Where have all the doctors gone?

Rob Sanchez, in his most recent Job Destruction Newsletter, writes about a new Senate bill that would effectively lift the H-1B caps on the importation of foreign doctors. As Rob points out:

In conclusion, the Conrad "improvement" program is a backdoor attempt to raise the H-1B cap. That's because if more foreign medical students can get a Conrad waiver there will be more H-1B visas left over for programmers and engineers. We can expect more bills like this that whittle away at the H-1B cap without having to actually raise it.

This is likely true, and brings up a larger point that I'll probably get around to writing about tomorrow, but I wanted to pick up on one statement in the press release from the senator who's sponsoring this change:

The physician shortage in America is a growing crisis. By 2020, some projections show the nation may fall short by as many as 200,000 doctors. This shortage will be felt hardest in rural areas in North Dakota -- and across the nation.

The Conrad State 30 Program has brought more than 100 doctors to North Dakota communities that otherwise would have experienced a lack of physician coverage.

Need I talk about this again? I guess so. This is the same argument that we hear about the need to increase H-1B visas, that we simply cannot find all the qualified people we require to do...whatever it is the speaker thinks needs to be done.

Let me help the rural areas of North Dakota -- and across the nation -- with their problem. Fill a briefcase with cash, let's say a million dollars worth. Go to the Minot International Airport, catch a flight to Minneapolis, then on to Milwaukee, and finish in Boston, it takes less than a day. Go walk around a medical center, offering the briefcase to any doctor who's willing to commit to two years. I bet you'll find someone who will come.

[Actually, to go up even earlier in the quote, I'm not sure what it means to have a shortage of 200,000 doctors. We could make more simply by letting more into our medical schools, and immigration policy wouldn't have to enter into it at all.]

This is yet another in a long list of assertions that ignore how markets work. Any such statement should be followed by, "at the price we're willing to pay." You can get doctors to North Dakota or anywhere else, just as you can attract students into certain fields of study, just as you can compete with the industry leader in a certain technology - if you're willing to pay for it.

Now I'm not contending that that isn't hard sometimes. Finding a million dollars for two years of a doctor may seem like an intractable problem, just as wresting someone away from Google's search team might present a real challenge to Microsoft's recruiters.

But those are options, and they shouldn't be removed from the discussion just because someone sees a more expedient route if they can just push (lobby? pay?) to have laws changed. Immigration has increasingly become the solution of first resort, when it should only be part of the mix as one possibility. I've written before that there may be times when certain markets have a short-term shortage that requires importation of labor, but, if that happens, any relaxation of visa quotas should be accompanied by a longer-term strategy to alleviate that shortage. Clearly, that second part never actually happens; instead, we change our policies yet again to make the relaxation permanent.

I'm all for attracting the "best and the brightest" to our shores, but I know too many talented developers who are unemployed or underemployed or underpaid to believe that magical people from overseas are going to upgrade the profession, especially when a large number of companies aren't seeking out the best and the brightest, just the cheapest and most easily exploited. Sure, it's easy just to churn out the visas and give American companies and governments what they want, and it's a lot harder to look at the long-term implications of our decisions and be rational about it. But being hard shouldn't serve as a dterrent to doing what is right.

(W)age discrimination revisited

I may have understated the problem last Saturday when I contended that age discrimination can be explained, at least in part, by expectations about the future:

If a company takes a chance and hires the older person for $40K, there is the real possibility that another company might come along two months later and decide to pay that person something closer to their previous salary. Then the company is out time and money, plus having their technology exposed to someone who's gone. It's a lot easier just to hire someone who's happy to get the $40K to begin with.

I still believe that's a real mechanism, but The New York Times has quite the sobering article:

But unemployed baby boomers, many of whom believed they were still in the prime of their careers, are confronting the grim reality that they face some of the steepest odds of any job seekers in this dismal market. Workers ages 45 and over form a disproportionate share of the hard-luck recession category, the long-term unemployed — those who have been out of work for six months or longer, according to the Bureau of Labor Statistics....Even when they finally land jobs, they typically experience a much steeper drop in earnings than their younger counterparts.

The piece also cites the fairly well-known study in which a professor sent out resumes that differed only in age. Younger workers were 40% more likely to be called for an interview.

There's a real disconnect here among various trends:

• We're going to "reform" Social Security at some point by delaying payouts (we've already done that to some extent) under the theory that people are living longer and, therefore, can work longer.
• An inability to effect meaningful monetary policy has created the necessity of less-effective fiscal policy, which is justified by one and all as filling the need of getting the un- and underemployed back to work, soaking up all that unused capacity.
• Workers over 45 are finding it hard to stay employed or get reemployed - and they're only about halfway through their working lives.

These simply don't fit together, in that we have an experienced population that is going to be asked to work longer at jobs that don't exist for them. There will likely be people who contend that this is a good thing, that workers will have to plan their lives better, not count on 40 years of earnings and Social Security.

I'm not qualified to talk about whether this will eventually be better in the sociological sense. What I do know is that the large number of folks who worked under the old assumptions are going to be in a lot of trouble as the world changes, and we as a society ought to figure out how we're going to look after Grandma and Grandpa when their security guard jobs are still not enough to keep them from eating cat food.

(W)age discrimination

There's been a lot of talk lately about age discrimination, especially in technical fields. It's been occurring to many of us that our experience and wisdom is being ignored in favor of the perceived advantages of youth, their "fresh outlook" and their "eagerness." For those of us in the knowledge fields who don't think enthusiasm trumps knowledge, that kind of statement is profoundly ignorant and insulting. While some people over 40 do become ossified in their thinking, stuck in a morass of 20-year-old knowledge, most I have known retain their interest and aptitude for solving problems by whatever means necessary. They are adept at learning new things, and the base of knowledge they already have makes that learning far easier than for someone, no matter how great their enthusiasm, who does not have that base.

None of what I've written so far is anything new, and other observers of this phenomenon have hit upon the idea of cost. Why pay an older person $80K, when you can get two young people for the same amount of money who will work incredible hours (no families yet) and bring cutting-edge ideas from their education?

That the older person may have the experience to know what does and doesn't work, allowing him or her to cut through the noise and solve the problem in less than half the time, doesn't occur to those who prefer to look, not at efficiency, but at cost per employee.

But there's another factor, and, that is, older people have been beaten down by the job market. Many of them would be perfectly happy to get to do what they want and love, even if the pay were considerably less than they received during the good times. Yet many still languish, working, if at all, in jobs that offer less challenge than they can handle, or worse working conditions than would be ideal. So why are they not snapped up?

[Note: I am not unaware of the argument that says employers prefer younger people because they have longer potential tenure. I just think it's wrong. I know of no statistics to back me up, but I'm guessing that it's at least as likely for a 55-year-old to still be with a company after 10 years as it is for a 25-year-old.]

It's easy to look at age discrimination as the answer, and de facto that's what we have, but I think the mechanism is a bit different from, "we don't like having old people around." Here's my analogy.

Let's say you engaged in an auction, but the rules were different. You would have to pay something every time you made a bid. Of course, this would change your behavior, perhaps to the point where the auction couldn't take place at all. If the payment was at all significant, you wouldn't make any trial bids early in the process, you'd wait until you were pretty much sure of winning...which you would never be.

This is analogous to what happens in the hiring process. If a company takes a chance and hires the older person for $40K, there is the real possibility that another company might come along two months later and decide to pay that person something closer to their previous salary. Then the company is out time and money, plus having their technology exposed to someone who's gone. It's a lot easier just to hire someone who's happy to get the $40K to begin with.

In this way we see the exclusion of people who have ever made more money than the current prevailing wage, creating a class of formerly successful people who now have far less chance of being employed. As a result, there is a tendency on the part of these people to downplay their experience (once again, I have no proof that this is happening, the "puffing down" of resumes, but I'd be very surprised if it isn't).

Economics doesn't do a good job of capturing this, given its propensity to believe that people move effortlessly up and down the wage scale. But this is a real problem, in that companies are deprived of utilizing the talents of the experienced, and the employees themselves who are prevented from working in their field.

Of course, companies could prevent this problem through the well-understood mechanism of contract law, but they really don't want to limit themselves in this way, no matter what the gains might be. It's hard to see the current model as the best way forward.

