Last month the world population reached seven (7) billion, a landmark event that started me thinking about how this large population might affect the world economy. Is our population growing beyond what we can feasibly support? Will we ever be able to create enough jobs for the working age population?
As I started looking for answers to these questions, I discovered that the World was too big for me to get my hands around, so I narrowed my thoughts to the United States.
According to the Twenty-third United States Census, known as the 2010 Census, the current population of the U.S. is 308,745,538. Of that population the number of working age persons (between the age of 16 and older) is 237,830,000. (Source: U.S. Department of Labor, Bureau of Statistics http://www.bls.gov/fls/flscomparelf/population.htm)
Under this current recession, about 10% (in round numbers on average), of the total in the US working age population is unemployed. That means there are 23,783,000 persons of working age currently out of work. (NOTE: The official unemployment rate does not include people who are underemployed or who have given up looking for work.)
In contrast, at its highest point during the Great Depression, unemployment reached 25% (in 1933), but averaged around 15% over the course of the Depression. The Fifteenth United States Census taken in 1930, determined the resident population of the United States to be 122,775,046 in 1930 of which 84,714,782 were of working age. At that high point of the Great Depression there were 21,178,695 persons out of work but on the average about 12,707,217 persons were looking for employment during most of the Depression.
But a lot has changed between 1930 and today, mostly due to the advances in technology.
Back in the 20’s, 30’s and 40’s, everyday life was very labor intensive. Although factories were becoming more and more automated, they still required human labor to design, build and assemble nearly everything on the assembly lines. I remember my mother talking about working at the Timex plant dong “piece work” which meant putting pieces together to make watches and clocks. Laborers were paid by the number of pieces they could put together during their shift. Factories of all types employed hundreds of thousands of workers in two, to sometimes three shifts a day.
Besides factory work, large businesses such as insurance companies, banks, publishing, and the like also employed huge pools of secretarial staff, mail room staff, and other support personnel to work on manual typewriters and stenograph machines putting out the reams of paperwork that kept the businesses moving forward.
In fact, after Don Ameche invented the telephone, hundreds of thousands of switchboard operators were required by both telephone companies and large private businesses to handle telephone calls alone. (Pardon my humor; Don Ameche played the part of Alexander Gram Bell in the movie about Bell’s life in 1939.)
Outside of the cities, millions of family run farms filled the country side and required hundreds of thousands of hired hands to till the fields and harvest the crops.
In 1933, during the height of the “Great Depression”, President Franklin D. Roosevelt introduced the formation of the Civilian Conservation Corps (CCC) as a part of the New Deal. The CCC was a public work relief program that operated from 1933 to 1942 in the United States for unemployed, unmarried men ages 18–25. It provided unskilled manual labor jobs related to the conservation and development of natural resources in rural lands owned by federal, state and local governments. The CCC was designed to provide employment for young men in relief families who had difficulty finding jobs during the Great Depression, while at the same time implementing a general natural resource conservation program in every state and territory. The maximum enrollment at any one time was 300,000; in nine years 2.5 million young men participated.
During the time of the CCC, volunteers planted nearly 3 billion trees to help reforest America, constructed more than 800 parks nationwide and upgraded most state parks, updated forest fire fighting methods, and built a network of service buildings and public roadways in remote areas.
The CCC performed 300 possible types of work projects within ten approved general classifications:
- Structural Improvements: bridges, fire lookout towers, service buildings;
- Transportation: truck trails, minor roads, foot trails and airport landing fields;
- Erosion Control: check dams, terracing and vegetable covering;
- Flood Control: irrigation, drainage, dams, ditching, channel work, riprapping;
- Forest Culture: planting trees and shrubs, timber stand improvement, seed collection, nursery work;
- Forest Protection: fire prevention, fire pre-suppression, firefighting, insect and disease control;
- Landscape and Recreation: public camp and picnic ground development, lake and pond site clearing and development;
- Range: stock driveways, elimination of predatory animals;
- Wildlife: stream improvement, fish stocking, food and cover planting;
10. Miscellaneous: emergency work, surveys, mosquito control.
Today, computers, touch pads, cellular phones and other digital devices have replaced several hundreds of thousands of laborers. We no longer need army’s of typists, stenographers, or switchboard operators to run even the largest of companies. Manufacturing (which has not been sent off shore), has become even more automated with robotic arms assembling even the smallest pieces into working parts that are installed into even larger devices without the single touch of a human hand thus displacing huge numbers of the labor workforce.
