| Wednesday,
Go read:
http://nytimes.com/2002/09/29/weekinreview/29LEON.html
Out of a Job and No Longer Looking
IN New York Times, 29 September, 2002 (Week
in Review)
By DAVID LEONHARDT
THE American welfare state was supposed to be
dead, victim of the free-market economy and its success in creating a job
for anybody who wanted one.
While European countries maintained huge
social-service programs and paid for them with high unemployment, the
United States sharply curtailed its best-known welfare program in the
mid-1990's and the jobless rate just kept dropping. Even today, two years
into an economic slump, the labor market appears healthier than it was for
most of the last three decades.
But the current downturn is beginning to
expose an uncomfortable truth: the American economy looks more like
Europe's than most people ever imagined during the triumphal 1990's.
Millions of people, particularly men, have
dropped out of the labor force over the last decade, apparently unable to
find work that pays near what they once earned in the blue-collar jobs
that have since moved to lower-wage countries. Unwilling to take new jobs
that pay far less, neither employed nor looking for work, they are not
counted in the jobless rate, and a surprising and growing number of them
instead depend on a government check to get by.
Once these statistical nonpersons are
counted, the labor market of today looks all too similar to those of
supposedly bleaker past decades, according to a number of recent studies
by economists. <snip>
And think again about the cost of exporting jobs. I am more and
more of the opinion that Free Trade is an illusion. As to
alternatives, I am not so certain. I keep being pushed toward a flat 10%
tariff on all imported goods: high enough to protect some jobs and
industries, low enough that really inefficient industries feel the
pressure. I have absolutely no magical commitment to the 10% number.
Once again, my concern is for American citizens displaced by having
their jobs exported. That particularly applies to those on the lower side
of the Bell Curve, who aren't so easily re-educated to new jobs after
spending a good part of their lives learning a blue collar skill.
This is not Lake Woebegone where all the children are above average. Half
the population has an IQ of less than 100. I doubt that includes many of
my readers. Indeed, I doubt that many of my readers spend much time with
people of IQ 110 and below.
Below average doesn't mean stupid or unable to function. It doesn't
mean being a hewer of wood or drawer of water. Below average in
intelligence doesn't mean noticeably uneducated. It does mean a bit slower
to learn new skills, a bit slower to adjust, and a lot more likely to know
and enjoy hand working skills -- building really fine furniture, tuning up
and repairing machinery, operating a particular piece of equipment, and so
forth. Indeed, down at the low end of the scale, say 80-85 IQ, are many
jobs that must be done, require considerable skill, and are sufficiently
repetitive to drive and IQ 110 or above stark raving mad.
My favorite example was soldering mini-plugs in the aircraft industry,
a job that was eventually relegated to people who were (in the terminology
of the time) legally morons (mental age of 12). Smart people learned
this skill fast, and hated it, and after a while made too many errors or
quit from boredom. The less gifted loved the work: they could do it, they
were contributing to American life, and they earned darned good money,
often more than their smarter relatives.
And that was the low end of the scale. People of IQ 85 - 100 are some
30% of the population, and IQ 85 - 115 is a full 68% of the people. A
country that doesn't provide meaningful work and a way to be part of the
middle class for that group is not a republic.
=========
Incidentally, the above is an illustration of the problem of working
with memory: I used to be considered somewhat expert in normal curve
statistics, and yet I managed to mis-remember the standard deviation to
which IQ is normalized, and the percentage of the population within one
standard deviation of the mean. Bob Thompson pointed this out within
minutes and I've corrected it. It doesn't change the argument.
In a normal or "bell" curve, 34% of the population (34.13 to
be exact) lies within one standard deviation of the mean in one direction;
thus 68.26% is within plus or minus one standard deviation, usually called
'sigma" in statistical terminology, and if you want to get really
refined you use a different symbol for the -- theoretical -- population
standard deviation than the one you use for the sample standard deviation.
The normal or bell curve is a theoretical construct drawn from
mathematics. It seems to fit the distribution of many random aspects of a
population, including such unrelated stuff as the distribution you get
when you put a class to repeated measurements of the diagonal length of a
laboratory bench using a tape measure, and a bunch of other stuff, as well
as the distribution of IQ scores, which, in the United States, are
mathematically manipulated so that the mean will be 100 and the standard
deviation 15. Note that the bell curve can't be an exact fit, since any IQ
below 50 isn't likely to survive, and we don't know of any above about 200
(and can't really determine IQ with any accuracy above about 150; but the
difference between 150 and 200 is pretty apparent if you ever meet such
people).
It isn't an exact fit, but it's close, plenty close enough to be useful
in making predictions about the population.
====
That digression aside, the economic problem I see is that we no longer
make things. Now that's an exaggeration; but in 1995 or so, the financial
contribution (moving money around, investment banking, insurance, real
estate) to GDP surpassed the manufacturing sector; we were
"creating" more wealth through distribution and financial moves
than we were creating by making things.
A manufacturing economy automatically distributes wealth. A financial
economy concentrates wealth: as Kevin Phillips points out the median
income in the US has barely kept ahead of inflation since 1980, but while
in 1980 the ten highest paid executives in the US had an average
compensation of $3.45 million, by 2001 that number was $155 million.
This is quite a lot of money for taking us through the boom and bust and
getting us out of the manufacturing business.
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