The Intellectual War Over the Rise of the Machines Continues…: Focus

I see that the vir illustris Lawrence Mishel, our neighbor here in the Great Center-Left Atrium Building at 1333 H St. N.W., has had his ire awakened by the femina clarissima Melissa Kearney and her forthcoming Hamilton Project event on robots tomorrow:

Lawrence Mishel: Failed Theory Posed by Wall Street Dems Puts Hillary Clinton in a Bind: “There was a time where it was plausible to argue that more education and innovation were the primary solutions to our economic problems. But that time has passed…. You cannot tell that, however, to the… Hamilton Project…. The new framing paper… details how ‘advancing computer power and automation technology’ creates a challenge for:

how to educate more people for the jobs of the future, how to foster creation of high-paying jobs, and how to support those who struggle economically during the transition…

the same analysis we heard from the Clinton administration 20 years ago, when the discussion was of a ‘transition to the new information economy.’ Let them eat education. The education-only solution wasn’t appropriate when it was first put forward, and it is not even remotely plausible now….

According to Autor’s “The Polarization of Job Opportunities in the U.S. Labor Market”… technological change… was polarizing the job market… necessitating major changes in… education…. Over the last few years… researchers, including Autor, have documented that occupational job polarization has not been present in the 2000s…. My research with my then-colleague Heidi Shierholz, and with economist John Schmitt of the Center for Economic and Policy Research, was the first to document these trends…. [While] innovation may yield higher productivity and more growth… entire center-left field of economists… acknowledges that this will not necessarily lead to robust wage growth…. Hopefully they will soon embrace many of the recommendations of CAP’s Inclusive Prosperity report…

I note Larry Mishel’s invocation of both melior princeps Hillary Rodham Clinton and of “Wall Street Democrats”. I infer that the stakes appear not just to be attaining correct thought, but also involve shaping the policies and staffing of a potential Democratic administration come 2017…

Some more context:

Lawrence Mishel: Policies that Do and Do Not Address the Challenges of Raising Wages and Creating Jobs: “Policies that help to achieve full employment…

…are the following:

  1. The Federal Reserve Board needs to target full employment with wage growth matching productivity….
  2. Targeted employment programs… [for the] many communities that will still be suffering substantial unemployment….
  3. Public investment and infrastructure….
  4. Reducing our trade deficit….

It is a welcome development that policymakers and presidential candidates in both parties have now acknowledged that stagnant wages are a critical economic challenge…. Globalization has… served to suppress wage growth for non-college-educated workers…. Two sets of policies… have greatly contributed to wage stagnation that receive far too little attention….

Aggregate factors:

  1. Excessive unemployment….
  2. Unleashing the top 1 percent: finance and executive pay….

Labor standards, labor market institutions, and business practices….

  1. Raising the minimum wage….
  2. Updating overtime rules….
  3. Strengthening rights to collective bargaining….
  4. Regularizing undocumented workers….
  5. Ending forced arbitration….
  6. Modernizing labor standards: sick leave, paid family leave….
  7. Closing Race and gender inequities….
  8. Fair contracting….
  9. Tackling misclassification, wage theft, prevailing wages, and enforcement…

To summarize, Larry’s recommended policies are four:

  1. Correct, full-employment macro policy.
  2. Proper public spending–especially to boost our infrastructure capital.
  3. Reining-in our hypertrophied financial sector and the CEO-takeover-private-equity cycle that gives the CEO and his (almost always his) bucelarii the equivalent of a 25% equity stake in the company they run.
  4. Restoring worker bargaining power in the labor market.

As a card-carrying neoliberal and as a member of the Rubin wing of the Democratic Party, what do I think of all this?

Well, I think that Larry is largely right. A big push for more and better education will not solve our labor market problems.

Now it will alleviate some labor market problems. Increasing the number of people who finish college–both through figuring out how to use modern technologies to complement instructors and through more-generous college financing–is an investment that has a high societal rate of return on the order of 6%/year or so, plus it will do a lot to bring the wages and salaries of the 20%-60% and the 60%-95% slots of the income distribution together by changing relative supplies of workers qualified for the jobs associated with those slots.

Moreover, the Hamilton Project view and the Great 1333 H Center-Left Atrium Building view are, I think, in accord on the necessity for boosting public investment and on the necessity of macroeconomic policies that succeed in avoiding unnecessary unemployment–even if the Hamilton Project has not yet gotten to where I think it needs to be in terms of how the public sector ought to be financed in this era of the global savings glut.

