The Growing Underclass: Jobs Gone Forever | Hacker News Reader

The Growing Underclass: Jobs Gone Forever

economix.blogs.nytimes.com

37 pointsrobg65 comments

This article suggests that perhaps the way to get out of the recession is to force people to accept reality:

"Workers whose entire occupations...are disappearing (think: auto workers) will need to start over and find a new career path. But the new skills they will need take a long time to acquire."

Reality: auto work was not highly skilled labor, and it just paid as if it was skilled due to union coercion. This turned out to be unsustainable. Former auto workers must now accept low skill pay.

"...some workers may need to move to new places in order to start a different career....Homeowners who are “underwater” ...may not be able to sell their house for enough money to enable them to buy a home in a new area."

Reality: you speculated on real estate and lost. You can not afford to own a home anymore. Rent.

This is also a reminder that for those struggling during this recession, it would go a long way if those who are not reached out to help. That way we don't need to rely on ever more inefficient gov't programs trying to help. Private charity is good for the giver and receiver (most of the time).

The funny thing is, the problem auto workers face isn't exactly new to America. I remember when there were massive auto plant layoffs in the 1980's, yet new people must have been going into that line of work.

Exactly! Many people don't want to accept the reality. We have been enjoying a really high standard of living which we can't really afford. But now we have to perfect storm and people don't want to accept that they won't be able to buy a 50in TV or a new car every 3 years.

Reality: you speculated on real estate and lost. You can not afford to own a home anymore. Rent.

Look at the silver lining. Due to ridiculous cultural issues in the U.S., you got to live well beyond your means for quite a long time.

cultural? Please explain. The trickle-down of Wall Street irrationality, perhaps.

Former auto workers must now accept low skill pay.

Or try to get a job at the industry unionization is least likely to kill: the government. You don't need to be a highly trained specialist to be a DMV clerk or supervise the Berkeley toolshed.

In related news, the portion of unionized workers working in the public sector exceeded 50% this month...

> This article suggests that perhaps the way to get out of the recession is to force people to accept reality.

In other words, the way to get "out of the recession" is to redefine the current situation as normal, rather than to actually improve it. Well, that would work.

> redefine the current situation as normal

I think the point is that the current situation is normal.

I think the point was that the current situation is acceptable. I can't agree with that.

One thing Congress could do immediately is cut the minimum wage. It is now at $7.25 per hour. This is a price control on labor. You can't make a worker's $5.00/hour skills magically worth $7.25.

They could also make it cheaper for small businesses to hire people. That $7.25/hour labor really costs $14.50.

Unions like minimum wage too much for that to happen. They've historically used minimum wages to try to drive up wage rates for their members.

This is sad and true. The only way out for governments historically has been to inflate the currency to cut labor costs. It's like people need a government for them to have someone to lie to them.

Nobody's labor is worth as little as $5/hour. That's not a living wage anywhere in the US, and as a result it borders on slave labor to hire people for that little. The high price for small businesses is, however, a more realistic problem.

By what process do you come to the conclusion that no labor is worth as little as $5/hour?

By virtue of the fact that it's not possible to make enough to provide food and shelter on that amount (an untested hypothesis on my own part, admittedly). If someone is not trying to make a living then there well may be labor that is worth that little, but I'm not sure how you would make a meaningful distinction to avoid exploitation without a ton of other, more onerous regulations.

sure you can, here's how $5/day on food $10/day rent $5/day utilities + entertainment $2.50/day transportation

$22.50/day or $8,218.13 per year in expenses. At $5/hr, you are making $10k a year for a full time job w/ 2 weeks vacation.

$300/mo for rent and $2.50/day for transportation? Sign me up.

FYI a single ride on the bus/light rail in the Bay Area (VTA) costs $3.75.

That's your issue. You want to live in the bay area. Many cities have monthly passes for under $60.

Austin bus system is $2 for a day pass (unlimited riding for 24 hours), $8 for a for a 7 day pass and $28 for a 31 day pass. $300/month is a bit low for rent, but for $500 you can have a nice 1 bedroom, $350-$400 you can get a reasonable studio in a decent part of town.

