It's Professionals vs Everyone Else in the K-Shaped Recovery

Mish

If you are a professional able to work-at-home you probably landed on your feet.

K-Shaped Recovery Bites the Unskilled

Cashiers, retail clerks, servers, and hotel maids and others in the service sector already had jobs that were slated for robots. 

Covid accelerated the pace.

There are now two Americas as Covid Divides Workers into groups.

Even before the pandemic, “Automation can explain labor share decline, stagnant median wages and declining real wages at the bottom,” says Daron Acemoglu, a professor of economics at the Massachusetts Institute of Technology. “It’s the bottom that’s really getting hammered.”

Robot Subsidy

Robot Subsidy

Another factor that could increase economic inequality is that, as in all recessions, many small businesses will be wiped out. According to Yelp, 73,000 businesses in the U.S. listed on its website have already closed permanently since March, including bars, restaurants, gyms, salons and shops.

“I believe our field has a mind-set that will lead to a large humans-to-robots replacement for certain types of work,” says Odest Chadwicke Jenkins, a roboticist and professor of computer science and engineering at University of Michigan. “My worry is that robotic technology will be used to simply reduce costs by automating highly populated jobs—for example, vehicle driver, manufacturing, logistics,” he adds.

Blame the Robots? Covid?

It's easy to blame robots, or Covid, or progress in general.

I have yet seen one mainstream article blame the Fed's cheap interest rates, the push for $15 wages, labor unions, or the cost of tuition.

Every one of those accelerated inevitable trends.

The bankruptcy reform act of 2005 which made student debt not dischargeable in bankruptcies compounded the woes of those with worthless degrees and no skills. 

Spotlight on the Fed

In addition to artificially cheap interest rates which lowered the cost of capital, the Fed actively promotes 2% inflation, without having any idea how to measure it.

The Fed has blown serial bubbles of increasing amplitude over time, leaving the have nots deeper and deeper in huge unrecoverable holes.

Then, when the jobs vanish in the inevitable bust, the academics blame robots,

Yes, Covid accelerated the push to robots, but so did the Fed and so did Progressives pushing for $15 an hour for people with zero skills.   

The Recovery Will Have Many Shapes, Not One

On July 1, I noted The Recovery Will Have Many Shapes, Not One.

We can add a new shape to the list: K. 

Mish

Comments (92)
No. 1-25
njbr
njbr

Recall that there are a lot of "professionals" that rely on the worker bees for their daily bread.

AbeFroman
AbeFroman

Johnson really shouldn’t have pursued the Great Society and the Vietnam War at the same time. :)

Eddie_T
Eddie_T

Ever take a deep dive into student loans? I did, and I was pretty surprised to find that the actual defaults are rare at flagship universities.....but rampant in these trade schools....many of which are nothing more than conduit schemes designed to put tax money into the hands of minority run diploma mills....And...that bankruptcy "reform" act was nothing more than a gift to the banks.

The MSM likes to talk about people who owe big money....but the average defaulted loan is in the 10K range. Did you know that?

Another thing. When I started professional school in 1981, interest rates were sky high (after Volcker raised them)....but the interest on student loans was about the same as it is now...with prime now nearly 10X lower than it was back then....making the spreads a big fat deal for the lenders too. Nothing but a scam.

Whether you get a great credential that gets you a good job or not, the set-up is grossly unfair to young people, who don't have as many good options as we did.

Nickelodeon
Nickelodeon

The irony of "academics" blaming robots for the despair of the unskilled is super rich given most of them champion big gov't funded by payroll taxes, which is partially responsible for robots being a better proposition than hiring the unskilled.

Further, that "academics" wouldn't recognize that robots lower the cost of living laughably puts them in same category as Luddites. Their lack of self awareness is incredibly funny.

Casual_Observer
Casual_Observer

If you are saying we have a disconnected economy because of globalization I agree.

KidHorn
KidHorn

Automation is nothing new. 200 years ago in the US, most worked on a farm. Now only 2% work on farms. Secretaries were replaced by word processing software. No one needs a mathematician anymore. Maybe some low skilled, easily automated jobs will be gone, but something new will replace them.

Sechel
Sechel

I fall into the professional working from home category. despite being a little stir crazy, financially it works out. I'm saving on lunches at work(which are not cheap) as well as dog walking fees. its literally $1,000 a month so not pocket change.

Zardoz
Zardoz

Well the world needs ditch diggers.... wait, maybe not.

We're in the process of discovering that we have no use for the majority of human beings, but more keep coming.

Tony Bennett
Tony Bennett

"If you are a professional able to work-at-home you probably landed on your feet."

...

Sure. So far.

Recession nowhere near over. Just getting started. Waning fiscal stimulus / forbearance / moratorium + tightening credit = vicious cycle. It consumed the low wagers first, now heading up the wage ladder.

PecuniaNonOlet
PecuniaNonOlet

70 days till election. As a working professional, I can tell you October is when layoffs will come to many F100 companies.