Think about all the things you do today that until as late as the 1980’s required the assistance of someone else. Take for instance the purchase of airline and hotel reservations which are done entirely on the internet by you. How about self service gas stations and grocery check-out or even shopping in general. Each one of these businesses have been able to down size the amount of staff needed because we, as consumers, have put the burden upon ourselves to purchase goods and services through the internet or use automated teller machines and even pump our own gas and bag our own groceries.
While some support businesses still require manpower to operate (i.e. grocery story, cleaners, beauty and barber shops, auto repair, etc.), those businesses could never afford to hire enough manpower to make up for the displacement of jobs by computers, robotics and other automated devices. And, as large corporations with their streamlined efficiency continue to grow to dominate the marketplace, smaller “mom and pop” businesses will disappear and so too will the jobs associated with those businesses.
In the rural communities, family farmers are being forced out of business at an alarming rate. According to Farm Aid, every week 330 farmers leave their land. As a result, there are now nearly five million fewer farms in the U.S. than there were in the 1930’s. Of the two million remaining farms, only 565,000 are family operations. As established family farms are shut down, they are not being replaced by new farms and young farmers. Very few young people become farmers today, and half of all U.S. farmers are between the ages of 45 and 65, while only 6% of all farmers are under the age of 35.
So with nearly double the amount of working age persons currently unemployed compared to those unemployed during the Great Depression, my unscientific estimate is that there are less than half the jobs available due to the increased use of technology.
Can we create enough jobs to employ all of the working age persons?
Actually, there is one industry that despite the advance in technology, that still requires a tremendous amount of labor. That industry is construction, and whether or not construction alone can employ enough persons to make a difference is questionable. The big obstacle to finding out is in the Davis-Bacon Law.
With today’s union and prevailing wage regulations I believe that the United States has crippled our ability to maintain our own infrastructure.
I know that is a bold statement but it is true. Today we have thousands of citizens out of work and are suffering from the highest high school dropout rates of all times. We have a lot of work that can be done by laborers with minimal education, but the unions and Government Prevailing Wage contracts prevent us from putting many of these people into jobs.
I am not saying that we need to pay minimum wage to these workers. Nevada’s minimum wage (which is $1.00 higher than the Federal minimum wage), is $8.25 per hour which during a 40 hour work week would equate to $1,430 per month or $17,160 per year. According to U.S. Poverty Guidelines, a single person making less than $10,890 or two persons making less than $14,710 per year are considered to be below the poverty level. So as you can see, minimum wage does not mean “poverty” wage.
In addition, a person earning an income of $1,500 to $2,000 per month (a level of income that would generally make a person with children or other dependents eligible for Temporary Assistance for Needy Families (TANF)), could expect to get a Government check for somewhere between $350 and $450 per month.
However, the costs of Government Public Works projects are based upon a “Prevailing Wage” scale that differs by areas or regions on the United States. Prevailing Wages are usually close to Union Wage scales which are far greater than minimum wage for many jobs or positions that require little to no technical skills.
Take for instance the construction of a roadway. We have all passed lines of construction barrels along the highway cautioning us to slow down; that we are in a construction zone. At certain construction access points you will see a very tanned female (sometimes a male), holding a sign at the end of a pole. Under Prevailing Wage classifications this person is called a Flag Person. When construction traffic is not accessing the site the Flag Person turns the sign to read “SLOW”, and might give you visual reprimand with their hand if you do not heed the caution. When construction traffic is approaching Flag Person turns the sign to read “STOP”, and is prepared to dodge your bumper in case you do not. While I admit that this job is quite serious and necessary along with being a bit hazardous; the skill level is minimal. The prevailing wage rate for a roadway flag person is $41.44 per hour plus between $1.50 and $2.25 per hour extra depending how far the project is from the center of town. That means that this job pays just over $86,000.00 per year.
In another example, the Clark County, Nevada Prevailing Wage “Group 1 Labor” classification for 2011pays $42.94 per hour. This Group includes two positions called the Tool Crib and Light Tool Repairman. The definition of those two positions are as follows:
Receives, stores, and issues handtools, machine tools, dies, materials, and equipment in industrial establishment: Issues tools and equipment to workers and maintains records of tools and equipment issued and returned, manually or using computer. Locates lost or misplaced tools and equipment. Prepares periodic inventory or maintains perpetual inventory of tools and equipment, manually or using computer. Receives, unpacks, and stores incoming tools and equipment, and requisitions stock to replenish inventory. Inspects and measures tools and equipment for defects and wear, visually or using micrometer, and reports damage or wear to supervisors. Repairs, services, and lubricates tools and equipment, using hand tools, spray gun, or pressurized spray can. May deliver tools or equipment to workers, manually or using hand truck. May mark and identify tools and equipment, using identification tag, stamp, or electric marking tool. May be designated according to item stored as Die-Storage Clerk (clerical).
