[Music] well good morning good morning please please come in find a seat keep the aisles free and today we're going to be talking about globalization technological change and the jobs of the future let me remind you that we started this course two weeks ago with a question a kind of paradox and we still haven't answered the paradox we won't for a little bit of time and that paradox is why did wages start to stagnate level out in the late 70s early 1980s even though the economy kept on growing at the same pace if not a faster pace than it was growing for the first three decades after the second world war we asked this question because it might provide a very important clue as to why inequality is widening because most of the benefits of economic growth have not gone to people in the middle but most of the benefits of economic growth have gone to people who are near or at the very top since then since the late 70s early 1980s and we need to understand why if we are going to understand what can be done or should be done or if something should be done the other thing remember we started talking about is is this really a problem and there are some people around who say it is not a problem widening inequality is not a problem because widening inequality means we get more incentives for innovation for growth we get more elon musks who are inventing electric cars we get more jeff bezos who are coming up with amazons and making people making it more efficient for people in other words there is this view and it is still very much out there and i'm not going to tell you what to believe that inequality ultimately is good for everybody then in week two we started to ask well why is it particularly people at the top last week we looked at ceos and other people who are very wealthy why are they doing so well and i asked you is it because they have somehow rigged the system or is it because they are very talented and very much sought after or is it somehow because they are in positions where they have a lot of well let's put let's put it power and we looked at the market for athletes we looked at the market for performers for star performers we looked even at the market in berkeley for people like football coaches and that all seems to suggest that there is a market for talent and then we looked at the stock market talking about markets and i shared with you why more and more executive pay is coming out of the stock market in terms of stock options and stock grants to executives which led quite obviously to the question of well what happens to everybody else and what has happened to the corporation and is there a fundamental change in the purpose and the structure of the corporation that coincides roughly with the late 70s and early 1980s in terms of our paradox and what we did look at and did discover is that we went as a country from what might be called stakeholder capitalism in which corporations had some responsibility to all of their stakeholders not just shareholders but to their employees to their communities etc to what might be called shareholder capitalism is that good is that bad is that necessary how much of this is because of laws and rules that were changed and who changed them hmm well today we're going to be looking at the labor market we're going to be looking at the consequences of all of the above and also taking a look at two supposed causes of widening inequality that we've not talked about and those are globalization and technological change so the outline today is we're first of all going to be talking about consumers investors and the new corporation globalization and technology again two big factors that have been talked about as the central factors with regard to widening inequality i want to introduce you to the three jobs of the future or at least a way of thinking about the three jobs of the future we'll talk about race jobs and education the growth of the gig economy which plays a very important role here not enough attention in my humble opinion is given to the gig economy and then finally we're going to talk about politics and the reason we're going to talk about politics is i want you to consider how all of this relates to what has happened politically in the united states because one of the themes of this course is you can't separate economics from politic from politics you can't really separate history from economics or politics it is a system it's a system that is evolving and it continues to evolve all right consumers investors and the new corporation just to summarize where we've been and i've summarized this pretty much already consumers are under greater and greater pressure to get the best deals and we talked about this a little bit last week as the median wage flattens you as consumers really want to get the best deals even if you've got to shop online even if you've got to go to walmart even if you've got to sacrifice other values and corporations themselves are under greater and greater pressure to get the highest returns as investors demand it corporate raiders private equity the vehicles in a sense through which investors are getting better and better returns on their investments in the shareholder market which is called the stock market and these widening choices for consumers and investors are related to technological advances and globalization we'll talk about this today but also they're related and i want to make sure you get this because we're going to talk more about it it's a very important theme in this course changes in laws and in regulations okay uh a question for you we're going to look at the the old corporation uh you know the old corporation from let's say 1945 to 1980 first three decades after the second world war what was the most significant barrier to entry now let me explain what i mean but barry by barrier and entry if you have an organization that is competitive that is trying to make money in the market there's no way you're gonna make money if there's no barrier to entry if anybody else can see you got a good idea a new mouse drop some innovation and they can do exactly the same thing and everybody can get into your particular line of work and replicate exactly what you do well that's no barrier entry at all you're not going to even have an incentive to get involved to begin with so there's always going to be some barrier to entry every company every private sector entity needs in order to survive some some sort of entry barrier the question is what are they and what's the public cost so if you look at the corporation between 1945 and 1980 what do you think was the most significant entry barrier was it a access to capital in other words access to investors and to loans or was it b economies of scale just getting very very large or was it the geographic proximity