Reader Question on Robots: What are People Supposed To Do For Their Livelihoods?
In response to my post France Vows to "Save the Bookstores", Fixes Price of Books, Bans Free Shipping by Amazon, reader David writes ...
I enjoy your columns, and agree with most of your economic analyses, but I do have a question about this morning's entry regarding France and bookstores: namely, what are people supposed to do for their livelihoods if nearly everything is going to be done by computer and robotics?
This is the issue that Hollande, in his outdated, ham-fisted way--is getting at, and for the record, I don't have the answer, either. The economy needs middle class consumers, but they in turn need money, which they can't earn without quality jobs. In the past, technological development led to more businesses being created than destroyed. The same was true for quality jobs. I believe the experience of the last five years, however, has demonstrated that this linkage is impaired, if not completely broken.
Businesses and quality jobs - livelihoods - constitute the economic foundation upon which a community rests. Socialist remedies to the problem posed by hyper-automation will fail (as have socialist agendas to any problem), but raising the issue does not make one a Luddite.
Plight of Bookstore Owners
First let's discuss the plight of bookstore owners. Is it really a bad thing if they go out of business?
For numerous reasons (unless you are a bookstore owner), it's a good thing, just as is was when buggy-whip manufacturers went out of business as autos replaced horses.
For every job lost by small bookstores, additional jobs are created at Amazon and online bookstores. Is the ratio 1-1? Probably not, but it does not matter.
The easily seen (alleged problem) is bookstores go out of business. The unseen benefit is people have more money to spend on other things that they used to spend on books.
Perhaps people take in an extra movie, go out to lunch one more time, pay down debts, or simply save the money for a "rainy day".
All things considered, there is a huge overall economic benefit of lower prices. Yet the Fed, the unions, Keynesian clowns, banks, and various bureaucrats want prices to go up.
Let's define a "quality job" as a job that provides sufficient income for standards of living to go up over time.
Note that standards of living go up when prices go down (assuming pay stays constant). Standards of living decline with price inflation, unless wages rise more than inflation.
And that is the crux of the problem.
As I have stated countless times, the problem is not low wages, the problem is rising prices.
And we would have falling prices were it not for the inflationary policies of the Fed (central bankers in general).
Yet, misguided fools in the state of Washington are currently pushing for a $15 minimum wage. More people will lose than gain by such a move, because prices will rise to make up the difference.
Where Will The Jobs Come From?
People ask me all the time: where will the quality jobs come from? Unfortunately, I don't know, nor does anyone else. But just because no one knows, does not imply that no jobs are coming.
One could have asked the same question right before the railroad boom-bust, right before the great depression, right before the internet boom-bust, and right before the housing boom-bust.
So here we are. Unless it's different this time, there will be another advance of some kind that is highly likely to create jobs. I cannot say what or when.
In the meantime, government and Fed policies seriously exacerbate the problem. Higher minimum wages, together with cheap money at low interest rates, and coupled with increased business costs of Obamacare all encourage businesses to shed workers as fast as they can.
For further inflation reading and who benefits from it, please see ...
- Reader Question: "How Can One Calculate True Price Inflation?"
- Illusion of Prosperity: Deflating the American Dream; No Recovery in "Real" Income
- Reader Asks Me to Prove "Inflation Benefits the Wealthy" (At the Expense of Everyone Else)
- The Morning After; Price Discovery is Zero; PUT on the Bond Market? Is Inflation Really Under 2%?
- Does Inflation Targeting Make Any Sense?
- Inflation Targeting Revisited; Three Major Fed-Sponsored Bubbles; Who Benefits From Inflation?