By Ashok Bardhan
Five years after the onset of the global financial crisis and the recession that followed, jobless growth seems to be the buzz-phrase for describing the economic landscape today; and even that ambiguously happy phrase refers to those economies that are growing. The US economy, supposedly the one bright spot on the global economic stage has over two million fewer people employed than five years ago, and the share of adults working or looking for work is the lowest since 1978. The labor force is increasingly a mix of part-time, temporarily employed and self-employed, and the lion’s share of jobs created is in low-paying personal services and retail occupations. The emergence of emerging markets has been delayed and the rapid increase in their labor forces temporarily stalled. India is battling a serious economic crisis on many fronts, Brazil has faced popular unrest over the economy, and even China seems to be settling into a lower growth mode.
Is the job creation “machine” of a modern economy finally succumbing to those other machines? Are the footsteps of the marching army of robots getting closer and closer? Is the combination of globalization/offshoring and mechanization/computerization sounding the death knell for decent employment prospects everywhere?
For many years now, the offshore migration of jobs from developed economies to the emerging world has fueled debate over the costs and benefits of globalization. While in the developed economies there is growing concern over the footloose nature of jobs, competitiveness, and future standards of living, in the emerging economies there is increasing uncertainty and insecurity about the sustainability of their economic growth model.
Globalization has been closely intertwined with, and has conflated the impact of technological change. Nobody disputes that technological advances have been a major driver of economic growth and increasing standards of living. But machines and computers have displaced many low-paying as well as high-paying jobs. Jobs requiring repetitive, machine-replicable activities and processes in manufacturing, or involving information classification, standardized analysis and retrieval in services sectors have been pummeled by automation. On the other hand, it is difficult to machine-replicate and machine-substitute activities involving manual and physical dexterity, subtle hand-eye coordination, simultaneous deployment of a range of senses, and nuanced judgment. Many people can accomplish these tasks with a fair degree of competence. But therein lies the rub. Since potentially many humans can excel at these occupations, such as food servers, janitors, drivers and gardeners, which require relatively little training and education, they compete against each other, leading to lower wages. At the same time, it is also difficult to automate jobs involving creativity, judgment born of human trial and error, and analysis born of years of education. These jobs continue to command high wages. Unless, of course, they are offshoreable.
Many tasks that are telecommutable and can be delivered from a distance have migrated to take advantage of lower wages, thus combining both technology and globalization. Competition for a job these days comes both from a machine, as well as a fellow job seeker, sometimes half way around the world. When Keynes wrote, back in 1920, that “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep,” he could scarcely have imagined a similar scenario for services. The occupational spectrum is therefore pockmarked with vulnerable vocations. At one end of the wage range are personal services jobs, largely unthreatened either by machines or cheap, foreign labor. At the other end of the occupational gamut, and scattered throughout, are those jobs that have a personalized or localized delivery aspect, some of which, involving specialized skills, education, and local networking are high-paying.
The economies of most countries are becoming increasingly dominated by services. This poses some additional and unprecedented challenges to their national economic policies. Many services have slow productivity growth, and in the case of some the very concept underscores the futility of applying criteria from “economics” to human activity (e.g. in the arts and other creative fields). Does this mean that economies relying primarily on services, especially those of developed countries, will become relatively costlier, condemning them to even higher cost structures in future, as well as increasing inequality? Does this mean that manufacturing, and the production of tangible goods is somehow special, and explains the relatively happier economic fortunes of, say, Germany, which has retained a sizeable high-end manufacturing niche?
While it is true that some services do not require sophisticated manufactured goods for their production and delivery, many others, such as medical care, environmental services, transportation services, software and so forth do. Manufacturing and services are therefore inseparable; it is difficult to sustain competitiveness in manufacturing-dependent services without commensurate quality in complementary tangible goods production. Both are vital to human development and welfare, although it does seem that manufacturing can no longer play the same role it did in the past in generating mass employment. Over the past few centuries, the making of manufactured products has been a fulcrum of progress and a cornerstone of nation building. It has left a deep imprint on our collective psyches and social behavioral patterns. The historian, Paul Kennedy, who grew up in a shipbuilding community describes in a beautiful passage, “There was a deep satisfaction about making things. A deep satisfaction among all of those that had supplied the services, whether it was the local bankers with credit; whether it was the local design firms. When a ship was launched at [Newcastle firm] Swan Hunter all the kids at the local school went to see the thing our fathers had put together and when we looked down from the cross-wired fence, tried to find Uncle Mick, Uncle Jim or your dad, this notion of an integrated, productive community was quite astonishing.” But if economies are adjusting to this bias toward services, then societies can do so as well, and they will — by creating a different, evolving notion of an “integrated, productive community,” making “things” and creating jobs that give meaning, fulfillment and satisfaction.
Ashok Bardhan is a Senior Research Associate at the Fisher Center for Urban Economics, Haas School of Business, University of California, Berkeley. He is co-editor of The Oxford Handbook of Offshoring and Global Employment with Dwight M. Jaffee and Cynthia A. Kroll.
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