There once was a time when Congress did nothing and the nation prospered. From 1997 to 2007 — a full decade — the federal minimum wage remained at $5.15 per hour. Then Congress screwed up in a way only Congress can by mandating three successive increases.
In 2007, the federal minimum wage increased 13.6 percent to $5.85. In 2008, the wage increased 12 percent to $6.55. And in 2009, the wage rose 10.7 percent to $7.25 where it currently remains. All totaled, Congress jumped the federal minimum wage 41 percent from July 2007 to July 2009 — a two-year period.
The 2008 increase kicked in just a month before the financial panic in August of that year. The 2009 increase kicked in as the charts showed the bottom falling out of the economy. But of course, the rising unemployment rate during this period was just a coincidence.
When Congress hikes the minimum wage, that increase drives up wage rates across the board. A worker who made $7.25 per hour in 2006 felt pretty good making 41 percent more than the minimum wage. However, in July 2009, the same worker needed $10.15 per hour to have felt so good.
Unlike Congress, businesses cannot wave wands and escalate payroll wages by 41 percent in two years.
Congress enacted a series of unemployment benefit extensions when the recession started. These benefits can run for 99 weeks. But that was of no matter because Congress convinced itself that spending trillions of stimulus dollars would re-start the economy, and that the unemployed would all be back at work in two years.
We now know that plan did not work. Nevertheless, employers have been stuck with a big bill for unemployment insurance premiums.
Congress enacted the Davis-Bacon Act in 1931 mandating “prevailing wages” on federally funded projects. This gem of legislation has never been anything but a sham and a swindle. But it persists, and President Obama’s shovel-ready projects never got started, in part, because of these artificially high wage rates.
President Franklin Roosevelt pioneered shovel-ready projects — literally. The Works Progress Administration handed out shovels to unemployed men and told them to start leanin’ or start shovelin’. These “lean” and hungry diggers were never paid Davis-Bacon wage rates, however.
And then there was the passage of Obama Care — the national health insurance plan that Rep. Nancy Pelosi, D-Calif., promised to read after it passed. No one knows how much this insurance plan will cost employers.
If a company can afford a K Street lobbyist, it gets a waiver for its group health plan. For companies without such influence, they become prisoners of Obama Care and all of its unknowns.
Congressional meddling with private sector employment law has created massive unemployment. Perhaps for the worse, this meddling has chilled hiring for years to come.
The unemployment rate is trending upward again. If $3 trillion of deficit spending didn’t prime the pump, then a double-dip recession is a real possibility.
The recent job creation report was a big disappointment to the experts who follow these numbers. For June, an expected 90,000 jobs created turned out to be 18,000. For May, the jobs created were revised downward to 25,000. Numbers like these suggest that businesses are only replacing turnover, not expanding.
Businesses would hire workers if consumers started buying more. When UPS recently was asked if it planned to hire additional workers, the company’s spokesman answered, “Packages equal people.” That is a qualified “No.”
Consumers aren’t spending for two reasons. Their houses have dropped in value. And the corn-ethanol subsidies have driven up fuel and food prices. Consumers can’t borrow against their biggest asset. Consumers are spending more of their limited disposable income on food and fuel.
As I recall, the housing bubble and its subsequent collapse had something to do with Congress and its red-handed stepchildren — Freddie Mac and Fannie Mae.
As I recall, Congress loves corn. So much so, that the Capitol’s privies are stocked with bushel baskets full of corn cobs.
The mess we are in has been caused by Congress. Congress needs to quit meddling. Congress needs to take a lesson from the past — do nothing for 10 years.
But this Congress apparently won’t sit on its thumbs. This is a shovel-ready Congress. This Congress is determined to dig an even deeper hole.
Showing posts with label unemployment. Show all posts
Showing posts with label unemployment. Show all posts
Friday, July 22, 2011
Friday, May 20, 2011
Even Ken Jennings Can Be Replaced By a Machine
In my last column, I touched on automation as a reason for improved workplace safety. Perhaps we should revisit automation as a job killer. This is not new. The most famous automation story is the Luddite Revolt of 1811 when English weavers set about to destroy newly-invented looms run by Jacquard’s punched card system.
Eli Whitney introduced the cotton gin in 1794. Whereas Jacquard’s machine replaced highly-skilled workers, Whitney’s machine replaced unskilled labor. And further, the cotton ginning machine did more to guarantee consistent quality than increase production. Hence, there was no revolt in America’s cotton belt.
Automation, nevertheless, continues its march. We accept it because it works.
