The Case for a Universal Basic Income

[From John Griffin - Edited narrative from a PowerPoint presentation given to various discussion clubs in The Villages, Florida]

Welcome to “The Case for a Universal Basic Income”.  I have prepared a handout that is appended to the end of this post, and I will reference it at various points during this presentation.  And since most of you do not know me, I will give some of my background information.  Before I get to that, however, I would like to start in a fairly unconventional manner by going straight to the conclusion of this presentation.  The evidence to support that conclusion will come later.  The conclusion has two parts.

 

Part 1: A statement of “The Problem”

•      Automation, computerization, corporate mergers, and globalization have eliminated so many jobs that we no longer have enough worthwhile jobs for all who need and want them.

•      Those same processes will continue (and probably accelerate), and the job shortage will only get worse.

Part 2: The Proposed Solution

•      Provide a Universal Basic Income (UBI) to all citizens over the age of 18 regardless of their income or employment status.

•      The UBI will be enough to cover basic necessities – food, shelter and clothing.

•      The UBI will not be taxable unless total income is well in excess of the UBI.   This is necessary so as not to create a disincentive to finding or creating a job whenever that is possible.

•      Medical care is a separate issue and will not be covered by the UBI.

 

In earlier versions of this presentation I waited until I was about ¾ finished before I even mentioned the Universal Basic Income (UBI) as a possible solution to “The Problem”.  And the phrase “Universal Basic Income” was certainly not in the title.  I think I was afraid of being immediately labeled as just another bleeding heart Socialist intent on taking money from hard working people and giving it to freeloaders.  I was afraid that once the Socialist labeled was applied, many people would feel justified in just rolling their eyes and tuning me out.  Two things have happened to make me more bold:  1. I have become even more convinced that a UBI is not only a viable solution, but may well be the best solution, to “The Problem”; 2. Discussion of the UBI is increasing in the news media – giving me a feeling of safety in numbers.

 Much of this presentation is based on material appearing in the following two books:

•      Rise of the Robots: Technology and the threat of a jobless future  (Martin Ford - 2015)

•      Raising the Floor: How a universal basic income can renew our economy and rebuild the American Dream (Andy Stern – 2016) 

Martin Ford has over 25 years experience as a software developer and computer designer in that area of Northern California that has come to be known as Silicon Valley.  He also wrote an earlier book titled “The Lights in the Tunnel” (2009) discussing the issue of technological unemployment. 

From 1996 to 2010 Andy Stern was president of the Service Employees International Union, the largest private union in the country.  He left that position because he felt he needed to find a better way to advance the interests of his constituents.  Subsequently, he has been speaking and writing on the subject of the Universal Basic Income.

Some quotes used in this presentation and attributed to notable individuals are found in the above books.

My Background 

First a confession – I have no formal training in economics.  I have, however, had a long-time interest in reading about economies and how they work and often do not work.

I do have a BS in Computer Science and Mathematics from Michigan State University. 

I spent my career writing software and designing computer hardware in Silicon Valley – an interesting parallel to Martin Ford’s career.  As far as I know we never met. 

I have had a lifelong interest in Machine Intelligence (aka: AI or Artificial Intelligence), and I believe I have a good feel for what is required in automating various jobs in our economy.

My personal beliefs 

Why do I mention my personal beliefs?  I do that so you will better understand my motives during the remainder of this presentation.

1. I am a big fan of our capitalist economic system and believe that such a system is the most efficient way to bring products and services to the people.  I am not a fan of Socialist economies.  I feel that we only need to look at examples such as the former Soviet Union, Cuba, and the basket case that Venezuela is today to see the many ways that Socialism can fail.

2. I believe that entrepreneurs and capitalists should be celebrated and encouraged.  They should own and administer the means of production, and produce and distribute their goods in whatever way maximizes their profits.  I do not believe that the word “profit” should be a swear word.

3. I believe that the best way to encourage capitalism is to allow risk takers to keep the lion’s share of what they create. 

However, I also believe that our economy has evolved (and continues to evolve) toward a winner-take-all system that fails to meet the needs of an ever-increasing percentage of our population.  The people, as voters, will not allow such a system to persist. 

That is why I have chosen to subtitle this presentation as:  “Saving Capitalism in the Age of Automation“. 

