Jobs Must be Both Created and Destroyed

Saturday, January 14, 2006
The great economist Joseph Schumpeter coined the term “creative destruction.” He convincingly argued that a growing and dynamic economy both creates jobs---and destroys those no longer relevant. The quintessential example may be the ones in the farming sector since the beginning of the 20th Century. At that time, roughly forty percent of the American working population earned a living in this manner. Today that figure is under three percent, and still dropping. There was also once a thriving horse and buggy industry before the car became our standard means of transportation. The lives of the overall American people were greatly enhanced, but admittedly life was often cruel for the newly unemployed. Some probably never again saw a steady paycheck.

What can be done to assist those compelled to find a new occupation? Should we offer them some form of welfare assistance? Might we underwrite their returning to school? Whatever, the bottom line is this: these jobs must be allowed to disappear! This is not optional. The world does not owe anybody anything. Nobody’s employment should be safe. Am I talking only about blue collar occupations? Nope, I also include doctors, lawyers, and technological experts. We are all obligated to allow our jobs to be destroyed if they no longer can be justified. Not to do so, is literally stealing from those around you. There is no such thing as economic improvement unless we increase productivity. We become wealthier only by providing better goods and services in less time. A protected job impoverishes all of us.

42 comments:

markg8 said...

Sounds a lot like Bill Clinton's campaign speeches in 1992.

Buddy Larsen said...

yep, gotta give him credit for understanding the information function of markets.

Morgan said...

Absolutely right.

There is a purely economic case for helping people to retrain, though it seems to me that the best way to do it is through loans much like those available to graduate students.

And I wouldn't be averse to the government securing loans for retraining against the risk that someone still can't find a job. There is a "distributed value" component to undergoing retraining (we're all marginally better off if you become productive), and government may be able to improve on a purely free market in cases like that.

It's the same logic that underlies many government actions, including subsidies for the steel industry (the value of securing the availability of steel in the case of a future pressing need, such as war, does not fall only to purchaser) and environmental laws (the distributed value of a cleaner environment does not fall only to the user of the polluting good or service). And as in those cases, it's the execution that's the issue, not whether government has a place or not.

Have I just sacrificed all of my libertarian street cred? If it would help, I could go off on what a lousy job government actually does of "purchasing" the distributed value.

Buddy Larsen said...

Not with me, Morgan--being automatically anti-government is pretty short-sighted.

FDR was right in every way, in his help to the depression-weary. But, where were the 'sunset' provisions?

The problem is actually in the internal dynamics of the natural system known as 'bureaucracy'.

Or, as you say, "It's the Execution, stupid!"

Buddy Larsen said...

John Stossel had an ABC 20/20 special last night--dammit I missed it--on what the gov't monopoly on public education has produced. The show's teaser mentioned some new study of the world's 40 top national ed stats; USA is 17th/reading, 27th/math, 22nd/science.

The least the DOE could do is nationalize four years of Mandarin.

Pastorius said...

Yes, I think we should help with welfare assistance for job retraining. While the world "doesn't owe" anyone anything, the truth is, just as we should pay taxes because we use the roads and benefit from the system which allows us to make money, the system benefits from the hard work of people throughout the years. When a person is eliminated because their job is no longer relative, the system ought to help.

And, guess what, I voted for Bush, and would do so again.

I agree with Morgan that the assistance should be in the form of government-secured loans.

terrye said...

Well I live in rural America and I have been watching these little towns die for some time now.

The farms sustained the infrastructure that in turn payed for everyone and everything else. The schools, the clinics, the local businesses.. etc.

I can remember when parts of the southwest were deserts but the government paid for the subsidized water that made it possible for many of the people who live in those states to even be there, before there was not enough water to sustain communities. Now there is Las Vegas and cities like it.

