Warning: this little post isn’t going to live up to that mouthful of a title.
Brian Howey writes about a recent conversation with former Governor and current Purdue President, Mitch Daniels. Daniels identifies what I agree is a very real problem with the change in our economy. The shift from manufacturing to a knowledge based economy may leave us producing more than we need, but the production is going to be done by fewer and fewer people:
“Every time human ingenuity has created one of these transformations, people have worried,” Daniels said. “They see what is being lost. It won’t take a third of us to grow food. What’s everybody going to do? Every time up to now, the new economy produced more opportunities than the old one did.”
But the change gripping the United States today is worrisome to Daniels.
“It’s not yet clear to me that it will create sufficient categories of new high-paying jobs,” Daniels said. “Whether there will be enough of them to support a growing population and a middle class like we’ve known, that’s what is bothering me.”
As I view it, we’ll be economically productive enough to create what we need to support everyone as well or better than we ever had. The problem is that our current means of allocating the benefits of that productivity doesn’t distribute those benefits in a manner that will support everyone as well or better than we have in recent memory. Traditionally, there has been some justification in telling someone that, if they weren’t producing and acquiring what they needed to support themselves, it was because they were lazy, and we ought not reward laziness. More and more, it seems to me, there are people who are perfectly willing to work; but the economy has shifted in ways that requires labor less and less. If labor isn’t something the economy needs very much, how do we go about allocating our resources in a way that doesn’t rely on labor as a proxy for merit?
Universal Basic Income
Universal Healthcare
Housing
Maybe not all of those but I think in order of “solving” this problem.
Well, maybe things aren’t as bad as we feared, and that Mr. Daniels is actually learning something at Purdue.
What happens when a society is so firmly fixed on mechanization and robotization that there are fewer opportunities available for folks who may not have advanced academic degrees, and that despite their willingness to learn and to work, they are unemployed? There are Youtube videos showing one machine that grabs a tree, strips the branches off and cuts the tree into ten foot lengths. I hate to think how many otherwise skilled men with chainsaws, who were proud of their abilities and feed their families, were replaced with that.
Furthermore, what happens when, despite the claims that you hear, we actually have a glut of STEM graduates, as is actually the case? A good friend of mine, who has an M.S. in electrical engineering, tells me that engineers are quickly snapped up on graduation but after a few years, their jobs suddenly vaporize and they are replaced by new engineers. The fortunate ones, because of their background, move into management. When Steve Jobs complained to the president that he had to go to China for engineers because the U.S. didn’t have enough, he neglected to say that there weren’t enough to work at $10 an hour. We have lots of engineers and scientists at all levels, but more than for whom we have jobs. Just ask any physicist. Just because we are moving to a knowledge-based economy, it doesn’t mean that things are just hunky dory for the “ones who know”. Methinks that there are some pretty well educated greeters at Walmart. Things are not going well.
Stuart, you present an interesting situation. When I worked for an IT company as the HIPAA Compliance Officer, the company had an unwritten policy that I called “recharge.” (I was exempt because I was a friend of the owner, a lucky class of employees that the then company present could not touch.) Skill sets and skill requirements change very quickly. To bring in the new skills, entry level salaries were high, but salary increases were puny. This caused more experienced employees to leave and new, and younger, employees were hired at a premium. And the recharge process repeated itself.
The situation you describe could also be considered salary compression, where new recruits must be paid well to attract them, but money is not there for annual increases. This was a common phenomena in nursing. This is a YOYOMF economy.
To put an Indiana spin on this (though I think it applies to many other states), I think you can see the same conflict in our local legislature. It appears to me, as a city slicker, is that the folks outside of the big cities with economic growth perceive the big cities as “having enough” and that the state should do more to help the rest of the state.
On the other side, when I visit the “rest of the state”, I wonder exactly what the graduates of the local schools are supposed to do if they want to stay in their hometowns. Very little work to be had and seemingly very little opportunity, and the best option appears to be to move to one of the big cities.
Feel free to correct me.
Joe, And for that matter, many people in the small towns don’t seem to appreciate or have the vision to understand that these small towns are in serious trouble, and not just because there so many vacant store fronts. Last year, in Southern Indiana, a local newspaper asked residents of a small town what should be changed in that town that was filled with deteriorating houses and roads, empty store fronts, had lousy Internet and TV access, and on and on. The people, straightfaced, said that things were just fine and nothing needed changing. Meanwhile, this town has a college and I-69 exit nearby which,most people would call a “business opportunity” but which they call “interference”. The lights are out.