Maximus_Minimus
Maximus_Minimus

That up-and-down elevator also visualizes the tax burden. In a rational world someone has to pay for those government bailouts, or are we already post-rationalists?

numike
numike

covid19 has only just begun: Coronavirus: World’s first reinfection case confirmed in Hong Kong University study, as city reports single-digit rise in cases for first time since early July
Covid-19 is likely to continue to circulate in the human population as in the case of other human coronaviruses, HKU researchers say https://www.scmp.com/news/hong-kong/health-environment/article/3098551/hong-kongs-third-wave-losing-momentum-city

davebarnes2
davebarnes2

Don't ignore the retired population.
For most of us, nothing has changed financially.

Jam_Ham
Jam_Ham

I don't buy that labor unions would be to blame for this rising mess as Union membership has done nothing but decrease in the last 30+ years. Of course labor unions may not be peak efficiency, but isn't there a negative correlation between union membership and federal deficits?

Jojo
Jojo

Politico has a story saying WC workers also getting hit. Based on job postings, WC job postings are down 28% vs. 12% for BC work.

‘Not just a low-wage recession’: White-collar workers feel coronavirus squeeze
The drop in overall employment that white-collar industries have seen in five months is already on par with or worse than the hits they took during the Great Recession.
By MEGAN CASSELLA
08/23/2020 06:50 AM EDT

PecuniaNonOlet
PecuniaNonOlet

On Sunday, 60 Minutes had a program about automated big rig trucking. Evidently, by 2021, driverless trucks will start roaming the roads delivering goods. The union trucker rep said he expected 300,000 to 400,000 trucker jobs gone over the next few years.

Jojo
Jojo

One of the problems with robots/automation in the USA seems to be that it doesn't get adopted as quickly as I thought it would. I wonder how much of the delay is because of unions and management not wanting to change the status quo? From a fiefdom perspective, perhaps less people is like less budget - you lose status and relevancy?

For example, years ago I read of a machine that repaired potholes. the story showed what appeared to be a working model of a machine that incorporated lasers, cameras, etc. and was manned by a single driver (sort of like modern garbage trucks). The truck moved over the pothole, where the hole was computer analyzed, hot tar was dropped in, a roller then rolled over the and job was done in a few minutes. Using this truck would replace a typical pothole repair team of 5 people with one person (you know, the guy directing traffic, the guy shoveling the tar, the guy driving the lead truck, the guy driving the roller, etc.).

Apparently, these machines are in active development:

Yet, I have never seen such a machine here in CA and potholes often take years to get fixed, especially on Caltrans maintained roads. Evan if they costs a$1 million apiece, when you figure out the cost of a 5 person unionized work crew including benefits and eventual pensions, the ROI on a $1 million machine should be 2-4 years. Are such machines being blocked by unions out of fear of job losses?

This is only one example. There are many, many other places where automation should have been deployed already but has not. One has to wonder if driverless trucks are really going to get deployed in any meaningful amount anytime soon.

Mr. Purple
Mr. Purple

The FED and TPTB appear so incompetent that it's almost as if the destruction of the working class was the intended result.

channelstuffing
channelstuffing

By 2030 on 22nd year of "recovery" LOL the majority of Americans will live on the street!

Casual_Observer
Casual_Observer

It is a bifurcated economy we live in. It has been that way for the better of part of 20 years. Even Trump will not be able to stop globalization and financialization with a second term. In fact I predict things get worse faster. I fully expect the United States will be taken over by Putin one day soon if Trump "wins" a second term as he is getting older. He is waiting to exact his revenge for tearing down the Berlin Wall and breaking up the Soviet Union. If you thought capitalists were bad wait until the oligarchs take over.

Casual_Observer
Casual_Observer

The Recovery Will Have Many Shapes, Not One.

A recession is when a neighbor loses his or her job. A depression is when you lose yours.

Stuki
Stuki

"Even before the pandemic, “Automation can explain labor share decline, stagnant median wages and declining real wages at the bottom,”"

No it can't.

If it could, wages in 1970 would be plenty lower than they were before automation took hold in the form of assembly lines. And wages in the least automated countries would be higher that in the most automated ones.

As long as automation improves efficiency, hence enables each worker to create increased value, this increased value makes it worth vile to pay more for his services. And then, as long as anything even remotely resembling free markets are the norm, competition for his services will hence ensure his wages increase.

Labor is demanded because it creates value. The more value a worker creates, the greater the demand for his services. That really is about as 101 as things can possibly get.

It really is a pretty damning testament to the quackshow which is currently attempted passed of as "economics," that a bloody MIT Prof, whom you'd think would be at least minimally literate, sits around spouting that kind of nonsense with a straight face.

Instead, THE reason why wages are stagnant, is because the added efficiency accrued from increased automation, AND THEN SOME, is by now summarily stolen by way of Fed debasement, in order to hand it to deadweights who create exactly no value; in the form of "asset appreciation" benefiting idle nothings.

THAT can explain all the "labor share decline, stagnant median wages and declining real wages at the bottom." And very obviously so as well. After all, when A robs B and hands the loot to C; B gets poorer and C gets richer (duh!). You'd think MIT would be a bit above hiring yahoos who haven't even figured that one out yet, but hey: It's America in the Fed era. Not exactly a bastion of competence at anything at all. At any institution, no matter how once-was renowned.

magoomba
magoomba

All these work at home jobs will vanish much sooner than you think. It's just a good way to break the chain and close the shop with all the free money. Very soon, kaput.


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