The More Fungible Worker

A lot of people have been worrying the technology is taking away jobs and suppressing wages. To a large extent these worries are compared to the Luddites and are dismissed as silly and misguided.

The economist reaction to these worries is basically "That's silly, this is how economic growth works. No one thinks it is bad that the horse driver and telegraph operator jobs have disappeared." Economists are right that old inefficient jobs need to be replaced in order for human society to grow richer over time. When technology satisfies one need, workers are free to take a job that satisfies another of the almost infinite desires that humans have. And when workers are more productive, the marginal productivity of a good worker often goes up proportionally and their wages increase. 

But there is more to the "technology reduces wages" story than economists like to admit. The Luddites tried futilely to stop progress that benefited society, but the artisans themselves really did see their wages fall due to competition from technology. 

The obvious way that technology reduces the wages of workers in the developed world is how it enables and facilitates competition from workers in the developing world. Arnold Kling has called this the Great Factor Price Normalization.  In this scenario the average worker is significantly better off and society gains from trade, but workers in the developed world may see wage stagnation to pair with lower prices.

Arnold explains. "I want to suggest that there is a connection between this trend and the stagnation of median incomes in the United States, and even to the decade-long drop-off in employment here. New patterns of trade are developing that are reducing the advantage that a person enjoys merely for being located in the United States."

But there is a second way by which technology can suppress wages - when technology can guide and track workers the output of different workers becomes more uniform and thus more fungible. Before the era of ubiquitous cheap information technology, training and tracking the performance of mid and low skill workers was more expensive. Workers varied significantly in quality and ability and it made sense to pay workers with experience more so they would not have to be replaced by new workers who would be expensive to train. The extreme example of the fungible worker is the Amazon warehouse worker.

"The programs for our scanners are designed with the assumption that we disposable employees don't know what we're doing."

Amazon can quickly train employees as well as track them to make sure they are not underperforming. There is a smaller difference between one employee and their potential replacement. If an employee decides to leave their replacement is guided by technology that makes the new worker's productivity very close to that of a good worker.