At this point I will make one additional attempt to convince any remaining doubters that a Universal Basic Income is not a Socialist program.  The Merriam-Webster dictionary defines Socialism as:

1. any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

2. a system of society or group living in which there is no private property

3. a system or condition of society in which the means of production are owned and controlled by the state 

A UBI leads to none of the above.  When a government nationalizes your company, that is Socialism.  When a government levies reasonable taxes and fees for a legitimate purpose, that is just a cost of doing business.

This presentation will explore two questions:

1. What is the evidence that “The Problem” actually exists?

2. What are the reasons for believing that a Universal Basic Income is a good solution to The Problem, and what might result if we do provide it? 

Question 1: Does “The Problem” really exist? 

In other words: Is it true that automation, computerization, consolidation and globalization have caused an employment crisis?

This same question can also be asked in a form that has come to be known as “The Machinery Question.”  It is typically expressed as follows: “Hasn’t technological advancement always resulted, eventually, in the creation of more and higher paying jobs than are destroyed?”

We will start examining the evidence for this question with the following diagram which shows the distribution of our labor force by economic sector from 1840 to 2010.

 

Economists often divide our economy into three sectors: Agriculture (which includes hunting, fishing, forestry and farming), Industry (which includes construction, mining and manufacturing) and Services which is conveniently defined to include everything else.  That is nice since it makes the percentages on this chart add to 100 percent.

We see that in 1840 nearly 70% of our labor force was involved in Agriculture.  Since that time, due to automation and the consolidation of small farms into larger ones, the Agriculture labor force has declined to where it is less than 2% of our overall labor force today.  And yet we have all of the food we need and a nice surplus for export.  Clearly, automation has not created more and better paying jobs in the Agriculture sector than it destroyed.  But, no one claimed that automation would create new jobs in the same sector in which they were destroyed.  And, in fact, we see that the percentage of our labor force in the Industrial sector increased steadily from 1840 to 1950 with a short timeout for the Great Depression.  But then in 1950 the percentage in the Industrial sector also began to decline – largely due to automation.  All the while, the percentage in the Services sector continued to rise. 

So – some sectors lose employment, and some sectors (namely the Services sector) gain employment.  And since the unemployment rate is currently under five percent, everything is fine – right?

Well, no.  Our most recent recession (the so-called Great Recession) officially began in December, 2007 and ended in June, 2009.  So after just 18 months the economy was growing again and would soon be back to record levels of output.  However, the unemployment rate remained stubbornly high.  In a very real sense this was a jobless recovery.  Output was rising, but employment was lagging.  The Federal Reserve responded to this unprecedented situation with the unprecedented measure of lowering interest rates to nearly zero and holding them there to this day.  And when zero interest rates weren’t enough, the Federal Reserve invented a new strategy called quantitative easing, and flooded the economy with cash to stimulate demand and production.  After nearly eight years of this extreme strategy, the economy finally recovered the jobs that were lost in that 18-month recession. 

But even then, the unemployment rate is only part of the picture.  The unemployment rate is that percentage of workers who are actively looking for work but are still unemployed.  It does not count those who have become discouraged and have dropped out of the labor force altogether.  Those dropouts are accounted for in the following diagram which shows the “labor force participation rate”. 

This diagram shows the percentage of the working age population currently working or actively looking for work.  That percentage increased from 1965 to the year 2000, but then it declined sharply and today is at a 38-year low.  But you may think that since it increased in the past, maybe it will go up again.  This next diagram shows why that is unlikely to happen. 

Here we see that the participation rate for Men has actually been declining steadily since at least 1950 – from 87% to under 70%.  So what happened when the primary family wage earner was having increasing trouble finding and holding a worthwhile job?  The women stepped in to help support the family.  Their labor participation rate rose from 33%  in 1950 to 60% in 2000.  But now we see that the participation rate for women has been declining since then, and the result is the 38-year low. 

So - The unemployment rate is relatively low, but only because of unprecedented stimulus, and because it ignores the decline in the participation rate.  But the situation is seen to be even worse when we consider the underemployment rate.

The Underemployment rate is equal to the unemployment rate plus the percentage of workers who have part time work but would like full time work.  In November of 2015, the U.S. underemployment rate was 14.6 percent, so nearly ten percent of our employed workers wanted full time work but could not find it. 

But wait – it is even worse than that!

In addition to the underemployed workers, there are full time workers who are earning less than they did in a previous job.  A good example would be laid off factory workers who used to earn $25 or more per hour but are now earning little more than minimum wage manning a cash register at Wal-Mart or in some department store.

