices would appear in the field or on the factory floor one week, and workers would be dismissed the next.

The effects of 21st Century technology are somewhat different. Corporations may spend millions on computers, client server networks, enterprise software and telecommunications without any noticeable reduction in their workforce.

However, the situation changes during an economic downturn. When economic conditions soften, consumers buy less and corporations produce less. Because less is produced, workers are laid off. The effects of the new technology kick in when the economy begins to recover. As businesses begin to increase output, they discover that they can produce more without restoring the labor force to previous levels. This gives rise to what has come to be known as a "jobless recovery."

If labor markets were perfect, this would not happen. Corporations would continually assess their workforce needs and act to change the size of the labor force whenever prudent. In reality, businesses consider their workforce needs periodically but not continually. After performing a workforce assessment, a business may keep the labor force in place until a significant event causes a reassessment. Recessions provide an occasion for significant reassessments.

The United States is in the midst of a jobless recovery. The data indicate that corporate profits have never been higher, but the unemployment rate remains at historically high levels.

Two economists, Nir Jaimovich and Henry Siu, have examined jobless recoveries and the impact of recessions on low-skill, middle-skill and high-skill workers. The effect of the recession has been exceedingly different for these workers, and the reason lies in modern technology.

Interestingly, low-skill workers are the least affected by technology. For more than two hundred years, inventors successfully explored ways to mechanize low-skill, manual labor jobs. Today, the manual labor jobs remaining are those that are almost impervious to mechanization. Jaimovich and Siu find that today’s low-skill jobs are largely isolated from the effects of technology. Bus persons clear restaurant tables the same way they did 30 years ago. The majority of fresh fruit is still picked by hand. Cross-country truck drivers are not at great risk of being replaced by a computer. Low-skill workers lose their jobs during a recession because the need for their work declines. However, they are quickly rehired when an economic recovery begins because they cannot be replaced with technology.

At the other end of the skill spectrum, high-skill workers are at little risk of being replaced by technology. Software engineers, strategic planners, cardiac surgeons, real estate attorneys, genetic scientists, molecular biologists, venture capitalists and a host of other high-skill workers are unlikely to be replaced with technology in the near future. Indeed, the evidence is that these high-skilled workers suffered very little unemployment during the most recent recession.

The impact of economic downturns is most pronounced among middle-skill workers. This middle-skill work includes a wide range jobs: auto workers, telephone operators, bank tellers, and secretaries. The middle-skill jobs are increasingly being done by technology rather than by people. As an illustration, think of the last time you telephoned a large corporation and were greeted by an actual person rather than an automated phone menu. Thousands of these jobs disappeared in the last recession. Bruce Springsteen captured the situation of many middle-skill workers when he sang, "Foreman says these jobs are going boys and they ain’t coming back."

What does all this mean for Utah? Governor Herbert’s Education Excellence Commission wants 66 percent of Utah adults to have some type of post-secondary certificate or degree by 2020. This will mean that significantly more Utahns pursue some type of education or training after high school. Yet, this initiative has not identified the specific certificates and degrees the state should emphasize.

Much of the training provided by Utah’s colleges, area technical centers and proprietary schools is still focused upon middle-skill jobs because this training meets the short-term needs of some industries. Continuing this practice risks creating a class of workers whose jobs could be lost in the next recession.

As an example, a few years ago colleges and technical centers had programs which trained travel agents. Few of the students who completed those programs are employed as travel agents today.

Instead, the goal of having 66 percent of Utahns with a degree or certificate should be coupled with the goal of preparing Utahns to work and live in the high-skilled economy of the 2020s, 2030s, and beyond.

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