Workers Share of Productivity Gains

       In the February issue of The Electrical Worker,  the journal of the International Brotherhood of Electrical Workers,  union president Ed Hill makes an interesting point.  He says that in America, from the end of WWII to 1970,  there were across the board income gains for all groups, because gains in productivity were shared by workers.   (Actually,  this trend for broadly shared income growth goes clear back to the 1870s.)   But since 1970, real wages have remained stagnant because though American workers have continued to increase their productivity, they have not claimed a share of that increase.  If they had continued to claim the same share of their own productivity gains as before, then the median household income in America would be about $90,000 instead of $50,000.  That's where the rising inequality is coming from.

The Real Housing Crisis

            Everyone is now painfully aware that the collapse of a housing bubble has precipitated a market crash that took down the entire economy.  And we are reminded every day that the millions of “underwater” mortgages are a persistent drag on the economy—a drag which still prevents a full recovery.   Yet the same editions of our Sunday papers which cover this story occasionally carry stories of how inflated rent levels in some areas are also dragging down the economy.  For most of the last century, the rule of thumb for housing costs was that a family could not afford to pay more than 25% of its gross income on housing.  Yet in most major metropolitan markets today, it is not uncommon for two-income families to be paying over 50%.  And this is often true across a wide range of income levels, from minimum wage couples paying rent on a slum apartment, to upscale couples with two professional incomes.

            Housing bubbles are a cyclical phenomenon; they have been around a long time.  But price instability in housing and high housing cost are both symptoms of a deeper problem that has been around at least since WWII, which is that  jobs often continue to concentrate in areas where there is no additional land on which to build more housing.  In short, we actually have plenty of housing, and sometimes we even have plenty of jobs—but the jobs are not usually where the houses are.   Why?   Because no one in charge directing the massive capital flows that determine the geographical focus of new industrial or commercial development really cares whether employees have a place to live, nor has anyone ever attempted to hold them accountable for such outcomes.  This was left to the market, and the market couldn’t give a damn whether we live in a paradise or a sewer, even when both options are equally available.

            If you’re pressed for time today and are looking for a good place to stop reading, you’ve found it.  If you’ve read the above paragraph and you understand it, then you may leave with confidence that you already grasp the main idea.    But if you have a few minutes, then read on and I will give you a first person account of what it’s like to live through a regional collapse of the entire economy.

So, You Think You Have a Housing Bust?

            There are a few areas which are not experiencing the current housing bust. In Northeast Iowa, we already had our housing bust in what was called “the farm crisis of the 80s.”  So when housing prices started doubling every few years after 2001, we were still trying to climb out of the hole we fell into twenty years earlier.  In short, we didn’t get in on the bust because we never got in on the boom.

            The interesting thing was that in the 80s, while small towns linked to the farm economy or to manufacturing were utterly devastated, the main commercial centers were almost unaffected. Towns in Northeast Iowa like Waterloo, Cedar Rapids, and Dubuque had the highest unemployment rates in the country while Minneapolis, St. Louis, and Omaha were only vaguely aware of the problem.   In 1989, eight years into the crash, the May/June issue of Utne Reader’s cover article asked, “Is your dream home an impossible dream?”  Utne Reader was printed in Minneapolis, and I got the impression that the people who published it had never lived anywhere else.  The gist of the article was that rising house prices might permanently close the option of ever owning a home to an entire generation.  It claimed that houses were now so costly that there was no way to buy one except by selling one which you already own. The cover art showed a young couple with children stopping to look longingly at an advertisement for an older house.  The house was a typical older two-story house with a big front porch, well kept, and in a nice old neighborhood.

             I wrote a letter to the editor (which they printed) claiming that in some places, including Waterloo, Iowa, the picture would make no sense because anyone who could afford the nice new car in the picture would turn up their nose at the house they depicted.  Not that there was anything wrong with the house.  You got the impression that it was in a pleasant, residential neighborhood—one that was safe, well kept, and close to good schools, shopping  centers, hospitals, and parks. 

            But, I pointed out, in Waterloo, Iowa, such properties were available at prices starting at less than $10,000.  Since I knew the editors would have trouble believing this, I enclosed a current real estate brochure.  And I highlighted at least a dozen such houses with asking prices under $10,000.  I’m sure they were flabbergasted.  Let me quote some of what they printed from my letter.  