And other workers have never found employment that pays at a level commensurate with their education level, their experience or their skills.  A good number of recent college graduates are in that category. 

We will call them the underpaid workers. 

It is difficult to find data specifically for underpaid workers because it is difficult to establish the level at which a given worker is considered to be underpaid, but we can get a good general idea of what is happening from this next diagram. 

This diagram shows two trend lines.  The one labeled “major sector productivity” rises steadily from the late 1940s to approximately 2010.  The second trend line, labeled “real (i.e. inflation-adjusted) wages of goods-producing workers” tracks the first trend line from the late 1940s until the early 1970s.  During that time increasing productivity and production resulted in increasing real wages.  Labor shared in the increasing prosperity.  Then the wages trend line stopped rising and remained essentially flat to this day in a phenomenon that some economists refer to as “The Great Decoupling”. 

But why?  Why have real hourly wages been stagnant for over 40 years while productivity continues to rise?

There is a simple answer: supply and demand.

The demand for workers declines when there are other less expensive ways to produce the output.  When  demand goes down, pay goes down - or, in this case, goes flat for 40 years. 

But what are these other less expensive ways to get a job done?

The first way is Automation and the second is Foreign Labor.  We could spend quite some time debating the relative contributions of these two factors.  Instead I will direct your attention to the article titled “Why robots, not trade, are behind so many factory job losses” at the top of the Appendix.  That article claims that the vast majority of job losses are due to automation rather than foreign labor.

It can also be noted that the percentage of the labor force in the Industrial sector in China, the proverbial land of cheap labor, has started to decline.  China also recently surpassed the U.S. and Japan in the number of industrial robots installed.  So even the Chinese are looking to replace workers with automation. 

A second look at the Productivity vs Real Wages diagram (above) can further aid our understanding when we consider that productivity is defined as that output produced by a given input of labor and capital.  For “capital” you can substitute “labor saving machinery”.  When the increased productivity is due to machines, there is little incentive or reason to pay more to labor. 

This brings us to the point where we can attempt to answer “The Machinery Question”.

Once again, that question is often asked in the following form:

“Hasn’t automation, in the long run, always created more (and better paying) jobs than it destroys?”

Since the beginning of the Industrial Age, the answer to this question has consistently been “Yes”.  Machines have taken over much of physical labor and freed workers to do the better paid “brain work” of design, planning and supervision. 

But then, starting in the 60s and 70s, computers became less expensive and more common and brain work was no longer limited to humans.

Over time, automation chased us out of the Agricultural sector, and into the Industrial and Services sectors.  Then it chased us out of the Industrial sector as well.  Now it is invading the Services sector and workers have “nowhere else to hide”.

In summary we can safely say “This time it really is different”.  Automation is destroying more jobs than it is creating. 

But why are employers trying so hard to replace us with machines?

The only problem we have in answering this question is where to start.

•      Machines can increase productivity – often substantially.

•      Machines can work 24/7.

•      Machines don’t make careless mistakes.

•      Machines won’t call in sick.

•      Machines won’t form a union and strike for higher wages.

•      Machines won’t leave to take another job.

•      Machines won’t steal from their employers.

•      Machines don’t need pensions and Social Security.

•      Machines do need maintenance, but that is insignificant compared to human health care costs.

•      Machines don’t sue their employers or get their employers sued because of careless mistakes.

•      A working machine design can be readily copied, but each human worker must be individually trained. 

I created this list in about fifteen minutes.  In another fifteen minutes I could add several more items.  However, the bottom line is obvious.  Human workers are a pain in the neck.  Can we really blame employers for wanting to replace us with machines?

So, wages are stagnant, our employers would rather do without us, and computers are pushing us out of the job market.  What can we do? 

Perhaps more education would make us more valuable and enable us to remain employed.

•      In 1970 8.2% of women and 14.1% of men had four or more years of college.

•      By 2014 those numbers had risen steadily to 32% and 31.9% respectively. 

And yet – according to the Bureau of Labor Statistics, 260,000 Americans with bachelor’s degrees were earning the federal minimum wage or less in 2013.  And that is more than double the number in the same situation in 2005.

At this point I will direct your attention to the short article near the end of the Appendix which is titled “Millennials Are Falling Behind Their Boomer Parents”.  This is in spite of the fact that Millennials are better educated than their Boomer parents.

