Macro Roundup

James Pethokoukis, "A techno-optimist take on automation and jobs," American Enterprise Institute, June 9, 2017, https://www.aei.org/economics/a-techno-optimist-take-on-automation-and-jobs/

A techno-optimist take on automation and jobs

Reason writer Ronald Bailey outlines a strong case that fears about technological unemployment are overblown. For instance: He adds needed context to the recent finding by MIT economist Daron Acemoğlu and Boston University economist Pascual Restrepo that each additional industrial robot in the United States results in 5.6 American workers losing their jobs.

But even taking the high-end estimate, job loss due to robots was has been just 670,000 since 1990 while “last year some 62.5 million Americans were hired in new jobs, while 60.1 million either quit or were laid off from old ones, according the Bureau of Labor Statistics.” I would add that total nonfarm employment over that span has increased by nearly 40 million.

And Bailey on the basic economics that shock stories often miss:

When businesses automate to boost productivity, they can cut their prices, thus increasing the demand for their products, which in turn requires more workers. Furthermore, the lower prices allow consumers to take the money they save and spend it on other goods or services, and this increased demand creates more jobs in those other industries. New products and services create new markets and new demands, and the result is more new jobs.

Pessimists also fail to appreciate our inability to imagine what future jobs look like, a failing that stems from our inability to imagine future technology and its uses. Bailey cites research from economist Michael Mandel that in the decade since the advent of the smartphone, the “app economy” now supports nearly two million jobs.

Let me end with this bit from Bailey that quotes economist David Autor:

Imagine a time-traveling economist from our day meeting with Thomas Edison, Henry Ford, and John D. Rockefeller at the turn of the 20th century. She informs these titans that in 2017, only 14 percent of American workers will be employed in agriculture, mining, construction, and manufacturing, down from around 70 percent in 1900. Then the economist asks the trio, “What do you think the other 56 percent of workers are going to do?”

They wouldn’t know the answer. And as we look ahead now to the end of the 21st century, we can’t predict what jobs workers will be doing then either. But that’s no reason to assume those jobs won’t exist.

“I can’t tell you what people are going to do for work 100 years from now,” Autor said last year, “but the future doesn’t hinge on my imagination.”

(For more on the issues surrounding automation, a relatively recent piece from the Richmond Fed is worth reading. It looks at things through the lens of how driverless vehicles might affect truck drivers.)

Sarah O'Connor, Employment rate passes 2007 peak in developed world, says OECD, Financial Times, June 13, 2017, https://www.ft.com/content/2aa8db88-4f68-11e7-a1f2-db19572361bb

John Evans, general secretary of the Trade Union Advisory Committee to the OECD, said this was a significant shift in outlook for the organisation. “That recognition now has to be translated into recommendations to strengthen bargaining and social dialogue at the country level,” he said. “Too often the IMF and OECD’s recommendations in the past have decentralised and weakened bargaining systems.”

The OECD has also reassessed its policy advice to member countries on how to improve their labour markets, becoming more supportive of trade unions, especially when collective bargaining is centralised. “Labour market adjustment to structural change is likely to proceed more smoothly and leave fewer workers behind if trade unions or other forms of worker representation allow workers’ interests to be taken more fully into account,” the report said.

There was good news too: most countries narrowed their gender pay gaps and better integrated disadvantaged groups such as the disabled into the labour market. European countries faced with fiscal problems, such as Spain and Greece, experienced a fall in most of their labour market metrics, while Germany, Israel and Poland managed to improve most of theirs.

The OECD has developed a new framework to assess the quality, inclusiveness and resilience of labour markets. This includes metrics such as the proportion of people on less than half the median income, gender employment gaps, and whether jobs put people under strain. According to these measures, labour market insecurity and low income rates increased in many OECD countries between 2006 and 2015.

About a third of this polarisation was owing to the destruction of factory jobs and their replacement with lower-skilled service sector roles. The rest was because of polarisation within industries. The OECD attributed this more to the development of new technologies than to globalisation, though it said the two trends were difficult to disentangle.

The organisation’s research showed that labour markets had been “hollowed out” across the developed world, with fewer roles in the middle of the jobs ladder and more at the top and bottom. The share of employment in “middle-skilled” jobs fell 9.5 percentage points between 1995 and 2015 in the OECD area, while the share of high and low-skilled jobs rose 7.6 and 1.9 percentage points respectively.

This wave of discontent has prompted soul-searching at the OECD, made up of 35 of the world’s wealthiest nations. “The populist backlash against globalisation challenges the policy advice offered by international organisations like the OECD, which have long emphasised the benefits of global integration,” the report said.

“While the job gap is closing, many people do not feel the benefits as they are facing stagnant wages and no career prospect: we need an inclusive labour market that reconnects the benefits of our economic model with those who work in it,” said Angel Gurría, OECD secretary-general.

The report highlighted what the OECD called a “paradoxical” moment for the developed world: employment is rising but so is workers’ anger about globalisation and inequality.

The annual jobs report from the Organisation for Economic Co-operation and Development, published on Tuesday, revealed that the employment rate for people aged 15-74 in the OECD area reached 61 per cent last year. This took it above the peak of 60.8 per cent at the end of 2007, just before the global recession pushed millions out of work.

