Productivity gains versus employment

[PeteM]

Originally Posted by adh2000

Since we have all this technology and machinery creating all these increases in productivity why can't we all just take some time off? It doesn't take very many people to grow all the food we need, build all the housing we need, and make all the things we use.

Actually, a lot of "primitive" societies managed to do just that, especially if they lived in a fertile area with a temperate climate. Some built their housing, fed themselves well, and managed a fairly impressive tribal culture on 3-4 hours a day of work. So, it's a reasonable question.

[jim rozen]

Yeah, that ten percent number only basically counts the folks who were laid off
within about four months. So they WERE working as of four months ago. That
shoots that idea in the foot, that they're not employable.

If you include the number who are currently working part time, and WANT full time
employment, I think the number heads up to about 18 percent or so.

Then you include the folks who have been without work for so long, they've stopped
looking.

Kids under 16, old guys over 50, well I think they're not part of the stats at all.

Jim

[PeteM]

Another misleading part of the statistics is the dramatic increase since 1990 or so in numbers of people who are self-employed (consultants, service workers, trades, laborers, independent sales reps, one man machine shops, etc. etc.). Virtually every industry uses consultants rather than new hires to handle extra work; and these consultants are the first to go in a downturn.

Years ago most everyone worked for a large company. Today there are nearly 20 million US businesses with NO employees. I'd hazard a guess that a majority of these are now seriously under-employed to effectively unemployed AND that few of them show up in the unemployment numbers.

[Joe D Grinder]

Originally Posted by PeteM

Another misleading part of the statistics is the dramatic increase since 1990 or so in numbers of people who are self-employed (consultants, service workers, trades, laborers, independent sales reps, one man machine shops, etc. etc.). Virtually every industry uses consultants rather than new hires to handle extra work; and these consultants are the first to go in a downturn.

Years ago most everyone worked for a large company. Today there are nearly 20 million US businesses with NO employees. I'd hazard a guess that a majority of these are now seriously under-employed to effectively unemployed AND that few of them show up in the unemployment numbers.

I think that you are partly right, partly wrong.

I have been a one-man band for the most part since 1978, and have dealt with a lot of similar businesses. You are very correct that few ever show up on the unemployment roles, but it is mostly because they are almost never unemployed if they remain small and flexable. I can't speak to the consultants and those who rely on one or two big businesses for thier income, but those who have a diverse customer base and/or product/service line seem to always be able to shift their efforts or customer base a bit and keep on truckin' when the pinch is on.

Of course, the down side is that nobody is going to be earning me money if I don't do it myself, but the upside of staying free and flexible is worth it, in spades. Business continues to increase modestly over the last couple of years, with modest changes in what we do and who we do it with, to match the times.

Can't ever stop thinking, though.

As to increased productivity bringing on increased employment, it certainly can. There was a small tool line that was made by a lot of folks for a lot of years, with each tool costing several bucks. Everybody in the business had a choice whether to buy ANY of these tools and use them, and not many did.

We came along in the late 70's and figured out how to make them faster and better. NOw, EVERYBODY can afford to have a handfull in their box. Not only did we expand sales nationwide, we produced them for less per tool. Not only do our direct customers benifit, but several dealers sell them at quadruple the price we charge them, to those who don't seem to know the difference. Everybody is happy, and more tools are being made, sold and used than ever before...........Joe

[PeteM]

Originally Posted by Joe D Grinder

I think that you are partly right, partly wrong.

Could be.

I don't think anyone keeps track of the business activity level of one-person businesses whether tradesmen, shop owners, laborers, consultants etc.

Do have a bit of data, though very limited, behind my thinking that a majority (e.g. greater than 51% or so) of self-employed folks are now significantly underemployed. At least once a week I grab breakfast at a great local place and usually sit at a shared table. Lots of friends and new friends show up; a variety ranging from adjunct prof's (virtually self-employed, no benefits) to tradesmen, computer consultants, CPA's, recruiters, builders, musicians, retired engineers, rocket scientists (really) etc. etc. Most every week we do a "how's business" poll. About 1/4 say "thankfully we're, busy." About 1/4 say "enough business to get by, but no backlog." Fully half say "business is lousy."

Some of this is just luck, not talent. I know a couple of extremely talented cabinet makers. Over the past two years, one will have just stumbled onto a great job while the next fellow has nothing for a while. Same thing with a couple of one-man electrical contractors I know; little dribbles of work until an increasingly-rare big job comes along.

Have also seen a couple folks (e.g. freelance graphic designer, a PR person) that used to show up. They say they can't justify the cost of eating out.