Why is this happening? 

I offer the following quote from page 252 of Martin Ford’s book as a partial answer to this question: 

“We are running up against a fundamental limit both in terms of the capabilities of the people being herded into colleges and the number of high-skill jobs that will be available for them if they manage to graduate.”

“The problem is that the skills ladder is not really a ladder at all: it is a pyramid, and there is only so much room at the top.” 

In other words, what will we do when we only have jobs for “rocket scientists” and most people simply are not capable of doing those jobs?  And even if they were capable, we would not have enough such jobs at the top of the pyramid for all who need them. 

At this point I will direct your attention to near the middle of the Appendix to an excerpt from chapter 4 of Andy Stern’s book which is titled “The New Landscape of Work”.  It tells of a poignant encounter with a 28-year-old woman facing the real prospect of having to move back in with her parents – even after earning a college degree and trying her best to find worthwhile work. 

This brings us to the second question being examined in this presentation: 

Question 2: What are the reasons for believing that a Universal Basic Income is a good solution to “The Problem”? 

Reason #1 for providing a Universal Basic Income:

Because it simply may be the only effective solution to “The Problem”.

All conventional remedies are falling short.  These include:

•      Extended economic stimulus (near-zero interest rates, business tax cuts, etc.)

•      Increased levels of education

•      Extended unemployment payments

•      Job retraining assistance 

Reason #2 for providing a Universal Basic Income:

Because it gives each citizen the ability to purchase the goods and services created by the economy.  Without that demand the economy will not create the supply.  Our economic policy has long emphasized supply-side stimulus.  It may well be time to emphasize demand-side stimulus.

But isn’t there something fundamentally wrong with taking money from people who have earned it and giving it to people who haven’t earned it? 

Let’s take an example:

Mark Zuckerberg – founder of Facebook – age: 32 – net worth: $50+ billion

By all accounts, young Mr. Zuckerberg is a genius, and a hard working prodigy of business strategy and business management.  If anyone deserves to be a billionaire, one can easily make the case that he does.

At the same time, however, we should not forget that his company could not exist without:

•      the Internet

•      modern computer technology

•      a population educated well enough to work for him or to use his product

•      a legal system that keeps others from stealing his work

•      a military strong enough to keep the peace (After all, it is difficult to run a company if foreign soldiers are marching up and down Main Street.) 

All of these things are part of the societal infrastructure without which Facebook and all other companies would be much less prosperous or even non-existent.  Neither Mr. Zuckerberg nor his company created that infrastructure.  We did!  We and our predecessors over the previous decades and centuries created the society that enables the prosperity of today’s enterprises.

Reason #3 for providing a Universal Basic Income:

This brings us to reason #3 for providing a UBI for people who haven’t “earned it”.  And that reason is: “Because all citizens, past and present, have earned the UBI by contributing to the creation of our current society”.

If you are bothered by the idea of raising taxes on the wealthy and their companies to pay for the UBI, then let me offer an alternative.  Don’t think of these levies as taxes.

Instead,

•      think of the UBI as a dividend payable for those prior contributions,

•      or, think of it as an inheritance received by current citizens from our predecessors (After all, most people have no problem leaving an inheritance to their heirs even though their heirs did not “earn it”.),

•      or, think of it as a license fee payable by businesses for the use of our societal infrastructure.

Reason #4 for providing a Universal Basic Income:

Because we can afford it.  A UBI simply would not be possible in a poor country, and our country is not poor.  Our GDP for 2015 was 17.947 trillion dollars.  Our population at the end of 2015 was 321.57 million.  If we do the math, we see that our per capita GDP at the end of 2015 was $55,810.  That is nearly $56,000 per year for every man, woman and child in the United States.  If our per capita GDP is that high, you might ask, why do we need a UBI?  The answer, as we are all well aware, is that the GDP is not at all evenly distributed. 

How much should the UBI provide?  Andy Stern says approximately $1,000 per month for each citizen over the age of 18.  This will cost between 2 and 3 trillion dollars per year (between 11% and 17% of our GDP).  This level of expenditure will still leave over 80% of our GDP for other purposes, including providing the incentive for capitalists to do what they do so well.  After all, we don’t want to kill the goose that lays the golden egg. 

Where will we get the money to pay the UBI?  The money already exists.