When I visited the T. L. Smith factory in Milwaukee in the late 1970s, I expected to see machinists standing at their lathes turning out parts for Telsmith rock crushers. I always admired machinists and their ability to hone steel. But on that day in Milwaukee, the machinists were sitting in lawn chairs, reading the paper and drinking coffee. The machine tools were made by Cincinnati Milacron and, like Jacquard’s loom, were operated by a punched tape drive.
Fixed machines performing repetitive tasks are the easiest machines to automate. Machines that move in space and time present much more of a challenge. But the advent of global positioning satellites has made that task less difficult.
In the last few years, highway contractors have been fitting bulldozers with GPS receivers and computers. The highway construction plans are digitized in three dimensions and loaded into the onboard computer. The GPS controls tell the computer where the bulldozer is on the X and Y axes. A laser reference light provides the elevation reference (Z axis).
Studies indicate that computer-controlled bulldozers are up to 50% more efficient and use some 40% less fuel than their human-operated peers. The savings are obvious. Two bulldozers do the work of three; each bulldozer uses 30 gallons less fuel per shift.
Companies like Caterpillar are now designing bulldozers that will be totally operated by other machines. The bulldozer of the future won’t require an OSHA-approved, rollover-proof, soundproofed and air-conditioned operators cab.
The automated bulldozer always knows where it is in space, and it does not rely on a survey crew to set grade stakes as reminders. So the need of the surveyor has diminished. But surveying work has already diminished for another reason—the work of a four-man survey crew 30 years ago is now done by one man with an electronic instrument.
Machinists. Bulldozer operators. Surveyors. These are just three good-paying occupations that have to compete with machines.
We have the technology to replace air traffic controllers. Unfortunately, we will tolerate sleeping Luddites until an air disaster forces our government to have the will to do so.
When Boeing and Airbus began designing aircraft with seats for two pilots, a joke circulated around the industry. It went: The new planes are so sophisticated that the cockpit only needs two seats—one for the pilot and one for a dog. The pilot’s job is to feed the dog. The dog’s job is to bite the pilot if he reaches for the controls.
We’ll never see this happen because we think all pilots are like “Sully” Sullenberger. But the point of the joke remains.
Now that human medical scans are digitized, why do we need a radiologist to read the image? We don’t. The computer can read the image as soon as it is taken. The computer can see pixels that the human eye cannot.
Is there a limit to replacing humans with machines?
In February, the game show Jeopardy staged a contest pitting an IBM computer vs. the two biggest Jeopardy winners on record. The computer won.
Impressively.
Many faithful fans derided the computer as having an unfair edge—it could beep the beeper faster than a human. Well, so what?
Others derided the computer by saying that Jeopardy was essentially a memory test, and that a computer could memorize everything in print. Well, so what?
Jeopardy is a trivia test, not a simple memory exam. Remembering trivial facts is a very human pursuit. Programmed by humans to win a human game show, the computer displayed a degree of human intuition.
Is this not the same underlying concept as programming the Jacquard loom’s punched cards to weave patterns that are pleasing to the eye?
Machines will only become smarter. Machines will take away more human occupations. So what will humans of the future do for work?
John Henry (and Ken Jennings), we feel your pain.
Eli Whitney introduced the cotton gin in 1794. Whereas Jacquard’s machine replaced highly-skilled workers, Whitney’s machine replaced unskilled labor. And further, the cotton ginning machine did more to guarantee consistent quality than increase production. Hence, there was no revolt in America’s cotton belt.
Automation, nevertheless, continues its march. We accept it because it works.
When I visited the T. L. Smith factory in Milwaukee in the late 1970s, I expected to see machinists standing at their lathes turning out parts for Telsmith rock crushers. I always admired machinists and their ability to hone steel. But on that day in Milwaukee, the machinists were sitting in lawn chairs, reading the paper and drinking coffee. The machine tools were made by Cincinnati Milacron and, like Jacquard’s loom, were operated by a punched tape drive.
Fixed machines performing repetitive tasks are the easiest machines to automate. Machines that move in space and time present much more of a challenge. But the advent of global positioning satellites has made that task less difficult.
In the last few years, highway contractors have been fitting bulldozers with GPS receivers and computers. The highway construction plans are digitized in three dimensions and loaded into the onboard computer. The GPS controls tell the computer where the bulldozer is on the X and Y axes. A laser reference light provides the elevation reference (Z axis).
Studies indicate that computer-controlled bulldozers are up to 50% more efficient and use some 40% less fuel than their human-operated peers. The savings are obvious. Two bulldozers do the work of three; each bulldozer uses 30 gallons less fuel per shift.
Companies like Caterpillar are now designing bulldozers that will be totally operated by other machines. The bulldozer of the future won’t require an OSHA-approved, rollover-proof, soundproofed and air-conditioned operators cab.
