Automation is set to hit workers in developing countries hard
theoutline.com
theoutline.com
Brexit, Trump and other national retrenchment movements are looking more like canaries in the coal mine --a bracing for the waves of displaced workers looking to displace the ebbing but expensive workforces in mature industrialized countries (EU, US, Japan, SK, CA, AU, etc) for less as the need for cheap labor by mature industrialized economies evaporates due to quickly slacking demand caused by automation. [We don't need factories overseas making things to sell in Wal*mart if we can have robots make them "in-house".]
Question 1 is how will mature economies offer their own population a way to make a living [keep their standard of living]. Question 2. is while globalization enabled billions to emerge from extreme poverty, a pause in demand for labor combined with growing populations in developing countries will result in big messes. If the first world finds it hard to provide for itself, there will be little they do for what were developing economies and even less the governments of those economies will do for their own.
We might see some economies ban automation as a way to stave off untenable unemployment in economies with little tax revenue.
Interesting times.
* This would probably look like the UDSSR or WW-II Germany, but without the downsides caused by ideology. Workers could concentrate on improving automation ever further. The obvious downside would be that ideology would not die out, and nations would still strive to grow bigger > war.
interesting. the analogy i've been seeing is more like "closing the barn door after all the horses ran out".
Any modern car is going to have an enormous amount of robotic assembly involved. Having humans can give you more flexibility (robots take time to set up), but expose you to more quality problems because they're inconsistent. But many things just can't be done that well by humans.
My first two cars, bought in 1997 and 1999 were pretty prone to breaking and costing a lot of money and time to fix. But the car I bought in 2005 was different. I checked around, and it would seem all brands have suddenly become very fiable. I suppose the factory switched from manual to automated production.
https://outline-prod.imgix.net/20170323-c86vRGKVPsbek3PZXpVw...
Someone else responded with a picture of a car factory in 1984: https://i.kinja-img.com/gawker-media/image/upload/s--OKTGFiU...
They've had automated production in car factories for a long time. And it's not an either-or thing; just like robots were only used for certain jobs back in 1984, and other stuff was done by humans, it's still like that (though probably more stuff is done robotically). Some tasks are just easier to have humans do, or not worth the expense of a robot (and the set-up, jigs, etc. needed for the robot).
Did you buy a different brand car in 2005 than the 97 and 99 cars? Different brands are different. Even within the same brand, there have been improvements over time (and also regressions). Designs have changed; maybe that company focused more on designing for serviceability between those times. Design has little to do with automated vs. manual production. There's nothing stopping you from designing a car to be assembled by hand (like a small production-run handbuilt exotic), and designing it to be easy to change the oil on.
It also depends on what exactly it is that a given country is arbitraging.
I've been considering China for a few years as not selling its labour or resources but its sinks: the willingness of the country to pollute its air, water, and land, in building up wealth and/or capital.
Other opportunities might be space, shipping access, or the ability to bulldoze through any competing property claims. In that case, say, bulldozing a slum in Mumbai to throw up a frabrication plant that can import raw materials and export finished goods from a factory with a very low labour footprint ... could make sense.
I'm not saying it does, but if you're going to bring automation to a place such as India, then you'd look for a dynamic like that: high-quality or low-tolerance manufacturing, probably dirty, with a high transport need, for which the ability to secure seaport-adjacent property with minimal fuss would be expedient.
It makes no sense for automation to get here before it gets into the developed world. It never worked this way (except when unions made it so) and there's no reason presented for anything to change.
Besides the article spends some time arguing why a level of automation would have a larger impact on developing countries because we rely more on industries and less on services. I think that is too big a focus on the past - we have reasons to think future automation will have a larger impact on services than in the past.
I think the article is interesting, but the conclusions are flawed.
I think you are right, automation will get to the developed world first, but I think in part to automate the developing world remotely.
If you build from scratch, adopting the latest technologies makes sense. If automation technology becomes mature, any new factory will likely use it from the get-go...
A hundred fifty years later the (manual) handloom textile industry is still the second largest source of employment in Rural India after agriculture.
So why has automation of the loom not displaced all these weavers? There are many factors and one of the big ones is - automation isn't magic. It doesn't self-fix flaws. It doesn't upgrade itself. Master weavers can.
The looms weren't AI -- just automation.
In any environment other than grinding poverty, automation is cheaper than human labour.
It changes everything.
It won't matter if a large percentage of jobs have been automated. The ones that haven't will go up in demand with every habitable planet that is settled.
When I wrote that comment I guess I was probably thinking habitable in a similar way to Earth. Possible to thrive on the surface under ambient conditions.
They nearly went extinct because their population outgrew their planet, and probably would have if they didn't make contact with the Hanar, a species that had achieved interstellar flight who took a few hundred thousand home with them before the rest died off.
So, thats getting them to orbit and moving them somewhere.
Plus I'm not sure why whereever they end up won't also be automated given you can ship 10's of millions of unemployed people cheap, one assumes robots would also be cheap to ship.
Resources are bound.
And it will not be viable to send resources from space.
Space colonization is just an excuse for subsidizing the military industry nowadays.
Of course, you might disappear down the awesome rabbit hole that is his Youtube channel.
As paid work becomes less available, it hopefully becomes less integral to our picture of a fulfilled adult's life (particularly a fulfilled man's life). If that happens, I hope to see a huge uptick in reproductive work: people whose jobs have been automated away using their daytime to raise their children, care for their elderly, or serve their community.