My feller is 54, he used to be a farmer and he got pushed out of that, then he went to work for a trucking company and a couple of years ago they cut back and when he lost that job he lost his health insurance. Nobody wants to give health insurance to a man in his fifties with hypertension and an irregular heart beat. There are only 27,000 people left in this county.

Now I guess a lot of the rest of us coule move to Indianapolis where people could complain about having to take care of us but we would rather stay right here, where our homes and property are.

The truth is everybody gets help from the government, they just do not realize it. Airports, highways, school systems.

Right down here the state came up with the idea to spend 20 million on what we call the Goose Pond. Department of Natural Resources in our Republican state of Indiana is spending millions in this poor county to turn farm land into a swamp for some natural habitat crap.

But the right people will build a fancy restaurant and maybe a lodge and the right people will get to go duck hunting so just screw the white trash who live here.

Government spending is fine as long as they are spending it on the right people I guess.

terrye said...

I voted for George Bush too and I voted for Mitch Daniels the Governor of Indiana as well.

Buddy Larsen said...

The last real estate bargains in the country are in the little farming towns shrinking away in flyover country. It IS tragic that they can no longer keep their young people. Happens even here in the red-hot Austin/San Antone corridor. An hour out of either city, the little towns have high-schoolers and middle-aged semi-retired farmers, and nobody in between.

But it wouldn't be that way, if the nation as a whole wasn't chock-ful of opportunity (for the 20, 30, 40-somethings) in the opportunity areas. Raw, but real.

David Thomson said...

“Well I live in rural America and I have been watching these little towns die for some time now.”

Towns have come and gone throughout history. Economic efficiency make us overall wealthier---but sometimes exacts a cruel price on particular individuals. I am not God and therefore do not have all the answers. These people should not be abandoned. I have nothing against tax payer funds being used to alleviate their suffering.

Medical insurance is prohibitively high because politicians force insurance companies to often cover sex change operations, aroma therapy, and countless other less than life threatening medical matters. Health insurance, as we know it today, is the result of General Motors providing added benefits during a wage and price control era. This got the ball rolling---and has ultimately resulted in something close to a national disaster. I will deal with this more at a later date.

Buddy Larsen said...

Its the "Problem of the Commons" again. Somebody else seems to be paying, so why not use the medical system in place of your brain?

terrye said...

David:

Yeah right.

You know what? If Democrats are smart they will run on health care issues and economic issues because Republicans have this let them eat cake attitude that can seem a tad insensitive from time to time.

My point is that the locals are hardworking taxpaying people who are right of center in their politics and we are now watching a bunch of rich people from the city descend upon us and take advantage of our poverty.

Hey, but look at this way. Maybe a guy who used to own and operate his own farm can get a job parking cars.

terrye said...

Buddy:

I got a real estate license, along with half the people around here.

If there is a rush to buy property out here in the sticks it has been lost on those of us who tried to sell it.

Nobody wants to live here. Gas is too high, no shopping, no night life, no big fancy medical centers etc.

Hell, I can't even get broadband out here.

I live 30 miles from Bloomington, In, home of IU..you would think we could get more than two local TV stations.

terrye said...

Too bad we don't have any Indian tribes out here who want to build a casino. Maybe then someone would give a damn.

terrye said...

Sorry I am so bitchy. But we are having trouble paying teachers here and the Republican state of Indiana is going to pay 20 million dollars [that would be taxpayer dollars] to make a swamp. No one will live there but ducks and that is only so some guys from Indianapolis can drive down here and kill them. Wetlands doncha know.

It will take me awhile to get over being pissed. but I will try.

Buddy Larsen said...

Nah, let it out--it's real.

terrye said...

buddy:

Yeah I am real alright. Maybe a little too real....

The only thing saving the Republicans here is the sheer stupidity of the Democrats. Sound familiar?

The last administration was Democrat and they lost the Teachers pension on some dumbass dot com nonsense back when that whole thing crashed and so people kicked them out.