Oh, it's possible to provide food and shelter on that amount (depending on what area you're living in, and dependent on you only needing to support yourself), but it's very hard to do so in such a way that one moves themselves forward in life, and it's practically impossible to do so in a way that isn't ridiculously depressing.

Sources: I lived on < $10,000/yr for quite a while.

It should be noted that I am not advocating reducing (or increasing) minimum wage. I think that the issue that people try to address via minimum wage is a clusterfuck of an issue that won't really be solved without a pretty large paradigm shift in how people acquire, or are provided with, their food and shelter.

I think you're confusing the ideas of what work is worth and how much money people ought to get. As most people use the word "worth," it means the amount of wealth something embodies (one good measure of which is the market price).

The distinction becomes particularly clear when you consider societies of one-- e.g. a castaway. If he wasn't industrious enough, a castaway could clearly work in a way that wouldn't guarantee sufficient food and shelter. Ergo it is possible for work to generate less wealth (= be worth less) than would guarantee food and shelter.

I think what you mean to say is that if people can't generate enough wealth to cover certain minimum requirements, the rest of us should make up the difference. And I don't think anyone would argue with that general principle.

By what process do you come to the conclusion that not everyone deserves a chance at food and shelter?

Actually, you're both wrong.

According to new numbers from the Labor Department, in 2008 only 1.1% of Americans who work 40 hours a week or more even earned the minimum wage. In other words, 98.9% of 40-hour-a-week workers earn more than the minimum. The data also show that teenagers are five times more likely to earn the minimum wage than adults.

http://online.wsj.com/article/SB1000142405297020344010457440...

So the people who are most affected by changes to the minimum wage are teenagers who aren't paying for food and shelter, but looking for disposable income.

Ergo, cutting the minimum wage won't be a boon for new jobs nor will it be cutting anyone's standard of living.

> So the people who are most affected by changes to the minimum wage are teenagers who aren't paying for food and shelter, but looking for disposable income.

> Ergo, cutting the minimum wage won't be a boon for new jobs nor will it be cutting anyone's standard of living.

Not so fast.

Many of those teenagers are learning to work, which makes their future labor more valuable. If they don't get such skills, they'll never be worth employing.

Also, some of those teens are contributing to their household's income.

Do you think that cost of labor has any connection to prices, which , in aggregate, creates the cost of living in any particular place?

In other words: higher minimum wage = higher prices = higher 'cost of living'

As a thought experiment, would you support making the minimum wage $1000/hr. If not, why not?

Honestly, the concept of a 'minimum wage' is one of the stupidest things I can imagine.

It all depends on the job and how labor intensive it is. For many jobs that are not labor intensive , reducing wages below won't make a huge difference , but for those who wok for this jobs , it will make a huge difference.

your mistake is in believing that all work is worth enough to live on -- but it isn't.

There is a lot of trivial work to be done that isn't worth rent+food+utilities+... There are things I'd pay someone $5/hr to do but not 50% more than that. It's a huge gap.

At one point in history, Luxembourg had the highest unemployment, largely due to the $10/hr minimum wage, which was the highest in the world at that time.

> your mistake is in believing that all work is worth enough to live on -- but it isn't.

I think it's more a moral belief that anyone who works ought to be able to support themselves by doing so.

Nobody is forced to work for any wage, thus the "slave" analogy doesn't apply. If not enough people are willing to do a job for $5/hr, then the employer will have to either pay a higher wage or reassess whether he needs the work done at all.

Your definition of "worth" must be more like my definition of "deserves".

My first job paid me $4 per hour, plus tips. That was 16 years ago and I was overpaid. However, that's what my labor was worth to my superiors, and they knew their business better than did the USG.

You make two assumptions with your comment. One is that everybody making minimum wage is supporting a family of four. I have sympathy for those people. Pricing them out of a job, however, is simply cruel. They need to increase the value of their skill with experience or education. And what better way to do that than to make less than they want for a period of time so that they can build up one or both of those.