Let's get rid of the saviour complex.
If we have the power to help somebody in another country (without, say, bankrupting ourselves or causing some other harm), why don't we have a moral responsibility to do it?
Certainly we can disagree on what realistically and specifically should be done, but can agree that, in principle, humans are obligated to help other humans?
As far as helping people, I feel morally obliged to help the people close to me, and no one else. That's not to say I refuse to help anyone outside of that group, it's just that I don't feel obliged to. My position is perfectly normal and natural and probably shared by the majority of the Earths inhabitants. Global Altruism is the edge-case here.
The 19th century missionary analogy is that you believe you have a moral obligation to help everyone on planet earth. Whether you have religious motivations or not is beside the point.
How did you come up with this far-fetched fantasy?
The people from developing countries who could afford to do that come from a more privileged background than I do. Migration is not cheap.
Um, yes, exactly (modulo "to automation")?
Just how many migrants arrived in Germany last year? Do you suggest they are all somehow "privileged"? And that's just the beginning!
You (probably) live in a place which is geographically hard to migrate to, as you'd basically need to cross the ocean to do so[1]. On the other hand, and on the other side of the pond, we've seen hundreds of thousands of people come here on foot or on boats that I'm amazed even kept afloat as long as they did.
It may look far-fetched to you, but it's already happening. It will get to you sooner or later.
Disclaimer: I'm not against migrants or anything (virtue signaling!), but I feel bad that our policies were among the causes which made them migrate in the first place. I think that such policies were developed by people with a mindset similar to yours: whatever happens there it's not here, so whatever. It is not so. Whatever happens anywhere will, sooner or later, come here and sit on your lawn.
[1] And even then there are people who view migration as a major, significant problem - some of them are even in positions of power.
Of course they are relatively privileged. Do you think the average person from Afghanistan or Iraq or Central Africa can afford to travel to Germany, illegally? Do you think it's cheap to travel overland and pay smugglers!? The average person from a first world country doesn't even have that much disposable income. Use some common sense - the wave of illegal migrants a few years back weren't made up of the lower class, it's economically infeasible.
You (probably) live in a place which is geographically hard to migrate to, as you'd basically need to cross the ocean to do so[1]. On the other hand, and on the other side of the pond, we've seen hundreds of thousands of people come here on foot or on boats that I'm amazed even kept afloat as long as they did. It may look far-fetched to you, but it's already happening. It will get to you sooner or later.
It has nothing to do with sheer numbers, it's willpower. You're absolutely right in that it would be foolish to purchase property and the like from a country that doesn't even have the political and social will to protect itself from unarmed invasion. Luckily not every place is as short sighted as Germany or Western Europe in general.
I think that such policies were developed by people with a mindset similar to yours: whatever happens there it's not here, so whatever. It is not so. Whatever happens anywhere will, sooner or later, come here and sit on your lawn.
I've never advocated military regime change or any other such nonsense. So no, the mindset is not similar to mine. I am against aggression.
[1] And even then there are people who view migration as a major, significant problem - some of them are even in positions of power.
Who are you eluding to here? The Government of China, Japan, South Korea...?
"The Luddite movement began in Nottingham and culminated in a region-wide rebellion that lasted from 1811 to 1816. Mill owners took to shooting protesters and eventually the movement was brutally suppressed with military force."
Historically, when things changed people moved. They had no choice - there was no government welfare system in place. Displaced coal miners can choose to remain in Appalachia where there are no jobs - they know the government won't let them starve.
Trump's saying "coal is back, coal is good" before the election certainly made sense. It was a key factor in him getting elected. But the actions he's taking now to confront this disruption will be what? He's not going to convince congress to give these harmed workers more benefits.
The next wave of disruption will be replacing truck drivers with robots. How things pan out with the coal miners and the government's reaction will be of great interest to the truck drivers (the number one occupation in ~30 states [1]. Interesting thing in that map is that the second most common occupation is "software engineer").
You could say that truck driving is the last bastion of "blue-collar" middle-class occupation is the US. Are these folk going to go quietly? No chance. And like I said, they'll be paying close attention to how the government treats the coal miners. I could see a populist politician promote legislation saying that only people can own truck-driving robots, and that a single person can only own one such robot.
[1] http://www.npr.org/sections/money/2015/02/05/382664837/map-t...
When this happens on a small scale, it's often possible to relocate in a big country like the US. When this sort of industrial shift happens simultaneously across the geographic range where migration has low friction, workers whose cognitive ability or general flexibility is inadequate to retraining are well and truly screwed.
Let alone software, there is an infinite amount of ways how stuff can be better and more efficient. The same goes for engineering, as long as stuff costs more than the materials it takes to produce them. Let alone new fields like material science (graphene) or space exploration.
The demand for those jobs will grow even more to make this robot future happen.
The only thing that needs to change is education in those fields. Why can't work the rest of our population in those areas? Just use tools like capital gains tax (the value those robots produce) and direct those funds into education. If you say that's impossible, in theory a person with average intelligence can learn those things by himself with a single computer.
Tell me where the big flaw is here?
You seem to assume there are jobs which 1) AI won't be able to do and sooner or later 2) that the things that humans will be able to do for a while yet which AI wont requires specialized education.
But thats not how things work.
As I mentioned somewhere else. A cleaning lady is going to have her job longer than a radiologist. Everyone can become a cleaning lady and thus there is going to be oversupply of people who can clean.
