We have an economy burdened by debt, coupled with a workforce growing slowly. Further, enhanced productivity (at least the way we measure it now) in the service industries will also mean that fewer people have jobs – not exactly the outcome a labor economist wants to see.
The picture is not entirely gloom and doom. There will be a large cultural shift in the way work and income are allocated. But that is going to require society to go through wrenching changes, because our expectation seems to be that we can somehow get back to the nirvana of the ’50s through the ’90s. That is just not going to happen. And we’re going to have to adjust far more quickly than our great-great-grandparents and their children did in going from the farm to the factory to the office.
So, yes, much angst for the Millennial and younger generations. Helpfully, they seem to be more realistic about their future than my generation was. But they are not as entrepreneurial and risk-taking as previous generations were, and those are the qualities required to grow an economy.
Let’s finish with a set of quotes from Tyler Cowen’s book Average Is Over.
Being young and having no job remains stubbornly common. Wages for young people fortunate enough to get a job have gone down. Inflation-adjusted wages for young high school graduates were 11 percent higher in 2000 than they were more than a decade later, and inflation-adjusted wages of young college graduates (four years only) have fallen by more than 5 percent. Unemployment rates for young college graduates have been running for years now in the neighborhood of 10 percent and underemployment rates near 20 percent. The sorry truth is that a lot of young people are facing diminished job opportunities, even several years after the formal end of the recession in 2009, when the economy began to once again expand after a historic contraction.
At the same time, the very top earners, who often have advanced postsecondary degrees, are earning much more. Average is over is the catchphrase of our age, and it is likely to apply all the more to our future. This maxim will apply to the quality of your job, to your earnings, to where you live, to your education and to the education of your children, and maybe even to your most intimate relationships. Marriages, families, businesses, countries, cities, and regions all will see a greater split in material outcomes; namely, they will either rise to the top in terms of quality or make do with unimpressive results.
These trends stem from some fairly basic and hard-to-reverse forces: the increasing productivity of intelligent machines, economic globalization, and the split of modern economies into both very stagnant sectors and some very dynamic sectors. Consider the iPhone. The iPhone is made on a global scale, and it blends computers, the internet, communications, and artificial intelligence in one blockbuster, game-changing innovation. It reflects so many of the things that our contemporary world is good at, indeed great at. Today’s iPhone would have been the most powerful computer in the world as recently as 1985. Yet to cite two contrasting sectors, typical air travel doesn’t go faster than it did in 1970, and it is not clear our K–12 educational system has much improved.
This imbalance in technological growth will have some surprising implications. For instance, workers more and more will come to be classified into two categories. The key questions will be: Are you good at working with intelligent machines or not? Are your skills a complement to the skills of the computer, or is the computer doing better without you? Worst of all, are you competing against the computer? Are computers helping people in China and India compete against you?
If you and your skills are a complement to the computer, your wage and labor market prospects are likely to be cheery. If your skills do not complement the computer, you may want to address that mismatch. Ever more people are starting to fall on one side of the divide or the other. That’s why average is over. This insight clarifies many key issues, such as how we should reform our education; where new jobs will come from and why (some) wages might start rising again; which regions will see skyrocketing real estate prices and which will empty out; why some companies will get smarter and smarter, while others just try to ship product out the door; which human beings will earn a lot more and which workers will move to low-rent areas to make ends meet; and how shopping, dating, and meeting negotiations will all change.
Orlando and SIC
My next trip will be to the Strategic Investment Conference, May 22–25 in Orlando. On the 26th, Shane and I fly up to Washington DC to be with Neil Howe and bride Gisela at their wedding. And in late June Shane and I will fly to St. Thomas for a week of vacation.