The Robots Are Here and More Are Coming: Do Not Blame Them for our Wage or Job Problems

The “robots are coming” narrative dominating discussions of the economy  was popularized by Erik Brynjolfsson and Andrew McAfee in their 2011 book, Race Against the Machine. They have built on that theme in the richer, deeper The Second Machine Age (W.W. Norton, 2014). The first half of the book provides a valuable window, at least for a non-technologist like me, into past developments and the future trajectory of digitization. Their claim is that digitization will do for mental power what the steam engine did for muscle power—that is, quite a bit, transforming our lives at work and play.

The remainder of the book dwells on the role of digitization in generating both bounty (more consumer choice and greater output, wealth, and income) and spread (greater inequalities of wages, income, and wealth). In treating these topics, they heavily rely on the work of others. As in their last book, they do not provide much direct evidence of the connection between technological change and wage inequality. I study these issues and believe they are wrong to tightly link digitization and robots to wage inequality and the slow job growth of the 2000s. Although the authors claim “technology is certainly not the only force causing this rise in spreads, but it is one of the main ones” my fear is that this book, like their last one, will fuel the mistaken narrative that technology is responsible for our job and wage problems and that we are powerless to obtain more equitable growth.

Let me start where we agree and where I very much appreciate their argumentation. Brynjolfsson and McAfee are very clear that we are experiencing a dramatic growth in wage, income, and wealth inequality; that living standards have faltered for a significant share of the population; and that these are challenges that must be addressed. They rightly fear that current inequities will generate greater future inequity: They argue that current wealth solidifies and expands inequality through the political process and worry that inequality impedes social mobility—the degree to which a child’s chances are linked to his or her parents’ current station. Inequality begets greater inequality. I appreciate their refutation of denialism and ‘so whatism’.

Their weakest case is that digitization is associated with the slow job growth of the last 15 years. The authors review all the reasons why economists find such a claim untrue, including 200 years of history disproving a link between technology and slow job growth.  They propose a few reasons why things may be different now. However, their only evidence is that employment and productivity grew in tandem for many decades but became decoupled in the late 1990s and offer their “reading of technology” as an explanation. In fact, there’s a simple answer to the riddle of slow job growth: slow economic growth resulting from the collapse of two asset bubbles and inadequate policy responses. Job growth occurs when economic growth exceeds productivity. Simply put, if workers can produce 2 percent more this year than last year, the economy can grow 2 percent without adding any employment. Thus, the economy must grow faster than productivity to create jobs, something that has not happened in the unique circumstances of the 2000s.

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Recommitting to Dr. King’s Goals Would Help All Working Families

Monday’s celebration of Dr. Martin Luther King Jr.’s legacy presents the perfect opportunity to reflect on how far the country has come and to acknowledge the undeniable advancements African Americans have made, and to consider the goals that remain unmet. Last year, EPI released the Unfinished March, a series of reports that detailed the remaining steps to fully achieve the goals of the March on Washington for Jobs and Freedom, the setting for King’s “I Have a Dream” speech.  Yet to be achieved are the hard economic goals, critical to transforming the life opportunities of African Americans. They include decent housing, adequate and integrated education, full employment, and a national minimum wage that can realistically lift a family out of poverty.

The employment trends for African Americans over the past decade, as seen in this week’s Economic Snapshot, show just how much work remains to be done just to achieve the goal of full employment. While the economic woes of the past few years have worsened labor market prospects for all workers, for African American workers the employment situation is significantly worse, akin to depression-level conditions. An estimated 19.6 percent of black workers (nearly one in five) were unemployed at some point in 2013. Furthermore, given unemployment projections for 2014, it is likely that 17.4 percent of black workers will be unemployed at some point this year.

Needless to say, it doesn’t have to be this way. Recommitting ourselves to achieving Dr. King’s goals means implementing policies that would aid all U.S. workers, including large-scale ongoing public investments, the restoration of public services and public-sector employment cut in the recession and its aftermath, and the renewal of federal unemployment insurance benefits. Passing these policies would not only celebrate Dr. King’s legacy, but also help working families, of all races, across the country.

New Analysis of the Labor Market Outcomes of Employment- and Family-Based Immigrants Can Improve Policymaking

Unlike other developed countries such as Australia and Canada, the U.S. government simply does not collect and analyze enough information on the labor market outcomes of immigrants who are issued visas that grant them legal permanent resident (LPR) status. Especially when it comes to longitudinal data that track the same immigrants over time in order to see how their situation has changed. This dooms policymakers to make uninformed decisions based on assumptions or that are influenced by lobbying from interest groups. That’s why new (and as-of-yet unpublished) research from Professors Mark Rosenzweig (Yale University) and Guillermina Jasso (New York University) is groundbreaking: it analyzes data from Princeton University’s New Immigrant Survey (NIS) and offers a glimpse at how immigrants in the United States are performing in the labor market over time and by visa category.