If a robot could do all that we would basically be close to a general purpose AI. We aren't even close.
http://www.usatoday.com/story/news/nation-now/2016/08/15/poo...
What is this mystical "future AI" that makes every software developer or engineer suddenly obsolete. Maybe creative thought requires a brain and nothing will ever beat human reproduction in producing engineers.
Most developers today use automated builds, packaging, test runners, app genertors and so on.
Automation in software development is already there, it's been present from almost day 0, but it has so far been aimed at assisting humans, not completely replacing them.
Also I dont thin you realize little magic there is in imagination. Computers can dream, thats what it requires to imagine. The rest is just about finding proper context that fits humans needs, but even that is learnable by machines.
So the question you should be asking is what mystical human ability is imagination that it can't be done by machines.
But again even if it was always outside of human abilities it wouldn't require more but less developers over time.
Robots are the worst nightmare to those very people. Plus, for every great idea somebody has, there is another automation project following right behind.
Reminds me of what Fred from AVC said: company A comes out with technology B and it becomes a major success. Then company C makes a cheaper version of B and displaces the billion dollar company A. Then open source group D comes out with open source version of B, and relegates A and C into has-beens.
My addition: market collapses, new market with new idea is born on open source technology B. Cycle Repeats.
With automation, you have only certain players who will be playing the game.
Actually not just finite, but less than the jobs that will be replaced.
There's not infinite problems to solve - we live in a finite universe, and once we invent a general AI then that's the last thing (as the saying goes) that you ever need to invent -- consequently, no more problems to solve (other than working out how to survive their revolt etc etc).
There's the implication that humans can solve all these infinite employment-providing problems -- clearly plenty of these will be solvable more effectively by AI's (of either variant).
Finally, on this point, there's the implied value judgement in there that we want 'infinite employment opportunities' ... where want either means culturally / emotionally, or just that it's an objectively good and worthwhile goal (to have everyone 'employed' -- and I concede I may be misunderstanding your use of that word) and that we all agree that this is the ideal we should be working <haha> towards.
Beyond that first sentence ... education in new fields is not guaranteed (and casual observation of the rate of growth of ML / AI suggests it's somewhere between hubris and naivete) to be possible, or worthwhile, for humans to exclusively engage in - at the exclusion of, or even just competition with, ML / AI.
Again, extrapolating from what we're seeing happen already, it's likely that we humans will be eclipsed relatively soon in our ability to speculate and investigate these new fields.
Of course limited AI systems (without the "G") will continue to improve and eliminate jobs that don't involve advanced reasoning or creativity.
Even absent a general AI in the near future, the rapid increases in automation from ML and weak AI that we're already seeing don't look to reduce in pace or sophistication.
Education is hard.
Learning is influenced by nutrition levels, base language proficiency, teacher ability, learning style, teacher learning style.
Forget other things like bullying, parental education levels, maternal nutrition levels (which affects fetal development), family stability.
Forget access to water, security, exercise, social stability, cultural and societal norms, and a whole host of other issues.
This is just what affects children.
We can afford to send children to school for the entirety of their working day.
Children have the luxury of time, years upon years of it.
Imagine having to work 2 jobs and get a degree while having to help a family out.
And even if you DID have the time, AND the inclination, you will still likely fail, seeing how MOOCs are free, at your convenience, and still have single digit success rates.
Tldr; solving by invoking education, are like Hollywood hackers who bring down the CIA with exactly 30 key strokes and a pair of glasses.
The engineers and management have already decided. You want a job, I suggest you get into the robot design business.
https://i.kinja-img.com/gawker-media/image/upload/s--OKTGFiU...
You have to pay for that. How do you do it? You can't give away the product. And, not only do you have to recoup your ten billion investment but you need money for new product development and the certainty of supporting a constant flow of lawsuits and legal work that comes with the territory.
Making drugs in the US is incredibly expensive. Scratch that, doing almost anything in the Medical industry is incredibly expensive. Not only do you have to want to innovate and fund the R&D, you have to, from day one, get ready for lawsuits and build-up a war chest. That's a shitty position to be in.
The best thing government could do in order to reduce our medical costs is to enact sensible and fair tort reform. That, right there, would have a huge impact on the cost of medicine at all levels.
No, this does not mean throwing all regulations out the window and letting companies put out unsafe product.
There's a huge continuum between the scenario you envision someone like me "pushing" for and our current reality (which is getting worst every year). Somewhere in there there's a better place where drug company costs are reduced, approvals don't cost so much, frivolous lawsuits are reduced and the regulatory framework achieves a good balance between promoting R&D and serving the common good.
You are stuck on "they are all evil", which simply does not align with reality.
Here:
https://www.forbes.com/sites/matthewherper/2013/08/11/how-th...
https://www.fool.com/investing/general/2016/04/30/the-cost-o...
I am astounded at how illiterate our population is about even the most basic aspects of business. We give our school system our kids for, what, 13 years or so and they come out without any real skills to hold a job, start a business or even understand finances. This is truly terrible.
If you want people to shun goods made by robots, you should campaign for visible "MADE BY ROBOTS" markings on relevant products, educate people why this is bad, and maybe also tax such produce extra for a good measure. Of course, it may not work very well, may have an opposite effect (see "Made In Germany" story), and will definitely introduce potential for abuse and gaming of the system.
There are exceptions, but the world I see as served by capitalism is one of cheap, frustrating crap that keeps optimizing toward even worse quality, and overpriced (overpriced compared to an imagined world where the magic of market efficiency were brought to bear on it) nice things, and little in between. So much for choice.