The number of people in work in the developed world has surpassed pre-crisis levels, but the newly created jobs are more polarising and insecure than those that were destroyed.

Employment rate passes 2007 peak in developed world, says OECD

Seems like good news to me, chart from report not article

Matches our findings for the US (and doesn't account for comp shift)"...The organisation’s research showed that labour markets had been “hollowed out” across the developed world, with fewer roles in the middle of the jobs ladder and more at the top and bottom.The share of employment in “middle-skilled” jobs fell 9.5 percentage points between 1995 and 2015 in the OECD area, while the share of high and low-skilled jobs rose 7.6 and 1.9 percentage points respectively...."

“…Also in 2006 a young senator declared: “When I see Mexican flags waved at pro-immigration demonstrations, I sometimes feel a flush of patriotic resentment. When I’m forced to use a translator to communicate with the guy fixing my car, I feel a certain frustration.” That was Barack Obama….”

William Galston, "Our Walled Off Immigration Debate,"Wall Street Journal, July 4, 2017, https://www.wsj.com/articles/our-walled-off-immigration-debate-1499188885

Our Walled-Off Immigration Debate

Democratic analysts have begun a long-overdue review of their party’s weakness among white working-class voters. Because postelection research has shown that immigration is important to these Americans, the review has brought to the surface a long-suppressed debate among Democrats about this contentious issue.

More than politics is at stake. The basic architecture of today’s immigration policy was enacted more than half a century ago. Immigrants’ share of the U.S. population has since tripled while economic opportunities for low-skilled workers have diminished. It is not unreasonable to ask whether a 1965 law is suitable for today’s economy and society.

Among the Democrats weighing in is Stanley Greenberg, a veteran pollster who came to prominence in the mid-1980s for his study of “Reagan Democrats” in Macomb County, Mich. A month into the Trump presidency, Mr. Greenberg returned to Macomb County and interviewed white working-class Trump supporters who had previously voted for Barack Obama. “It was clear,” he reports, “how central concerns about immigration, borders, foreignness, and Islam were to their receptivity to his call to take back America. Many thought Clinton, on the other hand, wanted ‘open borders.’” As they saw it, “Democrats have moved from seeking to manage and champion the nation’s growing diversity to seeming to champion immigrant rights over American citizens’.”

During a public event convened by the liberal magazine American Prospect, Mr. Greenberg was blunt about the political implications of his findings. “You can only succeed if people believe you want to manage immigration,” he declared. Every center-left party in the West is struggling with this issue, he warned. “Sometimes it’s fatal.”

A week later, Peter Beinart of the Atlantic entered the fray. As recently as a decade ago, he pointed out, progressives were willing to entertain tough questions about immigration. In 2006 Paul Krugmanwrote that “immigration reduces the wages of domestic workers who compete with immigrants” and that “the fiscal burden of low-wage immigrants is also pretty clear.” His conclusion: “We’ll need to reduce the inflow of low-skill immigrants.” As recently as 2014, Mr. Krugman said that “if you don’t feel conflicted about these issues, there’s something wrong with you.”

Also in 2006 a young senator declared: “When I see Mexican flags waved at pro-immigration demonstrations, I sometimes feel a flush of patriotic resentment. When I’m forced to use a translator to communicate with the guy fixing my car, I feel a certain frustration.” That was Barack Obama.

By 2015 these economic and cultural doubts were out of bounds for Democrats with political aspirations. Early in his campaign Sen. Bernie Sanders was pilloried for suggesting that low-skilled immigrants would depress wages for American workers. He quickly retreated, even though the facts were mainly on his side. If he had been feeling brave, he might have cited a National Academies of Sciences report that found today’s immigrant-headed families with children are disproportionately likely to rely on food stamps and Medicaid—and slower than their predecessors to learn English.

The constriction of Democratic debate is part of a larger problem facing today’s upscale liberals, who are fixated on cultural issues. In October 2016, progressive stalwart Robert Kuttnerwrote in the American Prospect that it is hard to tell white working-class voters to check their privilege when they are so much worse off than their parents. “The charge of political correctness, used so deftly by Trump, resonates with white workaday voters in part because liberals seem to give priority to every other downtrodden group, from illegal aliens (sic) to transgender people to brown pelicans.” The “sic” was Mr. Kuttner’s.

In a recent issue of Foreign Affairs, two staunch liberal internationalists point to the politics of immigration as the principal obstacle to a sustainable balance between openness and national solidarity. “It is not bigotry,” write Jeff Colgan and Robert Keohane, “to calibrate immigration levels to the ability of immigrants to assimilate and to society’s ability to adjust.”

A new immigration policy need not mean surrendering to nativism. A recent study by the Public Religion Research Institute found majorities of Republicans as well as Democrats who favor a path to citizenship for illegal immigrants, provided that they meet certain conditions. By contrast, support for identifying and deporting them is low in every sector of the population.

Humane treatment for those already here is compatible with a fundamental shift from an immigration policy focused on family reunification to one that prizes education and skills and emphasizes the rapid attainment of English fluency. If both parties are willing to set aside obsolete preconceptions, this new bargain is within reach.