Goodbye, middle class

From about a month ago, Mark Thoma quotes an article by Stephanie Schorow:

Dramatic shifts in the U.S. labor market in the last 25 years are relegating older workers -- even those with a college education -- to lower-wage jobs, according to a research paper by MIT Economics Professor David Autor.

This trend appears likely to steepen in the current recession, as employers accelerate the rate at which they shed nonessential positions....

As the labor market "hollows out," workers who in a previous generation would have occupied middle-skill, white-collar positions must increasingly find their fortunes elsewhere -- either in high-skill, high-education professional, technical and managerial positions, or in less-educated manual labor and in-person service jobs. Autor's data indicate that since 1980, older workers with at least some college education are increasingly doing what was once thought of as "non-college" work, i.e. non-routine, but not highly skilled jobs.

I have certainly written before that the "college premium" is on its way downward, and this research supports my contention. We need to be cognizant of the implications of this idea, because it changes many of our long-held beliefs as to how we get ahead, and calls into question the commonly-held belief that more education is always better. I just don't know what it will take to get us to see that putting every young person on the college track and letting them fail into the vital (but non-academic) jobs is not a recipe for long-term survival.

The tragic comedy of visas

I've written before that I'm not categorically opposed to the H-1B visa program, that offering short-term employment to people from other countries in certain fields is not necessarily a bad thing. But I do insist that the various people who buy wholeheartedly into maintenance or expansion of the program be honest in presenting their reasons, and that just isn't happening. When Bill Gates testifies to Congress that the program needs to be expanded, he isn't speaking as a statesman or expert in immigration policy, he's doing so as a major stockholder in a company that will profit from that immigration.

We hear a lot about a study that claims that every H-1B application generates five to eight jobs. I've read the study, and it's rather poorly done. (You can tell that from the conclusion, which is preposterous; if it were true, we could hire interns to fill out applications that would never be approved, and, voila!, instant jobs.) It's a regression study, plain and simple, with no causative factors explored. I would guess that, were it to be redone today, we would see continued H-1Bs and a drop in technical employment. That result would be just as spurious ("H-1Bs Cost American Jobs, Study Says"), and just as dismissible.

I don't know what the "right" number of H-1Bs is, and neither does anyone else. Right now, it's 65,000 a year, plus 20,000 for applicants who have earned masters' degrees or higher. I see nothing wrong with attracting the best and the brightest (the term that is invariably used by supporters of the program), I just don't see the mechanism by which we ensure that we're actually getting them.

I also don't like the marginalization of those who question or oppose the program. There are a lot of concerns that H-1B fans don't want to address, and those peope tend to be powerful enough to demonize the questioners. If you want to discuss whether the program has the right limits, or whether it's being used as intended (the companies that use the largest number of these visas are Indian inshoring companies), or whether the workers are paid the "prevailing wage," or whether this amounts to a kind of indentured servitude that enriches corporate executives, you're either told that you don't understand the wonders of free trade, or that you're an immigrant-hating racist.

It's something I've written before, but it bears repeating. I, unlike many of the people who feel free to weigh in on this issue, have worked with quite a few H-1B holders. Some of them are very good; you'd want them on your team, in your company, in your country. Some of them are just terrible, and should be sent home and drummed out of the field. The vast majority of them are, well, OK, competent, but nothing special. And the percentages of the people who fall into these categories are not so very different from that of US citizens.

It's really hard to justify, in our current climate, the importation of the mediocre and the terrible when there are good, experienced workers out of a job. That doesn't mean that we should exclude everybody, just that we should find some way of distinguishing those who are truly outstanding from those who are not. It's not as easy as handing every college graduate a visa, as not every mope who drags him- or herself to four years of classes is necessarily best or brightest (this goes for Americans as well).

Rob Sanchez's Job Destruction Newsletter chronicles the issues surrounding this topic in thorough fashion. He is, probably, more anti-H1Bs than I am, but that's fine. What is scandalous is that the issues Sanchez writes about are rarely taken seriously by the CEOs and pundits whose single-minded focus is "American workers bad, H-1Bs good."

April 1 is the day that US Citizenship and Immigration Services begins accepting H-1B petitions, and Sanchez is staying on top of this. There is a deadline of five days for accepting these petitions, and you may be wondering what happens if the cap is reached in that time - how does our government determine these best and brightest?

I'll let Sanchez answer this:

In case you are wondering what happens after the cap is reached, the USCIS will hold a random drawing to determine which ones get visas to work in the USA, and which ones have to go back to India. So, in order to select the "best and brightest" whiz kids in the world who will be invited to take jobs that Americans either can't do or don't want, we will pull names out of a big hat.

Again, I'm not absolutely opposed to some kind of program like this, but random selection completely undercuts the contention of its supporters. We're not looking for the elite, we're just looking to bring in people to do our work. That is most certainly not the stated intention.

Note: I'm not ignoring one possibility. It is conceivable that proponents of the H-1B program have no problem with the random draw because they believe that any immigrant is superior to any American. If so, they should just say that, and clarify their thinking for us.

H-1Bs and you

I suppose it's somewhat encouraging that The Numbers Guy (Carl Bialik) in the Wall Street Journal is at least writing something about the numbers surrounding the H-1B visa issue. (The link in the first sentence is to his blog post; his print article is here.)

It's not all to the good, as he tries for that false parallelism so common in journalism today ("Bob Franklin teaches his students that 2 + 2 = 5; some experts disagree"). As the subtitle in the print piece states, "Both Sides in the Debate Over Employee Immigration Policies Misuse Data to Advance Their Positions on the Issue."

He does expose the idiocy of Bill Gates' statement to Congress, "for every H-1B holder that technology companies hire, five additional jobs are created around that person," which comes from a "study" I have taken issue with before. That study, so flawed, seems to continue to rally the troops in favor of lifting the cap on H-1Bs. Bialik also points out that the study omits the biggest users of these visas, the Indian technology companies.

For balance, he tries to find fault with those who are against granting more of these tickets to employment. The evidence of statistical misuse is a lot more thin than the above, relying mainly on the premise that the number of actual jobs affected is less than some say. Citigroup says H-1Bs are "fewer than 1% of all employees," which may be true, but doesn't stand as much of a refutation of the larger issues.

Of course, the issue is way more complicated than this back and forth, and Bialik doesn't delve very deeply into it. But at least a mainstream publication is doing something more than parroting the standard drivel served up by those "statesmen" who, coincidentally, have something to gain from bringing in low-cost labor. Whatever statistics one wishes to cite, I'm still not convinced that we won't, someday, be looking at the H-1B program the way we now look (negatively) at the bracero program for agricultural workers of the 1940s and '50s.

More from the dreaded France

This idea, that Barack Obama is turning the United States into France (quel horreur!), is apparently not just from the fevered mind of Republican operative Mike Murphy (as I wrote about on Monday).  Kevin Drum writes about a New York Times op-ed by Roger Cohen, who at least does some fleshing out as to why he thinks we're going the way of our Gallic neighbors across the sea.

Apparently, in France the government is seen "as all-embracing solution rather than problem," and:

there’s more than a touch of France in the bash-the-rich righteousness with which the new president cast his plans as “a threat to the status quo in Washington.”

This piece goes on, and gives us a glimpse of what Obama's opposition is thinking.  There's the warning against nationalization, which France tried, then rejected about 25 years ago (so the nationalizations were the scary France, and the reversals were, quoi?, the non-France?).

But we get the crux of the argument a little lower down.  "French savoir-faire" offers great pleasures, but in no way matches the joyously chaotic American ambition.  We offer "the ease of American identity and the boundlessness of American horizons."  And then comes this pronouncement:

Churn is the American way. Companies are born, rise, fall and die. Others come along to replace them. The country’s remarkable capacity for innovation, for reinvention, is tied to its acceptance of failure. Or always has been. Without failure, the culture of risk fades. Without risk, creativity withers. Save the zombies and you sabotage the vital.

If America loses sight of these truths, it will cease to be itself.

I'm still not sure why, other than force of habit, the Republicans use France as their model for static, non-innovative, stifling cultures.  But let's move past that.  (Actually, let's not.  Is France, with their restless immigrant population and 80% nuclear power, really the slow ponderous culture Cohen purports it to be?  Seems not.)

One of the major aspects of the American experience has been the conflict between limitless chaos and organized civilization.  We worship the frontier, the men on their horses riding hither and yon, but that's always in support of the town, the stagecoach, the new schoolmarm.  We may need a certain amount of "creative destruction" in order to remain vital, but once we slip past a certain boundary, we have anarchy.