So I don't see anyone deciding to pay 10x what the crap costs (no economies of scale kicking in or it'd be 3-4x, in a perfect world, but hey) and 1/3 what luxury goods cost for handmade mid-range. They'll bump up and have real quality plus the public image and ego-boost that goes with it, or have 10x as much crap-tier stuff instead. This is in part because people want more stuff, all other thing being equal, and in part because no-one's got the time to figure out how to evaluate quality in more than a small fraction of what they buy (this is why the mid-range is a no-man's land—your market is budget conscious but discerning, educated consumers, which is to say, you're screwed). The consequence is that without regulation setting a highish floor on how awful products can be, we get the deep bathtub shaped graph of supply on the Y and Price/quality on the X, necessarily. There's no room for semi-affordable goods with a human touch. That's just how it is. :-/
Also, nitpick: per Graeber, barter is where you go forward from money when money is temporarily not working, not something that you return to from money, since it didn't, in any meaningful way, represent a step on the way to money.
Also, the ever-rising high-end of the market gets lifted up partially by easy access to credit. If fewer people had access to credit cards, maybe those high-end products would gravitate more towards the mid-range as well.
The quality bathtub graph falls out of that. Not enough confident mid-range buyers to pay 10x the crap price, so you never get to a scale where you can (and/or are forced to by competition) drop to 4-5x the crap price (multipliers pulled from thin air, obviously, and are just representative of some real values).
[EDIT] in fact, to take your example, you may need to know at least a little about jeans to be sure the $60 jeans will last at least 3x as long as the $20 ones, and with more knowledge and time shopping you might be able to find a $40 pair that'd last even longer than the $60 ones. The fact that the $60 pair might still be crap is the real problem.
Personally, I like Lee these days. They're good quality, not as expensive as Levi's, and not as crappy as the off-brand stuff, and seem to fit pretty well.
Currently, I am also trying out a couple of pairs of tactical pants made by LA Police Gear - they were fairly cheap ($30.00 a pair), but seem to be pretty good quality. I only wear them for hiking, and so far for the past 6 months they've held up well. They aren't exactly "stylish" though.
Machines can make perfectly fine products, and if they fail, you usually see it right after purchase while the warranty is on.
The more annoying issue is of shitty design, sometime to save a few cents(shitty motherboard capacitors, shitty earphone hinge), sometimes intentionally - like toyota seeing some model getting to a 300K-1M miles lifetime - and changing a chain to make it 100K, i think.
>> no-one's got the time to figure out how to evaluate quality in more than a small fraction of what they buy
Why should that be hard ? why can't i go to some e-commerce site, and see a reliable evaluation of the lifetime of a product ? of the quality of the main parameters ? With some option to comparison shop on those ?
If you do find someone serving up quality mid-priced stuff, they'll probably be disproportionally expensive for what they are (if not as high as the luxury market, assuming there is one for that product) for reasons of low scale and the tiny market of informed consumers providing less support for competition.
It's not that no-one ever becomes an informed consumer of any product—it's that so few do that it's hard to sustain oneself selling real quality to bargain-seeking informed consumers, and when a company manages to they have trouble scaling to a point that they can lower prices and capture more market share. There's also less room for competition to survive, so there goes another price-lowering mechanism. And good luck getting distribution when retailers make a better margin selling faux-quality at the same price. It's not that you can't ever possibly succeed doing that, it's that it tends to be much harder, resulting in the observed crap/ripoff/luxury (luxury category not always existing for all products) categories of so many goods in practice.
Incidentally, agreed about good machine-made things being possible. Maybe small scale manufacturing/fabrication will get really cheap and break us out of this mess. As it is, they don't usually design the robots to make good stuff (if you can point me to machine-made knotted wool rugs that'll last 100 years at a substantial discount from the hand-knotted variety, ideally without my having to become a rug expert to verify that they really are similarly durable, please do)
But the question is - how do we change this situation?
Because there must be a way, since there are a lot of tools that can be combined for solution -crowdsourcing, including crowdsourcing engineers analysis, the easiness which one can create a niche retailer, the rich chinese manufacturing ecosystem(where there are even small companies making electric cars), the ability to order customer parts to replace the weak link in a product before breakage or just do preventive strengthening with some glue(I.e. earphone hinges) , etc...
A Raspi Zero W, plus a 3G (or 4G if you want to spend the money) module, plus a few other sensors and a screen - and a 3D printed case, etc - are virtually all you need.
Again, though - not most people's idea of a smartphone (I've given thought about building such a thing, though).
>and a 3D printed case
That's not allowed. The requirement was for something "hand made". 3D printing is robotic, so you can't do that. You have to make the case by hand from a block of plastic with unpowered hand tools.
EDIT: If you are going to down-vote this please have the courtesy of reading it
and replying with a counter-argument based on mathematics. I went through the
trouble of doing the math for you and providing objective support for my claims.
To a politician this $15 per hour battle cry is great. They have nothing whatsoever to lose. It's something they can promise and buy votes with that promise. They can even fight to get it implemented and actually have it pass. Why? Because all politicians need votes and this is an easy way to buy those votes from the masses.
But, what does this $15 per hour minimum wage do? And, please, do extrapolate past $15 per hour, because it is in the interest of politicians to keep feeding the drug, even if it kills the patient. The more miserable the masses are the better for populist politicians.