            “How did this happen? Mr. Greider and Mr. Kuttner [authors of the articles to which I was responding] both point out that part of the housing problem derives from the vertical redistribution of income wrought about by recent economic policies. This is true. But another part derives from a geographical redistribution of income that has placed the jobs and the people where the houses aren’t.

            As high interest rates threw the Third World into a depression and raised the value of the U.S. Dollar, it reduced our agricultural, mining, and manufacturing exports while making it difficult for manufacturers to compete with cheaper foreign imports. This mainly affected farm areas and middle-sized industrial cities, most of which are located in the heartland. As plant closings forced families to flee the heartland for the coasts and for the larger cities, they left behind boarded–up houses, reduced levels of retail sales, and a declining tax base.  They left behind ghost towns.” 

            I suggested that everyone who reads their magazine probably knows how hard it is to buy a house in a place like Minneapolis, but few have any knowledge of how hard it is to sell one in Waterloo, only 200 miles to the south.  The process I described had affected all middle-sized manufacturing towns in the heartland, but probably none more so than Waterloo, Iowa.              In the 1970s, Waterloo had been a boom town.  Because of the high inflation of the 70s, farmland prices rose because investors from all over the country needed a place to park their money that would hold its long term value.  Few Iowa farmers owned their farms free and clear. Their net worth was figured as equity, that is, the value of the farm, including equipment, minus the debt owed against it. From 1971 to 1981, farmland price went from $400 per acre to $2,400 per acre.   Farmers who had been struggling to eke out a living suddenly became millionaires, at least on paper.  Naturally, they immediately upgraded their equipment.  John Deere Tractor works, which had already started expanding and modernizing their Waterloo plant in the late 60s, built a new, state-of-the-art foundry, engine plant, and assembly plant between 1970 and 1980. This building boom provided steady work for over a thousand skilled craftsmen, and I was one of them. When the rest of the country was having a recession in 1976, I worked overtime every week. The demand for tractors was so intense that after Deere finished their new foundry, they still kept the older, less efficient foundry running because they needed every tractor they could build.  They worked so much overtime that the union threatened to go on strike in an attempt to gain the right to refuse Sunday overtime work.  By 1980, Deere had 16,000 workers in the Waterloo bargaining unit, another 4,000 salaried and steady work for at least 4,000 outside supplier and contractor employees like me.  All 24,000 were well paid, and their discretionary income, when spent, supported a huge retail sector.  The union claimed that because of the excellent wages paid to Deere employees, the county was supporting   more small businessmen per capita than any place in the country.  And the state planning office said that more roads would have to be built into Waterloo, because at its present rate of expansion, “greater Waterloo” in ten years would grow from about 125,000 people to over 250,000, making it the largest city in the state.

            Then came the recession of 1982.  This recession was national in scope, and fairly mild in large commercial cities. But it was horrible in manufacturing towns, and a complete meltdown for places like Waterloo.  Mr. Volker’s attempts to control inflation through high interest rates and tight money threw the entire country into a recession. That was intended.  But this crashed the price of farmland, which went from $2,400 to $1,200.  Some farmers who had been millionaires now had negative net worth, so it would be a long time before anyone bought another tractor. Many farmers went bankrupt, as did some of the banks which had financed them. Deere went from making 225 huge tractors per day went to only 25 per day, and they laid off workers back to 21 years of seniority.  Only about 4% of Iowans were farmers, but the economy of the entire state was almost destroyed.  People who could not have imagined that they had any connection to agriculture found themselves jobless--in towns where everyone else was also jobless.   As a skilled construction worker, I would be the very first to be laid off and the last re-hired.  After all, what would anyone want to build in a ghost town?

            I remember discussing this on the phone with an out-of-state friend.  He advised, “Why don’t you just pull up stakes and leave?”   I asked, “You mean sell my house?”  He replied, “Yes, of course!”   I said, “To whom?”

            At that point, there wasn’t a great exodus—not yet. Although the recession in the rest of the country was much milder, there was no place where there was actually much hiring, so there was really no place to go.  But as jobs of any kind became available in other states, there was an exodus. Some of those who left took minimum wage jobs and lived in their cars; some moved in with relatives. But they still left. There was no choice.  Over ten thousand homes in Waterloo went up for sale.  In most neighborhoods, you would not have noticed this, because the realtors had made an agreement that no “For Sale” signs would be posted. (Having a “For Sale” sign on every house would tend to depress sales even further.)  But if you asked a realtor, “Which of the houses on this block are for sale?” the reply would be, “All of them.  Make an offer.”    With 10,000 sellers and no buyers, the price just dropped, and dropped, and dropped.  By the time the brochure which I sent to Utne Reader was printed, many homes had lost 75% of their value. 