And our current situation has some measure of that, some degree of having left rules behind and thrusting the most vulnerable out into the wilderness.  While the CEOs, who are supposed to be bold visionaries and risk-takers, the John Waynes of the modern-day frontier, protect themselves in their gated communities with their golden parachutes, the walls of the fort are coming down and the average American is getting scalped.

When hundreds of thousands of our fellow Americans are being thrown out of their jobs every month, we have moved from "creative destruction" to, simply, destruction.

What Cohen misses is that the glorious "boundlessness" he writes about is not the end, it's the means.  We accept the chaos to get beyond it, because accepting it seems to be the best way to give the greatest number of people a respite from it.

The apotheosis of Cohen's America would be one in which all that we have is thrown into a big drum every year, then reapportioned out to whomever was most deserving.  You could never count on having achieved anything, as it might be taken away from you at any moment.  Is that really the American Dream?

Of course not.  We can argue back and forth as to whether AIG or Chrysler or Citigroup should be propped up or allowed to die, but we shouldn't argue that we want the whole system to die.  Vague warnings about France, which at the very least understands that a safety net is needed for the most vulnerable, doesn't advance the discussion of the specifics.  The contention of Cohen and Murphy that there are two poles, and classic America stands at one, and France at the other, simply doesn't hold up.  It's a subtle matter of degree, and righting the American ship is not the same as setting it on fire.  Republicans need to figure that out, and soon, or they truly will become irrelevant.

Surowiecki again

I'm not fond of writing in a way that suggests piling on. Obviously, anyone could take a, say, Thomas Friedman book and spend days going through and pointing out the infelicitous phrasing, the lack of willingness to climb past the self-aggrandizing neo-cliches, and the inability to take any thought to the next level. But that's pretty pointless, though I reserve the right to do that with any Friedman book or column I happen to come across.

So I'm not trying to focus on James Surowiecki of The New Yorker, even if it appears that way. It just happens that he's written on topics that interest me, so I will write about him again, even though I did so just yesterday. I actually have two points here.

1) It can be dangerous to look at what people quote in preference to reading the whole thing. Case in point, Andrew Sullivan quotes Surowiecki:

Historically, productivity has been “procyclical”: it rose during booms and fell during recessions. But not this time. Even as the economy did a cliff dive in the last quarter, productivity rose an impressive 3.1 per cent. And since, in theory, workers get paid more the more productive they are, their increased productivity has helped them avoid pay cuts.

I read this and thought, has Surowiecki missed the boat this thoroughly again? Since productivity is generally measured as output per hour of employment, all we need is what we're seeing, where the denominator (hours worked) is falling faster than the numerator (economic output). And this is true enough, and belies the Sullivan title for his post, Silver Lining Watch. It's not good news at all that we are shedding jobs faster than we can cut spending.

Added to that was the loopy application of a true-enough theory, workers get paid more as productivity rises, to a specific point in time, one short enough that the theory does not hold. If we are avoiding pay cuts (and we're not - Microsoft is cutting pay for its contingent staff [at least that's what I'm told in my comments], and Acco Brands is cutting pay by 47% for a while - so it's premature to argue that this won't happen), it has little to do with perceived productivity and more to do with the general stickiness of wages.

To my surprise, once I read the entire article, I found that Surowiecki has actually spoken to most (I stress, most) of these issues. It's actually a good piece, notwithstanding the flaw about pay cuts, that wages are not quite as sticky over the long haul as many would like to think. My conclusion is that it's important to look past the quote that Sullivan cited and read the whole thing.

2) However, Surowiecki misses something else, and it's a big something else:

Bad times have always meant job losses, of course. But what’s distinctive about the speed and depth of today’s job cuts is that, even before the recession hit, American companies were, by historical standards, running lean operations. While the economy grew at a respectable rate for much of this decade, hiring did not. So one might have thought that companies would have had less room to slash payrolls, since they were already relatively slim. Instead, the same companies that were slow to hire after the last recession have been fast to fire during this one. G.D.P., after all, actually grew for much of 2008. Yet every month companies were cutting jobs. And after the credit crisis erupted, in September, companies wasted no time: as fast as consumer spending was plummeting, businesses were cutting payrolls even more aggressively. Companies have always wanted to do more with less; nowadays it’s a positive obsession.

This is true enough, but what is completely missed is the existence of greater labor pools. I'm referring, of course, to the existence and accessibility of overseas labor. Companies don't need to, as Surowiecki puts it, "hoard labor," because they can get warm, cheaper bodies that are a T1 line away.

Missing this factor is a huge omission. What we are seeing is a revolution in the way we hire and retain labor, and how we account for it. Frankly, I don't trust any of the productivity numbers I see any more; determining this was always problematic, but the presence of giant sources of hitherto untapped labor has thrown these statistics up for grabs, and I doubt we're capturing a lot of that.

You cannot hope to understand the labor market of the 1970s and '80s without considering the influx of women, and you can't discuss today's without taking offshoring into account. That we continue to try, among the punditry and the statisticians, is a major logical flaw, and no article that misses these factors can reach conclusions we can trust.

No middle ground

Not to belabor the Buschmann ground again (read here and here if you don't know what I'm talking about), but there is another issue that I've neglected before. In any of the stories that have been swirling around this blog on this issue, whether it be an international businessman who is now selling suits and carrying boxes, or the erstwhile pizza delivery guy who is now a professional tech doc specialist but has no problem returning to pizzas if that's how it goes, or the people I know who have been forced to take subsistence jobs to replace their engineering or development careers, we consistently fail to wonder why so many people end up with these choices.

What I mean is that we pretty much accept the idea that the engineer whom the market has cast aside will be working at a sandwich shop or a Best Buy. We rarely talk about the possibility of transferable skills, that the engineer through years of rigorous study and effort might be qualified for something similar.

I see this in my profession of software development all the time. If I were hiring, I'd rather hire someone with 20 years of experience, even if he had never worked with the specific technology, than the kid with a couple of years gained solely in that technology. (Understand I'm not being absolute here; there are plenty of dullards who've somehow lumped through a 20-year career without doing anything of note, and plenty of bright eager young people who are worth their weight in gold. I'm talking about a comparison of two average people in the two groups.) But I'm not hiring, and my attitude is most definitely not the dominant one.

Even more broadly, as a developer, I've done every job in the software lifecycle, so I know, for example, that I am a great tester. I've worked with a lot of the automated tools, and I seem to have the kind of curiosity and thoroughness that are the hallmarks of fine testers. Yet, I can't get a job as a software tester, because I've never had that exact title, I haven't lived and breathed the testing lifestyle (or whatever people are looking for).

I'll survive, but it's indicative of something larger. When our economy was on the rise, there was so much demand for so many different jobs that intense specialization became the rule, even when it wasn't appropriate. Now we have C programmers, and C++ programmers, and Java programmers, and so forth, and each exists in his or her own employment silo. That a good C++ programmer might be superior at coding Java than a mediocre Java programmer isn't a problem, not as long as a superior Java programmer will come down the road soon, and there is a near-infinite supply of C++ jobs anyway.

But things are different now. For various reasons, in various fields, opportunities are far harder to come by. So, if the C++ market dries up (or large corporate auditing, or Wall Street quant modeling, or radiology), the only option left for even the best performer is to take a generic job. No one in corporate hiring (if any of those people are left) is going to "take a chance" on even the best C++ person if the job listing calls for Java.

The job seeker is left with some pretty noxious options, most of which involve fudging the resume. If that doesn't work, it's off to the warehouse with you.

This has huge implications for education and career development. There used to be a focus on creating the "educated man," on giving all graduates a common base of knowledge that they could apply to whatever profession came their way. There were specific specialties that needed advanced training, but the vast majority were expected to be generalists, getting more specific as their careers progressed.

Now we have high school students who are required to declare a major, and, even in schools without this requirement, there is societal pressure to figure out what "you're going to do with your life." This is why we shouldn't be surprised that our young people seem so stupid. There is no reason for the person on the investment banking track to know where Madagascar is; that's just mental space that is better spent on collateralized debentures.

We're all duly appalled at Leno's Jaywalking features, in which some telegenic kindergarten teacher demonstrates that she doesn't know who the first president was, but her job is teaching letter recognition and monitoring naptime; George Washington doesn't come up a lot in her duties. Articles like this one, which lament Americans' ignorance of the particulars of the current status of Bethlehem, are ultimately pointless; it might be nice if people knew the demographics of Christ's birthplace, but it is hardly essential knowledge (and, realistically, how many people could describe the religious makeup of their current towns?).