to customers or was it executive talent what do you think go well most of you say access to capital and i can understand not most of you 48 almost half of you and i can understand that because we've been talking last week a lot about capital and access to capital uh the next uh almost maybe 29 you say economies of scale and then geographic proximity and then a few of you think it's executive talent well it turns out that the biggest barrier entry between 1945 and 1980 had to do with economies of scale now let me explain this because after the second world war the biggest companies got very very big in the auto industry there were only three big companies emerging the big three gm chrysler and ford in other areas of the economy like chemicals there are only five major chemical manufacturers there are only four of this and three of that the reason is that there were huge economies of scale and by economies of scale i simply mean that the costs of equipment of rental of factories all of those fixed costs could be amortized that is they could be divided up among more and more units of the same product the more you produced the cheaper it was to produce because those fixed costs would actually be smaller and smaller as a percentage of the cost of any individual product economies of scale meant that high volume standardized mass production you've heard the term mass production well these this was the golden age of mass production high volume standardized stable mass production was the core to big companies getting profits and doing well and getting bigger now in order to maintain economies of scale in order to get economies of scale everything needed to be stable and predictable that is if something unforeseen happened if something if if if some particular component was not really working well if one particular point in the line if it was a big auto assembly line if one particular point really broke down all of the economies of scale would start to be undermined uh in fact when i talked about just now or mentioned the assembly line what you really do have in your head i think is something like what henry ford came up with in the first part of the 20th century that is the big automobile assembly line that was the beginnings of economies of scale now predictability and stability also meant you needed to have a reliable workforce incomes rose over time because you wanted to keep your workers reliability meant stability of your workforce those jobs themselves were stable and predictable predictable most people spent their entire careers with the same firm you in fact i remember when i was growing up most of my friends had fathers most it was it was fathers most of the mothers who were in the middle class were lower middle class uh stayed home they were quote unquote housewives uh and that was not true for poor women by the way poor women were in the workforce but in the years were talking about it was mostly male workers and most of them did the same thing from morning to night they worked eight hours and they did the same job over and over again the more predictable the job the more stable the job the easier to achieve economies of scale careers were also very predictable most people in the workforce again were talking about in terms of the middle class most men were working in ways that they could join a firm when they were right out of high school most of them did not have a college degree still most people don't have college degrees were in the workforce but then college degrees were very rare and most men in the middle class went to work without a college degree they signed in or checked in to work at 9 00 a.m sometimes 8 a.m they worked eight hours and over time those promotions often meant the same work but they were getting more money for it because the company valued stability if you can imagine that workforce very dramatically different from the workforce we have today for reasons having to do with economies of scale today what do you think is the most significant barrier to entry is it access to capital a is it brand loyalty b is it innovation c now there's another factor we're going to talk about that in a couple weeks that's market dominance let's put that aside that's not d we're not going to talk about market dominance today i just want you to choose between access to capital brand loyalty and innovation as being today's most significant barriers to entry go okay 47 you say access to capital and i totally understand and it is important i mean access to capital today is exceedingly important some of you say brand loyalty but it turns out that the most important and significant entry barrier today what gives companies the security and profitability they need is they have to innovate they've got to make it better and cheaper or faster they've got to continue to innovate in terms of what their customers want because other companies can so easily catch up with them innovation better faster cheaper innovation has become the most significant entry barrier and this is where technology technological change comes in and why i want to talk with you about globalization technology because undoubtedly it has had a big effect undoubtedly these are puzzle pieces to the riddle the paradox of what has happened to widening inequality in america and elsewhere why inequality has widened so fast here but they are just puzzle pieces they don't give us the entire answer there's a big debate going on and has been going on for about 20 years now about whether technological change is more important than globalization in terms of explaining widening inequality or globalization is the biggest factor uh what do you think a i think technological change has been had a bigger effect on the us labor force than globalization or b i disagree i think globalization has had a bigger effect than technological change why don't you go go well there's not a huge difference 55 percent of you say technology 43 say globalization uh actually i can tell you how many papers i have read have been written how many books on whether it's technology or globalization uh i wrote i once wrote a book called the work of nations and i thought it was globalization more than technology uh but uh that my critics all said i was wrong it was all technology technology but other people said no i was right globalization globalization uh well let me just share with you uh two realities two facts one is that between 2001 when china entered the world trade organization and 2018 the growing trade deficit between the united states and china displaced and we have good data on this about 3.7 million u.s jobs and that included 2.8 million jobs