            My cousin bought a house on contract for $2,700.  This house was in bad shape.  But his brother bought a house for $6,000 in the same area that was a solidly built, two story home with nothing wrong with it at all, except perhaps that it could have used a coat of paint. This was in a working class neighborhood, but by no means a slum.

            In 1979, my parents had been living on an acreage on the edge of town. My father had a stroke, so they sold the place and bought a smaller house on a tiny lot in one of the nicer old neighborhoods in town. This was just before the crash.  They sold the acreage for $85,000 on contract, which would be about $200,000 in today’s dollars. They sold it to a Deere worker, who was a 40 year old man with a growing family.  He had owned a small house free and clear, which he sold for $30,000 cash.  He made a $15,000 down payment on my parents’ property, and put the other $15,000 in the bank.  Since he had 15 years of seniority at Deere, anyone would have assumed that had a secure job.   And he made excellent wages. My parents planned to use about half of the receipts of this sale for retirement income, and use the rest to make the payments on the small house they were buying. The asset they were selling was the product of a lifetime of hard work and frugal living. It was their entire life savings, and the sole hope of a comfortable retirement. For about two years, things went as planned.

            Then came the big Deere lay off. And even with 15 years seniority, the buyer was laid off.  And so were 12,000 others, along with another 20,000 who had never worked directly for Deere’s, but who eventually lost their jobs as a direct consequence of the collapse. As industrial workers left the area, teachers who had taught the children of the Deere workers also found themselves without jobs. (My wife was one of these teachers.) And then the car salesmen who had sold cars to the Deere workers and to the teachers also left.  And then the dentists and doctors who had tended the needs of the Deere workers and the teachers and the car salesmen-- also left; etc.   After my parents’ buyer could no longer make payments on the property, my parents allowed him to stay there for about three years anyway.  There would be no point in foreclosing on the house, since there was zero chance of finding a new buyer.  Eventually, the buyer decided that even a house for nothing was of no use in a city with no jobs. So he abandoned the place and moved to Oregon, where I heard he took a minimum wage job and lived in his car for a while.

            The retail sector of Waterloo’s economy was decimated. The main commercial street in old downtown Waterloo was 4^th Street and a couple streets either side of it, for about one mile.  In 1983, I drove down this stretch of 4^th Street and counted two hundred store fronts.  All except 6 of them were boarded up. The suburban shopping centers did better.  They maintained about 50% occupancy.   But all the stores still open had laid off all but a skeleton crew, and there were few if any customers.  As goods were finally sold, little of it was replaced. Eventually, the stores were nearly as empty of goods as they were of shoppers.

            There was little chance of any of the laid off people ever finding work if they remained in the area.  But there was also no place to go that had enough job openings that there was much chance of an out-of-towner with no local social connections being hired either. At one point a new Target store was to open in Waterloo, and they announced that about 50 minimum wages jobs would be offered.  It boggles the mind why it would occur to a chain like Target to put a store in Waterloo at a time when all the stores in Waterloo were going broke. Perhaps they had started the process earlier, when the boom was still going, and had entered into contracts that were irrevocable. Or perhaps they assumed that the downturn would be a short term problem, and they wanted to build while land and skilled labor could be had cheaply.  Or perhaps it was a bureaucratic bungle by executives who were living in a city so completely unaffected by the problem that they still did not understand what was happening.  In any case, on the morning that applications for these jobs were to begin, there were 500 people waiting in line, and some of them had been in line all night. The company did not have enough application forms to go around, so fist fights broke out over who would get the last forms. So who were these pathetic losers who would fight it out over a small statistical chance of getting a minimum wage job?   They were skilled and semi-skilled Deere workers who until recently could not remember a year when they had earned less than $50,000.  (In today’s dollars, that would be more like $110,000.)  Many of these people had been raised on farms, and all of them had worked hard all of their lives.  They were well-disciplined, competent people had become successful, and they had earned that success. They saved their money, built beautiful homes, and planned to send their kids to college. And for most of their lives, they had assumed that anyone who was homeless or hungry was probably an alcoholic, a drug addict, or lazy beyond description.  But they were to be rudely disabused of this misapprehension.   

