Texas Liberal

All People Matter

Companies Invest More In Machines Than In People—We’ve Got To Fight For Ourselves As Working People

The New York Times reports that companies are spending more on new computers and other machines than they are spending on hiring new people.

From the Times

“…Workers are getting more expensive while equipment is getting cheaper, and the combination is encouraging companies to spend on machines rather than people. “I want to have as few people touching our products as possible,” said Dan Mishek, managing director of Vista Technologies in Vadnais Heights, Minn. “Everything should be as automated as it can be. We just can’t afford to compete with countries like China on labor costs, especially when workers are getting even more expensive.” Vista, which makes plastic products for equipment manufacturers, spent $450,000 on new technology last year. During the same period, it hired just two new workers, whose combined annual salary and benefits are $160,000.”….with the rising costs of hiring, companies like Vista are finding ways to use capital to replace workers whose jobs are relatively routine. “If you’re doing something that can be written down in a programmatic, algorithmic manner, you’re going to be substituted for quickly,” said Claudia Goldin, an economist at Harvard. To add insult to injury, much of the equipment used to replace American workers is made by workers abroad, meaning that capital spending is going overseas. Of the four pieces of equipment Vista bought last year, one was made domestically…”

Could somebody please tell me where people are going to work and how they are going to get by as we move forward in this country?

Here is where we seem to be in our nation today—

* We’re cutting spending on education that would prepare young people for the job market.

* We won’t ask the most wealthy to pay more taxes.

* Employers won’t hire even at a time of record profits.

* Government is laying off thousands of workers.

* Many people who are working are unable to get a steady 40 hours a week.

* There is vehement opposition from the right to the extension of health insurance to all Americans.

* Unions are under assault. 

* Pensions are a thing of the past and people’s retirement—if they even have a 401K—is at the whims of the stock market.

* Social Security and Medicare are under constant attack.

* Poverty is rarely mentioned by leaders of either major political party.

* The unemployed don’t seem to be on the agenda at all as states cut back on unemployment benefits and the talk in Washington is about debt reduction.

It seems that the average person is being abandoned in America.

Given the direction we are headed, how are even the most hard-working people going to find steady work and good benefits?

The good news is that average people have the ability to fight back and to demand a fair return for the work they are willing to do. People are not helpless.

Here is a series of articles from The American Prospect Magazine about the problems facing middle class American and about some possible solutions.

The work of a better and more fair nation and society is up to each of us.  Every individual has the ability to attend a public meeting, attend or organize a protest, write or call an elected official, talk to friends and family, start a blog, donate money, write a letter to the editor, volunteer for candidates and causes, and even run for public office.

If you don’t take control of your future, somebody else will.

June 10, 2011 - Posted by | Uncategorized | , ,

7 Comments »

  1. Replacing labor with capital ultimately makes everyone far more prosperous. In the late 1800s, something like 3 in 4 Americans were employed in agriculture. Now it’s 2 or 3 in 100, and the produce is far greater in quality and quantity. Mechanization is one of the biggest reasons.

    That process has been repeated over and over again. The electric refrigerator wiped out the ice man, and thank God it did! While it created a temporary disruption for a tiny minority of people, it increased the general standard of living. And it ultimately freed up people from having to do the awful job of lugging blocks of ice up flights of stairs.

    It’s also worth pointing out that an initial capital investment shouldn’t be looked at over the same time frame as an employee’s salary. Yes, that company bought $450,000 in machines and only hired $160,000 in labor. That equipment is bought. It’s going to last for several years, while those people will draw their salaries year-in and year-out. For example, if the equipment lasts five years, annual expenses will be $90,000 in machines and $160,000 in labor. By the time that machine wears out, the company will have spent far more on people than on machines.

    As for capital going overseas, that’s a common mistake, but an important one. Dollars don’t just go away, never to be seen again, as though foreigners burn the dollars when they get them. Imports represent demand for dollar-denominated assets and they increase foreign direct investment in the United States. Whenever a foreigner sells anything to an American, he’s effectively announcing a vote of confidence in the American economy.