As for what will happen next, I don't know. Workers will have to somehow become more generalist, or they'll be subject to the feast-or-famine workplace we are developing now. But the other side will have to change, companies will have to spend the time to figure out what person will fit the job best, even if the credentials aren't an exact match...but they won't.

Why not? Because they don't have to. XYZ Corp can't find 25 Java programmers with exactly 2-1/2 years experience, who each have training in some obscure library? No problem, some guy who works out of a post office box will offer up his 25 people with exactly that experience (then call his brother-in-law back in Bangalore and tell him to staff up and find some online training guides).

What this does is create even more risk for the person trying to build a career. You have to be fortunate enough to pick some specialty that "can't be outsourced," and you better make yourself absolutely indispensable within that specialty. Retraining, the great answer to every question, will only allow you to start over at the bottom. Unless you're really lucky, your income will lurch up and down until you hit a certain age, at which point it's pretty much whatever you can scrape out of the marketplace. There will be no middle ground.

This post is already long enough, so I'll let the reader work out the implications for society. (By the way, I understand that there are some people who find what I've outlined above as desirable, a commendable way to regularly reorder things to approach an optimum condition. To them, those who value the creative aspects of chaos over the institutions that one can build on stability, then it's all good and you should be happy.) The changes will be profound.

The specific and the general

I would be remiss if I didn't follow up on the post I wrote about the Chicago Tribune story that used one Karl Buschmann as an example of how someone with a great deal of education finds himself working very hard to make ends meet. Ron May, who I wrote about here, left a comment with some specific observations about Mr. Buschmann, a man he knows slightly. The impression I get from Mr. May's comments is that Mr. Buschmann doesn't fit the mold of the "hale fellow well met," and that his experience may be somewhat limited in a way that might curtail his current opportunities.

I don't know Mr. Buschmann, of course, and whatever twists and turns he may have experienced on the way to his current situation are unknown to me. However, I didn't pick him as the subject of a feature story, the eighth (or so, who knows today) largest newspaper in the country did. Is he the exemplar of a trend, or an outlier? Don't know.

What I do know is that it is a trend. I haven't cleared the relating of some stories with the people involved, so I can't be too specific, but I know quite a few people who are in similar straits as Mr. Buschmann. In general, these are people who were well-respected in their positions, who performed well, who had credentials and experience, and are in no way "odd ducks." They may not have been tireless self-promoters, but they certainly added value to their organizations - and they're now underemployed, forced to take jobs outside of their fields of proven expertise.

Some can argue that that's just the way the cookie crumbles, and maybe it is. Maybe these are simply people who got caught up by a trend external to themselves, and they need to understand that and accept that. And, you know what, they've done just that. They may still be looking for work in their chosen fields, but they're also doing what they have to.

Perhaps this country doesn't need as many software engineers and electrical engineers and project managers as it used to, no matter what the "experts" say. But that is the crux of the matter, isn't it?

Those who choose to read this blog as a tribute to inefficiency or an immature desire to the world as it can never again be, I would suggest that they have not read it at all closely. What I have said is that there are costs to the business-friendly policies we've adopted, costs that are being increasingly borne by people who are already exposed to a great deal of risk. I have written that there are risks to any nation that farms out vital activities to other countries, and doesn't wish to realize the full implications of those risks. And I have stated that the CEOs and the college presidents and the pundits who go on talk shows and insist that our children need to major in STEM (science, technology, engineering, mathematics) fields have an equal obligation to point out where they think the jobs will come from.

No guarantees, there never are any - but then I am not the one being certain, am I? I'm not the one telling the audience that we need x number of people to go into these fields in order to remain competitive, when the vast majority of these jobs have been lost solely on the basis of price. After all, it costs the CEO nothing if 5,000 young people major in EE because he's talking it up, then end up working at Starbucks. (In fact, he has a perverse reason for doing just that, in that the higher supply will lower the price of whatever engineers he does need to hire in this country.)

So we can pick through the specifics of one case, trust that the system has worked to expose one man's flaws and put him in the position he "deserves," without regard to what he has achieved. We can assume that the 50-year-old guy working at Best Buy is there, not because of rampant age discrimination, but because of some character defect that somehow went undetected in the 25 years he spent earning patents and missing school plays for the good of his company.

But, in the end, we're left to square the conflicting messages. We can't have it both ways: we can't cast out the Karl Buschmann's and all the others with varying amounts of oddness, then insist that our future will be built on an ever-increasing supply of people with those same credentials (unless we assume that our educational system is somehow optimzed to cast out that oddness). My complaint is not with reality, things are what things are. It's with those who insist the system works properly because they're too myopic to admit that luck or fate has just as much to do with picking the winners and losers. And, while I don't ask for guaranteed outcomes, I do ask that the people who are given a forum, those who might just possibly influence behavior, not lie to us about the truth of the matter.

Someday we'll all be contingent

At the risk of starting a self-referential loop that will bring down the entire Internet, I'm going to take the chance of linking to a Citizen Carrie post from Monday that refers to a post of mine. Without going into the substance of mine again (I have one coming on that), I urge you to read hers for a different slant on the employment picture. There are actually two or three threads here, but I start with a quote:

I hope that no one in this country is still thinking that income for typical workers will continue to rise throughout their careers. It's more realistic to live on a total austerity budget during your peak earning years so you'll have enough money saved away to get you through your remaining forty or fifty years. The big gamble, and I wish we all had crystal balls, is trying to figure out if paying for expensive continuing education will be worth it given the fact that you could be starting your downward salary trajectory at any given time. (For example, is it worth it for 35-year old engineers to get MBA's?)

When I worked at a well-known research institution, I saw a graph of average salaries for their engineers. It rose quite quickly over the first ten years, then flattened out, which was explained to me as a combination of two factors: there tends to be a lot of learning in that time, whether in-company (and it had enviable training at that time) or through the accretion of additional degrees; and there was a desire to cement in those workers, to get their salaries high enough by the age of 30-35 that they wouldn't want to leave. We're not talking about the Dark Ages here, this was less than 20 years ago, but I'm guessing that neither of those factors carries much weight now, and that the curve would be far less smooth.

The point is, if you continued to get education, you saw an immediate boost in your compensation, at least up to a certain age. It probably wasn't a perfect system in that it offered very little incentive for a 45-year-old to go out and get another degree, but chances were the company preferred that, because that worker was already in the position (with 20 years experience) where he or she was "most needed."

The world has certainly changed, and a lot more of this has been pushed back on the worker. Carrie's question as to the worth of the MBA at a certain point in life is not one that people had to answer before. If you were an engineer but wanted to pursue management, of course you got that MBA. Otherwise, you received additional training in engineering to keep your skills sharp. Now, you have to calculate at every turn what your opportunities are today, might be five years from now, ten years from now, and so forth, then try to make a cost-effective decision (taking into consideration all the relevant tradeoffs). Some people probably find that exciting, but it just doesn't feel like the way to run a reasonably stable society.

Carrie then changes gears a little and contemplates the possibility that, given the reluctance of more and more companies to offer health insurance (particularly those small businesses that Republicans get so rhapsodic over), perhaps we would be better served by a combination of part-time jobs. Personally, I find that idea pretty monstrous, but, anyway, Carrie goes through the implications. To me, this conjures up visions of this vast nomadic, contingent workforce, serving at the whim of whatever corporate master happens to own the company this week. The societal implications seem huge, but it is late and I do not wish to think about this anymore tonight.

Wonder how much Karl's giving to the Alumni Fund this year?

The Chicago Tribune has a rather perky story today about one Karl Buschmann. It takes only a few minutes looking around the Internet to get a picture of successful businessman Buschmann: in 2000, he was featured in the University of Chicago Graduate School of Business (hey, that's Booth now) as a marketing manager; just two years ago, he was named executive director of the Japan America Society of Chicago, and he was also founder and chairman of the business school's International Roundtable. Here's a guy who did the right things, got the MBA in 1985, parlayed that into the kind of connections and ties that should have ensured his success.