Which brings me to your other assumption -- people who make a low wage will always make a low wage. I now make many times over that $4 per hour. That job enabled me to get another job which enabled me to get another job, etc. I wasn't doing what I do now, but every job had in common the attribute that I had to make myself worth what I was being paid, whether that's $4 per hour or $100. Every day I use experience gained at each of those jobs, even the most miserable ones.

There was a story on HN a while ago about a guy with an MBA who now works at Publix. He had been laid off and claimed that he wanted to teach his sons that work was dignified no matter the job. I believe he was being paid $8/hour or so. Publix has no choice but to pay him $8/hour because he likely can't do a much better job at bagging groceries than the 16 year-old next to him whose labor has been assigned that value by politicians who have never run a grocery store. If Publix wasn't forced to pay the teenager a higher wage than he's likely worth, Publix could either hire more teenagers and reduce everyone's workload and provide the customer a better experience, or they could pay the teen $4/hr and the father $12/hr.

That may enable the father to work there a little longer only to discover he is next in line for management because of his experience. His wife is thrilled that he's not traveling the world anymore eating out. And who better to run the store than someone who has been at the lowest level? Is the teen a slave at $4/hr? No, because he can walk next door to Kroger and see what they pay. Maybe it's $4.10. He decides to stay at Publix because he's already decorated his locker and made friends with the older guy who has great stories about traveling the world.

Businesses will determine quite well what their labor is worth and doesn't need USG to do it. Workers will determine quite well what corners they are willing to cut when times get hard. The latter may find that getting out of bed for a crappy, low-paying job enabled them to find a better opportunity.

There are a lot of states without minimum wages. They are cheaper to live in and, believe it or not, workers make more than pennies per hour.

The second point you bring up is worth discussing too. Between payroll taxes, health insurance, and social security hiring people is ather expensive.

Isn't there a Federal minimum wage? Don't the states have to respect it? California's is higher, but I thought everybody had to respect Federal minimum wage, at least in the US.

Weirdly enough, the Federal minimum wage applies to states that track the Federal minimum. Some states have no minimum wage and some have minimum wages different from the Federal minimum. I think it's a strange system, but there you go.

http://en.wikipedia.org/wiki/Minimum_wage_in_the_United_Stat...

And all of those states are in the the bottom half (I'd say third, but south carolina is a bit above that for standard of living) of states ranked by standard of living, education, and infant mortality. In fact, for infant mortality these 5 states hold the top 4 spots.

Minimum wage is there for a reason - to protect workers from exploitation. We will always have people who lack education and work ethic, then you have immigrants who are not necessarily familiar with a language - all these people are relatively easy to exploit, and they are still human and deserve access to certain basic things (food, shelter, transportation, heat, etc.).

While the educated and ambitious are not worried about the minimum wage, it helps a great many people survive.

Furthermore, very cheap labour (as well as subsidized labour) reduces the incentive to innovate and automate, which I am sure this forum is keen on.

It would be great if all minimum wage did was 'prevent exploitation.' But the simple fact is: minimum wage cuts jobs.

That's not a "simple fact."

Minimum wage also transfers money to low-wage workers, who tend to spend every cent they're given, which acts as an economic boost for the area, and creates job.

All the research I've seen shows that there are two conflicting effects, and even well-educated experts, who have spent long periods of time studying it, have a very hard time determining if the effect is net positive, negative, or neutral.

It only transfers money to low wage workers if they still have a job.

Fortunately, minimum wage cuts very few jobs; market rate is usually significantly higher than $7.25 an hour. However, when you pass a minimum wage higher than market rate, you do have significant effects. Take American Samoa, for example, which recently lost several thousand tuna canning jobs to the recent minimum wage hike:

http://www.washingtonexaminer.com/opinion/columns/Ask-Americ...

Yes, there are edge cases. Yes, if you jack it to levels that are substantially higher than market rates there are negative effects.

None of that demonstrates that reasonable minimum wage laws, in the aggregate, cost jobs.

Exactly. When a minimum wage is higher than market rate, it costs jobs.

When it is below market rate, it has no effect on jobs (or wages); it is essentially a law saying "keep doing what you are already doing".

So tell me, what is the purpose of minimum wage laws?