Approximately $1 trillion can be had by replacing all or some of the 126 current welfare programs (e.g. food stamps, housing assistance, EITC) and the expensive bureaucracies that manage them.  This should warm the hearts of conservatives who believe that smaller government is better government. 

Another $1+ trillion can be had by reducing or eliminating tax deductions that primarily benefit the wealthy.  These include:

•      Accelerated Depreciation

•      Preferential treatment of capital gains

•      Investment expenses

Many of these deductions were created to provide extra money for business owners to invest and thereby create jobs.  In an automated world, however, business owners may simply use the money to purchase automated equipment and not create jobs.  In that case, it is legitimate to ask if these deductions are still valid. 

The rest (and more) can be had by implementing a value added tax (VAT), or a financial transaction tax, or even a wealth tax, etc.  If we fully pay for the UBI with the aforementioned methods then the UBI will not add anything at all to the national debt. 

Reason #5 for providing a Universal Basic Income:

Because it will eliminate poverty overnight, and will replace scores of existing programs and eliminate the bureaucracies behind them.

The poverty threshold in the U.S. is $12,000 per year for an individual.  The poverty threshold for a couple is $16,000 per year.  Therefore, a UBI of $1,000 per month per person would eliminate poverty immediately – by definition.

I direct your attention to near the end of the Appendix for two quotes from notable individuals from several years ago.  They both advocated for the elimination of poverty directly by means of a UBI.  This not a new idea.

Reason #6 for providing a Universal Basic Income:

Because it will save capitalism!

If no changes are made, our current economic system will trend toward ever fewer jobs and ever more income and wealth inequality.  Such a system is unsustainable.  The people, as voters, will simply take increasingly disruptive measures until their needs are met.  In the beginning they may be attracted to the rhetoric of populist demagogues.  They may even vote to put one in the White House.  Can it get worse than that?  Of course.  Just ask Louis XVI or Marie Antoinette.

I direct your attention to near the end of the Appendix for a recent press release from the World Economic Forum held in January of this year titled “World Economic Forum Says Capitalism Needs Urgent Change”.  This press release calls for changes to our capitalist system in order to defuse such citizen discontent. 

The following is a quote from Andrew Grove, co-founder of Intel Corporation, and a champion of our capitalist system:

“Our generation has seen the decisive victory of free market principles over planned economies.  So we stick with this belief largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.” 

I would add that there is not only room for such a modification, but also a need.  

Are we going to vote for a UBI tomorrow?  No! – Not that soon.

•       It will take more time for this idea to gain exposure and political momentum.

•       It will take time for more people to realize that the promises of politicians to “bring back our jobs” are just hollow political rhetoric.

•       It will take time for more people to realize that the fast food job they took to tide them over during their search for a real job, has become their new career. 

In conclusion: I believe that a Universal Basic Income should receive serious consideration as a solution to the growing problems of unemployment and income and wealth inequality.  I invite all interested parties to engage in a discussion of its merits and shortcomings.

I will start that process by offering short answers to some commonly asked questions.

1. How can we be sure that politicians won’t be tempted to buy votes by raising the UBI to an unsustainable percentage of GDP?

Answer: This is a legitimate concern.  If the UBI takes too much of GDP then incentives for producers will be insufficient to maintain production.  It may well be necessary to limit the UBI to a certain percentage of GDP by constitutional amendment. 

2. Should we provide some form of UBI for children under the age of 18?

Answer: While we don’t want children living in poverty, neither do we want people to have children simply because they will get more money.  Perhaps 0.8 of a UBI for the first child, 0.6 for the second, 0.4 for the third and nothing for subsequent children. 

3. Would the UBI be paid to foreign workers and students while they are in the US?

Answer: No.  Our UBI would be for US citizens only.  Other countries would need to provide for their citizens. 

END OF NARRATIVE

APPENDIX: HANDOUT TO ACCOMPANY THE NARRATIVE

Why robots, not trade, are behind so many factory job losses

By PAUL WISEMAN Associated Press - Nov. 2, 2016

 WASHINGTON (AP) — Donald Trump blames Mexico and China for stealing millions of jobs from the United States.  He might want to bash the robots instead.

Despite the Republican presidential nominee's charge that "we don't make anything anymore," manufacturing is still flourishing in America. Problem is, factories don't need as many people as they used to because machines now do so much of the work.