And yet, Buschmann has been out of work for a year and a half. Well, not quite out of work - he now cleans toilets at a clothing store. The Tribune article is titled, "Former execs prove well-suited to 'survival' jobs," a fairly sprightly title for what should be seen as a cautionary tale and a catastrophe (I've reprinted the article in full below, because I'm still not sure how the Tribune handles old articles).

This is actually a pretty strange article, with bizarre shifts in tone and content. To summarize:

• Buschmann's good at selling menswear, because he has a great resume
• He has to do whatever he can because he needs to work, even sweeping the floor and cleaning the toilets
• But he seems happy that he's good at his job
• You can follow the rules, achieve a great deal, and still move downward
• But it should be good for retailers because they can pay minimum wage to seasonal workers who are really good with their MBAs and experience
• But they aren't hiring anyone anyway
• So even the minimal advantage that a Buschmann would bring to retailing, what with his work ethic and all, isn't helping people like him
• Even with a great background, then, you can't find work in what you're trained to do, and you can't find work in a lesser field that might be able to use your talents
• So Buschmann also works in a warehouse lugging heavy boxes, even though he's 54, but maybe that's OK because he's a triathlete
• And his business experience implies that he understands the needs of suit-buying executives

I can't tell whether this article thinks Buschmann's situation is good or bad, so let me help.

This is bad, really bad. It's certainly bad for Karl Buschmann, who did all the right things, got the right degrees, joined the right professional organizations, got his name out there. But maybe you're an old-line Reaganomics type, and you say, "Well, that's just the way it goes, creative destruction and all that."

But can we really afford to take someone who has many productive years ahead of him and throw him, and so many others, on the scrapheap? Let's forget the plight of Buschmann for a minute, and think about what this implies.

First, here's someone who has proven talents and abilities, at a time when this country needs such people, and the best we can find for him to do is to sweep floors. We've got wetbrains paying themselves millions while their companies go down the tubes, and we think it's just part of the economic process that people like this man are cleaning toilets.

Second, what does this say to our young people? The mantra is, work hard, go to school, get that graduate degree, go into debt, do whatever the company asks you to do, and your reward will come. That's right, your reward will be to schlep heavy crates around a cold warehouse at the age of 54, and you better keep yourself in triathlon shape just in case.

Third, expect the media, on the rare occasions when they notice you at all, to write incoherent stories with cutesy headlines about this problem - my guess is the stories won't be quite so breezy when there are huge numbers of journalists who are toting that barge and lifting that bale.

Karl Buschmann has sold menswear for only a month now, but, it turns out, he's pretty good at it.

Maybe it's his years of international business experience.

Or his graduate degree from Washington University in St. Louis.

Or his University of Chicago MBA, Class of 1985.

Or the fact that he really, really needs this gig as a part-time sales clerk.

After a year and a half without full-time employment, the 54-year-old Schaumburg resident is resigned to doing whatever he must.

If that means sweeping the floor and cleaning the toilet at a clothing store, so be it.

"You just check your ego. It's what you've got to do," he said. "I'm good at my job."

As the recession turns ever uglier, job seekers are lowering their expectations, and employers are seeing applications from some of the most highly qualified candidates in memory.

With top companies cutting positions by the thousands, a stellar resume and strong work ethic are no guarantee against downward mobility.

"When they said, 'Go to college, go to work and, once you're qualified, the system takes care of you,' it doesn't anymore," said Brian Healy, a ministry leader at the Holy Family Job Support Group, where Buschmann is a member. "Unemployment is very bad and getting worse."

The educated, white-collar workers lining up for unemployment checks have come in handy for retailers who typically staff up during the holidays. All else being equal, that high quality should translate into better service, said Neil Stern, a senior partner with Chicago retail consultancy McMillan/Doolittle.

Yet, this is the first year in "a long, long time" that holiday hiring is down, he noted. With the recession squeezing merchants across the board, sales staffs in many cases are leaner than ever.

After decades of dwindling retail service, customers expect less. Forget about knowledgeable, friendly help. If stores have their products readily available and make checkout a breeze, "That's good customer service today," Stern said.

A few merchants such as Nordstrom's, Container Store and Trader Joe's pay more to maintain higher standards. But for most, especially with the economy flagging, "It's about cutting, trying to run as lean and minimally as possible," he said. "Survival may hinge on how fast and deep you can cut."

That approach obviously does no favors for Buschmann, who also works part time in a warehouse hauling heavy packages to qualify for the company's unusually good benefits, though it's a tough workout even for a perennial triathlete.

"I'm working a couple of survival jobs to earn a few shekels and obtain medical insurance," he said.

It's a far cry from his days of business travel to China and Germany, working in the software and consumer-electronics industries.

At least he can relate to the executives who buy suits from him. And his experience overseas comes in handy when the customers occasionally hail from Europe, Asia or Africa.

Buschmann's extended job search also has taught him he's not alone. Plenty of fellow fiftysomethings are looking for high-level corporate jobs too.

"There's more people in the pool now," he said. "We're out there in the marketplace in spades." (Greg Burns)

Japan - our future?

Citizen Carrie does another of her fine survey articles as she rounds up a lot of information on current Japanese labor practices. There's a lot here, and I won't be able to summarize it - read it for yourself - but one thing that stuck out for me was the ineptness of Japan's transition from the old lifetime-employment style labor force to the new contingent world. Theirs is a society classically based on relationships, and the move from these relationships to the transaction-based world that is now favored is proving to be difficult.

The United States never did go quite as far down that path as Japan did, but, for stability's sake, we emulated the focus on relationships. Not lifetime employment, perhaps, except in some highly-unionized settings, but we certainly seemed to believe that a degree of constancy was desirable, that experienced employees were an asset that were prized (even if they cost a bit more than the greenhorns). In return, there were such concepts as loyalty that didn't seem like a bad joke.

We've lost interest in all that now; we extol "creative destruction" and flexibility and assume that someone will pick up the cost - of course, it's the worker and his/her family. According to Carrie, Japan has gone farther down the road toward two-tier wage schemes and temporary employment than we have...yet.

One big difference is that Japan doesn't have the safety nets we take for granted, but they weren't going to be needed, because the Japanese industrial machine was going to take care of it. Naturally, we found a different way: we had a safety net that worked, with occasional problems (health care foremost among them), but the deficiencies were made up for by our incredible growth. Lose your job? Don't worry, another one will come along in no time.

Japan's now embarked on a program to build the safety nets; we'll see if such a plan does better than the more organic way we've let ours grow. But the bigger problem for us is that we've let our net sag, that we aren't funding the components as we must, having spent the money on other things. So we've emerged at the same place, with insufficient support for those who have inevitably been cast off by a noxious form of capitalism. The solutions proffered in the U.S., which generally begin and end with the extension of unemployment benefits and retraining programs, are laughably lacking; we see in Carrie's article that Japan has made very little effort in that direction (but at least do not blame the workers for their deficiencies).

What we'll probably do is continue to trot out the usual talking heads to derogate American workers for their problems, castigate unions for their unwillingness to act as passive instruments of management, and wring their hands over the problem without offering anything other than slogans as solutions. Above all, we'll continue to believe in magic, that we can systematically dismantle our economy and new things will just come along to replace it, and all workers will be happy, empowered, and giving their all for God, company, and the U.S.A.

Review - High Wire

The media does not have a lot of patience with digging out real economic stories. It's easier just to go through the Rolodex and call up the usual suspects, the economists and business leaders who are always quoted in stories or put on TV panels. There's an economist in Chicago who is the go-to gal for every upturn and downturn in the market, so much so that she probably works out of a TV studio. We also have our own version of Suze Orman, a woman who has appeared on local television for decades with financial advice (her stock answer, no matter the situation: invest and diversify - for anything else, check with your own financial adviser).

The problem, of course, is that the media never stands back and takes the longer view. The stories boil down to, how should people deal with today's stock market, and what are individual shoppers thinking? Very occasionally, a newspaper will look at the longer-term plight of a real family, but it's rarely deep enough to help us see what's actually going on.

This blog (among others) has tried to shed some light on some number of larger topics; in particular, I've written several times about how the large institutions of our society have been shifting risk to the less powerful, their employees, their customers, their suppliers, and their stockholders. (It's my belief that this is an outgrowth of financial risk management, which emboldened executives into thinking that risk is a commodity rather than an inherent part of doing business.)