in manufacturing uh is that a big number um it's it's not small it's it's fairly significant but i also want to share with you something else and that is that technological changes in terms of such things as container ships and there weren't really container ships before the 1970s and container ports which grew dramatically in the 1980s and satellite communications technologies that enabled companies to coordinate their production around the world and other technological advances like these these technological advances made globalization possible or to put it another way it's both globalization and technological change that have had a huge impact on the us labor force but you can't easily separate them technology has fueled globalization and the desire to globalize for the purpose that we will now look at has fueled technological changes here are places in the united states that are most affected that have been most affected by chinese imports since 1990 in terms of the increase in chinese imports per worker in each of these areas what you can see is that these places missouri or it depends on whether you're from the north or the south part of missouri if you're from one part of it you call it missouri missouri and then look at tennessee and look at north carolina and mississippi and alabama and also georgia and and take a look at arkansas i mean these places and i don't want to leave out indiana uh even pennsylvania and in virginia by the way in the back of your minds want to be the reality that every one of these places i'm pointing to we're not everyone but most of them are called swing states they are politically up for grabs all of these states where you see dark red are most affected that is 20 percent or more of the jobs were affected by chinese imports since 1990 a lot of job losses there are two forms of globalization and they are often confused one is trade and the other is direct investment now let me explain direct investment is basically a company in the united states investing in let's say for example china putting a plant in china investing in a factory in china to then import components from china or to export whatever the company is producing from china to other places around the world direct investment that is financial direct investment around the world it depended on and the reason it increased dramatically laws that liberalized finance in the 1970s and 1980s and also from the united states pushed other countries to open their borders to the united states direct investment before then before the 1970s and 80s a lot of countries didn't want a lot of outside investment they wanted to be financially independent or isolationist the united states also had a little bit of that tendency but right now direct investment allows corporations to make just about anything anywhere changing the bargaining relationship between labor and capital in the united states and by that i simply mean that companies had to rely on their own workforces in the united states to increase output those workforces had more bargaining power once companies in the united states could outsource anywhere around the world those companies had more bargaining power and those workers had less bargaining power and you can understand that intuitively if you as a corporation or a an executive of a corporation can make anything anywhere then you don't really have to negotiate hard with your own american workers in your own factories or your own places of business to get more output do you even before the pandemic trade in terms of globalization was dropping and global investment as of another form of globalization was growing and so here i want to show you trade as a percentage of world gdp and then i want to show you in the red line outbound foreign direct investment that is money coming from a country in the united states coming from the united states corporations going elsewhere in order to invest in factories and equipment and production and what you see here is the trade has gone up this is starting in 1978 and trade continues to increase in fact it and then it sort of decreased a little bit after the financial crisis of 2008 trade became less and less important as a form of globalization but look at what has happened to foreign direct investment more and more important as a form of globalization or another way of saying that is that in the 1970s and even the 1980s trade was more important than foreign direct investment in terms of linking the the world together since the financial crisis since 2007 2008 foreign direct investment has been more important in terms of globalization linking the world together than trade they're often confused and the reason i'm i'm i'm talking about this is because there are there's so many myths about globalization that for the purpose of this course for the purpose of understanding widening inequality you need to debunk these mythologies two very common myths is that foreign workforces are much cheaper than american workers well that's true in general i mean chinese workers are are able and willing to work for a small fraction of the wages of american workers and southeast asian workers in general are willing to and south asian workers also in general are willing to when i say willing i mean that's they don't have much choice those are the jobs they can get mexican workers uh are also charging or willing to work for a very small fraction of the wages that american workers get and that's not because mexican workers have such great unions or lousy unions it's because mexican unions don't really do terrible terribly good job representing the interests of their workers and we could get into this to a greater extent uh but uh uh you know when i was secretary of labor i'll give you an example um i needed to buy a car for my family the old car had died uh my wife and i uh we spent a weekend we looked at various dealerships uh and uh my assistant at the labor department had said to me everybody who's in the cabinet gets a political assistant usually appointed from the white house uh they're kind of spies i think but they're also advisors and my political assistant a very nice young man who who kind of kept his eye on me and knew we were buying a car and was interested in what kind of car and i we looked for a car and we found a terrific car and i i he was interested in what kind of car we were likely to buy and i said well we found a great toyota uh we haven't bought it yet but it really meets the family's needs and then i remember he looked at me uh in a very kind of patronizing way he was only 23 years old or 27 something like that and he looked at me in a kind of patronizing condescending way and he said mr secretary i said yes he said might i suggest since you are secretary of labor of the united states that you think about an american car well i instantly understood the wisdom that he was providing me and he was covering my derriere and he was a very