The key word in my post was substantially.

If you jack it up to a level insubstantially higher than market rate, then the number of jobs lost will probably also be insubstantial (and statistically insignificant in most studies). I agree with this statement.

So basically, an insubstantial increase in minimum wage hides the harm in statistical noise. On the other hand, the (also insubstantially small) benefits will be completely visible.

Sounds like a political win to me: an invisible cost but a visible (albeit small) benefit.

No. Once again you are misrepresenting the alternate hypothesis.

Simply put, the economic effects of modest increases in the minimum wage floor are sufficiently complex that it is difficult to conclusively prove that there is a negative aggregate effect on unemployment.

Further, a useful analysis of the matter would also consider effects on labor force participation, distribution of wages, the poverty rate, entitlement expenses, the cost of living, incentives to attain education, incentives to work, consumer expenditures, prices, etc, in addition to unemployment.

Minimum wage laws cannot be usefully discussed by saying "increasing the minimum wage increase unemployment, it's that simple." Because it's not that simple. And even if that one variable did change that simply, it still would not be a useful policy analysis.

That said, I no longer get paid for presenting or analyzing policy, and your personal opinions have no effect on me, so I'm going to go spend my time doing something more useful and profitable.

You can't sit through an econ 101 course in college where the effects of minimum wage aren't thoroughly discussed as being negative.

It's just a fantasy to suggest that it isn't harmful to marginalized workers like minorities.

Econ 101 gives a very easily understood prediction of huge, obvious disemployment effects which do not occur in reality. Something much more subtle, hard to measure, and not yet understood is happening instead.

Your Econ 101 class must've been far more definitive than my Econ 600 classes.

Econ 100 -- Keeping all other variables the same, if the cost of wages goes up, demand for workers goes down.

Econ 600 -- When wages go up, the other variables do not remain the same, so a useful comparison must analyze the second-order effects to determine the change in aggregate demand for workers.

I think the right approach is a negative income tax, not a minimum wage. Let employers pay no more than they find appropriate, then have taxes (which include taxes on that employer) make up the rest, bringing a household's income up to appropriate levels. (This sort of subsidy would have to be on a basis more frequent than "once a year," of course.)

I would be strongly in favor of eliminating the minimum wage, if we had an appropriately socialized system of food, water, clothing, and job training distribution. But that's never going to happen.

I have a nearly unlimited amount of viewpoints on political matters, but more and more I think it's almost irrelevant. Politics seems like this kind of fun thing where we can have infinitely many new and continuing arguments, but this arguing is never going to accomplish anything. I'm not a senator, and even senators quickly become jaded and cynical at how little actual power their high status provides.

Or maybe the culprit is a corollary of Moore’s Law, the idea of exponential advances in technology over time. That might suggest that innovation and automation displace more and more workers by the time each recession rolls around.

This is also Marshall Brain's thesis in Robotic Nation:

http://www.marshallbrain.com/robotic-nation.htm

In the broadest terms, automation and computerization increase productivity, which means fewer people are needed to do the same amount of work. Conventional wisdom holds that new jobs will be created for displaced workers, but it's as yet unclear what those new jobs might be.

In a more general sense, increased productivity means more value is created per unit cost. This could mean the same value with less jobs; it could also mean the same amount of jobs with more value.

A growing pool of displaced labour is also a growing un-tapped resource (or a growing revolution, depending on how well society manages it).

http://marshallbrain.com/robotic-faq.htm

His suggestion is to ramp up to giving everyone $25,000 per year living costs from the government, with the understanding that people will not just "do nothing" anymore than people "do nothing" with their free time now, but still keep a capitalist system so people who want to earn more can earn more, and ... more details in the FAQ linked above.

Are workers being replaced by robots, or by workers in other countries who are willing/able to work for less money?

This makes me wonder what may end up being the "auto worker" job in 2035? Software/web development? University teachers? How do you even prepare for such an eventuality?

"Web development" quite possibly. However, one of the reasons I chose my career in programming oh-so-long-ago is that I don't forsee the end of programming coming for a long time. Or, if you prefer, "automation".