There have been a few books that have tried to chronicle this trend, but the most effective one I have read is High Wire: The Precarious Financial Lives of American Families (2008) by Los Angeles Times reporter Peter Gosselin. (I referred to a review of this book by Robert Solow here; he is at least as complimentary as I.) This book is profoundly sobering in its comprehensive look at the extent to which families are being asked to assume not just greater burdens, but a larger amount of volatility.

Volatility is important because it demonstrates the probability that a family will experience a life-changing reduction in its income. If people were simply losing ground, that could be handled (even though it is incongruous with the supposed leap in productivity we've seen in the U.S.), they would cut back and learn to do without. But an increase in volatility makes it more likely that people will be thrown into a hole with possible long-lasting effects. Gosselin develops a measure of volatility and refers to other studies in the subject; there is general agreement that financial life has become more risky over the past 30 years. This is true at each income level but the very top, but, of course, the upper middle class have a somewhat better chance of withstanding a drop.

But studies aren't going to be what a reader takes away from High Wire. It's the people who Gosselin finds, people who, for the most part, are living the American dream when something happens that irrevocably changes their lives - and there's no backstop for them, no safety net to smooth over the rough spots.

The book is divided into different subject areas, classified by the categories that most affect the average American. I won't go into detail on each - you really should read the book - but Gosselin demonstrates how the ERISA legislation has provided cover for corporations to dump defined-benefit pension plans for defined-contribution ones. This provides an illusion of control, but leaves retirement income up to the vagaries of the market.

The chapters on jobs and "unjobs" are quite affecting. We've become aware of the elimination of lifetime employment; layoffs are far more likely than they were just a few decades ago. The vaunted small business economy, which is touted as a job creation engine, is more illusory than it appears, because smaller companies go out of business far more easily than do large ones. They may create jobs (though, as I've pointed out many times, it is necessary to point out that that function is not an objective but a by-product of increased business), but those jobs are less likely to last for even a fraction of a career.

An "unjob" is one that is by its very nature temporary. It tends not to offer benefits, even at the very highest level, and there is no commitment on the part of the company. It reduces people to contingency workers, eliminating the relationship between a person and his or her work to a transactional exchange. Some of these are lucrative; there's even a market for temporary CEOs, but they still suffer from their short-term nature, making it hard to plan a life. What these jobs do is turn back from one of the great human inventions, division of labor, by turning everyone into a perpetual marketer of self (OK, maybe bees were there first). Gosselin doesn't spend much time on this aspect, leaving it to Barbara Ehrenreich, but it's certainly disturbing to see talented, experienced people spinning their wheels on a variety of money-making ideas when they have proven value.

Many of the programs that used to help the poor have been eliminated or cut back beginning in the Reagan years. Housing assistance has been reduced considerably, as easy-way-out politicians chose to assume that the market would provide. Of course, it hasn't, and those at the bottom of the ladder are the ones who are most at risk as we see the subprime mortgage market implode.

The two sections on insurance, house and health, are probably the most frightening. Very few of us understand the extent to which actuaries (who deal with probabilities over large populations) are being supplanted by risk managers, who attempt to ascertain individual risk, allowing their companies to price accordingly (or stop providing insurance in certain risky areas). Naturally, this removes one of the justifications for insurance, risk pooling, and turns that market into a perverse sort of lottery. The idea that, if you are lucky enough to remain unhealthy or your house doesn't burn down, you might actually pay slightly more than people who don't have that luck, is disappearing. But that implies that bad luck is just that much more devastating.

Reading the chapter on health insurance will convince you, if you aren't already convinced, that we need some serious changes to the process. People are dying because non-medical personnel are making decisions about treatment and payment, and our legal system is geared toward backing whatever decisions are made. That seriously ill people have to spend time wrangling with an insurance company over what is covered and what is not is a travesty in any civilized society.

Education is the ticket to success, at least that's what we're told by virtually everybody. But, as Gosselin says:

Young people are expected to make career calls early on, place large educational bets on those calls - usually with their parents' money - and suffer the consequences if the decisions turn out to have been wrong. If the student or the economy changes along the way, so that the career option chosen at a relatively early age has lost its luster, too bad.

This process was not so problematic in a growing economy, as more jobs were needed in virtually every field. Furthermore, jobs were less specialized (alternatively, credentialism had not taken hold to the extent it has today), so skills were transferable to a degree that almost certainly won't be available to today's students.

We look at the stock market and bless the day(s) that Bush's replacement of Social Security with private accounts fell through. We've already tried to turn far too many Americans into investment professionals, and, frankly, we're just not up for the job. The actual professionals don't do a very good job - why would we be any better? Gosselin is entertaining, but disturbing, when he queries Nobel economics laureates on their own investments, finding that they're as clueless as the rest of us in saving for retirement.

Finally, we're taken to New Orleans in the aftermath of Katrina. Here again, the free market is supposedly handling the rebuilding efforts, with some minimal incentives provided by government. The problem is one of critical mass: Until enough people are convinced to return to make the provision of services profitable, those services won't come back - but the people won't return without the services. Giving no-bid contracts to Halliburton subsidiaries will not solve that problem.

In this review, I've just touched on some highlights. There's a lot more in High Wire, well-researched and well-written. The Introduction is a superior essay on these topics. Gosselin intelligently avoids the tendency to propose programs to "fix" these problems, admitting that many of the most sound ideas have no chance of being enacted. He touches upon some specific proposals that have been offered in the past, such as income-contingent college lending, but concedes that the old ways are likely not returning. If we are, however, to provide more security, especially for the most vulnerable in America, we need to do something: "What has been damaged by some can be repaired by others." Steps in that direction would truly be change we could believe in.

Save the cars, not the people

I haven't written anything on the proposed bailout of the auto industry, mainly because I haven't been able to decide where I come down on the topic, partially because I didn't have anything significant to say. I probably don't have any more insight than I had before, but I have been motivated to weigh in by the remarkably poor dialog on the two sides.

The argument, of course, is at its base fairly simple: do we help one of the giant industries in our nation, one which is going through some rough times right now, especially since we are assisting the financial industry through its rough patch; or do we let market discipline, which is clearly pointing toward the failure of one or more of the Big 3, do its job and let them go, the way we would any convenience store or graphic design firm?

Out come the advocates on each side, citing statistics, making appeals to our desire to help others, whatever it takes. And so much of what they say is nonsense, or wrong, or beside the point, and they're never called on it. Here's the bottom-line question I want answered: Who is this bailout for?

Proponents say it's for the people, to preserve the jobs of the good men and women who currently build our cars. But then, on yesterday's Meet the Press, Tom Brokaw cites this:

Most researchers say there are three million jobs nationwide. As you can see there in Michigan, Illinois, Missouri, Indiana and Ohio there are thousands of jobs that are involved. And then if you talk just about dealerships across the country, nationwide there are about 740,000 jobs involved with the Big Three in dealerships alone; General Motors, 325,000 jobs in their GM dealers across America.

Far be it from me to tell Mr. Brokaw to do his job as he tries to burnish his Cronkite credentials, but this last "fact" is no help at all. How do I make this clear? Jobs in dealerships are the result of the need to sell cars...people may not be buying cars now, presumably they will again one day...when they do, it really doesn't matter which nameplate is on the car they're buying, the number of people working in dealerships will be pretty close to the same. So these hordes of people won't be selling Big 3 cars, they'll be selling Hondas or Toyotas or Hyundais - the bailout has absolutely nothing to do with these people.

Needless to say, Uncle Tom's guest, Carl Levin, auto industry shill (wait a second, I've just been informed that he's a United States senator, I never would have guessed that), didn't mention that.

Here's the thing. The advocates of the bailout say that's it's all about the three million jobs that are in or depend on the auto industry. So the measure of the bailout plan has to be how much it helps those three million people (actually more like ten million if you start including families).

But the advocates also say the money will be used to "restructure" the Big 3, which as we all know means plant closings and the elimination of jobs. So who is being helped by the bailout again?

A few people have suggested using the existing bankruptcy structure to get the job done. Apparently there are some impediments to that, foremost among them the difficulty the car companies would have obtaining credit. If we could get by that, apparently through an act of Congress, they could move forward with, that's right, their restructuring. The "good" thing about Chapter 11 is that the Big 3 could shed all of those unfortunate burdens that they agreed to, things like pensions and retiree health care (George Will was remarkable on this topic on ABC's This Week yesterday; I plan to write a separate post about Mr. Will). Then they could move forward with a truly clean slate.

