The One They Don’t Talk About

2017 September 8
by drdog09

Many an economist is all agast about the coming robot revolution. The thesis being a concern for the percentage of labor that part of national GDP and how that affects 95% of the work force. Or as a Democrat would say, “The economic inequality has to stop!!”

For example in this article Charles Hugh-Smith is attempting to bat away a quite frivolous claim.

Real wage growth is a function of two things: changes in productivity and changes in the share of national output attributed to labor. If the share of GDP going to workers doesn’t change, then real wages simply track productivity.”

The market power argument is straightforward: as competition declines, cartels and quasi-monopolies scoop up a larger share of the national income, leaving relatively less for labor.

The high housing costs crush wages argument is more nuanced. The high cost of housing means that much of the nation’s available capital stock is invested in housing, rather than in productivity-boosting capital investments. This diversion of capital from productivity to housing reduces the productivity gains that enable higher wages.

Smith’s analysis is pretty firm on the matter. But few of the econ eggheads ever mention Labor Substitution. I don’t even take into account the issue of robotics. Its not part of the equation. A few examples if I may:

  • You pull into a gas station who pumps the gas? You do of course. But 30 years ago that was not the case. A gas jockey did that for you. The market has substituted your labor for his.
  • You go onto Amazon and buy a new laptop. Early in PC computer history you would go down to Microcenter and a clerk would assist you in selection, purchase and in setup with the in-house geek. Now its online. Fact it is a double whammy you clerked for yourself and defacto replaced the geek.
  • You decide to take a trip so you need to book a flight. In the past you would go to a travel agency and have the agent set your reservation and print out your tickets. Now you go on any number of online reservation systems and do it yourself.
  • In the past to do any banking you generally interfaced with a teller. Now you are forced to do it via the atm or your cellphone. The teller has been reduced though many banks still have them. (for now)

Now automation has been instrumental in this transformation. But what we really have going on is a transition to a self serve economy. The labor costs are being shifted out of the provider and onto the customer base. That is Labor Substitution.

But Dog the 5% are flying high, what gives. Well most of that 5% is in one industry — finance. But they are not immune either. Vast majority of the wall street volume is now done by programmed computers making trades. It won’t be long before the pits are empty of people. It won’t be long before a good chunk of that 5% is eliminated out as well.

In the end we are back to Mr. Ford’s observation —

Employers only handle the money – it is the customer who pays the wages.

When there are no wages there will be no customers.

13 Responses leave one →
  1. 2017 September 8 5:02 am
    drdog09 permalink

    Looks like Irma may be ‘the storm of the century’. More damage than either Sandy or Harvey.

  2. 2017 September 8 5:03 am
    drdog09 permalink

    You also might want to enroll in equifax relief. 143m accounts hacked. Its on Drudge.

  3. 2017 September 8 6:52 am
    justrand permalink

    Brilliant post, drdog…scary for the youth of our country, however.

    For years I have been cautioning/instructing my kids & grandkids to focus on jobs/industries that require a human in a specific location as AT LEAST their fall-back career. E.g., if you need two plates welded at a construction site, someone in India can’t do that over the phone!

  4. 2017 September 8 9:45 am
    drdog09 permalink


    You are wise beyond your years Sir.

  5. 2017 September 8 10:02 am
    drdog09 permalink

    I see that the first NFL game had low arbitron numbers. Keep it up boys and you will kill your own golden goose.

  6. 2017 September 8 10:59 am
    JimNorCal permalink


    Here’s what this case boils down to: Officers had a hunch
    that a drug transaction was going down. They saw nothing
    obviously suspicious, but got tired of waiting, watching and
    wiretapping. They then jumped the gun by executing a
    warrantless search. Until today, this was not enough to
    support probable cause, but going forward it will be. This is
    a green light for the police to search anyone’s property based
    on what officers subjectively believe—or claim to
    believe—about someone’s everyday conduct.

    That puts all of us at risk. Accordingly, I dissent, and I’m off to Costco to
    buy some food.

  7. 2017 September 8 12:11 pm
    justrand permalink

    jim, we’re at CostCo now!

    Agree completely re. the searches. The 4th Amendment is a hollow shell already…and getting worse

  8. 2017 September 8 2:17 pm
    drdog09 permalink

    “Attention shoppers! Drug drop in aisle 6!”

  9. 2017 September 8 2:36 pm
    Eph permalink

    5. DR

    Where did you see that?

  10. 2017 September 8 3:43 pm
    drdog09 permalink

    Sorry Eph, been away from the computer for a while. But I see you found it.

  11. 2017 September 8 6:29 pm

    Are they truly awakened, or will they just fart,belch, roll over and go back to sleep.??

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