But such education-promoting policies will do little or nothing to redistribute back to the 20%-95% slots of the income distribution any of the immense wealth that has been grabbed by the top 5% and 1% and 0.1% and 0.01% slots of the income distribution. Take a look at See the rise of the top 5% from 15% to 25% of total incomes, of the top 1% from 5% to 12%, of the top 0.1% from 2.5% to 9%, and of the top 0.01% from 0.7% to 4% are not driven by processes over which even successful pro-education policies as our educational system is currently structured have any purchase.

Larry’s non-education policies include two that are all-boat-lifting policies–the top 0.01% as well as the 20%-60%–in the form of full-employment and infrastructure, and two that are bargaining power related: the cutting-back of the pretensions of finance and its associates in the CEO suites and a restoration of labor’s power to bargain for a share of the joint product in situations where everyone is already locked-into the employer-employee relationship. He thinks that that is what we need to do, and should do, and should focus on.

Kearney, Hirshbein, and Body are not so sure as they look at the “proliferation of smart machines, networked communication, and digitization… [and their] potential to transform the economy in groundbreaking ways…” They see three things going on:

  1. Job Polarization: Even though it has not been apparent in the data in the 2000s, it was clearly there in the 1990s, and–in their view, and mine–may well reemerge in the data in 2010s and 2020s. As they put it: “work involving visual and language recognition and in-person interaction has… proved mostly elusive for computers to master…. Robots will have a hard time… in food service, cleaning, and caregiving… [as] dexterity, eyesight, and communication give humans a comparative advantage…. [Moreover,] computers are very far from being able to use creativity, intuition, persuasion, and imaginative problem-solving…” The problem in the face of the potential for an additional wave of polarization is then: how do we make being a janitor, a home health aide, an exercise-class leader, a hairdresser, or a cafeteria line worker not what they are now but rather middle-class jobs? People using their brains in very basic and easy ways from a brainwork perspective got middle-class blue-collar and white-collar jobs on assembly line and in cubicles in the second half of the twentieth century. Can we recapture that for service-sector jobs analogous to those that did not have middle-class status a generation ago? That is a hard and interesting question–and I think the answer, if there is an answer, is much harder and more complicated than “tweak the labor-relations system so they can form a union…”

  2. The New Technostructure: In a world in which rapidly-progressing information technology is obsoleting human brains as blue-collar cybernetic complements to manufacturing machines and white-collar substitutes for software ‘bots shuffling data, labor will be abundant. If that world also sees a global savings glut pushing down interest rates, capital will also be abundant. The scarce and valuable factor of production will then be access to the nexuses of processes that put the robots to work making things that the brands entice consumers to buy–membership in what we might, adapting Galbraith, call the New Technostructure. Kearney et al. (and Brynjolfsson and McAfee) seem to see a focus on “entrepreneurship” as a way both to maximize the number of people with access to this New Technostructure and also to put some downward pressure on its income share to the benefit of other factors of production. I find myself very skeptical indeed…

The danger of tomorrow’s Hamilton Project event, I think, is that the people there will take their “advances in artificial intelligence and broad technological development will create employment possibilities that we cannot yet begin to imagine…”, “major commitment to increasing education and skill levels…”, and “fostering business and organization innovation…” to be things we know how to do. I do not think we know what we need. I don’t think making community college and four-year college free will do it. I don’t think tax credits for small businesses, cheerleading incubators, and entrepreneurial mentorship coaches will do it. At this stage “increasing education” and “fostering innovation” are simply placeholders for policies we will not be able to imagine until we see more of the shape of our future.

So I find myself reminded of John Maynard Keynes on, of all people, Leon Trotsky:

We lack more than usual a coherent scheme of progress…. No one has a gospel. The next move is with the head…

Note: As Larry Mishel says, “The Inclusive Prosperity Report”:

co-chaired by Lawrence H. Summers… calls for full employment (a ‘high pressure economy,’ as Summers calls it), a more welcoming environment for collective bargaining, higher labor standards (overtime, minimum wage, earned sick and paid family leave), changes in corporate governance, and large scale public investment to address middle-class wage stagnation…


February 18, 2015

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