Source: No less than the entire history of every Latin American country.
A higher minimum wage is great for politicians. They keep their jobs. They might even ascend the ranks and make more money.
For workers? Bad idea. Why? Because there's a limit to COGS for a business. We are in a competitive global economy. You can't sell something for $30 when others are selling it for $15 or $20. And so, given labor cost hikes, you have very few choices on the table. Automation and offshoring are two of them.
At $15 per hour is likely to cost an employer about $18 per hour in real terms. That's $36,000 per year for someone who will work 2,000 hours per year on average (50 weeks @ 40 hours per week). If you don't understand how this works, here's a quick article by a CPA explaining the add-ons:
http://cpainerie.com/how-much-does-your-employee-actually-co...
It goes beyond that. A forced rise in minimum wage will hike all costs in an organization. Let's take a hypothetical. I'll use Oregon's current $9.75 minimum wage because I was just talking to a friend who lives there. Let's say you have a company with the following full time labor arrangement:
5 warehouse employees at minimum wage ($9.75)
10 office employees at $15 per hour
5 managers at $25 per hour
3 top level managers at $50 per hour
Now give the first tier a raise to $15 per hour. That's a 54% raise.
The second tier won't be happy. You have to give them a raise. How much? Same percentage or same dollar amount? Let's go with same dollar amount. They go from $15 per hour to $20.25.
The other groups are affected as well, so wages go up by the same dollar amount for everyone. In other words, everyone is making $5.25 more per hour.
Total annual labor cost just went up to $1,426,800, about a 25% hike. An increase of $289,800, of which only $63K was due to the minimum wage workers getting $15 per hour.
And, BTW, as you fold Obamacare insurance into this, the numbers are significantly worst.
$289,800 is real money. It's $24,100 per month. Where is that money going to come from?
What does a business do? In a real competitive environment you can't have your expenses go up by $24K per month and simply raise your prices. It doesn't work that way at all.
Oh, yes, let's not forget the other parts of the COGS equation. I won't even try to quantify this one but I'll mention it because it is important. If you source materials and services from other US-based companies and all of them see their wage costs go up by 25% you can bet some of your costs will go up.
At this point you are faced with the two options I mentioned above: Automate if possible or Offshore. I'll add: Fire a few people to the equation.
Well, guess what? All three of those options produce the same result: People lose their jobs.
Nobody is going to go to Walmart and pay 25% more for a product when the one next to it (probably sourced from China) costs less. The same with online shopping. If your product is sold on, say, Amazon or your own website and your competition doesn't have to deal with government-imposed COGS hikes, your products will not sell. People look for good pricing. They won't pay 25% or 50% more so you can keep your employees and pay them more.
That's the heartless mathematical reality of business.
In all of this politicians lose nothing. They get the masses rattled about inequality and give them the gift of a $15 per hour minimum wage. They get the votes and continue on a sweet ride in government. In the meantime, the tsunami starts to build and millions are likely to lose their jobs.
Automation is likely to be a solution for a lot of companies. If a $40K to $100K robot can replace a $15 per hour employee, work two or three shifts and not have the management complexities of a human worker. Well, guess what, it is very likely it will happen wherever that option makes sense. Another group will ship jobs to China and a small group will hike their retail pricing because they can and keep the jobs here at a higher wage level.
The cold hard truth is that automation in business is purely about the mathematics of running a business. In a free market there would always be a push-pull where people could find jobs at lower wages if they need them. By having politicians interfere with this (mostly for their own benefit, because few others will benefit) they probably have succeeded in creating the conditions to push automation through the inflection point and what's on the other side isn't going to be pink unicorns for everybody.
Once the genie is out there is no way to stuff it back into the bottle. Even scarier than that is low wage countries adopting automation as well.
If anyone objects to my conclusion they need to fire-up Excel, go through the simple math I presented and explain why it is that what I predict is wrong. Mathematically. I don't care about feelings or theories. You have to show how this would work at the most rudimentary business level without losing any jobs.
Its wrong or immoral to say America's economy rides on the premise that we must pay laborers a miserable below-poverty wage. If that were so, what an obvious truth Economists have missed all this time! All we have to do is have a sub-population we treat miserably and the rest of us can have it nice. Economics solved!
Show me the math. Not the words.
Your reply sounds good but it provides zero analytical information, even at a simple level, to support anything at all.
BTW, "free market" does not mean people make "dirt" wages. It does not work that way at all. People will accept pay in the context of their reality. People in the US can't work for Chinese wages, it's simply impossible. This doomsday scenario people like to paint isn't real.
Oh, please! If you are going to write something like that at least pull-up a recent Walmart annual report and study it. Do some research and educate yourself before forming opinions so far out of alignment with reality.
Walmart employs over TWO MILLION people in the US alone. Labor cost is, in fact, one of Walmart's largest liabilities. There is NOT WAY they could survive a 25% labor cost hike without rising retail prices AND laying off a bunch of people because nobody is going to pay tons more for their products.
Please, do yourself a favor and learn to read a financial statement and play with it in a spreadsheet in order to understand how the real world works.
I call it 'playing dot-to-dot'. You can string together a sketch that jumps from point to point and make any case you like. Let me try.
Minimum wage goes up - so folks have more money to spend, so they buy more from retailers, so profit margins rise, so the economy booms and hiring increases. Everybody wins!
That story is 'true' too. They all are. Just, its part of a bigger story. Which is called 'economics' and isn't just some madeup cherry-picked local case folks like to trot out and say "what about this!" and think they've got it all figured out.