There are a lot of one-man shops on this board. I'd guess that less than half are staying as busy as they'd like, judging from various threads. Some, despite their talent, are struggling. For example, it must be mighty hard to make a living as an independent these days in Detroit. About the only answer for many is to move.

Anyhow, some are doing well. Others have had to cut way back, drop health insurance, etc. Best as I can tell it's more than half that have felt some significant impact.

[jim rozen]

The comment above reminds me of the guggenheim's Balboa, spain, building.

It was made using large stryofoam blocks as molds, which were machine by a large
CNC milling machine. Each mold was used, and then re-used for a larger block
for the next go-round.

The building literally went from the CAD tube, to concrete, with no paper involved.
The joints were apparently so tight they needed no caulking or adhesive.

I hate to see unemployment like this, it is so tempting to blame it on one political
party or another. He did it/They did it, but it seems to me this is a fruition of
productivity gains which eliminate jobs. Also the offshoring, which eliminates
jobs.

In the end you have nobody left to buy the goods made more efficiently, or
cheaper, because nobody is working. The econcomy goes into what might
best be described as a death spiral.

I think that unless the US makes its collective mind up to do something fast,
it's going to steepen and worsen. Short of employing lots of workers in an
agrarian system, I don't know what that would be. Possibly some sort of
CCC-type program, or national service for young adults.

Jim

[motion guru]

Interesting I was reading another thread asking for advice . . . buy a better faster machine or run the old machine two shifts and hire another body.

The overwhelming advice offered was . . . "Buy another machine"

Jim - I think we will look back on the turn of the century as "the good old days" - the way the deficit is now snowballing - the only way we can "earn" our way out is to become a producer of items that are desired by the emerging economies in China and India. And we lack the natural resources and manufacturing base to be able to do that.

This economic downturn is going to be a long hard slog and I doubt we will see less than 10 percent unemployment for several years.

[metlmunchr]

Someone mentioned this TV show "Schmatta: rags to riches to rags" in another thread. I watched it last nite and thought it was worth mentioning again. Its on HBO in the On Demand (or whatever your cable company calls it) section so you can watch it anytime.

Anyway, the program is about the garment mfg industry in NYC, from its inception, thru the sweatshop era, eventual unionization due to sweatshop conditions, and continuing to the present when its all pretty much gone.

The consistent theme, from workers, supplers, and sewing shop owners, is that greed driven outsourcing killed business.

One particularly appropriate comment came from a guy who owned a business that supplied some specialty items to the garment trade. He said "They keep telling us to just give it time and everything will be okay. Meanwhile, we're trying to feed our families, pay our mortgages, and send our kids to college. They may as well be telling us to hold our breaths for half an hour and they'll give us each $10 million. Long before the half hour's over, it just doesn't matter."

Maybe I'm missing something, but I don't see increased productivity as a problem that destroys massive numbers of jobs. Of course there are instances where processes are mechanized and manpower requirements fall pretty drastically, but it seems a lot more technology is aimed at helping workers work more efficiently as compared to the amount that's aimed at mass replacement of workers by machines. I can't remember passing a million sq ft of shuttered plantsite and thinking Damn, they got so productive they just closed the place down. Sure do pass plenty of them regularly though that are monuments to the wholesale shipment of jobs to the third world.

[Joe D Grinder]

Originally Posted by jim rozen

The comment above reminds me of the guggenheim's Balboa, spain, building.

It was made using large stryofoam blocks as molds, which were machine by a large
CNC milling machine. Each mold was used, and then re-used for a larger block
for the next go-round.

The building literally went from the CAD tube, to concrete, with no paper involved.
The joints were apparently so tight they needed no caulking or adhesive.

I hate to see unemployment like this, it is so tempting to blame it on one political
party or another. He did it/They did it, but it seems to me this is a fruition of
productivity gains which eliminate jobs. Also the offshoring, which eliminates
jobs.

In the end you have nobody left to buy the goods made more efficiently, or
cheaper, because nobody is working. The econcomy goes into what might
best be described as a death spiral.

I think that unless the US makes its collective mind up to do something fast,
it's going to steepen and worsen. Short of employing lots of workers in an
agrarian system, I don't know what that would be. Possibly some sort of
CCC-type program, or national service for young adults.

Jim

It can work different ways, for sure. In your example of the building trades, there is a strange thing that's been happeneing for a number of years around here.