If, however, people who have never asked anyone for anything and live out in the boonies minding their own damn business have to not only watch their town die but someone feed off the corpse, well....

That and the state honchos are planning to build a highway. If Indiana pays for it. It is the NAFTA highway that will connect Evansville and Indianapolis.

The problem is they are saying there will be few if any local exits. The state will decide who can put gas stations on the damn thing etc. Just a straight shot through...so much for helping the locals. The ones they don't run off the land anyway. My old farm will be under the highway, it will have a three mile wide corridor.

I dunno, I will believe it when I see it. This thing has been under discussion for years.

David Thomson said...

“If Democrats are smart they will run on health care issues and economic issues because Republicans have this let them eat cake attitude that can seem a tad insensitive from time to time.”

Democratic protectionist policies always hurt poor people. They are forced to pay more for their good and services. You are unwittingly damaging the overall society to benefit a relatively small handful of people.

The Democrats are the ones who screwed up health insurance. Their policies have gotten us into this mess. They can only make matters worse.

terrye said...

Well you know something David, that is not how people see it.

They see big drug companies making a huge amount of money and HMOs making money while they can't even afford to buy health insurance and after a life time of working and paying taxes people are treating them like charity cases because the cost of health care has gone through the roof.

It is also distressing people to people to see jobs leave.

I understand about out sourcing. I understand about jobs going to cheaper markets. I really do.

But Bloomington had several factories a few years ago. GE shut down, Otis Elevator shut down, RCA shut down and as far as these people are concerned all those jobs went to Mexico.

To add insult to injury they see tax money being spent on projects that will be owned and controlled by people who already have resources.

I know what you are saying. I have had to change my lifestyle, my job, everything to adapt to a changing economy. And I never asked anyone for a damn thing. Nothing.

And neither has Gale. He served his country for years in the NG. And he went to work when he was still a kid. By the time he was 17 he owned his own herd of cows. Now he is struggling and he is getting older, so please don't tell me no one owes him anything.

What is the purpose of the government if people like Gale have to worry about losing everything they have worked for if they get sick? Is it just to fight wars?

But no, it is about abortion and gay marriage....

terrye said...

Do you think you can judge the value of a person by their bank account?

Are the people who can not afford health insurance or who don't qualify for it just disposable?

terrye said...

BTW, Gale tried and failed to get insurance, they sent his check back.

Buddy Larsen said...

There's a group--like the AARP but not a subversive front--for over 50s. I'll bet there's an insurance fund--a group insurance--that he can get into reasonably.

Knucklehead said...

One needn't go back to the horse and buggy days to find jobs long gone.

Whithin the working lifetime of anyone in the lower range of "middle age", say the past 25 years, we have seen keypunch operators go from legions upon legions to virtually zero. There were smaller, but similar legions of keypunch repairmen.

Draftsmen working at tables with varius rulers and fancy pencils - gone.

There were, not that long ago, a class of "secretary/typist" who were the queens of word processing - they made quite a good living simply because they were among the few, the proud, who knew how to deal with fancy-arse Wang word processor systems and SW. People used to make good livings developing slick presentation slide decks on uber-expensive software systems using expensive workstations. Now nearly everyone south of the executive suite who has any need for word processing or presentations does those functions for themselves on their personal computers.

How many companies have anyone staffing the copy room anymore? Hire someone just to make copies and fondle copiers? Not likely.

Once upon a time, not all that very long ago, rougly 25+/-% of everyone who had anything to do with computers in their workplace worked in operations, administration, and maintenance. Computers rooms were staffed around the clock with people changing tapes, monitoring batch jobs, feeding paper to printers, bursting printouts, etc. etc.

For every three or four people who touched a computer there was at least one person working a well paying job keeping computers running. Nowadays there is somewhere on the order of one or two people employed in OA&M for every thousand computer users.

These are just examples from the computer industry which has only existed for a half-century or so.

It is painful to those whose jobs go the way of the Dodo, but it is the necessary nature of things.