So anyway, its immoral to freeze just the wage labor is paid, for the sole purpose of making the rest of us live better. Its simply wrong.
> Minimum wage goes up - so folks have more money to spend, so they buy more from retailers, so profit margins rise, so the economy booms and hiring increases. Everybody wins!
Fantasy.
You are missing a very important part there that should be obvious to anyone today: Competition is global, not national.
Let's take your theory up to an extreme. Let's raise minimum wage to, say, $50 an hour. Why not? Per your thinking it's simple. Everyone raises prices and all is good.
And so, you manufacture product A in the US and now have to sell it for $155 each.
I manufacture the same product. I fire everyone except for a small sales staff and take the product to China to manufacture it there. I am able to sell the same product with equal or better quality for $25.
When people have to choose between your product for $155 or mine, of equal or better quality, for $25, they will choose mine every single time over yours. Your sales plummet, you have to fire everyone and close down the company. Or you fire everyone and go to China just like I was forced to do.
At one point even importing bricks from China becomes a better financial decisions.
In other words, the scenario you painted is a fantasy.
The vast majority of products sold in the US today are NOT made in the US. We can raise our wages and prices all we want. It will only serve to create vast unemployment and further destroy us from within.
Just wait and see what will happen when $15 per hour laws ripple through the entire nation during the next few years. There are companies already leaving California because of just this.
Same recommendation as I seem to make all too often on HN: You don't understand how business works. Please do some reading and fire-up a spreadsheet and play with numbers. It isn't very complicated at a basic level.
> So anyway, its immoral to freeze just the wage labor is paid
Exactly. That's minimum wage. The free market should determine what that is. Our local and national economies will determine where the wage floor might be. In San Francisco this could be $15 per hour minimum wage due to cost of living. In other parts of the country it could be $7, $10 or $12. Government intrusion accomplishes only one thing: Job loss.
Not necessarily:
https://en.wikipedia.org/wiki/Common_law_of_business_balance
...and related with:
https://en.wikipedia.org/wiki/Veblen_good
You probably already know this, though - and I am not saying that because of these two things that your premise (or anyone else's) is wrong -or- correct.
I just wanted to inject this, as to many it may be counter-intuitive that by dropping your price (or selling at a lower price), that sometimes people won't purchase it.
I think there have been studies done where they've used the exact same product, but priced it differently, and despite the product being identical in every way, people purchased the higher-priced item more frequently.
What's going on with our economy is that people have become very used to seeing very high quality products made in China. A stroll through Walmart, Best Buy, Fry's Electronics, Home Depot, Lowe's, Sears, Kohls, Petco, etc. is all that's required to ascertain this.
Nearly everything sold at those retailers is made in China. In fact, short of things like obvious US-made products like bricks and lumber products (and I even hesitate to make that statement) everything else is made outside the US, mostly in China.
And quality is excellent.
It didn't use to be that way. China was synonymous with cheap junk. Sure, there's still cheap junk coming out of China but I think it is safe to say that most of what you can buy at the top retailers in the country is of fairly decent quality.
And so, when faced with a price difference between a high priced US-made good and a lower priced Chinese product the effects you linked to don't really apply. In fact, in some cases the Chinese product is of equal or better quality when objectively compared to the US-made product.
Here we have a case where paying a low price does, in fact, deliver a good-to-excellent quality product.
Luxury goods are a different story. They don't necessarily obey the laws of physics.
We have a problem. A really big problem. I wish I was smart enough to know what the solution might be. I don't. I know bits and pieces of it. Yet it is way too complicated. There is one thing I do know, Trump's idea of "bringing jobs back" sounds great but it is easy to see, given our discussion, that this is just-about impossible.
Can we start manufacturing excellent iPhones if we build fully automated factories? Nope. Not a chance.
Why?
Because China has reached a point where labor cost advantages are not the only advantages they enjoy. I don't have the time to get into the details so I'll be brief. Manufacturing businesses depend on efficient supply pipelines in order to produce product at the lowest possible cost. Chinese industrial cities are setup such that the supply pipelines are very short and efficient. Everything is an hour or less from the OEM. There are towns that make microwave ovens and all of the sub-contractors for the microwave oven makers surround them. Same with other product categories.
This advantage is huge and it is one we do not have. We don't make semiconductors or motors or almost anything here any more. You'd have to take the desert in Nevada and build a huge manufacturing town consisting of fully automated factories producing every component needed to make an iPhone in order to reach the point where we MIGHT be able to make iPhone on par with China.
That's what I call a "gulp" moment. When you realize just how terrible our position might be in a globally competitive marketplace.
As I said before, an artificially high forced minimum wage only exists completely disconnected from the context and the realities of what's going on in the real world. And this, precisely, is the reason it is so destructive. Companies don't need to pay lower wages because they are greedy. They need to reduce their costs because they are getting killed right and left by China, and high government-imposed minimum wages only means one thing: Our government is helping China force these companies out of business one by one. This is not what we should be doing.
The argument for protection of the poor sound interesting until you realize that the more businesses we kill off and the more jobs we export the reality of high minimum wages is that the very people the idea seeks to help will be the first to end-up on the street by the millions.
This is a math problem. And politics and politicians are fucking it all up because they do not suffer direct consequences and their lives are secure. I mean, look at the Obama's. They are getting paid SIXTY MILLION DOLLARS to write a couple of books. Their lives are completely decoupled from the policies they have forced upon us. They are set for life while everyone else will have to suffer. And that's the way it is.