This is the United Airlines model of bankruptcy, in which they stiffed their creditors and stockholders, shafted their employees and retirees, did virtually nothing to improve service to their customers, but enriched their executives (8% of the new company stock went right out to upper-rank employees; their CFO, a man who enraged many with his insensitive statements, has now retired at age 50 with a $2.4 million parting gift).

However this would get done, it seems quite clear that it isn't really about the hard-working people of the auto companies, but about the corporation itself and its executives. These companies have spent a couple of decades doing everything they can to move jobs overseas, bust the unions, do more with less. Some of these things may have been necessary, some not (don't you wish they had spent fewer millions on advertising?), but they have not been actions you could call pro-worker. (To be fair, that isn't a major goal of any corporation, it's just sad that so many people think so.)

So a pro-auto company bailout is, by definition, not necessarily a pro-auto company worker bailout, and we should consider that very carefully before we throw billions of dollars into it. Personally, I'd like to see a far more extensive plan for what will happen, how many jobs really will be saved, what the companies will have to do in the way of moving to post-petroleum technologies.

See, I don't really trust the auto executives with all that money. One chairman and CEO took his previous company nowhere during the greatest boom market in its product line, alienated pretty much everyone during his six-year tenure, and walked away with close to half a billion dollars. Another big player, a vice chairman at one of the Big 3, who runs a company based on science and technology, believes that global warming is "a crock of s***." These are silly small men who are supposed to take our money and, despite years of proof that they don't know how to succeed, are going to rebuild the auto industry.

Chances are the first thing these captains of industry will do with our tax dollars is fly off to a "Management Planning Retreat" in some tropical clime, because only golf and massages can help them figure out what to do with all that cash.

I still haven't decided where I stand on this bailout. I'll be very unhappy if it is used to enable more of the same behavior we've seen, if we're just throwing it down a rathole.

But there's the other side, the side that says, "Let them fail, and we'll help the real people on the other side." But none of these wise folks ever have much to offer beside extending unemployment benefits and offering a meager amount of cash for job retraining; I mean, how many hairdressers and chefs do we need? I still haven't seen a plan which isn't, in effect, here's some money, now go away and don't bother us. And that just isn't going to cut it.

So it's a dilemma, and one which is going to cost all of us either way, and whatever facts exist are being obscured by talking points, and I just don't know.

A question about infrastructure

One of the commonplace ideas that's being bandied about these days is that the magic bullet to stimulate the economy is to put massive amounts of money into fixing our infrastructure, our roads, our bridges, our reservoirs, and so forth. A lot of bright people has touted this "solution" in articles and blog posts and in appearances on talk shows. I won't try to cite names (try Googling "stimulus" and "infrastructure" and see what you get), but Robert Reich offers a pretty good ongoing summary of the argument.

Here's what I don't understand, any more than I understand why "investments" in new energy necessarily imply great wealth and riches for the American people: why is infrastructure going to rebuild our economy any more than anything else?

I know that we need to spend this money, that most governments have hopelessly neglected such projects in their continuing need to maintain the fiction that they get more and more things done without raising taxes. We have not kept up with the things we have, though we do sometimes find money for new splashy things (I live close to a multi-year project that is rebuilding an intersection, along with associated interchange improvements, despite the fact that the reality of the labor market means that the troublesome intersection is no longer a problem).

But there are two contentions I don't get. One is that these projects will create good jobs. I'm not sure what the profile of jobs created by construction work is, but I'd like to see some evidence that it's necessarily a high-compensation set of positions. Since we've seen the diminishing power of unions in this outsourcing world, I don't know that these are great jobs with good pay and limitless futures.

The second contention that confuses me is the idea that these projects will help our economy grow. The growth of any economy is directly tied to innovation, and it just doesn't seem to me that rebuilding a bridge or a highway is "innovative" enough to create that growth.

There are two possible answers to my questions that I can foresee, and they may provide enough of a positive effect to offset my concerns. The first is that infrastructure improvements enable other segments of the economy to grow, that by building new roads we create opportunities for the faster movement of goods, which helps the economy. True though that may be, I'd think that our long-time neglect of these things implies that much of this "investment" will be used to maintain the status quo, not directed to growth.

The other possible answer comes from something that the proponents sometimes include in their message, that we will improve our human infrastructure as well, by building new schools, extending the Internet, offering help for college. And I suppose that these things, even if they're part of any legislation, would help (though I have serious doubts as to the matching of future supply with demand). But these are long-term solutions with no guarantee of proper implementation; if we haven't figured out how to fix our schools yet, why is now any different? So, even in the 10-15 year timeframe, it's hard to see how this part of the "investment" solves any of our current problems.

It's possible I'm missing some part of the argument, but I've been reading what I can find about it, and specific details as to how our infrastructure spending will transform our lives are few and far between. One of the apparent problems with this year's "stimulus" is that it was unfocused, that it had no framework to guarantee that it would stimulate anything in particular. I'd sure like to have a few more answers before we commit more billions to build more stuff.

Goal-setting

One thing that we've heard a lot about is that we need a Manhattan Project for new forms of energy, that we need to commit ourselves to a massive endeavor to find the source or sources of fuel that will replace our dependence on foreign supplies. I have a lot of qualms about this, most of which I've expressed before (the two biggest: I doubt that New Energy = a New Economy; and there is no guarantee that the U.S. will be the great discoverer, so we'll just pay those billions to a different foreign entity).

Here, though, I want to talk about the analogy to the Manhattan Project, because its philosophy is virtually unsupportable in today's political climate. Let's remember that the Project was run by the government in secret, its budget hidden in a veil of "national security." I know that private companies had their hands in it, but it was, everyone can agree, a government effort.

But we all know from Ronald Reagan (and Sarah Palin) that government cannot be trusted, and this belief is so pervasive that very few Democrats seriously question it these days (I recognize the unreality of the current financial crisis, but the key word there is "crisis" - people are not yet convinced that the energy situation is in that mode). Therefore, no one sees an Energy Project; instead, we want to "unleash" the great creative power of the American people by offering tax credits or rebates or whatever. The government won't manage anything, because it can't, but it will dole out money and wait for magic to happen.

I'm not a lunatic liberal, there are many things where I want government to take a light touch. But there are areas in which government, as a representative of this great democracy, should take the lead. (I recognize that this is one of the great issues of political philosophy, this balance, but I think we've let the balance become tipped too far in one direction.)

China has not taken the world lead in manufacturing by providing vague "incentives." They don't turn out large numbers of engineers by hoping that kids would decide to go into the field. Maybe you don't like comparing us to a totalitarian system. Fine, then look at our democratic friends, the Indians. Do we believe that they just spontaneously saw the benefits of studying computer science, or providing call center services? No, in all these cases, their government made a concerted effort to steer their society along a path.

[To pre-answer my critics, I'm not advocating a Soviet-style 5 Year Plan. That was the apotheosis of a too-heavy hand. But the examples I've provided demonstrate that it's possible for a government to set targets and formulate policies to support them without strangling their economies.]

But we refuse to do that, so caught up are we in ideological purity. If I had to summarize our problems with education simply, I'd say that we have failed to establish real goals. Even No Child Left Behind, with its metrics and numbers, is not specific enough to carry through to the world of employment. After the TV show CSI started, there were numerous stories about how large numbers of students were choosing to study forensic science. No one explained where all those people were going to find jobs, given that forensic budgets weren't increasing by three figure percentages. A rational system, one in which we recognize foreign competition and the waste of resources, wouldn't permit that.

Who is more likely to come up with the Next Big Thing in energy? Americans working in their garages, taking a tax break for the 100 square feet they're using, or the Chinese, using tax dollars to set up huge industrial workshops? Think about where you'd put your money if you had to bet.

By-Products - 1/3/08

[Would that eight more months have made the ideas here more prevalent. But people still don't understand that American companies have no manifest desire to create American jobs.]

I produce sweat, carbon dioxide, urine, feces. That production is a biological imperative; I can control when I eat, when I drink, when I sleep (within certain limits), but it is difficult to control the output of waste products.

However, it would be quite a stretch to claim that production of waste is my purpose in life. Even if the proverbial man from Mars were to observe me and make that claim, it would not be true. (What my purpose in life is is unclear - maybe that's another day's post.)

Businesses exist to make money. They generate revenues through economic activity, incur necessary expenses, and this results in profits. These profits may be put to any number of uses (enriching executives), but the very survival of the enterprise depends on the creation of profit.