America has lost more than 7 million factory jobs since manufacturing employment peaked in 1979. Yet American factory production, minus raw materials and some other costs, more than doubled over the same span to $1.91 trillion last year, according to the Commerce Department, which uses 2009 dollars to adjust for inflation. That's a notch below the record set on the eve of the Great Recession in 2007. And it makes U.S. manufacturers No. 2 in the world behind China.

Trump and other critics are right that trade has claimed some American factory jobs, especially after China joined the World Trade Organization in 2001 and gained easier access to the U.S. market. And industries that have relied heavily on labor -- like textile and furniture manufacturing -- have lost jobs and production to low-wage foreign competition. U.S. textile production, for instance, is down 46 percent since 2000. And over that time, the textile industry has shed 366,000, or 62 percent, of its jobs in the United States.

But research shows that the automation of U.S. factories is a much bigger factor than foreign trade in the loss of factory jobs. A study at Ball State University's Center for Business and Economic Research last year found that trade accounted for just 13 percent of America's lost factory jobs. The vast majority of the lost jobs -- 88 percent -- were taken by robots and other homegrown factors that reduce factories' need for human labor.

"We're making more with fewer people," says Howard Shatz, a senior economist at the Rand Corp. think tank.

General Motors, for instance, now employs barely a third of the 600,000 workers it had in the 1970s. Yet it churns out more cars and trucks than ever.

Or look at production of steel and other primary metals. Since 1997, the United States has lost 265,000 jobs in the production of primary metals -- a 42 percent plunge -- at a time when such production in the U.S. has surged 38 percent.  Allan Collard-Wexler of Duke University and Jan De Loecker of Princeton University found last year that America didn't lose most steel jobs to foreign competition or faltering sales. Steel jobs vanished because of the rise of a new technology: Super-efficient mini-mills that make steel largely from scrap metal.

The robot revolution is just beginning.  The Boston Consulting Group predicts that investment in industrial robots will grow 10 percent a year in the 25-biggest export nations through 2025, up from 2 or 3 percent growth in recent years.

The economics of robotics are hard to argue with. When products are replaced or updated, robots can be reprogrammed far faster and more easily than people can be retrained.  And the costs are dropping: Owning and operating a robotic spot welder cost an average $182,000 in 2005 and $133,000 in 2014 and will likely run $103,000 by 2025, Boston Consulting says. Robots will shrink labor costs 22 percent in the United States, 25 percent in Japan and 33 percent in South Korea, the firm estimates.

CEO Ronald De Feo is overseeing a turnaround at Kennametal, a Pittsburgh-based industrial materials company. The effort includes investing $200 million to $300 million to modernize Kennametal's factories while cutting 1,000 of 12,000 jobs. Automation is claiming some of those jobs and will claim more in the future, De Feo says.

"What we want to do is automate and let attrition" reduce the workforce, he says.

Visiting a Kennametal plant in Germany, De Feo found workers packing items by hand. He ordered $10 million in machinery to automate the process in Germany and North America.

That move, he says, will produce "better quality at lower cost" and "likely result in a combination of job cuts and reassignments."

But the rise of the machines offers an upside to some American workers: The increased use of robots — combined with higher labor costs in China and other developing countries — has reduced the incentive for companies to chase low-wage labor around the world.

Multinational companies are also rethinking how they spread production across the globe in the 1990s and 2000s, when they tended to manufacture components in different countries and then assemble a product at a plant in China or other low-wage country. The 2011 earthquake and tsunami in Japan, which disrupted shipments of auto parts, and the bankruptcy of the South Korean shipping line Hanjin Shipping, which stranded cargo in ports, exposed the risk of relying on far-flung supply lines.

"If your supply chain gets interrupted and your raw materials are coming from offshore, all of a sudden shelves are empty and you can't sell product," says Thomas Caudle, president of the North Carolina-based textile company Unifi.

So companies have been returning to the United States, capitalizing on the savings provided by robots, cheap energy and the chance to be closer to customers.

"They don't have all their eggs in that Asian basket anymore," Caudle says.

Over the past six years, Unifi has added about 200 jobs, bringing the total to over 1,100, at its automated factory in Yadkinville, North Carolina, where recycled plastic bottles are converted into Repreve yarn. Unmanned carts crisscross the factory floor, retrieving packages of yarn with mechanical arms — work once done by people.

