The U.S. economy is growing again—about 2.5 percent annually in the second quarter and going forward—but good jobs remain scarce and wage gains lackluster. New technologies are reducing the demand for workers but poor government policies are making matters worse.
Friday, the Labor Department is expected to report the economy added 180,000 jobs in June, but this is partially catch up after a Verizon strike hammered down the May figure. The monthly average was about 113,000 from April to June, and that’s about half the pace from 2013 to 2015.
The robotics and artificial intelligence revolution is all around us—even if we don’t yet have an android doing our housework.
Uber brings patrons cars without the dispatchers that once took calls at the local car services. At Amazon Prime, customers point and click without the aid of sales clerks and packages are increasingly assembled by robots at fulfillment centers.
Tasks requiring complex manual dexterity have proven tougher to replace but automated checkouts are spreading, and robots are at the cusp of not just taking orders at McDonald’s but also grasping and handing you hamburgers, fries and soft drinks.
Globalization accelerates these trends by forcing more aggressive substitution of machines for high-wage Americans in factories.
The next generation of Boeing jetliners will be assembled with more robots—moving and fixing components into place. What few people are left will be greatly assisted, for example, by Google Glass and software that aid in assembling the complex wiring and programming of cockpits.
Sweeping labor saving innovations have confronted us since the spear and the wheel but in the past, we moved redundant workers who often did repetitive manual tasks into emerging industries. As agriculture mechanized, workers moved to repetitive tasks in manufacturing and as factories automated, workers moved into services—for example, at convenience restaurants, shopping malls and dry cleaners.
Major institutional failures make these challenges more wrenching.
Bad trade agreements permit other nations to boost exports into U.S. markets without accepting comparable amounts of American made goods and services. Subsidies, currency manipulation and non-tariff barriers to U.S. exports accentuate pressures on companies like Boeing and Ford to automate or outsource more.
The Obama administration promised thousands of new jobs from the 2012 Korean-U.S. Free Trade Agreement, but it boosted the trade deficit by $16 billion and unemployment by 130,000.
The Affordable Care Act, mandatory overtime and higher minimum wages imposed by many states and cities raise the cost of employing Americans, compelling businesses to purchase labor saving devices more quickly or close.
Our high schools and colleges are better at preaching social justice than producing enough graduates who can do the complex cognitive work that machines still leave to human beings. Skilled technicians with a year or two training and graduate engineers and systems analysts remain too scarce.
Too many Americans simply don’t qualify for the jobs that pay high wages in a globalized, technologically advanced economy. Consequently, average family incomes continue to cycle down, even as the upper middle class—the top 20 percent or so—gets richer.
Passing laws—taxing the upper middle class to subsidize child care or by forcing them to pay more for hamburgers to support a higher minimum wage—do not address those fundamental policy failures and leave America vulnerable to more aggressive societies in Asia.
Policymakers more effectively manage globalization by negotiating better trade deals, stop pandering to voters with giveaway programs and force schools and universities to shift from proselytizing about the evils of American capitalism to equipping young people with the skills they need to compete.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.