            About the time that my parents’ buyer left, my dad died, which left my mother with even less income.  With my father alive, she had her social security, his social security, plus his retirement pension from the packing house where he had spent 25 years. Now there was only her own social security. Eventually, she resold the acreage to a young school teacher for $27,000 on contract.  She had tried renting it out for a few years, but no one ever paid more than the first month’s rent, they usually trashed the place, and legal action was required to evict them. For a few years, she left it sit empty.  I felt sorry for my mother, but at the time, even with only social security, she still had more income than any of her kids.
       My brother had more than 21 years of seniority at Deere, so he would not be laid off. But then there was a lockout (the company called it a strike) that lasted seven or eight months.  Since this idleness was technically due to a "labor dispute," none of the workers were eligible to collect unemployment benefits. My brother's family had always been a one income family; and he still had a mortgage and three kids.  At that point in time, my brother's situation was at least as desperate as mine.

            The only businesses still booming were law practices and law enforcement.  Lawyers were needed for bankruptcies, foreclosures, evictions, and divorces. And there were still jobs in law enforcement, though I can’t imagine that arresting your cousins for stealing food for their children would be a pleasant way to earn a living. It was like a page out of Les Miserables . A couple guys were electrocuted trying to take down a high tension line so they could sell the copper for scrap.

            I was laid off from my job as a construction electrician on Christmas of 1980.   For the next ten years I took whatever electrical work I could obtain through out-of-state IBEW hiring halls. I rarely found work for more than five months per year, and once I went 18 months without a single day of paid employment. In 1982, I put 16,000 miles on my car, traveling the country looking for work, and found none at all. I was in every southern state except Arkansas at least twice. (And the South is where the work was.) 

            My wife was also unemployed.  She had left a teaching job several years earlier to have a baby, and was told that a job would be waiting for her when she was ready to return.  But even before the crash, demographic changes had caused school closings and teacher layoffs, so this was not to be.  From 1981 to 1984, there was a three year period where neither of us actually had a job—at least, not a steady, full time job.  I would pick up a few months work here and there in other states, hoping to work enough hours to remain eligible for unemployment benefits. My wife found occasional work substitute teaching and teaching part time at the community college.  Mostly we lived on my unemployment benefits and on our savings.  Both were exhausted by the summer of ’84.  Then I found an 8 month construction job building a nuke in Illinois.   I made some money and salted it away, and that year my wife’s part time job turned into full time work at the college.   But during the entire decade, from ’81 to ’91, I worked only 6 weeks in Iowa, and none of it in Waterloo.  And when I could find work at all, I had to leave the wife and baby at home and work in some other state, sometimes as far away as Montana.  Fortunately, my wife and I went into this period owning our own home and with no debt, and a small amount of savings.

              As houses went unsold and unoccupied for year after year, hundreds were eventually torn down for wood salvage, or so that the owners could stop paying taxes on them, or just for kindling. And some were deliberately torched by the neighbors after they had become derelicts.  
           So how long did this depression last?  It depends who you ask. By some reckoning, it lasted ten years. By mine, it’s still going on.   If you drive down 4^th Street today, you will not see a single boarded up store front.  Each one has a paying tenant. The street itself has been beautified with little trees, and most of the buildings have been sandblasted and made beautiful.  The city fathers are proud of this, and they should be.  But one thing you won’t find there is much retail business. Well, actually there are two, a dress shop and an Army surplus store.  Except for restaurants, all the rest are either government agencies, financial institutions of various kinds, or businesses that offer services to other businesses.  The city made several valiant attempts to lure shoppers back down town. But except for forcible abduction, there doesn’t seem to be a way to do this. Yet the office workers need a place to have lunch, so you can find several pleasant places that will sell you a good sandwich and a beer.  And some are open evenings and have a dinner crowd. And the houses that could be had for $10,000 in the 80s, if they weren’t torn down or burned down, are now selling for at least $50,000.

