Wednesday, March 2, 2016

Immigration: Baumol's Effect

Undocumented immigrants are at risk of being coerced into the least savory of jobs due to their vulnerability.
Over time, Baumol's effect changes the job market and creates pressures to allow immigration, legal or otherwise.

"Baumol's effect": in the long run, high status jobs become rare as the economy becomes dominated by large number of jobs that not amenable to productivity improvements.  High status jobs are typically highly paid jobs.  High pay is an artifact of high productivity.  High productivity is usually a result of automation.   The tasks that are easy to automate are usually scalable, that is, they can become even more automated or the machines can move ever-faster thus allowing fewer workers to produce more product.


Three consequences to Baumol's effect are that:
  1. The number of highly compensated jobs decrease over time as they become automated
  2. The work that is available is less attractive to workers.  In addition to the low pay (to go with the low productivity) the jobs are usually physically demanding or need a very high level of dexterity or attention
  3. Overall, productivity growth is self extinguishing because the low hanging fruit is harvested early on.

So what are some examples of jobs that are difficult to make more productive?


They are often described as "High touch" jobs.

Not all "High touch" jobs are low status.  Psychiatry, Dentistry are high-touch medical fields.  There has been little productivity growth in these fields other than off-loading the menial portions of the job (cleaning) to dental hygienists.
Agriculture.  These migrant workers are weeding onions.  There is no machine that can do that as quickly, as accurately and as cheaply as migrant laborers.
Forgive the pun, but sex-workers are the classic case of "high touch" workers.  They get paid piece-work and there is little they can do to increase the number of clients they serve on a given night.
Infrastructure development is often site based and does not adapt well to automation.  This crew is laying fiber optic cable in the field.
Construction.
Child and elder care.  Obviously, these are parents caring for their child.  Changing diapers are the classic item that is difficult to automate.  Diapers are floppy, the soiling of the child is unique and the skin of the child is fragile.
Food preparation.

In most cases, these are not "jobs" that we raised our children to aspire to.  These are the kinds of jobs that immigrants often fill.

What kinds of jobs are amenable to productivity improvements?


Jobs that are highly repetitive, where the task is stable, the work piece is rigid and easily held.

Numerical controlled machining where rigid, metal blanks are precisely positioned on pallets or carriers is a classic case of automation.

Operations that used to be considered impossible to automate can now be automated due to the workplace's saturation with computers (PLCs, on the factory floor) and the availability of programming talent.

Consider the DC-3, an icon of awesome engineering.  By the mid 1930s, engineers had enough experience with air frames to understand where cracks would start.  Basically, cracks start wherever one structural member is joined to another.  Stress is an artifact of how load flows through a structure.  High stresses occur when the loads flow through the smallest sectional area.  That typically occurs when load is transferred from one member to another via bolts or rivets.

Knowing this, the engineers specified that every significant member have beefed up sections in the immediate vicinity of where they join other members.  In 1940, that meant massive extrusions or billets were machined to remove all of the material except for immediately adjacent to the joint.  That resulted in the employment of legions of machinist who rendered +60% of extrusions into chips.

In 2016, a simple set of extrusion dies can be laser cut with an NC robot out of pre-hardened steel plate and assembled as a sandwich.  The middle of the sandwich can be varied by actuators to locally thicken or thin a flange or the web of a section.  And the thickening and thinning can all be controlled using digital imaging of the output.  Wing spars and fuselage stringers can be cranked out in minutes at near-net-shape with very little material waste.

Obviously, there is less demand for highly paid machinists in the 2016 scenario.

Where do all of those college graduates go?


In many cases they work for the government or in jobs mandated by government regulations.  Those mandated jobs are auditors and inspecting and regulating.

For the most part, auditing type jobs impair productivity.  They stop work (production) when they are activated.  That is a feature, not a bug.  As noted earlier...we have too much productivity in the things that can be automated.

Summary:

Baumol's Effect creates a vacuum that is filled by immigrants.  Native born workers seek higher status jobs, which by-and-large have been automated out of existence.  The low status, low paying, physically demanding jobs are abandoned by the native born workers.

Nature hates a vacuum.  These jobs are filled by immigrants (many of whom are undocumented) with the tacit knowledge of the people who hire them.

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