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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (14323)	10/29/2004 5:38:37 PM
From: benwood	Read Replies (1) \| Respond to of 116555

You are absolutely right. And the higher pay that frequently accompanies higher productivity is a reaction by employers to acquire and retain the more skilled staff necessary to perform the more complex job. Similarly, the education, training, and or experience, required to perform a more sophisticated job limits the potential pool of applicants, so the competition for a job might actually decline over time due to the shrinking pool of qualified workers.

To: GraceZ who wrote (14323)	10/29/2004 8:34:46 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Nope. What you express here has been expressed since the beginning of the industrial revolution and it has been proven over and over to be dead wrong. Rising levels of productivity ultimately lead to higher aggregate wealth, increases in income, expanding markets and rising standards of living as well as a greater value being placed on capital (money, capital goods, raw materials, knowledge and human capital). Consider if we take the inverse of the statement and say, falling productivity leads to higher incomes and increases in wealth. You know this to be false so why do you think the inverse is true? From John Steel Gordon about the productivity boost that occurred subsequent to the invention of the sewing machine: An interesting idea and one with merit. Lots of merit. That said I think it all depends on where one is in the cycle. Consider railroads. Very disruptive? Would you agree? Now while we were building those railroads was there a huge boom? What happened after that? Huge bust. Right? Next step. Cars. Ford revolutionized the assemply line. Disruptive? You bet. More workeres employed? You bet. Did continued improvents in productivity outstrip demand and lead to layoffs and a huge bust? You bet. Fast forward to the internet. Did it create enormous numbers of jobs? hell yes. Did improvements create more jobs? Very debatable. If it did, where were those jobs created? Certainly not here but in India and China. Are further improvements in the interent going to lesson or increase jobs, if so where? Now back to the sewing machine. Yes it led INITIALLY to massive employment opportunities. Consider manufacturing as a whole for the last 50 years. Has increased productivity led to more manufacturing jobs? HELL NO, and that is where you lose the argument. Fewer and fewer people are required to make things. Every advance in productivity requires fewer workers. China has actually lost manufacturing jobs. Do you for one second doubt that? Do you doubt that it takes fewer than ever people to produce a car? So.. Where does that leave us? IMO that leaves us with the fact that AT THIS STAGE productivity enhancements are going to be NET NEGATIVE in terms of job growth and wage distribution in manufacturing (continuing the trend in manufacturing and starting the trend in terms of the interenet). Now, EVENTUALLY we will see the next disruptive technology. The key word here is EVENTUALLY. I doubt it is next year or even 5 years. It could be but I doubt it. Furthermore, the plain and simple fact is that the internet created a GLOBAL wage arbitrage such that I sincerely doubt that the next boom is of tremendous JOB/WEALTH benefit to the US. If anything I see more and more wealth concentrating in the hands of fewer and fewer people. The Industrial revolution started a trend towards more wealth for the masses. Is it possible that the internet is about to do the opposite? I think so. But even if I am wrong about that, at THIS POINT in the cycle manufacturing and internet productivity enhancements are NET NEGATIVE for jobs and wealth to the masses for the US. Our standard of living not too long ago was rising with ONE wage earner. Now it has STALLED (IMO) with two wage earners. Unfortunately there is no scenario with three wage earners that makes any sense. So where to from here? Yes the SOL in the WORLD may very well rise. But what about the SOL in the USA itself in light of my arguments. I say it sinks. Mish