There are a lot of institutional structures in our system that support and assist business, especially big business. Our tax code, our bankruptcy laws, grants, TIFs, and on and on, all designed to help and protect business. United Airlines, perhaps the worst-run major company in the history of the U.S., can lay off employees, stiff shareholders, obliterate their pension obligations, all under the auspices of kindly bankruptcy courts, and return to disappointing customers and making their executive talent (?!) wealthy.

Why does business get treatment under our laws that the individual can only dream of? We have to assume it comes from the belief that companies create jobs in a way that the average person does not, that the synergy that comes from assembling a number of people in one place is worth the sweetheart deals.

But here's the flaw in the argument. Just as I do not exist to produce waste products, neither does a company exist to create jobs. The days when a CEO would look proudly at the company's employees, toiling away to create products and profits, are gone, replaced by resentment over how many resources those employees are using.

Companies do not want to create jobs, and public policies that devote tax dollars to assisting companies are reckless and wasteful. We who pay taxes to support this madness should insist that it stop.

Self-sacrifice

This is from about a week ago, but Andrew Sullivan linked to a Clive Crook post about Michelle Obama's convention speech, noting in particular the part where Crook writes:

It's starting to annoy me that Barack keeps telling us how he turned down Wall Street for a career in "public service". By this he means politics. Just how great a sacrifice is that? The kind of ambition that gets you into the Senate and maybe the White House is not exactly renouncing the world and all its temptations, is it? And now here we have Michelle doing the same thing. She gave up lawyering, she says, and chose "public service"--the kind that leads in due course to a 300k-plus salary. I've no problem with it. I just don't want to keep being asked to admire the sacrifice.

I have to say I share this sentiment somewhat. The nobility of people's personal choices, choices that we really have no way to evaluate, strikes me as overblown. We regard a person's subsequent success in the path they chose as a validation of all the alternatives they supposedly had. In other words, we think the way one commenter on Crook's post does:

Barack Obama would be making a lot more money as a Wall Street lawyer today if he had stayed there. Michelle Robinson would be making a lot more money today as a partner in a big Chicago law firm today if she had stayed there.

Who says? We have no way to know if Barack Obama's skills would have translated into infinite success in the Wall Street environment, or if Michelle would have made partner. For all we can say, Michelle jumped to a not-for-profit just before she was pushed out the door (which happens to many associates in law firms).

Anyone who has worked for any length of time has seen people who are ill-suited to a particular environment despite their demonstrated skills. There are those who flourish in a bureaucratic situation who flounder when put into an entrepreneurial-style company, and vice versa. We constantly see corporate vice presidents who are considered top-notch, and they abjectly fail when put into the top spot. Michael Jordan, despite his obvious athletic talents, couldn't hit a pitched ball and never was seen as a true baseball prospect.

Imagine a mover and shaker like Barack Obama logging serious time as an 80 hour-a-week associate in a big law firm, spending most of his time doing research and writing briefs. That might have been the path to great riches, but we don't know that; what we do know is that the path would have been a waste of his talent to connect with people, to inspire them with a vision (strangely enough, most law partners resist the "vision" of their new associates).

Just as Obama at some point had to realize that he was not going to be an NBA star, it may well be the case that he had a similar realization concerning his ability to thrive within a standard legal environment. His success, while admirable, may not be transferrable to any other arena - his path may well have been optimal for him, and, therefore, his choice may not have represented a sacrifice at all.

Lest this be seen as criticism of the Obamas, it is not. The point can be made about a host of other decisions that we are routinely expected to admire. The marginal high school grad who goes into the military based on the lack of unskilled jobs in his or her town and the educational benefits being offered is not necessarily sacrificing a future, but trying to build one. The law school graduate who goes into public aid law, then has to take a bartender job on weekends to pay back student loans, is in that situation as a consequence of choices, and I'm just not going to spend a lot of time crying about that.

As one travels along the road of life, decisions are constantly being made. Some of them work out, some don't, but trying to parse out which are noble and which are not is a pointless exercise after the fact. Had Barack Obama seen community organizing as an untenable choice for a career, he wouldn't have chosen it, but he did - that is neither admirable nor not.

Michael Phelps and H-1Bs

So let's say you have to hire someone for a programming job, and here's how you go about it. You put an ad in the paper stating that you have such a job, and then 100 people come in. You don't talk to them in any depth, don't consider whatever experience or aptitude they might have, but you put them at 100 workstations and put them to work on various problems you have. You don't pay them anything, but, over time, maybe a great deal of time, you realize which of them is the best one, and that's the one you hire.

There are big problems with this, which is why we don't use this method. First, who's going to go for this? I enjoy programming, but I wouldn't sit in a room solving problems for free, waiting to see if I'll get hired. More importantly, there's no guarantee that you'll end up with someone even minimally competent. You might, you might not. Since you probably won't, you're wasting your time.

What you do, assuming you're trying to find the best person for the job, is to recruit in places that might have potential employees who know what they're doing. You screen resumes, conduct interviews, possibly give a programming test. You try to maximize the probability that you're selecting from a pool of high-potential candidates, then you try to select the single best person out of that pool. And this is such a natural way to do this that we rarely think about it.

But we select our Olympic athletes the first way. We open a pool, or a gymnastics school, and, if we're lucky, Michael Phelps or Shawn Johnson wanders in. A lot more luck later, they become Olympic champions. We allow private enterprise to determine where the school is located, and we let fortune dictate whether or not the individual ever gets there.

And, since we fundamentally don't care if we get a Michael Phelps (no, we don't; we may thrill to his accomplishments, but, if he didn't exist, we would feel no loss - five gold medals, six gold medals, what's the difference?), this system works fine for us. It demands nothing from us. If the Johnsons want to mortgage their house to keep Shawn on the balance beam, they can go ahead - means nothing to me one way or the other.

If you did care, however.... Let's say you were given the job of increasing the number of swimming medals the U.S. wins. Your livelihood and your children's future depend on seeing gold, silver, and bronze draped around wet Americans. Would you:
a) Work hard to encourage people to build swimming pools at random places around the country, then just sit back and hope that kids who are genetically blessed wander in and start to take lessons, or;
b) Go out and try to identify kids who have the makeup to become great swimmers, have the requisite shoulder and ankle flexibility and other qualities, then send them to existing training facilities that could enhance and hone their skills?

Of course, you would choose b), you would have to. But that's what the Soviets and East Germans did, and that's what the Chinese are doing now, and we all feel a little queasy about that. It goes against the American ideal of individual choice, of allowing everyone to do what they want regardless of ability. "You can be whatever you want to be" is a far better motto than "E pluribus unum." There might be 10 or 100 more Michael Phelps out there in the U.S., and we'll never know it. They're off cooking or knitting or mountain biking, fulfilling their desires rather than maximizing their gifts.

It's fairly clear, however, that, for things we truly value, for which we're accountable, we take a more proactive approach. China's done so with respect to the Olympics, and they're winning medals left and right, and they've also done so in training engineers, just as India has chosen to work toward dominance in software and call center jobs.

What does this have to do with H-1B visas? Here in the U.S., we take approach a), where we just allow in a clump of workers who've demonstrated little more than the ability to earn a college degree, and assume that, out of thousands, some number of them will have the entrepreneurial bent necessary to build the companies of the future.

Grandpa John not only doesn't see a problem with that, he supports more of the same. From his campaign website:

John McCain will expand the number of H-1B visas to allow our companies to keep top-notch talent – often trained in our graduate schools – in the United States....For every foreign worker hired, corporations generally hire five to ten additional American workers.

[Link pointed out by the invaluable Job Destruction Newsletter.]

I'm not sure what's more disheartening here, that McCain believes that the H-1B visa program is geared around the desire to find "top-notch talent," or that his staff is inflating the results of a flawed regression study, which found that each H-1B application generates 5 to 6 new jobs (a ridiculous result, implying that we only need to apply for visas in order to employ the entire country, and ignoring the reality that the largest H-1B companies are Indian outsourcing firms).

Sure, it's possible that by letting thousands more immigrants into the country, without any additional screening other than "got a college degree," we will find the next founder of a Microsoft or an Intel, creating industries that will generate millions of jobs. But setting this up as a crapshoot, praying that the person is out there who will bring untold wealth to the U.S., is as quixotic as building a pool in the middle of South Dakota and just praying that the next Michael Phelps will wander in.