             Deere had record profits this year, and has become the world’s number one implement maker. But the number of workers in the Waterloo bargaining unit is only about 2,400—not 24,000. And the union gave them a two-tier wage contract a few years back. The “old contract” workers were paid about $30.00 per hour, the new hires get about $15.00.  So instead of 24,000 workers earning very good wages, we have 2,400 workers just earning wages. Yet Deere is selling as many tractors as they did in the hay day of ’79.  Part of the reduction in labor is due to automation—and part due to out-sourcing.  But the net result is that Waterloo can now brag that there are now almost enough jobs for all its inhabitants.  But that is only true because so many of us left.  I suspect that most of the émigrés eventually found a new life. But besides losing their jobs and their homes, they also lost ten years of their lives.

            Yet during all the years that 10,000 houses were for sale for about whatever price anyone would offer, there were firms in Minneapolis whose workers were either struggling to get by because of crushing rent costs, or spending four hours on the road every day on a long commute.  So why didn’t one of these companies move part of their operation to Waterloo? They could have just moved key personnel, offering cheap housing as an incentive, and hired the rest locally.  Or they could have leased a large block of houses and sublet them cheaply to their employees, with an option to buy.  This would have solved some of Waterloo’s problem, solved their employees' housing problem, and made them money in the process.  But they probably didn’t even think of it, because few companies give a damn whether their employees have access to affordable housing.  

Japan's First Trade Deficit Since 1980

            This post is a response to three separate articles which have appeared recently in the Wall Street Journal:  End of Era for Japan’s Exports, (Jan 24, 2012)  The factory Floor Has a Ceiling on Job Creation, (Jan 12, 2012) and Building a Case for Producers’ Relevance, (Jan 18, 1012).  Mostly, this post is about jobs—and about the relationship between jobs, trade deficits, and currency exchange rates.   But before beginning, I should perhaps explain why, as a liberal with no particular love for Wall Street, I should wish to quote WSJ or even bother to read anything which might be printed in its pages.

             When I was in college in the late 50s, the word about WSJ was that its opinion pages were filled with outrageous nonsense, but that its news pages contained accurate and reliable information, often including in-depth coverage of economic events across the globe that no one else was covering at all.   I think it still fits that template, except that since Mr. Murdoch purchased the paper, there seems to be a lot more opinion and a lot less of the in-depth coverage which made WSJ the useful research tool that it once was.  But it still contains information on global markets and commodities that you rarely find in other mainstream journals. I subscribe to over a dozen periodicals—mostly liberal journals like American Prospect, Nation, and In These Times.            But I still read WSJ, and I’ll explain why:  Last night, there was an account in my local paper from AP which stated that Japan had its first trade deficit since 1980.   This piece was one paragraph long.  WSJ gave the story a whole page.

            This WSJ article begins by explaining that some of the causes of Japan’s trade deficit are immediate, short term problems:   the tsunami, the loss of its nuclear power, etc.   These events have shut down a lot of Japanese production, and you cannot export that which you cannot produce.  And Japanese exports are also hurt by weak demand in the U.S. and Europe. But within a few years, Japan would have been entering an era of long term trade deficits anyway, due to other causes:   the graying of its population, the appreciation of the Yen, the increasing cost of imported oil and other commodities, and the recent rise of a number of third world industrial powers.

            The Japanese trade juggernaut began about 1950, with a government policy of export- led growth based on an artificially undervalued Yen and cheap credit for Japanese manufacturers.  This policy was so successful that it was called “The Japanese Miracle.”  For decades, Japanese manufacturers were able to promise their workers total job security, through good times and bad, because by running a large trade surplus, Japan was able to export its unemployment to the rest of the world--mostly to us.

             I’m going to digress here to explain something that the article does not go into. Japanese products were able to penetrate markets all over the world because they were able to sell higher quality cars and electronic goods at lower prices than their domestic competition. They claimed that this had something to do with “Japanese efficiency.”   But efficiency had nothing to do with it.  Originally, the Japanese price advantage was cheap labor.  Japanese workers, right after the war, were willing to work for much lower wages than workers in any other developed country. But even after Japanese wages reached parity with the U.S. and Europe, their manufacturers still were able to sell higher quality products at lower prices.  This was partly because Japanese manufacturers had much lower capital costs, since their government insured that loans were available to Japanese employers at much lower interest rates than the world average.  But most of the Japanese manufacturing advantage was due to a radically undervalued Yen.  In the 1960s, when $2,000 Japanese cars were being sold here, they were probably being built at a cost equivalent of over $4,000, but the phony exchange rate covered this loss and even made a fat profit.   If a dollar paid by a customer in the U.S. converts to the equivalent buying power of $3 in Japan, then it becomes pretty easy for a manufacturer to hire enough skilled labor to build whatever quality level he wants and still underprice our market.     And of course, in the 50s and 60s, Germany did the same thing.   I bought a new VW bug in 1967, and I sincerely believed that I did not buy a foreign car just because I was too cheap to pay for an American made car—I merely wanted a higher quality.  I paid $1,850, and there was at least one model of American car I could have bought for $1,800.  I just felt that the VW was a better car.  Well, I now suspect that if this exact car had been built by VW in the U.S. at that time and at that level of quality, it would have cost over $3,800 to produce, which was nearly the price of the cheapest Cadillac.  Of course the VW was a high quality car—why wouldn’t it be?   Price and quality are merely opposite sides of the same coin, but few people understood that. Like the Yen, the German Mark was deliberately undervalued.  We tolerated these trade games because of the cold war.  Our government wanted to build up Japan and Germany as a strong bulwark against the USSR and China, and we were willing to trash the jobs of millions of American workers to do this.