The NIS “is a nationally representative multi-cohort longitudinal study of new legal immigrants and their children to the United States,” and one of the most useful data sets available on U.S. immigrants. The first cohort of immigrants participating in the NIS were interviewed in 2003, and follow-up interviews were conducted from 2007 to 2009. Rosenzweig recently presented their research based on these survey data at an informative conference on family immigration hosted by the U.S. Department of Homeland Security and the Organisation for Economic Cooperation and Development (OECD). He showcased some of the first analyses of the NIS’s longitudinal data on the labor market performance of immigrants who came to the United States through the Diversity Visa (DV) lottery and the employment-based (including spouses) and family-based immigrant visa categories; the latter of which represent two-thirds of all immigrant visas issued (by far the highest share in the OECD), and allow foreign citizens to join a spouse or parent who is a U.S. citizen or LPR, or to join the son, daughter, or sibling of a citizen already in the United States. (Lindsay Lowell of Georgetown also presented notable new research and findings documenting the growth of the family-based visa category in the United States since the 1970s.)

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Seth Harris’s Legacy: Lives Saved, Wages Restored, Pensions Secured, and a More Effective U.S. Department of Labor

The Deputy Secretary of Labor for the last five years is not well known outside his agency (deputy secretaries are never well known, they’re supposed to avoid the limelight), but his record—the Department’s record of achievement during his tenure—deserves to be known and praised by every American who cares about justice and an economy that delivers shared prosperity. Seth D. Harris was appointed by President Obama in 2009, but he had already spent eight years at the Department as an aide and counselor to Secretary Robert Reich and as an Assistant Secretary under Secretary Alexis Herman. As Secretary of Labor Tom Perez said yesterday, no official since Frances Perkins in the 1930s has understood every aspect of the agency’s mission as thoroughly as Seth Harris, and the agency was much smaller then! It’s unlikely that anyone so knowledgeable will ever serve at the Department of Labor (DOL) again.

When Harris and Secretary Hilda Solis took office in 2009, the Department of Labor was a demoralized agency with poor operating systems and a disappointing record of declining enforcement and regulations that undermined the agency’s mission in important ways. With Secretary Solis’s support, Deputy Secretary Harris, as chief operating officer of the department, completely turned things around.

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Partnership or Putsch?

This article originally appeared on Project Syndicate.

In 2010, I sat across the table from Assistant US Trade Representative Barbara Weisel, who was responsible for negotiating the Trans-Pacific Partnership (TPP), the mega-regional free-trade treaty among Vietnam, Malaysia, and ten other Pacific Rim countries that President Barack Obama’s administration wants to conclude in the coming weeks. At the time, I was Senior Policy Adviser for the US House of Representatives’ Committee on Education and Labor – a position that made me the top congressional staff member responsible for upholding labor standards in international trade treaties.

The purpose of the meeting was for Congress to understand what steps the Obama administration was taking to protect American workers from being forced into unfair competition with workers from low-wage trading partners. I asked Weisel what I thought was a simple question: “What is the White House’s position on democracy?” Weisel claimed not to understand, so I explained: A majority of congressional Democrats supported the principle that the United States should sign trade agreements only with countries that are democracies.

Other democracies feel the same way. For example, trade agreements negotiated by members of the Commonwealth of Nations (formerly the British Commonwealth) contain just such a provision. The logic is obvious: If we in developed democracies had lacked the right to protest, speak out, organize unions, and vote for representatives of our choosing, we would never have ended child labor or established the eight-hour workday. Having used these rights to raise our own living standards, we should not now put developed countries’ workers in direct competition with workers who lack the basic freedoms needed to improve their own conditions.

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No Matter How We Measure Poverty, the Poverty Rate Would Be Much Lower If Economic Growth Were More Broadly Shared

In an op-ed for the New York Times, Jared Bernstein discusses the relationship between GDP and poverty. He explains that growing inequality, not slowing GDP, led to a higher  poverty rate than we would have had if economic growth were broadly shared. We create the same graphic in The State of Working America. Not surprising as Jared is a co-author on previous versions. I’m replicating the same idea below using the historical relationship between GDP and poverty from 1959 to 1979 to predict poverty to 2012. As you can see, poverty hits zero by the early 1990s. We choose a different end date in creating the prediction, which changes the estimated date poverty falls to zero, but the same basic fact remains: Poverty falls fast and would be erased from the United States had economic growth been as broadly shared as it had been in the years leading up to the late 1970s.

Many commentators, researchers, and others have argued that the official poverty measure fails to fully take into account the government tax and transfer system, which has accomplished much to reduce absolute deprivation. Some transfer programs are accounted for in the official poverty measure,including Social Security and unemployment insurance. Others, such as food stamps, housing assistance, and the earned income tax credit are not included in the official poverty measure. The Supplemental Poverty Measure (SPM), created by the Census Bureau, effectively takes many of these into account while simultaneously altering the threshold at which poverty is measured against.