The automated bulldozer always knows where it is in space, and it does not rely on a survey crew to set grade stakes as reminders. So the need of the surveyor has diminished. But surveying work has already diminished for another reason—the work of a four-man survey crew 30 years ago is now done by one man with an electronic instrument.
Machinists. Bulldozer operators. Surveyors. These are just three good-paying occupations that have to compete with machines.
We have the technology to replace air traffic controllers. Unfortunately, we will tolerate sleeping Luddites until an air disaster forces our government to have the will to do so.
When Boeing and Airbus began designing aircraft with seats for two pilots, a joke circulated around the industry. It went: The new planes are so sophisticated that the cockpit only needs two seats—one for the pilot and one for a dog. The pilot’s job is to feed the dog. The dog’s job is to bite the pilot if he reaches for the controls.
We’ll never see this happen because we think all pilots are like “Sully” Sullenberger. But the point of the joke remains.
Now that human medical scans are digitized, why do we need a radiologist to read the image? We don’t. The computer can read the image as soon as it is taken. The computer can see pixels that the human eye cannot.
Is there a limit to replacing humans with machines?
In February, the game show Jeopardy staged a contest pitting an IBM computer vs. the two biggest Jeopardy winners on record. The computer won.
Impressively.
Many faithful fans derided the computer as having an unfair edge—it could beep the beeper faster than a human. Well, so what?
Others derided the computer by saying that Jeopardy was essentially a memory test, and that a computer could memorize everything in print. Well, so what?
Jeopardy is a trivia test, not a simple memory exam. Remembering trivial facts is a very human pursuit. Programmed by humans to win a human game show, the computer displayed a degree of human intuition.
Is this not the same underlying concept as programming the Jacquard loom’s punched cards to weave patterns that are pleasing to the eye?
Machines will only become smarter. Machines will take away more human occupations. So what will humans of the future do for work?
John Henry (and Ken Jennings), we feel your pain.
Friday, January 7, 2011
We're in a Deep Hole ... and Still Digging
The number one song in America is "Ninety-nine Unemployment Checks in the Mail" (sung to the tune of "Ninety-nine Bottles of Beer"). The catchy lyrics, written by Rep. Nancy Pelosi, got much more air play than traditional holiday music during the past few weeks.
Before long, West Virginia lawmakers will be singing Nancy's song and raising unemployment compensation premiums. The popularity of "ninety-nine weeks of unemployment checks" has drained the fund (again). For the second time in two years, politicians will raise premiums rather than cut benefits, arguing that you cannot put a price on compassion.
Extending unemployment benefits to 99 weeks may seem compassionate, but creating a long-term dole is a cruel hoax. Here are some fallacies about the dole.
Fallacy 1: The unemployed are required to accept suitable employment offers; they may reject unsuitable employment and continue to draw benefits. "Suitable" employment generally means a comparable or better job.
In a recession, the suitable jobs disappear first, e.g., the housing industry is in a deep downturn. If there is less demand for oak flooring, then there is less demand for Appalachian oak lumber. The local sawyer is laid off, as are most sawyers within a 50-mile radius.
There are no suitable jobs for the local sawyer. The sawyer has a choice between working for less money or drawing unemployment. He will probably choose the latter, even though he could earn more money by taking a lesser job because unemployment compensation has been sold as an entitlement similar to paid vacation.
Fallacy 2: Week 100 arrives, and jobless benefits expire. The unemployed worker accepts lesser employment. When he returns to work, he finds out that technology has changed the workplace. When he last worked, he was proficient using Windows XP. Now he has to learn Windows 7 just to get up to speed in this "lesser" job.
Spending two years away from the modern workplace guarantees that one's work skills will deteriorate. Not only does technology change, but so do markets. And in week 100, our unemployed subject very well may accept a job description that did not even exist when he last worked.
Fallacy 3: A middle-aged worker drawing the maximum, or near-maximum, jobless benefit can get by financially. But the worker has lost two of his most productive work years if he takes that route. The worker will not realize the cost of his "two-year vacation" until he reaches his 50s. Then he learns one of life's cruel ironies -- he doesn't have the stamina that he did in his 30s. He also will learn that businesses want to hire 30-somethings but avoid hiring 50-somethings.
This worker also will learn the hard way that the money he saved when he was 30 has grown in value. The money he saves at age 55 will grow very little before he retires.
Fallacy 4: When unemployment premiums go up, there is less money for a business to spend on equipment, facilities, wages and benefits. Politicians don't seem to understand the macro effect of this tax increase. Indeed, politicians seem to have tunnel-vision regarding unemployment compensation premiums as evidenced when Rep. Pelosi declared that unemployment checks stimulated economic development because the unemployed spend all of that money.