At the end of the description you notice the word (clerical). Other than learning to use a micrometer (which by the way takes the same skill as using a ruler), as well as, spotting defects and how to lubricate certain tools, this position is not rocket science and certainly not worthy of nearly $90,000 per year in pay.
On a normal roadway construction job there maybe fifty to sixty workers depending on the project size. Many of these workers are highly skilled at driving heavy equipment, and using specialized tools. For the most part these skilled laborers are probably paid what they are worth under the Prevailing Wage system. However there are dozens of Group 1, 2, 3, and 4 laborers making between $42.94 and $43.34 per hour that require very little skill but are required under Union Contracts. These labor classification rates have made it nearly impossible for states and communities to afford to maintain our roadways.
Before going any further let me clarify that these wages also includes “Benefits” such as medical insurance, vacation pay, and retirement, etc. However, those benefits only amount to 8% of the overall pay. According to various reports Prevailing Wage rates range between 15% and 25% (depending on the skill), above non-union wages. For example, the median hourly rate for carpenters in Wayne County (the Detroit area) in 2005 according to the Bureau of Labor Statistics, adjusted to include fringe benefits, was $26.33, but the prevailing rate under Michigan law was $41.37.
For the complete history and basics of Prevailing Wage, I suggest that you read the White Paper written by George C. Leef entitled: Prevailing Wage Laws: Public Interest or Special Interest Legislation? http://www.cato.org/pubs/journal/cj30n1/cj30n1-7.pdf In his paper he determines that:
The most salient effect of prevailing wage laws is to raise the cost of public construction. They do so in several ways. First, by preventing competitive bidding on the labor costs of public projects, a greater outlay of tax dollars is required to pay the construction workers employed than would otherwise be necessary. Second, prevailing wage laws often interfere with efficient labor utilization because their enforcement mandates adherence to union work rules. Third, they impose additional compliance costs, including litigation, on contractors. And fourth, prevailing wage laws require additional administrative costs in determining what wage rates “prevail” and also adjudication and enforcement costs.
Another analysis of the cost of Prevailing Wage law (aka, Davis-Bacon Act) can be found in this report from the Beacon Hill Institute at Suffolk University: http://www.beaconhill.org/BHIStudies/PrevWage08/DavisBaconPrevWage080207Final.pdf
So in theory, if labor costs are 50% of the total construction cost, and we repealed the Prevailing Wage laws each construction project would cost between 15% and 25% less saving the public billions of dollars. And these billions of dollars in savings could be used to fund more projects putting more people to work.
There is precedence for the government putting people back to work.
The building of the Continental Railroad was in its time a Government backed economic stimulus project The House of Representatives voted for the project on May 6, 1862, and the Senate on June 20 and President Lincoln signed it into law on July 1. Two companies were hired — the Central Pacific would build from the west and the Union Pacific from the east.
Besides land grants along the right-of-way, each railroad was paid $16,000 per mile ($9,940/km) built over an easy grade, $32,000 per mile ($19,880/km) in the high plains, and $48,000 per mile ($29,830/km) in the mountains.
In 1864, the average pay for constructing the rail road was $8.00 per month or $96.00 per year. Using a conversion based upon the Payment (wage rate) per time period for unskilled labor (see http://www.measuringworth.com/uscompare/). Expressed in number of currency units per time period (for example, U.S. dollars per hour) that same Railroad worker in 2011 would receive $972.00 per month or $11,664.00 per year or $5.60 per hour.
In 1933 President Franklin D. Roosevelt introduced the formation of the Civilian Conservation Corps (CCC) as a part of the New Deal. The CCC was a public work relief program that operated from 1933 to 1942 in the United States for unemployed, unmarried men ages 18–25. It provided unskilled manual labor jobs related to the conservation and development of natural resources in rural lands owned by federal, state and local governments. The CCC was designed to provide employment for young men in relief families who had difficulty finding jobs during the Great Depression while at the same time implementing a general natural resource conservation program in every state and territory. Maximum enrollment at any one time was 300,000; in nine years 2.5 million young men participated.
Workers under the previously discussed Civilian Conservation Corps were paid $30 a month of which $25 went to their parents. Using a conversion based upon the Payment (wage rate) per time period for unskilled labor (see http://www.measuringworth.com/uscompare/). Expressed in number of currency units per time period (for example, U.S. dollars per hour) that same CCC worker in 2011 would receive $1,410.00 per month; $16,920.00 per year or $8.13 per hour.
So, has the world become unsustainable? You tell me!