What can be done about mitigating the pain? I personally believe retraining/educational loans and grants by the federal and state governments are an excellent investment. There is reasonable ROI in this; help people stay off the long-term dole and return to paying taxes.

People also need to pop their heads out of their holes once in a while and make an honest analysis of whether or not there is long term viability in their line or work.

I'll never forget yacking with a coworker one day, roughly 22 or so years ago. He was one of those draftsmen I mentioned above. He was telling me how his son was going to drafting school since drafting was such a safe and needed occupation that paid reasonably well. I had recently returned from a business trip where I'd seen some of the early CAD/CAM systems and couldn't help sitting there thinking to myself that about the last thing a young man oughta be doing was to learn how to use rulers and pencils to make technical drawings.

Knucklehead said...

When jobs start heading offshore it is generally (clearly not universally, but generally) a sigh that the skills and resources needed to do the job have become relatively commonplace.

One bit of advice I got years ago which seems sound, is to "make sure whatever job you pick keeps you somewhere within reach of the customers." Jobs move but customers tend to stay put.

Buddy Larsen said...

I guess that's why the urbanization of society. Out in the sticks, a marginal drop in demand for your specialty can be a killer, and you have few options. When you hit your 50s, you quite suddenly and unexpectedly have even fewer--far fewer, really. If I couldn't trade stuff over the net, I'd have to move to the city--and at my age, hope I could get on as a WalMart greeter.

flenser said...

Everyone gets sick and dies, regardless of money. In our system if you are very well off you may be able to put off death for several years. The middle class might only manage a year or two, and the poor perhaps several months.

There are other variables such as at what age you get sick, the nature of your illness, etc but the above is basically true.

I thinks its safe to say that some people see this as unfair and some people do not.

terrye, where do you stand?

Buddy Larsen said...

I to this day have no health nor life insurance--haven't been 'covered' since I last worked for a corp. back in 70s.

Instead I've put what would've gone to (unused) premiums into the companies--and their joint-ventures--that I've consulted for over the years in the oilpatch.

Since I started doing it (meaning in more recent years the return is much less) some of these have octupled, most have quadrupled. This 'health fund' is in an IRA now, a no-touch (except for what I'm required to take out), and is there in case I have some health problem worth screwin' with, or for the kids when I take my corporeal leave.

IOW, the insurance-company's ROI re what would've been my premiums, went to me instead, and is sitting there in a brokerage account making *me* a little return every day.

Everyone can't do this, you have to be a little irresponsible, be a jerk willing to drive your spouse nutz with nightmare visions of catastrophes that *could* happen, and have a 'screw that 600/month to Amalgamated Carriers' attitude. And raising four kids with the usual trips to the doc, paid out of pocket, I--and the kids, tho they don't know it--I'm still so far ahead of the health-insurance racket that it ain't even in the ballpark of consideration.

I relate all this not to toot my horn over (so far) winning the gamble, but to posit that are creative solurtions available that one can control oneself--if one starts early enough and thus has time to let the capital markets use one's personal-security allocation without a middleman taking the capital gain.

Buddy Larsen said...

Fleshing out the plan, if I contract something nasty, I don't plan to spend much time or money fighting for that last slice of life--the Big C or something, I slide over to east Austin and buy a half dozen dime bags of H and take the long trip under my own control. This leaves a catastrophic stroke--but my living will is, the 3rd morning i don't need coffee and cigarets to open my eyes, pull the damned plug. I mean, screw it--really. Grasping is unseemly, regardless of what for; fear is inconsistent with a certain vanity that to me is the spark of life. Enduring some long terminal--or quasi-terminal, or even chronically-debilitaing stretch of end-time, without pleasure or hope and acting only to fritter away assets the young folks could capitalize--no thanks, not for me.

That's just how I feel about all that.

Buddy Larsen said...

Move to Florida?"