Our level of abstraction that we operate at may rise ever higher and someday we may all be programming nanobots instead of "computers", but until full and true human-level AI comes along there will always be a need for programmers to be programming something, and while I doubt the nanobots will be programmed in Java there will still be significant carry-over from current skills. And sort of tying into the recent discussion about how the iPad is for "everybody else" who isn't a programmer, the idea that everybody will want to be programmers or will be programmers is clearly false. The iPad is apparently forcing some people to face up to that.

And since "full and true human-level AI" is basically the Singularity, I haven't tried to plan my career past that on the grounds that it's totally impossible to make plans.

There was a story yesterday about using genetic programming for automated debugging. Granted, its probably not putting out the best code in the world but if it works isn't that what business is going to truly care about (maybe its the sliced bread of software development, in that it sucks compared to bread from a bakery but you can still make an edible sandwich from it)

While debugging is only a part of the software development process, it seems like it creates an evolutionary path for automated development.

In that article, a programmer still had to input tests, I believe.

So you could end up with fully-test driven development (requirements oriented?).

I kind of doubt genetic programming is a way to fully automated development.

Someone will always have to describe what it is that the computer should do.

"Running the evolutionary process" has a small chance of being one of the ways I referred to that might involve us moving up the abstraction chain.

However, someone will have to know how to tweak the genetic algorithms and feed them the right data. If you think it will ever be "just specify the problem and run the GA/GP", you are gravely mistaken. It is not that simple, and there will be ways of phrasing the problem that will make it easy for the GA and ways that are hard, and problems that GA will not be able to deal with at all. There will still be programmers.

As I recently said in another post, the gulf between GP hype and GP reality is pretty much the largest I know of in the realm of computer science. There's a lot of very tricky theory, and my expectation is that this will never be a practical way to program (as opposed to fixing bugs), and even if it is, it will take a lot more knowledge and skill than a current programming job, which also means that fewer people will be able to do it. In my estimation, it will just plain be harder than writing it conventionally and thus never be practical.

If we end up forming a union against all odds then yeah it could happen to software developers.

Right now software development is highly skilled labor that charges a high premium for the service. If the demand drops then wages will drop accordingly and less people will get into the field over time. Right now the software market is largely a free one so it can correct itself naturally as demand changes.

The big difference between developers and auto workers is that a developer or two can start up their own company and build something new for little more than the cost of rent, food, and electricity.

Auto workers need a plant, a supply chain, engineers and designers, etc., etc.

University teacher is already there.

I doubt software will get there since it is too much of a free market. Before we get there, wages will drop, people will leave the field (or not enter it), and equilibrium will reestablish itself.

It is commonly accepted wisdom that the higher quality job you pursue the longer your job search will be; this makes sense as the matching problem becomes much more difficult.

Therefore the more skilled the labor force the longer time "between jobs" is going to be optimal from the job seekers perspective; it's worth it to get the match right.

I'll let you make your own conclusions on what this implies for the percentage unemployment rate after recessions.

Jobs gone forever? That's depressing news.

If only there were a way to make more. I mean actually make more, not just tax the people with jobs so you can hire and pay the people who don't have jobs to do work nobody really needs them to do. You know... jobs the employer can afford to pay for not because the employer forced earned money out of everyone's wallets, but because free-willed participants in a fair market agreed to pay for those services without being threatened with jail time.

Wouldn't that just be the bee's knees! If the government could create more jobs out of thin air like that? Well, for the government it'd be thin air anyway. For everyone else involved, it'd be blood, sweat, and tears. Almost makes you think it's unfair who gets the credit for job creation.

Maybe that's why the government makes it harder than it needs to be by getting in the way a little: because government leaders know they don't deserve the credit but there's no way avoid it, so they decided the only way to receive less undeserved credit for job creation would be to make it harder for people to create jobs. Sure, those people might have to bleed, sweat, and cry a little more to create those jobs for others, but in the end our noble government leaders know that sacrifice is worth being able to maintain their humility. Being a politician is a hard job, you know.

And there was me thinking this would be yet another Apple story...

Reply on news.ycombinator.com