An outfit (now several outfits) started making the pro-panel type of steel roofing and siding. The metal comes in giant rolls that seem to be pre-painted, then it comes off of the rolls and goes through a set of rolling dies to be formed. The purlin is formed the same way. It is filthy cheap to make the material and the company will sit there and design your building for you on the back of a napkin for free while your order is being processed. I did mine over the phone, just telling the guy the dimensions and roof pitch. It came in on a semi a few days later and the semi had it's own fork lift to deliver the material to the building site. Total bill, about 6 or 7 years ago, around 2K for a 600 SF building, 12 feet tall, with one 10 ft. roll up door and one steel walk-in door. About ten days later I was working in it.

20 years ago, the building would have employed a bunch of block-layers and roofers and taken a good deal of time and money to construct, so I probably would never have built it, but put up a cheezy tin shed. There are NOT a lot of block-layers working around here right now, but the paper is full of ads for metal buildings, constructed by the same guys who used to lay block, or their heirs. Buildings are cheaper and more of them get errected, good times and bad.

There sems to be a split in attitude about what is to be done with time-saving technology. When it's used to simply cut costs on an existing level of business, not many people benifit. When it's put ( I believe) to it's best use, it is used to generate MORE business by passing some of the benifit to the consumer. Not all, mind you, but enough to generate buyers where formerly existed NON-BUYERS.

'Most anybody can create a product. The trick is to create a market where one did not previously exist.....Joe

[motion guru]

I know that much of the work that our company does results in fewer people required to do the same amount of work. In lumber mills - you can process a log into a board with 10% of the number of people required 20 years ago.

A mold for a boat is now made using a solid model and a 20 foot by 80 foot 5-Axis millng machine from start to finish in a matter of weeks with at most 3-4 people involved at any given time compared to months and months with dozens of laborers using traditional methods a few years ago. And given the housing market - there are now literally hundreds of mills throughout the country being shuttered - way too much capacity that will likely never be needed.


Re unemployment . . . Jim, you are spot on with your 18% number. Here is a snippet on that topic from a weekly newsletter I get from John Maulden -

The Ugly Unemployment Numbers

The headlines said unemployment, as measured by the “establishment survey,”
was down by 190,000; and even though that was slightly worse than forecast, market bulls were cheered by the fact that the number was not as bad as last month’s. It is an improvement that we are not falling as fast.

Well, maybe. What I did not see in many of the stories I read was that the
number of unemployed actually soared by 558,000, to 15.7 million, as measured by the household survey. The establishment survey polls larger businesses; the household survey actually calls individual households.

Let’s look at the real number in the establishment survey. If you don’t seasonally adjust the number, the actual change in unemployment for October was
641,000, or about 450,000 more than the seasonally adjusted number. And the Bureau of Labor Statistics added 86,000 jobs that they simply guess were created through the socalled birth-death ratio. Interestingly, the birth-death ratio number is not seasonally adjusted, so it is just added to the unemployment number.
http://www.bls.gov/web/cesbd.htm

The total (U-6) employment rate is at a record high of 17.5% (this includes
those who are part-time for economic reasons). There are now over 10.5 million people who have lost their jobs since the beginning of the downturn.
My favorite slicer and dicer of data, Greg Weldon (www.weldononline.com),
offers up an even more horrific number. As I have noted before, if you have not looked for work in the last four weeks, the BLS does not count you as unemployed.

Quoting Greg:
“Moreover, when we combine the monthly change in the number of Unemployed,
with the number Not in the Labor Force, we might consider the result to be a proxy for the actual ‘change’ in the underlying labor market situation … in which case, October’s figure of 817,000 represents the fourth LARGEST yet, behind last month’s (September’s) second largest figure of 1,021,000 … for a two-month combined figure of 1.838 million, in newly Unemployed, or no longer ‘in’ the Labor Force …

“… the second LARGEST two-month total EVER posted, barely trailing the
December-08/January-09 total 1.955 million.

“Bottom line … basis this measure AND the ‘Total Unemployment Rate,’ we
could conclude that not only is there NO ‘improvement’ in the labor market, but
moreover, that it continues to DETERIORATE, intently.”

You can read the entire missive here . . . http://www.frontlinethoughts.com/pdf/mwo110609.pdf


We made the decision a few months ago to cut everyone's compensation 20% rather than cut the workforce 20% - I hope to change this to 10% starting in December as we have had a good bank of orders come in recently. Even still, the company will be under water for this year as it was last year. When things are slow - we have chosen to rebuild our own machines, push R&D initiatives and "buy" jobs that keep the cash flow going while working toward establishing ourselves with new customers. It is a cut throat world - and we intend to emerge from the downturn with as many of our employees as possible.

If the recovery does happen in 2010 - we will have better machines, new customers and employees with that much more experience. If the recovery doesn't happen - we will be in deep kimchi.