Here's something, the Gulf Coast is screaming for help rebuilding, but Katrina/Rita areas have few accommodations for something like this Jeb Bush program. construction trades hirees are getting free health insurance, sign-on bonuses, and retirement plans, the trades in ALL areas are 30,000 short and growing, as Katrina areas outbid for skilled labor. Florida's average journeyman is mid-50s, and this 2-to-8 week gov't training program is aiming for 10,000 trainees 'placed' after the skill-set level is documented, and "if the program works, we're gonna do it again, another 10,000!" sez Bush.

Ands, Geez, it's Florida.

America's millionaires more often than not come out of these trades--folks who start their own air-conditioning or roofing or somesuch business after learning the trade.

Ah, to be young two or three different times!

Knucklehead said...

Flenser,

I should not, and do not, presume to speak for Terrye. This is merely one man's observation based purely on the words I read.

Terrye sees, in her work and the life around her, a great deal of suffering and wishes there were some cure or, at least, some relief however small or temporary. How the suffering came about, whether or not it is the result of choices made once upon a time and now far too late to be changed or even compensated for, becomes moot at some point - all that stands at the moment, and beyond the moment, is the pain, the suffering.

And with the suffering, after time, often comes a loss of hope and, relentlessly and inevitably, a loss of will.

Above all our Terrye is fondest of hope. When that seems lost to those she cares about she too acutely feels the loss.

It was not my place to say this but I did.

Buddy Larsen said...

yep--Terrye's work puts her face-to-face with need, and the hows and whys are moot when the need is right there in the room looking at you. Please forgive my preachiness upthread. Sometimes we don't think. This medium is sometimes confusing--whether you're talking personally up close, or academically from afar.

Knucklehead said...

Jonathan, of Chicagoboyz presented his "Quote of the Day" (an irregular feature at best) for today. It is taken from a comment by one P. Froward from this thread. It is a very good observation:

The point about markets can be explained more simply:

It is very difficult to make people improve.

It is very easy (and very cheap) to find out who does something best.

offworld said...

buddy larsen touched on it with the increasing urbanization. It is sad but choosing to stay in the relatively thin economies that exist out in the boonies is a choice and one that is often extraordinarily expensive.

Specialization is helpful to a point. Phyiscal mobility is quite useful. Proximity to the customer is very good.

I know an electrician who owned a moderately big pickup truck. After Katrina he went up to the gulf coast and made four or five times his usual wage, just hauling garbage away in his truck. He camped out in a tent. He has since bought a brand new even bigger truck and has no doubt laid up some significant savings.

As Jim Cramer likes to say on CNBC's Mad Money, there is always a bull market somewhere.

buddy also touched on the tradesmen becoming millionaires phenomenon. That is all around us down here in south Florida where people build and buy and sell small service businesses like typical suburbanites might buy a car. I have a friend who sold his painting business and is preparing for a circumnavigation. He is maybe 34. I know someone who has built up and sold pool cleaning businesses twice. How hard can it be to clean pools? I know someone who has a laundry pick up and delivery service specifically for college students in dorms. He contracts out all the work and never touches the laundry. In fact, he has a full time job in commercial real estate.

At least in Florida, if you can show up on time and not stink of booze, you can get work. And even then sometimes as I can testify from some of the people I worked construction jobs with when I was down and out on technology. This is not true up north where unions keep the supply of tradesmen artificially depressed.

I know someone from Boston with a four year degree in community planning and construction who trained as an EMT and tried to become a fireman up there. Too many of those I guess. He could not find a job. He got his electrician's license but there was a several year waiting list for apprentiships with the union and all the jobs were unionized. He was stuck trimming trees. He moved to Florida and in less than a year he is now building homes and overseeing a 100 strong workforce for a national homebuilder and actually putting his schooling to use. He was living with his fiance in public-assisted housing up north. Now he bought his own two-story house on a lake with a yard for the dogs to play in and his wife does not have to work.

