No More Middle Class Jobs?

Photos

Illegal Immigration Proves Supply Siders Right

see larger image

uploaded by BigT

There was an interesting piece in the Wall Street Journal titled Why Job Market Is Sagging in the Middle
but since there is a subscriber firewall in place at WSJ.com you might
as well only click on the link if you are a subscriber. Anyways, the
article is interesting because of a chart that was in the article. The
chart showed that a couple of decades ago there was greater demand for
highly skilled labor then there was for skilled labor then there was
for unskilled labor. The current job situation no longer looks like
that fairly straight line going up from its bottom for unskilled labor
up to skilled labor. Now it looks like a crescent moon with more demand
at the bottom and the top with a sag in the middle. Basically, it looks
like sorta like this graph but not exactly.

So why is this the situation we find ourselves in? It’s simple supply side economics.

Now I know that Reaganomics is all about cutting the tax bracket at
the top and everything trickles down but I think that it is also
applicable here. See, the reason why Reaganomics works is because if
you put more supply, money in the ’80s sense, into an area it will
produce things causing more demand. Basically, the chicken comes before
the egg in this economic world view.

This is also true for labor. If we have more of one type of labor
then companies will find jobs for that labor class to do. Right now we
have an influx of low-skilled, cheap labor funneling in from the South.
This increase in the supply of cheap labor has undoubtedly caused a
reciprocal increase in the demand of cheap labor. Borrowing a phrase
from a retired Secretary of Defense, “you go to work with the labor
supply you have.”

Unlike all the breathless pundits who are freaking out about the
death of the middle class I would have to say that I’m not so worried.
First, each income bracket has a much higher standard of living then
they did a generation ago. This means that life has improved for
everyone even if the victim-first crowd is crying. But I’m also not
concerned because supply side economics can also work in our favor if
we want it to.

The problem is that we have a universal education system that fails
more thoroughly every generation. We are losing classically middle
class jobs not because computers and illegals but because we are losing
middle class skills. Companies are looking at the job market and
realizing they can pay two low-skilled worker less then they would have
to pay one skilled worker for the same production level. If, as a
country, we want this trend to end we need to improve the skill sets of
“average” American workers so they can provide more value.

Illegal immigration is a problem because it strains services
provided by schools, hospitals, roads, jails, and every other system
including, yes, the job market. But eliminating illegal immigration,
which is definitely a good idea, will not end the need to increase
skill sets so as to recover middle class jobs. The job market is
increasingly becoming a global market as barriers are broken down for
realizing productivity in faraway places.

Clutching the warm and fuzzy blanket of protectionism will not
improve the lot of the middle class or, for that matter, any class in
America. Blaming the game, in this instance, is not justifiable because
the game is never going to change. Companies are always striving to
increase productivity as efficiently as possible. This doesn’t mean
some day Goldman Sacks is going to be hiring illiterate illegal aliens
to run its Alpha Fund anytime soon. On the contrary, they’re paying
more for their labor because these people have cultivated their skills
so remarkably well that they merit the extra pay.

The same would be true if the people who have middle class jobs
right now would cultivate their skills further because someone with
more abilities will always get paid more then someone with less. Better
education is crucial for achieving this goal. Unfortunately, I don’t
think waiting on the government to improve upon its failed system will
do. From my vantage point the only thing that could possibly reverse
this trend would be for companies themselves to train their people up.

This is already happening in the best companies but those also tend
to be the biggest companies as well. GE has a great system for training
its best people. And there’s tons of Six Sigma camps all over the
country that fills this need as well. Something, though, still needs to
be done to augment the skills of average people to increase their
productivity. I don’t think there’s this massive program that anyone
can implement to solve this problem but rather it needs to be done
organically as each industry and company sees fit.

But this I’m sure of, whatever skills people bring to the market
they will find a job. They may have to create one for themselves but
the jobs will be there for the foreseeable future. The economy always
eventually responds to changes in the labor market. As the supply of
workers with middle class skill sets increases so will the demand for
those workers. BigT