The reason I think most small towns would reply that things are “fine” is that they’ve seen “change” happen and it’s never for the better. Given that most change is bad is it really that hard to understand why they’d rather have things stay as they are (bad as that is) versus get even worse?
Makes sense. Some of the changes that were wrought, were carried out so poorly and inefficiently that they figure they got that shirt.
Tom, you make a good point. Much “change” has been bad for small towns. Loss of well paying factory jobs, loss of local merchants, youth outmigration, are change in the form of decay. Positive change requires risk and leadership, attributes that have already been drained from some of these towns.
One small Indiana town that has undergone tumultuous, but positive change, is Ligonier in northeast Indiana. In the 1970s Ligonier was suffering from loss of factories and a vacant downtown. Mexicans and hispanics from Texas moved into Ligonier. Ligonier is now 53% hispanic, one of only two majority hispanic towns in Indiana. Many of the locals resented the immigrants and moved away. But Ligonier’s downtown now has many hispanic businesses instead of empty storefronts. Several factories have moved into the town and many hispanic men and women work in these jobs.The new residents are starting service businesses and hispanic children are going off to college. And on Saturday afternoons, soccer has replaced touch football.
What an inspiration! I knew a young woman whose parents were from Mexico, and when she was born named her “America”. Now, there is someone with a dream and a vision of what it means to these folks. How many non-Hispanics do you know whose name is “America”?
The problem with retail is they pay the top people extraordinary salaries and the lower people 7.50 an hour. But hey the benefits are killing these companies.
The problem is that change is either positive or negative depending upon the individuals perspective. My case to this point, when my father died in 2004 I received the remaining portion of the family farm, (that which I had not already purchased from my parents.) I paid state estate taxes based upon 12,000 dollars per acre, law stated that land would be valued at its best use which at that time was development. Since then my county has changed zoning laws so it is not as easy to create subdivisions out of farmland. Recent land sales in my area have been around 7500 dollars per acre. The biggest problem is in 2004 the taxes on this property were 3500.00 per year now they are 9500.00 per year. So it is costing me more for less value.
I suspect you have pretty good land, but you need it just to pay the freight. If you don’t regularly have excellent crops, you might be motivated to do something more profitable with it. This last year was not so hot if you had wheat and beans.
Exactly, like sell and cut my losses. The continued story is we are not talking about the most productive land in the state, one third of the property is woodland. Point being I could sell move to town into a 4000 square foot house( 5 bedrooms and 5 bathrooms) and pay only 2800.00 in taxes. Are local property taxes not a function of local goods and services used? Would I be using any less of those goods and services sitting in town?
Hmmm. 1/3 in woods? I wonder if you could put that in CRP. You might check with the Coop people who could tell you about the program and tax consequences. The county is probably taxing you for your woods. I’m not an attorney.
Yes the woodland is being taxed. Wood products are considered agricultural production. As far as CRP that applies only to cropland and their would be no property tax breaks for CRP land since it would be still earning income. Keep in mind I saw this problem heading down the road when “tax reform” was first started. All my farmer friends scoffed at me, since I am weird for a farmer and a democrat. They all said the Republicans would never do such a thing. I hate it when I am right.
I suspect you are not alone. And this is a state full of farms.
Not at all. The problem I have always said that farmers have is not realizing when it is time to stop farming. That said Indiana lost 320,000 acres of farmland to development in the 1990’s. Data from the 2000’s as far as I know is not in yet. I predict the trend continues. The average age of a US farmer is 57. I am 58, This land has been in my family since 1870, Change comes hard. Many states have tax policies that are more favorable to farming. You would be amazed at the names. Pennsylvania leads my list. Head east young man.
John, you make many good points. Both of my grandfathers and some of my uncles were farmers. My dad farmed part-time. Only my cousin who is 61 still farms. The original farm from the 1870s is still in the family. But none of the generation under me have shown any interest in farming. Over the years the farms have expanded and are now shrinking. Some of the land has been sold off, some cash rents, and the woodlots and marshs are where my cousin hunts and we hike and used to cross country ski and snowmobile.
I cannot say that letting go of farming has been all that hard for my family. Some of my family are now in various kinds of car business, some work for the railroad, and some of us hold professional gigs.