> What does a business do? In a real competitive environment you can't have your expenses go up by $24K per month and simply raise your prices. It doesn't work that way at all.
> If you source materials and services from other US-based companies and all of them see their wage costs go up by 25% you can bet some of your costs will go up.
I thought companies couldn't raise their prices? So pick one, either prices go up or costs don't.
No, that makes zero sense. You are assuming the business owner is evil and rolling in cash when the case is exactly opposite.
Costs are costs. Even taxes. If a business makes $100K at the end of the year and government takes $90K of that in taxes that business has no money to hire people, expand, innovate or survive market downturns. We can't just grab money from people and expect no consequences.
I suggest to fire-up a spreadsheet and run through some calculations because, if you are serious about the above, your view of how things work is quite distorted.
> I thought companies couldn't raise their prices? So pick one, either prices go up or costs don't.
There is no universal law. It all depends on the competitive environment a particular business inhabits. Some have no way to raise prices. Others do. I think I can say that the vast majority of products you find at places like Walmart or BestBuy come from companies who have nearly no freedom to raise prices. Competitors kill each other on margin and there's no room to go up.
I'll give you an example of a company that has some room to increase pricing: Storage companies. This just happened to me. We have a 10 ft x 30 ft storage unit full of business equipment. We started a few years ago paying $285 per month. I just got a notice that it's going up to $340.
When the cost of switching suppliers (or the pain) is such that the customer is kind of stuck the supplier has some room to climb. When mobility is easy and competition is plentiful there is no flexibility.
The example I concocted in post you referred to mentioned that a business might have suppliers who raise prices. This is possible for a certain class of products within limits. For example, if one of the components being purchased to manufacture a product is single source (there are no substitutes) they have the ability to raise prices within limits because the buyer has nowhere to go.
So, yeah, it's a dynamic and variable landscape but the vast majority of businesses in reasonably competitive product segments have no freedom. In fact, in most cases they are under downward pressure.
Here's an easy exercise to confirm this: Go to Amazon and search for any household product. I don't know, forks, plates, screwdrivers, light bulbs, trash cans, toilet cleaner, etc. You will get thousands of results with products within the same price range. Anyone outside a certain range isn't selling well at all. That's just reality.
This is getting rather tiresome.
Let's see. My guess is that "Things that can't be created by automation" become more scarce, hence more rare. That means their price goes up, demand increases, and more folks start making that stuff.
Why do rich people buy expensive designer cars? After all, once the model T came out, the problem of people wanting to go from one place to the other was solved.
I hope there's enough Lamborghinis to go around then...
> The Murcielago will run you about $2000 for an oil change, $4000 for plugs and the best part $12000 for an E-Gear Clutch. The Gallardo on the other hand is more docile and similar to the Ferrari 360 Modena at just $400 for an oil change, $2000 for plugs and finally about $3500 for an E-Gear clutch. The Lamborghini maintenance ranges heavily based on the line you select and should not be taken lightly as the cost of new transmission could cost you $50,000 if a replacement is needed and lets not even talk about the engine failing.
If a new transmission costs $50,000 in parts alone. How much can you charge to put it in?
And let's not forget that polishing these cars can cost thousands of dollars per shine.
Relevant link:
http://www.secretentourage.com/lifestyle/autos/cost-of-owner...
http://www.esotericdetail.com/detailing-services/ferrari-lam...
A cleaning lady is more likely to be a job than a radiologist for longer time as cleaning is actually using almost the entire human spectrum of abilities while radiologist primarily utilizes two.
That doesn't make cleaning more scarce or rare and more expensive it just means there is going to be more people who fight to get the job.
It used to be that fresh fruits were rare, sometimes even priceless. A huge number of people were required to grow, tend, harvest, transport, and sell fruit, especially in the off-months.
That's all automated now. So the price of fresh fruit is tending towards zero. All of those people are not that doing that any more. Those people are still working, just not in jobs that are as heavily automated.
There will always be something you cannot automate. Because you can't, it will be expensive. Because it is expensive, people will want it. It is not logical, but it is the way our species operates. So people do stuff, other people like it, then it's automated, then they find other stuff to do that's harder to automate.
If your thesis is that there is some sort of universal automation coming? Maybe 300-500 years out, when the Great Singularity occurs (because these two events are the same thing). But no time soon.
I will grant you that we currently have no freaking idea of what the economy in 2050 will look like. I believe this is the cool part of being mortal in our age -- things are always so goddamned different between when you're born and when you die.
I already gave you just one example of something thats not going to be more scarce, human cleaners.
How is something all humans can do, going to be cheaper even if ai never can do it?
I don't have to be right all the time. I'm not saying that everything that can't be automated will automatically get more expensive. It's only necessary that some things do.
But you're worse mistaken than just in quantity: there's no mechanism to make things that can't be automated more expensive. If anything it's exactly the opposite: they'll become cheaper and more plentiful:
a) automation removes N jobs
b) people who previously did those jobs turn to whatever they can find -- and they mainly turn to do what can't be automated.
c) we now have MORE people doing what can't be automated: the people that were already doing it before automation, and the people who lost their jobs and turned to "doing things that can't be automated".
d) Abundance of workers making those things (or offering those services), drives labour costs down, fills the market with those things/services and makes things/services that can't be automated get more devalued.