            But in the 1980s, the U.S. patience with Japan began to wear thin.  First, the U.S. demanded that Japan voluntarily limit the number of cars sold in the U.S.   And then the U.S. accused Japan of selling goods overseas at lower prices than they were charging at home.  This is called “dumping,” and it is generally considered an unfair trade practice.  In 1985, the U.S. and Europe’s leading economies pressured Japan into signing the “Plaza Accord,” an accord in which Japan agreed to stop intervening to keep its currency value artificially low.  The Yen rose from 239 Yen to the dollar in 1985 to 128 in 1988.

            According to WSJ, Japanese authorities tried to mitigate the effect of this change by flooding the economy with cheap money.  But this produced an asset bubble, which eventually crashed.  And the crash caused two decades of economic stagnation in Japan. One of the reasons that China is so reluctant to let the Yuan appreciate is that they remember what happened to Japan after the Plaza Accord.  (Of course, one could argue that the Japan disaster resulted not so much from the revaluation of the Yen but from the decision of the Japanese government to flood the country with cheap money—or perhaps even from the decision of the Japanese consumers to spend this easy money by just bidding up the price of real estate rather than buying more Japanese goods.)

            When the Japanese trade juggernaut first started, Japan had the cheapest labor costs of any country that had the industrial know-how to manufacture anything.  But Japan was soon joined by South Korea and Taiwan, and must now compete with new industrial tigers like China and Brazil, as well as new sources of cheap industrial labor such as Thailand, Indonesia, and Latin America.  Japanese manufacturers are responding by “off shoring”  some of their production—sometimes moving the entire operation overseas, sometimes just moving the low skill, labor intensive jobs, hoping to preserve at least some jobs in Japan by doing so. This is, of course, exactly what American manufacturers were forced to do when threatened with the Japanese trade advantage a generation ago.  Today, some  Japanese jobs are being off-shored to the U.S.   Mori Seiki is planning to build a machine tool plant in Davis, California.  But most jobs are being off-shored to countries that have one thing in common—an undervalued currency.

            The second article, The Factory Floor Has a Ceiling on Job Creation, by David Wessel, examines whether improvements in the manufacturing sector will solve our unemployment problem.  The short answer: No.    Wessel provides a graph showing factory employment as a percentage of total employment in the U.S. since 1950.   In the early 50s, factory jobs accounted to over 30% of all employment.  (And since these jobs usually paid better than service jobs or retail employment, they probably provided much more than 30% of the country’s spendable income.)  Then we started outsourcing jobs to low wage countries, and today, only 9% of U.S. employment is in factories.  So, if we could bring back all the jobs outsourced since 1950, would that bring back a nation with factory jobs for 30% of its people?  No—not even close, because another trend since 1950 has been automation.  Although we employ only 11.8 million people in manufacturing, total output since 1950 has increased 500%.  Productivity has also increased 500%, and real factory wages, on average, have more than doubled since 1950.

            So even if we could bring back all the lost production, it would not bring back all the lost jobs.  And even if we could, the modern factory job requires more skill and training than a generation ago.  In 1950, a factory job was a ticket to a middle class life for a person with no education beyond high school.  But today, an applicant without prior experience will usually need about 2 years of tech school to get an entry level factory job.

            Yet factories are important because they are a primary driver of growth.  As Obama’s “Manufacturing Czar,” Ron Bloom says, “If you get an auto assembly plant, a 

Wal-Mart follows.  If you get a Wal-Mart, an auto assembly plant doesn’t follow.”

