Did you notice that the highest rate of advanced degrees in the world is from the Russian Federation? Meanwhile at Forbes, in England and their children we get the classes and aristocracy. You just can't separate them from their kings. Now that is the real Road to Serfdom. Butterflies.
REH From: [email protected] [mailto:[email protected]] On Behalf Of Keith Hudson Sent: Friday, July 23, 2010 2:06 PM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, , EDUCATION Subject: [Futurework] Servants and Nannies? >From Forbes magazine, 23 July Will Your Children Grow Up To Be Servants And Nannies? Reihan Salam Why the labor market of the future will be even more polarized. Will large numbers of today's children grow up to become servants and nannies in the homes of the digital bourgeoisie? There is good reason to believe that the answer is yes. The most pressing issue of the day remains sky-high unemployment. There is, however, almost no consensus about how to think about the the depth of the problems facing the U.S. labor market. Many believe that the staggering unemployment rate is purely cyclical. Karl Smith, an economist at the UNC School of Government, has written a post on "the myth of structural unemployment", arguing that "the structure of the American economy hasn't changed that much in the last 24 months." Yet one wonders if the last 24 months are the right place to look. In Wired for Innovation, MIT economist Erik Brynjolffson and Adam Saunders of Wharton offer an insightful portrait of how the U.S. economy has evolved over the last decade. Their analysis strongly suggests that the shift toward a more IT-intensive economy will lead to even more polarization of the U.S. labor market. Brynjolffson has dubbed the "Great Recession" a "Great Restructuring," adding gravitas to arguments advanced by thinkers like Jeff Jarvis and Richard Florida who've argued in a similar vein. "As growth resumes," Brynjolffson writes, "millions of people will find that their old jobs are gone forever." Smith is undoubtedly right that we can't neglect the cyclical dimension, and that journalists and would-be visionaries have a tendency to grasp at sweeping rather than narrowly tailored explanations for high unemployment. In Smith's view, for example, construction employment will likely recover, as the building boom of the 2000s was not out of step with the earlier building boom of the 1970s. But consider the following counterfactual. As Barry LePatner argued in Broken Buildings, Busted Budgets, the trillion-dollar U.S. construction sector is unusually fragmented and undercapitalized, and thus ripe for consolidation. Economic as well as environmental imperatives could drive consolidation, leading to a construction sector that is leaner, more skill-intensive and more IT-intensive. This would mean far higher productivity. And it would also mean that the labor market position of less-skilled construction workers would deteriorate. There will, of course, always be a place for less-skilled workers, albeit at low wages. At a certain point, wages in the informal sector might look like a more attractive alternative. Discouraged workers who've stopped looking for work in the mainstream economy would, in this scenario, remain on the margins. Indeed, the steady deterioration in the labor market position of less-skilled men is one key reason why male labor force participation has declined so markedly over the last 30 years. The pressing question is whether we are likely to see this trend accelerate. Between 1973 and 1995 U.S. labor productivity grew at an average rate of 1.4% a year, a rate that means living standards would take 50 years to double. In contrast, the 2.7% growth rate in productivity from 1948 to 1972 doubled productivity in 26 years. And that earlier period is remembered as an economic Golden Age, when working and middle class Americans saw extraordinary progress in their living standards and the U.S. economy was without peer. >From 1995 to 2000 the productivity growth rate increased to 2.6% per year, almost matching the Golden Age. As Brynjolffson and Saunders observe, this productivity boom was traced to the deployment of IT investment across a wide range of sectors, particularly retail. The more interesting productivity boom, however, occurred between 2001 and 2003, when the productivity growth rate hit 3.6% per year. This productivity spike was driven less by investments in IT than by investments in organizational capital, a catch-all term for productivity-enhancing business practices. The authors observe a sharp divergence between firms that successfully transformed themselves into effective digital organizations and those that did not. Very bluntly, digital organizations flourish while others wither and die. Brynjolffson and Wharton economist Lorin Hitt identified the defining characteristics of digital organizations, and the most striking were those centered on valuing the strongest performers within an organization: In digital organizations, employees are empowered to make decisions and they are subject to performance-based incentives. Recruiting and investing in top performers is a high if not the highest priority. The logical implication is that the transition to digital organizations is a recipe for even more inequality. In "Performance Pay and Wage Inequality," economists Thomas Lemieux, W. Bentley MacLeod, and Daniel Parent maintain that the increasing use of performance pay can account for "nearly all of the top-end growth in wage dispersion". Assuming this pattern holds, there is no reason to believe that we will see any decrease in wage dispersion. Quite the opposite: The most skilled workers will cluster in digital organizations, and wages at the top will continue to expand at a healthy clip. This raises the question of what will happen to those trapped in the low end of the labor market. Recently, the cultural critic Annalee Newitz offered a provocative hypothesis: "We may return to arrangements that look a lot like what people had over a century ago," Newitz writes. As more skilled women enter the workforce, and as the labor market position of millions of less-skilled workers deteriorate, we'll see more servants and nannies in middle-class homes. While this future might seem disturbing at first, there is no reason to believe that these armies of servants and nannies won't earn decent wages. But let's just say that this isn't the future most of us envision for our children. Reihan Salam is a policy advisor at e21 and a fellow at the New America <http://topics.forbes.com/New%20America%20Foundation> Foundation. The co-author of Grand New Party: How Republicans Can Win the Working Class <http://topics.forbes.com/Working%20Class> and Save the American Dream <http://topics.forbes.com/American%20Dream> , he writes a weekly <http://search.forbes.com/search/colArchiveSearch?aname=Reihan+Salam&author= reihan+and+Salam> column for Forbes. for Forbes. Keith Hudson, Saltford, England
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