That is mobility.

Buddy Larsen said...

Gotta go where it is, for sure. The static nature of trades in union areas correalates very closely with the overall cost of living--as per the blue northeast vs open-shop red states. Another weird paradox in the party of the little man, hey? Nice optimistic post, offworld--

Knucklehead said...

Offworld's post brings up an interesting question re: what can be done, or should be done, by "society" as a whole and, presumably, at public expense to help those whose livelihood's have "disappeared". Retraining/education has been mentioned and I, for one, believe that it makes economic sense to do so (potential ROI for "society" and the public treasury).

The notion that "there's always a boom somewhere" suggests, of course, that if the goal is a job and income, or even to "get rich", one should "follow the booms" - be mobile. If We the People decide that we are willing to fund significant levels of retraining and re-education do we then assume the right to demand, as part of the package, mobility on the part of the recipients of that form of welfare?

If, for example, someone in the hinterlands of Minnesota can be retrained for for jobs that are begging for people to fill them, but those jobs exist on the gulf coast or in FL or TX or wherever, but not MN, can we demand that people relocate?

Buddy Larsen said...

That's always been the provence of the 'invisible hand'--aided by a publicly-provided transportation system making mobility as cheap and easy as possible. But, to your question, a precedent might be FDR's WPA or CCC, where folks did indeed have to relocate to the sites of the gov't projects.

terrye said...

The last year of my mother's life cost thirty thousand dollars in health care... and she had an aneurism. Lifestlye had jack to do with it.

Gale has a congenital heart condition, when his job was gone and his insurance with it, he simply could not find a company that was interested in covering him. So he buys his medicine and hopes he won't need surgery. He would rather just pay his bills himself.

As for leaving here, folks, that is dumb.


These people do go to work.... they don't make a lot, but they try. And they have property taxes to pay and mortgage payments. Are they supposed to walk away from all that and go live on the streets in some city in the hopes that maybe they will find a better job?

I am not asking for a hand out for anyone, but just an acknowledgment that even good hardworking people can find themselves in need of help. And they matter.

My point is that we do owe something to each other, as people.

And whenever paying basic health care bills for someone costs more than you make, then obviously the system is messed up.

My clients include a young man who was in an accident and left a cripple, an old woman who fell down, a man in is 60's who had a stroke, a young woman with ALS, a middle aged woman with ovarian cancer, an old man with Parkinsons and so forth.

Regular people. And more than once, mine is the last face they see.

And many of them were not poor when their illness or injury came on them..but they ended up that way.

What exactly do you think it will costs to keep that young man who survived the Sago mine disaster alive? More than it would have costs to send him to Harvard I would imagine.

This is going to hurt conservatives. As more and more and people read about corruption and see money going to people in high places while they are struggling to care for their parents and loved ones, it will create problems.

terrye said...

knucklehead:

Thank you.

terrye said...

People need to realize that bad things can happen to anyone. When he was young Gale was strong. He did not know about his heart condition and his blood pressure was fine. It was in his 40's that these things manifested.

My mother had that weak blood vessel in her brain for years and did not know it. She had inherited RP and was doomed to blindness and did not know that until she was in her 50's.

Things can go to hell, just like that.

Buddy Larsen said...

Good lesson in life, Terrye. Nota bene: should bad luck strike, be careful not to have added to your problems by having previous words to eat.

terrye said...

buddy:

This is true. I know, I have been there more than once myself.

But I don't blame politicians for everything. My mother collapsed in December 1996 and died in Nov 2000. Bush was not around.

Urban vs rural has been going on awhile too. We tend to make everything political when it is a lot more complicated than that.

Buddy Larsen said...

For sure. Ties to the community are powerful--mobility has its benefits, but so do roots. Choices have to be made before you can know the consequences--this may be the central tragedy of life. All the concentrated power of nature and man, all the accumulated knowledge of the ages, can't control a dumb little throw of the dice.