I didn't ask you to be right all the time, you set that bar up yourself by claiming that things that couldn't get automated would get more rare.
I just gave you an example of something that wouldn't get more expensive even if AI couldn't do it. And now that I think of it I am struggling to find anything that will get more more scarce if AI do almost everything else. That just means more humans, more potential competition and thus less rare.
Because in a world where we've automated away most of the good jobs and the threat of no job means being destitute and on the street, your argument that house cleaners become abundant seems irrefutable.
In a world where I balance my dislike for cleaning toilets with my desire for a slightly larger share of the robot-generated bounty, it's not clear there would be an over supply of house cleaners.
Handmade X is expensive and rare.
People will want handmade X.
It's a bit like Amdahl's Law of Parallelisation.
In some cases, that irreducible input is fairly small -- microchips and software can do a great deal (though at scale, they also represent some of the most expensive, and energy-hungry systems we've ever built).
In others ... not so much. Heating water from 0C to 100C will always take 100 calories per gram (and markedly more to convert it to steam). Casting a 22 kg iron weightlifting plate will require 22 kg of iron (and all its embedded energy). Food has its inputs, including sunlight, water, nugrients, land, topsoil, pest control, sowing, and harvesting. You might move that into a lab (I tend to doubt that), but there's still going to be some irreduceable residual.
(Actually, the story may be far worse in that we've taken a system which produces 2-8x the human labour energy inputs to one which consumes 5-10x the food energy output, largely as fossil fuels. Discounting soil and nutrient inputs.)
I strongly suspect your fruit prices are asymptotically approaching some lower bound other than zero.
There's nothing about automation that says that thing that can't be automated become rarer than they are now.
In fact, if people whose jobs were automated turn to creating those things (and what else could they do?), then things that can't be automated will be even more plentiful (and cheaper) than they are now.
Imagine the labor savings!
The invention of photography vastly reduced the demand for painters, first by allowing a photographer to produce vast numbers of portraits quickly and cheaply, then by allowing consumers to make their own photographs. People still make paintings for money, but there is a power-law distribution of the rewards - the vast majority are amateurs or barely scrape a living, while a tiny handful of artists sell paintings for tens of millions of dollars.
There is a growing economic consensus that automation will lead to substantial polarization of the labour market. The jobs most threatened by automation are the skilled but routine jobs that characterise most of the middle class. Some of the displaced factory workers, truck drivers and clerical workers might find a good career as an artisanal baker or a professional YouTuber; I suspect that many more will end up falling into poorly paid and precarious work at the bottom of the labour market, or dropping out of the labour market entirely.
Ultimately, we're talking about people's lives and livelihoods. It's simply not good enough to assume that everything will be OK, to hand-wave away serious doubts being raised by sensible and informed people. There is a strong possibility that the wave of populism spreading across the western world is being stoked by increasing economic insecurity resulting from automation. We on HN are the people responsible for automation; it is incumbent on us to seriously examine the risks posed by it. If we are not prepared for these risks, the results could be catastrophic.
However what you haven't addressed is the impact of reducing the human labor cost/skill to producing portraits. Historically painting portraits were prohibitively expensive, likely most people never had a painting/portrait of themselves or their family. The introduction of photography enabled everyone to have photos of themselves, their families, their children growing up, their wedding. In terms of labour, we started doing things with photos that only the richest people could have afforded to do with paint. Just think of how many mall photography shops there used to be in the early 90s. In the long term we wound up with a higher quality of life by making something that used to be expensive accessible, while still maintaining a large number of jobs. Just not if you're a painter.
tl;dr, automation is bad for the individual, but good for society.
We don't see it because we're immersed in it. To that guy, everything we do is gold-plated and incredibly decadent. We are far, far beyond creating and exchanging things simply for survival.
The richest people don't even create or exchange things of any substance. A guy plays basketball, makes ten million a year. Somebody writes a best-selling book, never has to work again for life. These things would have made no sense to the overwhelming majority of people just 150 years ago.
Hell, in France of the 1950s, the majority of homes outside Paris didn't have indoor plumbing.
(Consider, as a corrolary, that a major cause of building failure is moisture-induced rot: if you want to risk-mitigate your construction and reduce a major source of failure, you'll consolidate plumbing either outside the structure, or to a subsection of it which is particularly immune to rot.)
This assumes that:
(1) jobs making "things that can't be created by automation" would be enough to replace jobs replaced by automation.
(2)people whose jobs have been automated en masse will still have money to pay for that marginally useful scarce products (or consumption by the rich/upper classes will be enough to employ them).
None of those two are safe bets. There's nothing magical about jobs, and no physical or other law that guarantees that humanity will forever, whatever the technology available, still have jobs for everybody.
It's very much possible to have a world where only 5-10% of the population is required to perform the most manual/difficult to AI jobs and all the others are automated away.
We basically have 2 historical instances where this didn't happen, and we extrapolate that this is some guarantee. But it's far from guaranteed.
The industrial revolution turned most manual and farm jobs into factory jobs because early factories weren't automated enough by the technology of the time -- not because it was "inevitable".
The service factor jobs that replaced most factory jobs when factories got more automated happened because we had the increase factory production, but no way to automate those (from accounting to burger flipping). If the majority of those get automated away from AI and software, there might be new jobs, but there's no guarantee for that.
There might be some way (through a "New Deal" style effort to create various marginally useful jobs for humans), or a huge reduction in working hours, or there might be UBI, or there will be discontent and chaos and people who are more numerous than jobs.