"Companies Spend on Equipment Not Workers"

Front page headline New York Times June 10 2011

Kate and I have had many conversations about how employers following large scale layoffs always come out of rehiring less employees. Kate was Human Resources VP. in charge of hiring and firing. We agreed that, once business begins to pick up companies figure out how to get the same level of production prior to the layoffs. The Times piece says, “Business would rather buy new machinery. That’s cheaper than increasing the payroll.” I might add that they have a strong underneath pull not to help this President no matter what.

All of this reminds me of a blog I posted back on March 10th 2010. Oh! man a sure sign of aging is when you go back a year to quote yourself. Not me but, an old friend, a Noble Economics Laureate, Wassily Leontief.

He had received the Nobel Prize for Economics in 1972. His work was the development of an input output analysis that became an essential tool for major manufacturing companies. He was frequently consulted as the job market changed regarding the kinds of jobs that would be available It was in that capacity that we became friends.

In Washington he would often participate in various meetings regarding the training and job placement for unemployed youth. At these meetings he was always very professional and careful in his labor force projections. Early on he predicted the demand for computer literate people to meet the demand of that fast growing industry.
He also acknowledged the growth of the service sector and its advantages for women.

It was in the more informal New York City social settings that he would express a very different kind of concern. It turned out that a mutual friend lived in a loft in SOHO. Meeting Wassilly there I told him that these lofts, that were now home to artists, used to be the workplaces of many of the members of my Local of the Machinists Union. He was very interested in the kind of manufacturing that was done here. “It was mostly small parts manufacturing as well as specialized plants for making all kinds of fastenings, screws, nails, washers, lamp parts etc.” Wassily wanted to know what happened to them? “ I told him that most of that stuff was automated. I had the pleasure of participating in eliminating dumb jobs like hand feeding punch presses. “Lots of fingers were lost in those operations.” “But you were eliminating jobs by doing that. Weren’t you?" he asked? “Yes of course” I replied. “But nobody should have to do that hazardous dumb work when we can automate it.” That really caught his attention.

Wassily went into a lengthy explanation of what he thought was ahead for the job market. Yes there would be a big increase in the computer sector as well as the service sector, including health care. “Machinist” that’s what he called me, “as you and I and all those baby boomers age we are going to need a lot of care. That will create Health Care as the number one employer in the country.” "Okay, I understood that but what about all those members of my old Machinists Union? What about jobs for them?"

He paused for a long time, as if he did not want to give me the bad news to come. He spoke slowly as if measuring his word very carefully. “You see, Machinist, we are now in the second part of the Industrial Revolution. First part created jobs, second part is eliminating them through automation and now computer controlled manufacturing.” “I have experienced that when I was still working in a plant.” “Yes” he said “But the pace is now picking up and we are looking toward a time when we simply wont need all those workers of yours anymore. What we don’t automate we will export to the new rising economies in the third world countries.”

“Wassily” I said. "What are we to do?” “He smiled laughed a little said, “Your job Robert Machinist is to find things to do for all those workers we don’t need in the factories,” “Are you serious. I asked, “or are we drinking to much at this party?” He looked around at all the artists gathered, shook his head said, “These folks are all just trying to get a piece of work accepted into the Modern cause the curator is here. Maybe some of your old Union members could take up painting? Anyhow that’s your job now? Good luck,” As his wife came to drag him away from all that, “shop talk.”

I have often thought about that conversation with Leontief back in the 80s. With the unemployment rate sticking around the ten percent and a large number of workers not seeking jobs anymore.That adds up to something around 20 to 25 million out of work. Not to promising future if Wassily’s prediction is finally coming true? What do you think?