    Comment by Matt Bramanti | June 10, 2011

  2. Even if you are correct– and how we earn a living must change with new technologies— the absence of a more fair tax code, secure health benefits, and a secure retirement make a lifetime of hard-work a sucker’s bet for many. This is what I don’t grasp about the opposition to making life livable in the brief time we have. It seems that every door is shut in the way that the American right sees work and life.

    Comment by Neil Aquino | June 10, 2011

  3. “Replacing labor with capital ultimately makes everyone far more prosperous.”

    Please clarify. Where do laborers wound up?

    Not that we will (I sincerely hope) but if we automate everything Matt what kind of jobs are created for workers to transition into? With machines doing most of the labor what will the bulk of the workforce be left with?

    Comment by lbwoodgate | June 11, 2011

  4. Right on, Matt. The replacement of workers with machines get’s an unfair connotation even though its innovations like this that allow for higher production and more efficient use of resources.

    Neil, I have some thoughts regarding your comment here.

    “Pensions are a thing of the past and people’s retirement—if they even have a 401K—is at the whims of the stock market.”

    First of all, a 401k does not necessarily have to be invested in stocks. Secondly, with a 401k, the person who earned the money gets to choose how to allocate it. There are more risky options like some stocks, but there are very low risk options as well. Yes, prices go up and down and you can make or lose money on an investment, but when you buy a stock you are accepting this risk. It is up to the individual to invest the the way he or she thinks is most appropriate. It is unfair to demonize the stock market just because people have lost money.

    Comment by David @ I Love My Gov | June 11, 2011

  5. You say the tax code is unfair — presumably you mean the marginal rates aren’t progressive enough. Do you know the data?

    The top 1% of taxpayers have an effective tax rate of 23 percent. They pay more than a third of the country’s total individual income tax bill.

    The bottom 50% have an effective tax rate of under 3 percent. Those 70,000,000 people combined pay less than 3 percent of all individual income taxes.

    How much more progressive could it be? What do you want the rates to be? Should people in the fourth and fifth quintiles pay anything at all in income taxes?

    Comment by Matt Bramanti | June 11, 2011

  6. woodgate—They’ll be left with permanent unemployment and underemployment as many people seem to be left with already.

    David—Many working people have no 401K at all. Others may have the option, but do not make enough money to invest enough for a secure retirement. Others may retire just as the market is on a downturn. We’ve just seen this in our nation. You should not lose the chance to retire because your retirement date comes along at the wrong time.

    Matt—Here’s the goal: That if you work for a living—You able to get care when you are sick, and that you are able to retire when you are old.

    Part of working for a living means that the country has jobs for people. When we take the jobs away, and then attack the idea of universal health care and Social security, and then won’t increase tax revenues, and then starve government so that government jobs are gone as well—-What are people going to do? Every option is shut down even for the people who would like nothing more than to work a 40 hour job and earn a fair living. All in the name of a small government theology rather than real world day-to-day life.

    Comment by Neil Aquino | June 11, 2011

  7. “Please clarify. Where do laborers wound [sic] up?”

    They wind up in businesses that didn’t even exist prior to the innovation that obviated the need for their first job. Let’s take the ice man example again. When the refrigerator came along, ice men were no longer needed. Instead, we needed people to make refrigerators — jobs that paid better than delivering ice because one person was able to create more value than before. We needed more people to mine iron ore and coal to make steel and others to build and maintain power plants. Refrigerator companies needed delivery drivers, accountants, electricians, draftsmen and numerous others. We needed plumbers and repairmen that we didn’t need before.

    The most important economic activity is that which is unseen ex ante. You might see the creation of the automobile and think “my gosh, what will happen to the farrier?” The answer is that the dramatic productivity gains brought about by the car will create prosperity that leads to better jobs. Guys who change tires make a lot better money than the guys who shod horses ever did.

    Neil, you say “we take the jobs away,” as though there’s some bad set of central decisions that should be replaced by a better set. In fact, there is no such set of decisions. Your basic mistake is in thinking that action must be coordinated in order to be collective. Economies show that not to be the case at all.

    Was the move from animal- and human-powered agriculture to mechanization good or bad for employment?

    Comment by Matt Bramanti | June 11, 2011


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