Tuesday, October 9, 2018

The End of the World?

No, my friends, I am not writing about the Supreme Court. I am not even writing about Donald Trump. I am writing in response to months, if not years, of hand-wringing by some of my friends about various unfolding trends that promise something akin to the end of the world.

Artificial intelligence (AI), productivity, globalization, and the demise of baby boomers are among trends that cause all sorts of consternation if not hyperventilation. I won’t argue that these trends won't disturb our happy society. I won’t even argue that they are not already affecting many people in many places.

Concern for these and other issues is legitimate. What I am saying today is that, while there is much truth to the fact that we have considerable challenges ahead, the end of the world is nowhere in sight. Our biggest challenge is to decide as a nation what we can do so that jobs continue to exist and people are paid enough to keep the economy growing. This is our biggest challenge because it will take thoughtful policy in a very complicated US and global economy. There will always be more than one way to resolve these issues. In a world where politicians would rather spit that compromise, it is hard to see how they can be trusted to do the right thing. Whatever they could do won’t be perfect but sadly it is not clear that they are capable of anything besides giving hateful interviews to greedy media organizations.

But we do have time and it is possible that sanity might return to the political arena. Maybe it will take a severe recession or a flood of Biblical proportions, but there is at least some hope. In the meantime, I suggest we look at some data to reassure ourselves that the end of the world has not already come.

On the first line of the table below are numbers for the productivity of the private non-farm business sector. These are index numbers representing productivity in 2006 and 2018, and then the percentage change in the index over those 13 years. Notice that productivity in the business sector rose by around 15%.

The second line has comparable numbers for employment. The employment numbers are for all employees of non-farm businesses. They are in millions. In 2006, we had 137 million employees in the US. That number took a big dip in the recession down to 130 million in 2010 but then reached 148 million in early 2018. That amounted to an 8.5% increase.

The final row is the employment cost index. This index measures changes in wages and benefits of private industry workers. Starting at an index value of 102.1 in 2006, wages and benefits rose to almost 133 by 2018. That’s an increase of 30 percent.

The upshot of this little table is that we are nowhere near falling off the earth. While these numbers were clearly affected in a negative way by a very scary recession, they show that productivity grew, employment grew, and the wages and benefits of workers increased even faster.

I purposely leave you with this impression of growth. I could have compared this time to previous ones. I could have compared the wages and benefits change to inflation. I could have dissected the employment numbers by manufacturing versus services. There is a lot more I could have done to put changes from 2006 to 2018 in a more complete perspective. But I save that for other posts and other purposes.

I am not trying to say that this is the rosiest of times. I am not trying to say that we don’t need to get to work on solutions. But what I have tried to do with this little table is to suggest that we stop panicking. This is not the worst of all possible worlds. I am no Pangloss but then, again I am no Martin either (characters in Voltaire’s Candide). Pessimism might be warranted by some things we see today – but pessimism surely will not provide the answers. This glass is definitely half-full. How can we get policymakers to work together for us -- to make the glass even more half-full?

2006         2018       %Change
Productivity            94.4        108.2          14.6
Employment         136.5        148.1             8.5
Wages & Benefits 102.1        132.5           29.8
Note: The values are for the first quarters of these years.


  1. I hate to be a negative, but for sake of argument, productivity comes at the expense of additional AI not employment. Next the # of employed people increased over 10 years because the Boomers are retiring ( except for me) but the participation rate remains in the 66% range of of the people capable of working. Does that mean more housewives are staying home? The schools have caught on to career training rather than the old standard in an effort to fill the 100's of new types of career jobs which across the country cannot find enough qualified people. Housing prices remain relatively stable because they had to bounce back from the lows of 2010 and the interest rate is increasing. As a sideline....no pun intended....football coaches are being paid 100 time as much as they were in the 60's....same for pro players...outstripping by far normal wages for even C level position except for CEO and COB. 10% of the people still possess 80% of the wealth...is that the 80-20 rule? The cost of living for things people buy every day is rising but actually it is hard to tell since everything is negotiable and perpetually on sale with 210% to 30% off of what? However, for the most part other than the significant increase in murders and rapes, everyone seems to be happy. lastly ESPN is making a fortune off of ad money and the ad agencies are making a fortune off of ESPN and IT/SEO marketing.
    OK enough negatives.

    1. Yep you are predictable. Even when I preface a post with the idea that some people never see the positives, you still want to focus on the negatives. No positives for you!

  2. Dear LSD. I’m a little puzzled with the gloominess and handwringing stuff attributed to some of your friendz . . . . does this derive from attending IU futebowel games?

    I’ll bet they don’t binge-watch Fox Biz but rather MSNBC, CNN, CBS, ABC, NBC et al of the hair-on-fire, left-wing-nut, drive-by media. If so, encourage them to switch to FBN and join the Kavanaugh clique espousing the keg is half full.

    The negotiator-in-chief at 1600 has done more as a one-man act to uplift the national spirits (pun punnie pun pun) than any other POTUS and despite the headwinds/drag of politicians who prefer spitting to compromising. Keeping the House and bolstering the Senate Nov. 6th will do a lot to ensure jobs and wages keep improving. Spitters find solace dwelling in your spittoons. Sanity in the political arena is akin to eyeing the glass . . . er, keg . . . to see if half full or empty—it depends on the eye of the beholder.

    LSD, be a role model for your gloomy friendz. Advocate watching/attending less IU futebowel games and share more boddles of JD with them. That might not return any modicum of sanity to the D.C. swamp but it might help your friendz feel less gloomy.

    BTW, with the 1600 negotiator-in-chief who needs spit heads to compromise?

    1. Dearest Tuna,

      42 years of attending IU football games might have taken its toll. But the JD definitely helps.

  3. The sky isn't not falling, but a 25.07% increase in consumer prices over the period 2006-2018 can't be simply disregarded. The minimum wage is still $7.75!!!

    1. You have a warm heart Mr Sturbaum and you are correct to point out some negatives. But I stick with my forecast that the sky has not yet fallen! If it helps any, 29 states now sport minimum wages levels higher than the national level. Still, I am happy not to be earning the minimum wage! We need to find better ways to ensure that our people are worth more in the labor market.

  4. LSD have you read this book. I remember reading it as an undergrad and still think it is worth while.


    1. Veblen was a fun guy. I liked Ayn Rand better. Herman Hesse was pretty cool too.