There is no economic theory -- not even Marxism -- that says long-term unemployment stimulates a nation's economy.
Fallacy 5: This is the "Atlas Shrugged" effect. Productive, well-run businesses are taxed to pay for these long-term unemployment benefits. Rep. Pelosi's philosophy regarding long-term unemployment benefits reads like a scene out of Ayn Rand's novel. As the novel suggests, you can only bleed the productive businesses for so long before they rebel and move their production to lower cost states or overseas.
Fallacy 6: After the unemployed worker has slept in for three weeks, he has gotten out of the routine of going to work. You cannot measure this effect like you could lost earnings, but most people will lose, or greatly diminish, their sense of self-worth the longer their idleness continues.
The Legislature raised unemployment premiums 50 percent in 2009. We've blown through that money in less than two years. So, will the coming premium increase be even higher?
West Virginia has been down this road before. Some 20 years ago, the state borrowed heavily from the federal unemployment fund. To pay the federal loan back, the state taxed workers and businesses alike for about four years.
Yes, Nancy, unemployment checks do stimulate the economy -- in the worst ways possible.
Before long, West Virginia lawmakers will be singing Nancy's song and raising unemployment compensation premiums. The popularity of "ninety-nine weeks of unemployment checks" has drained the fund (again). For the second time in two years, politicians will raise premiums rather than cut benefits, arguing that you cannot put a price on compassion.
Extending unemployment benefits to 99 weeks may seem compassionate, but creating a long-term dole is a cruel hoax. Here are some fallacies about the dole.
Fallacy 1: The unemployed are required to accept suitable employment offers; they may reject unsuitable employment and continue to draw benefits. "Suitable" employment generally means a comparable or better job.
In a recession, the suitable jobs disappear first, e.g., the housing industry is in a deep downturn. If there is less demand for oak flooring, then there is less demand for Appalachian oak lumber. The local sawyer is laid off, as are most sawyers within a 50-mile radius.
There are no suitable jobs for the local sawyer. The sawyer has a choice between working for less money or drawing unemployment. He will probably choose the latter, even though he could earn more money by taking a lesser job because unemployment compensation has been sold as an entitlement similar to paid vacation.
Fallacy 2: Week 100 arrives, and jobless benefits expire. The unemployed worker accepts lesser employment. When he returns to work, he finds out that technology has changed the workplace. When he last worked, he was proficient using Windows XP. Now he has to learn Windows 7 just to get up to speed in this "lesser" job.
Spending two years away from the modern workplace guarantees that one's work skills will deteriorate. Not only does technology change, but so do markets. And in week 100, our unemployed subject very well may accept a job description that did not even exist when he last worked.
Fallacy 3: A middle-aged worker drawing the maximum, or near-maximum, jobless benefit can get by financially. But the worker has lost two of his most productive work years if he takes that route. The worker will not realize the cost of his "two-year vacation" until he reaches his 50s. Then he learns one of life's cruel ironies -- he doesn't have the stamina that he did in his 30s. He also will learn that businesses want to hire 30-somethings but avoid hiring 50-somethings.
This worker also will learn the hard way that the money he saved when he was 30 has grown in value. The money he saves at age 55 will grow very little before he retires.
Fallacy 4: When unemployment premiums go up, there is less money for a business to spend on equipment, facilities, wages and benefits. Politicians don't seem to understand the macro effect of this tax increase. Indeed, politicians seem to have tunnel-vision regarding unemployment compensation premiums as evidenced when Rep. Pelosi declared that unemployment checks stimulated economic development because the unemployed spend all of that money.
There is no economic theory -- not even Marxism -- that says long-term unemployment stimulates a nation's economy.
Fallacy 5: This is the "Atlas Shrugged" effect. Productive, well-run businesses are taxed to pay for these long-term unemployment benefits. Rep. Pelosi's philosophy regarding long-term unemployment benefits reads like a scene out of Ayn Rand's novel. As the novel suggests, you can only bleed the productive businesses for so long before they rebel and move their production to lower cost states or overseas.
Fallacy 6: After the unemployed worker has slept in for three weeks, he has gotten out of the routine of going to work. You cannot measure this effect like you could lost earnings, but most people will lose, or greatly diminish, their sense of self-worth the longer their idleness continues.
The Legislature raised unemployment premiums 50 percent in 2009. We've blown through that money in less than two years. So, will the coming premium increase be even higher?
West Virginia has been down this road before. Some 20 years ago, the state borrowed heavily from the federal unemployment fund. To pay the federal loan back, the state taxed workers and businesses alike for about four years.
Yes, Nancy, unemployment checks do stimulate the economy -- in the worst ways possible.
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