In many ways, the woes of Detroit are simply an extreme example of what’s happening in many advanced economies. The loss of manufacturing based jobs is creating a void that is not being filled - or is being filled differently - by new industries.
Manufacturing jobs allowed unskilled workers to make good middle class salaries. But other than a few remaining instances - such as in Fort McMurray
Today is Labo(u)r Day in Canada and the United States.
It is the official end of summer for a lot of people, which is always a bit sad. (Unlike a lot of people I know, I’m not a huge fan of fall.) But primarily, today is a day to celebrate the labor union movement.
Fred Wilson wrote an excellent post on his blog this morning about this topic. I agree with him and he put it far better than I could this morning. So here are a few snippets:
When one looks back over the history of the development of the modern economy from the agricultural age, to the industrial age, to the information age, the development of a strong labor movement has to be one of the signature events. Capitalism, taken to its excesses, does not allocate economic value fairly to all participants in the economic system.
I am a fan of the idea that labor needs a mechanism to obtain market power as a counterbalance to the excesses of markets and capitalism. I think we can look back and see all the good that has come from a strong labor movement in the US over the past 150 years.
However, like all bureaucratic institutions, the “Union” mechanism appears anachronistic sitting here in the second decade of the 21st century. We are witnessing the sustained unwinding of 19th and 20th century institutions that were built at a time when transaction and communications costs were high and the overhead of bureaucracy and institutional inertia were costs that were unavoidable.
On that note, I am in the market for new – ideally daily – blogs to read. Blogs such as this one, which generally focus on a particular topic but are written by one person and are a bit personal in nature. I find those are where the best online communities develop.
If you know of any, please leave the link in the comment section below. A lot of readers have also asked me for similar recommendations, so I am sure they would appreciate the suggestions.
Happy long weekend :)
, where high school graduates can make six figures working in the Canadian oil sands and the
- I think it’s pretty clear that the opportunities for unskilled workers is on the decline.
Therefore (and this is old news), we clearly need to figure out ways to retrain existing workers and ensure that the next generation is equipped with the skills and knowledge to compete in this new world. The problem though - and this is the second piece - is that I’m not sure the new economy will require the same raw number of people.
What I mean by this is that scaling up production of an automative plant is quite different than scaling up an internet platform like Twitter or Tumblr. You just don’t need as many people, which is why the returns to being smart have grown massively for those few. And this is part of the reason we’re seeing rising income inequality across the board.
Now, I don’t know what the answer is, but I think we’ve already shown that the transition to a new economy isn’t going to be a smooth one. To that end, I’ll leave you with one last thought which came from a former professor of mine at Rotman, Walid Hejazi.
His argument is that it’s actually unethical for governments to subsidize unproductive sectors of the economy, such as a manufacturing, in order to sustain jobs. The reason being that you then have high school students telling themselves that they don’t need to go to University because they can simply go work at the local plant and make decent money. But what they don’t realize is that there’s a very real expiry date to those opportunities and, when it comes, it’ll be much harder for them to be retrained.