In a survey by the consulting firm Deloitte, global manufacturing executives predicted that that the United States — now No. 2 — will overtake China as the most competitive country in manufacturing by 2020. (Competitiveness is measured by such factors as costs, productivity and the protection of intellectual property.)

The Reshoring Initiative, a nonprofit that lobbies manufacturers to return jobs to the United States, says America was losing an average of 220,000 net jobs a year to other countries a decade ago. Now, the number being moved abroad is roughly offset by the number that are coming back or being created by foreign investment.

Harold Sirkin, senior partner at Boston Consulting, says the global scramble by companies for cheap labor is ending.

"When I hear that (foreigners) are taking all our jobs — the answer is, they're not," he says.

THE NEW LANDSCAPE OF WORK

(Excerpt from chapter 4 of “Raising the Floor” by Andy Stern)

“Ready for the flight from hell?” she said as she squeezed by me into the last empty seat on the plane.  I knew exactly what she meant.  We would be spending the next two hours traveling from New York to Detroit on no-frills Spirit Airlines – “Home of the Bare Fare.”

And yet this slightly unnerved, tall, and brunette young woman – her name was Kristina – turned out to be the perfect traveling companion for a guy writing a book about the future of work, because all she could talk about was how she couldn’t find any.

“I’m twenty-eight, with a degree in medical management and interdisciplinary health systems from Western Michigan,” she said.  “I thought I was going to save the world after I graduated.”  But after a frustrating few months working in data entry for a Medicaid contractor, Kristina took a ten-dollar-an-hour job “answering phones and fetching coffee” at an advertising firm in Birmingham, Michigan.  Over the next several months, she worked her way up to become an assistant producer of how-to videos.  “But”, she told me, “I think I set myself up for failure.  Because it was just this awesome work environment and this amazing office culture, and you don’t find that.  And then the firm lost a major client, and I was kind of downsized.”

And so Kristina moved to New York.  I asked her why.

“I needed a fresh start,” she said.  “And I heard ‘if you can make it here, you can make it anywhere’.”

“I’ve heard that same song,” I said.

“Yeah,” she laughed.  “Sinatra, right?”

But the fact was that Kristina hadn’t had a single interview after four months of looking for a job through LinkedIn, Craigslist, and other online networking sites.  “Producers with a lot more experience than me are a dime a dozen in New York.  And companies in the medical field are hiring people with PhDs for the type of work I’m qualified to do with my BA.”

Kristina was less than an hour from seeing her parents for the first time since she’d left Detroit, and she told me she was feeling like “a huge failure – like I’m just letting them down.”  Her father had come to the United States from Italy when he was her age – twenty-eight.  He only had $50 in his pocket, but he was a really good cabinet maker.  And he worked hard.  And he became a big success, with his own stores – the American Dream.”  His only goal, she said was for his children to go to college.  “Which I did.  And see where it’s gotten me!”

On a no-frills flight back to Detroit to face the very real prospect of moving back to live in her parent’s home.

Millennials Are Falling Behind Their Boomer Parents

Daily Sun – Associated Press – Jan 15, 2017

Millennials earn 20 percent less than boomers did at the same stage of life, despite being better educated. 

Education does help boost incomes.  But the median college educated millennial with student debt is only earning slightly more than a baby boomer without a degree did in 1989.

 World Economic Forum Says Capitalism Needs Urgent Change

The Associated Press – London – Jan 12, 2017

Reforming the very nature of capitalism will be needed to combat the growing appeal of populist political movements around the world, the World Economic Forum said Wednesday.  Getting higher economic growth, it added, is necessary but insufficient to heal the fractures in society that were evident in the election of Donald Trump as U.S. president and Britain’s vote to leave the European Union.

Notable Quotes

“There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of a minimum income, or floor below which nobody need descend.”

-- Nobel economist F. A. Hayek (a Reagan favorite)

“I am now convinced that the simplest approach will prove to be the most effective – the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”      – Martin Luther King, Jr. - 1967 

“For now, it’s just a handful of chess and Go and Jeopardy! champions who no longer feel needed and useful. But what happens to society when it’s tens of millions of us?”

--- Ken Jennings - 74-time Jeopardy! winner – March 15, 2016 – shortly after a world class Go player was defeated by a computer.  Such a defeat was not expected for at least another ten years.  Mr. Jennings lost a famous Jeopardy! match to the Watson computer system in 2011.

 

John Griffin