Before these technological advancements, workers enjoyed mini-monopolies. The warehouse worker couldn't be easily replaced because their replacement might be way less efficient as they learned the layout of their workplace. As technology more directly guides low and mid skill workers in their jobs the workers are losing their mini-monopolies. Workers don't need job specific experience to be hired so the supply of workers available to every technology guided job has increased. A higher supply leads to a lower price (the price of a worker is their wage). After full employment is reached the general wage level may increase for low skilled workers, but for now the impact of the Great Factor Price Equalization and the More Fungible Worker are suppressing the wages of middle and lower class developed world workers.
8 responses
"Before these technological advancements, workers enjoyed mini-monopolies. The warehouse worker couldn't be easily replaced because their replacement might be way less efficient as they learned the layout of their workplace. As technology more directly guides low and mid skill workers in their jobs the workers are losing their mini-monopolies." I question any "mini-monopoly" most workhouse employees ever had. I have a neighbor friend who works at a large grain elevator (as a union man). He has told me that before going on strike, they know how to ruin things enough that when management tries to make equipment work, they don't know enough to get around what they disconnect or even booby trap. They have a mini-monopoly. But, while I use to eschew such leverage, I don't anymore (even though I'm still a staunch conservative and Republican in many, though not in all areas, [such as sending back illegal immigrants, who have done us the favor largely heretofore of making up a lot for our sub-replacement birthrates, which, IMO, are THE major cause of the world wide economic depression]). Cramming down wages and finding the lowest common denominator (the cheapest foreign worker) is not necessarily in the interest of the American citizen or even mere resident (such as illegal immigrants, among other non-citizens). Ludites they may be, not everything can, nor should be reduced to assuming that the physical product itself is fungible, or the only factor in either who makes / retrieves, or which company sells it. For example, I work in the 'idea' business. I sell, among other things, customized promotional products. I can give a client a low price. But, it is not necessarily the absolute bottom penny price item. However, what I can offer in ideas, not just on what item/s to use, but how to use it, and many other things (like knowing which supplier is closest, and can get it shipped at the lowest overall cost, including 'handling charges', as well as imprint 'set-up' charges. And, I have both a knowledge and an organization of product and supplier knowledge that most of my competitors doing what I do, as a distributor in my industry or trade, necessarily have. I also do art, and I know most of the in's and out's of different aspects of art (like type size, boldness, openess, etc), positive versus reverse images, when decorating (generally, but not always 'imprinting') a given item. And subjects like durability of imprint, as well as many different aspects of many products, and how that may impact the impression of the final recipient of the item, that you can't get for any price, unless you have a lot of extensive experience with many items, as one who sells them does. My wife just had surgery a week ago yesterday, to redo what a podiatrist messed up two years ago this month. If all foot surgery is fungible, then she shouldn't have needed this more recent surgery done. But it is not all fungible. Nor is what I do versus mass online marketers, who more sell products, than conceptual marketing ideas, and campaigns designed to elicit certain responses and/or behavior/s. I first learned the word 'fungible' from my business law instructor at the University of Utah. He told of how one law professor he had claimed that most all law school graduates are fungible. But, we know that isn't absolutely so, though their skill sets need to be brought often more into the real world, and they need to get a lot more experience under their individual belts. Yes, workers can and should work at becoming a bit more fungible. But, becoming an Amazon warehouse worker is nothing, I would suppose, any person of more than mean intelligence should aspire to, though many may take jobs with higher qualifications, but get stuck in it for much longer than they would like, due to lack of alternative opportunities, given situations they find themselves in, and need for just making some kind of payments on either student loans, credit cards, or just life as one must sometimes live. An Amazon warehouse employee would be more like a 3rd world job in a 1st world economy. Getting and keeping such employment might make gaining sufficient velocity to escape ever more difficult, unless someone can get a job with an employer and in a position that pays much, much more than I suppose an Amazon warehouse employee makes on average.
Technology moves at the same pace all over the world. Amazon has warehouses in other countries too. Have you considered why they don't have the same issues?
> Have you considered why they don't have the same issues? What makes you think that Amazon warehouses workers in other countries don't have issues ? in UK http://www.ft.com/cms/s/0/ed6a985c-70bd-11e2-85... in Germany: http://www.dailymail.co.uk/news/article-2874546...
Diligentdave - From a private perspective, workers should definitely try to avoid positions where they are easily replaced and gain no unique human capital from their work experience. What I'm saying is that technology enables more of these jobs than there were in the past - it's not a normative statement. Valentine - what Bob said. I focus on the US but other developed countries are facing similar pressures. And this isn't just Amazon warehouse workers - it's any job where technology encompasses enough know-how to turn the average inexperienced worker into a decently productive employee within a few weeks.
LCD or Lowest Common Denominator. I have been self-employed for 35 years. Over that time, I've seen again and again where clients, or potential clients, try to steal my ideas, and then try to turn my ideas into merely a commodity. Then, they try to find the lowest penny price using the customized items I have suggested they use. I contend not everyone, nor should everyone, allow themselves to be fungible. Last week, my wife had surgery on her foot to repair work done just two years before by another doctor. The previous surgeon was a podiatrist. The current one is an orthopedic doctor with a specialty in feet. They are not fungible. Amazon may be able to scrape up people desperate for work, as Ebay and many others do. Generally speaking, few mass employers care squat about individual contributions, viewing them all as being pretty much of the same. I contend, an employer of any size, would be smart to acknowledge individual efforts, differences, and reward initiative, if that is possible at their scale. I don't suppose that Amazon employees overseas don't have problems with them. I was only addressing problems they cause for employees here. That does not preclude that Amazon may and does cause problems for employees elsewhere.
I agree and I agree. But people desparate for money often have to take these kinds of jobs. And then, getting a better job can become ever more difficult.
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