Economist Tyler Cowen, of the www.marginalrevolution.com fame, notes that he and his fellow economists don't quite understand why high unemployment persists while US companies keep reporting near-record profits. Some kind of structural change is suspected, but the economists can't put their collective finger on it. "Macroeconomics is rarely simple," they say.
Why is it so difficult to understand? Companies make more profits because for the same revenue dollars they have, after multiple rounds of layoffs, much lower labor costs. In other words, compared to pre-recession levels, fewer people do the same or even greater amount of work.
How is it possible and why this productivity burst doesn't register with standard economic statistics?
It is possible because of two structural changes:
Firstly, over the last 30 years, manufacturing moved from the US and Europe to China and other so-called developing countries. That is, most work in the developed world is done at the office, not on the factory floor.
Secondly, over the last 10 years, communication technologies globalized and virtualized the office. That is, individual contributors and managers can do their work via web or e-mail anywhere anytime (which, with the advent of Blackberries, 3G laptops, and iPhones everybody does on a regular basis, now.)
As a result, from a highly regulated 5-days-a-week/8-hours-a-day sedentary work style we've transitioned to a largely unregulated 7-days-a-week/18-hours-a-day nomadic life. This means that the 40-hr work week ceiling has been effectively tripled to 120 hours. During the recession, office people work a lot more because ... well, they don't want to be fired. Working 60-70 hrs a week and being paid for 40hrs is still better than being unemployed. This structural shift is not reflected by the standard government statistics because, technically, it's not overtime. Rather, people work at home or Starbucks at their "pleasure".
To summarize, the persistent high unemployment in the US is not a fluke. It is due to the changes in technology(communications) and business methods(globalization, outsourcing). We can expect companies continue invest in information technologies because they make their workers more productive, e.g. by increasing work hours, without increasing the labor costs.
tags: information, technology, trend, economics, detection, problem, solution, communications, mobile, infrastructure, office, social, networking
No comments:
Post a Comment