            The third article, Building a case for Producers’ Relevance, by Justin Lahart, claims that the 330,000 new factory jobs added in the last two years, while not equal to the 2.3 million jobs lost in the two years before that, are still an important part of the recovery.  In fact, he says that’s mainly what’s driving the recovery.  In the third quarter, goods production accounted for 28% of GDP.   That’s far less than the 43% in 1960, but it’s still 28%. 

            I think we are approaching an era where we could bring back all the production that we ever out-sourced.  In my view, this would add at least 3.5 million jobs.  This would not completely solve our unemployment problem, but it would nearly cut it in half. Of the 13+ million officially unemployed, at least 5 million would be unemployed in a normal economy, due to routine job changing, bankruptcies, seasonal lay-offs, etc. That really only leaves a deficiency of 8 million jobs.   And since manufacturing jobs act as a primary driver for other jobs, each one these new jobs might eventually create one additional job. If that happened, we’d have nearly full employment.  

            If we had a government policy deliberately aimed at bringing back these off-shored jobs, we could easily do this. In his State of the Union Address, President Obama indicated that he would be pushing for precisely such a plan.   But don’t expect any help from the Republicans in Congress.  Most congressional Republicans depend heavily on Wall Street elites for campaign funding. This is a problem for both parties, but Democrats can access other sources of money--labor PACS, green PACs, trial lawyers, etc.  There are Republican voters who hate Wall Street, and they have pretty loud voices--but not very deep pockets.  So the GOP must give Wall Street what it wants. Right now, full employment is not what it wants. Wall Street loves a slack labor market. It allows them to bust unions and hire people for pennies.  Since they now have this advantage, I’m sure they have no desire to give it up.

Limerick of the Day, Jan 28, 2012

And then there's this fellow called Newt,
Whose own horn he continues to tewt.
When I hear his ex-wives
Discussing their lives,
I say, "God! What a phony old cewt!"

Metaphors for Hardness

        Starting after the middle of the 20th century, I began working with machinists and skilled construction tradesmen of all kinds.  I was impressed by the abundance of colorful metaphors they used in almost every line they spoke.   For instance, some of the expressions used to describe various kinds and degrees of hardness included:
 "Harder than a whore's heart",
  "Harder than the hubs of hell",
  "Harder than Chinese arithmetic",
  "Harder than a Nicholson file", and
  "So hard a cat couldn't scratch it."
  Only the reference to Nicholson files had any concrete reference point in the real world,  but they all served to convey the notion of really, really hard.  As a young man, I was fascinated by this style of narrative, and wish today that I had bothered to write some of it down.  Is there a modern day equivalent to this type of jargon? Do people still do this?

Interesting Gorbachev Article

                  It has been about twenty years since the demise of the Soviet Union.  The January 9/16 issue of Nation magazine marks this occasion with a set of three brief articles:  The first is by Mikhail Gorbachev, entitled “Is The World Really Safer Without The Soviet Union?”  The second is by American historian and Russian Studies expert Stephen F. Cohen, entitled, “The Soviet Union’s Afterlife.”  And the third is by American educated Russian journalist Vadim Nitikin, entitled “Back in the USSR.”  I recommend all of these articles, particularly the one by Gorbachev.

Whole Genome Sequence for $1,000?

    According to an article in the Jan 10 issue of Wall Street Journal,  Life Technologies Corp is introducing a machine in the coming year which it claims can provide a whole genome sequence for any individual who wants one--for about $1,000.   And it can do it in a day.   A genome read out that quick and cheap could allow genetic sequencing to be used as a routine medical screening.  And as the price drops even further, such tests would be available to the entire population in most developed countries.
     The advantages would be: first, individuals could discover early in life whether they are particularly at risk for certain diseases, and take preventative action. Second, this information could guide therapists in tailoring treatments to the individual. And third, it could allow drug companies to develop specific drugs for different genetic types.  And forth, it would make it more practical for drug companies to develop drugs to mitigate the effects of certain genetic diseases, particularly those caused by a single mutation, by identifying the pool of individuals who might benefit from them.
     Of course, there could be a downside.   Once such information exists, it's only a matter of time before some of it falls into the hands of those who might use it to our disadvantage.  And eventually, such use might even be legal and institutionalized.  Have you seen the movie GATTACA?