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Class War: The View From the Board Room

This post originally appeared on The American Prospect.

The Vice-President for Governmental Affairs has just finished his report to the corporate board of directors. “Thanks, Ted,” says the Chairman. “You and your Washington staff have done a great job. Getting that little amendment inserted in the budget bill will save us at least $25 million next year. …. Questions or comments? Paul?”

Paul, the hedge fund CEO: “I’m worried about the big picture down there in Washington, Ted. It’s a mess. Deficit out of control.The anti-business attitude. Not to mention incompetence. Can’t even run a website for their own health care program. Pathetic.”

“Amen,” says Hank, who used to run a tobacco company. “What bugs me is Obama’s complaining about inequality. Just whips people up. Saw them last night on the TV news, in front of a McDonald’s somewhere, screaming for more money. Makes you sick. Want money? Get a job!”

“Actually Hank, those people already have a job,” says Cliff from Silicon Valley. “And lucky to have it. Plenty more out there ready to take their place.”

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Six Flags Wants an Exemption From a Minimum Wage Increase

Whenever a new law is passed (usually before it passes), well-placed lobbyists attempt to make exceptions to the general rules, to insert exemptions for their clients. Thus, the federal Fair Labor Standards Act has exceptions for companies that harvest shellfish, for summer camps, for ski resorts in national forests, and many others. Some of these exceptions make sense, but many defy logic. Why, for example, should “motion picture theatres” be exempt from overtime pay requirements?

Prince George’s County recently raised its minimum wage to $11.50 in several increments over three years, and special interest pleading has begun. The first in line is apparently Six Flags, an amusement park that claims paying a higher minimum wage would create a special burden. Why? Because it claims it won’t hire as many teenagers and seniors if their wages are increased.

The company’s argument assumes that there is a necessary trade-off between paying seniors and teens a living wage and employing as many of them as it has. But is that true? Will higher wages compel the company to reduce its staff?

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A Viper Lurking in the Farm Bill: So-Called Sound Science Provision Carries Anti-Regulatory Poison

The biggest lie in Washington might be the claim that government regulation is strangling business and making it impossible to earn a profit. The clearest evidence that this is a lie is the fact that business profits are at an all-time high. The chiefs and bosses of those businesses are doing very well, too, with CEO pay soaring far beyond any rational relationship to the pay of average workers.

Yet “too much regulation” remains the cry of the Chamber of Commerce and scores of other business lobbying groups, and it gets taken seriously by the media and by Congress, which is always looking for some reward to give corporate lobbyists for their electoral support. The latest goody is a provision in the House farm bill poorly named the ‘Sound Science’ provision, which is intended to damage the ability of federal agencies to regulate anything that relies on a scientific justification.

Section 12307 requires agencies to develop guidelines not just for making scientific judgments, but for governing how “scientific information is considered.” These guidelines would be wasteful make-work in any case because the agencies are already subject to direction by OMB and the Office of Science and Technology Policy. But they are much worse than that, because they open up every regulatory action, including “the listing, labeling, or other identification of a substance, product, or activity as hazardous or creating risk to human health, safety, or the environment,” to judicial intervention.

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Fast Track Legislation: Dead On Arrival?

Fast track legislation is moving forward. Retiring Senator Max Baucus(D-MT) and Republican leaders introduced a bill to give trade promotion negotiating authority (a.k.a. “fast track” authority) to complete the proposed Trans-Pacific Partnership and a trade and investment deal (the TTIP) with the European Union. The sponsors were unable to obtain a Democratic co-sponsor in the House, and House Ways and Means Ranking Member Sander Levin introduced a strong statement calling for a better model for negotiating trade agreements.

Fast Track is a terrible idea because it’s a proven job killer. It gives the president the right to send treaty implementing legislation to Congress for a vote without any opportunity to amend or improve it. Setting enforceable job creation goals or creating effective mechanisms to deal with currency manipulation, for example, will be impossible if the legislation is fast-tracked.

NAFTA, which was fast-tracked in 1993, and which was the prototype for more than a dozen U.S. trade and investment deals negotiated over the past decade, resulted in growing trade deficits with Mexico that eliminated nearly 700,000 U.S. jobs by 2010. More recently, President Obama pushed through a new trade deal between Korea and the United States (the KORUS deal), which resulted in the loss of 40,000 jobs in the first year alone.

Fast track legislation in its current form is opposed by more than 170 Republican and Democratic House members, so this legislation might be dead on arrival. The House Republican leadership is reportedly insisting that at least 50 Democrats co-sponsor the legislation, including at least one House Democratic leader, before it will be allowed to come to a vote on the House floor. With luck, the fast track bill will die in the House. The last thing America needs is renewal of fast track and more trade and investment deals rushed through Congress.