very thoughtful political person and obvi i obviously wasn't and the next weekend my wife and i went to a ford dealership and we found a ford car that was almost as good as the toyota and i remember asking the ford dealer at the time i said can you you know i'm very interested we're very interested in this car uh but can you tell me uh was this car made in the united states by american workers and he looked at me for a long instant trying to decide was i one of those or was i one of those and then finally he looked up at me with a smile and said which would you prefer now what he was getting at i began to understand was that the ford had as much foreign components as many foreign components by value as the toyota in fact in terms of who made what where the toyota that i was looking at and the ford were almost identical the point being that there is no longer such thing as an american product where there were few and if you're looking at complex products there's no thing nothing there's no american product anymore uh every every complex thing that you buy comes from all over the world i mean look at my iphone or your iphone it's you know it has components and those components are coming from everywhere we'll get to this in a moment but when you're talking about american workers what you really want to understand is not american corporations versus foreign corporations what you really want to understand is whose workers are doing what whose workers from what country are doing what are adding what value and if you have workers in a particular company a country or adding a great deal of value they all other things considered are going to do well if american workers are not adding much value they're not going to do well in an increasingly integrated global economy the second mythology about globalization has to do with foreign corporations making inroads on the u.s market and foreign workers therefore being cheaper the example that comes to my mind here is a very personal example and it has to do with my my hips now let me share something with you just you and me i this is confidential nobody else just you and me i have artificial hips now i had to have my hips replaced uh you know years ago my hips were corroding my my you know the hips i was born with so i had to have new hips put in uh and i was talking uh a few years ago with with a class about globalization and i realized that i did not know where my hips came from i mean it was sort of you know it was about it was it was personal but it was also global i mean i was a bionic global i am a bionic global creature and so i wanted to know where my hips my beautiful and they are beautiful they are beautiful hips i can't show you but even if we were in a classroom together i wouldn't show you but you'll have to take my word for it they have plastic coating on the top and they are high tinsel strength very very beautifully designed so where were my hips made i went back to the hospital made an inquiry it turns out my beautiful new hips were not made in a low-wage country they were not made in china they were not made in any place in southeast asia they were not made in a low wage part of south south asia my new beautiful hips that have been terrific they were made in germany and they were made by workers who were earning more than american workers now i use that example to illustrate the following obvious point it's not just wages germany is well known around the world as a manufacturing center a very high value added precision manufacturing and that precision manufacturing is exactly what is needed for my hips and so both of these mythologies that they're american companies that are competing with foreign companies and that somehow it's all you know all the foreign countries and all these foreign uh workers are are are much cheaper than american there is a lot of confusion about all of this fundamentally it boils down to where the value is being created and how much value is being created where or take i mean if you look at an iphone for example when you buy an iphone what do you think is the biggest thing that you pay for is it manufacturing a legal and financial services b advertising and marketing services distribution and sales services design and engineering services what do you think go well you're sort of all over the map 15 of you manufacturing and then legal and then advertising and distribution and you're all right in terms of yes they're all very important uh but design and engineering 36 of you say yeah design and engineering is probably the most critical and most expensive why because the value added there is the greatest that's where and the workers around the world were providing the design and engineering services are probably being rewarded most in terms of where the money you spend for this iphone is actually going which gets to the next question which is the retail price of an iphone is what 10 1099 this is the iphone 12 this is not an iphone 12 uh and then what are you paying you're paying components and labor uh 490 dollars a screen battery uh triple camera you can see all of the things here uh that kind of total uh 490 dollars and then over here 606 dollars a lot of this is both design and engineering services and also profits uh profits profits we haven't talked about profits but obviously uh companies have got to make profits go back to the shareholders they want profits those profits actually do and are represented in share prices and iphone is doing pretty well in terms of apple's iphone 12 led to the largest revenue and profit in corporate history hello apple revenues 36 over one year quarterly revenues net quarterly profits well that's nice but what about labor what about actually workers where do most of your dollars go when you pay for components and labor components and labor which are a big big part not as much as design but big big part of apple do they go to japan do they go to germany do they go to workers in south korea are they going to workers in the united states or china what do you think go okay let's see where you think the dollars that you're spending for components and labor for your iphone are actually going well most of you are saying more than half you say china and then a lot of you think it's the united states well let's actually look uh china at least mainland china is 4.6 of your the dollars that you're spending for components and labor south korea turns out to be the biggest place where your dollars are going uh the united states and europe are tied japan is pretty is pretty high taiwan particularly with regard to semiconductors now why are you and why did most of you pick china probably because the iphones are assembled in china from components coming from south korea and japan and europe and even the united states and then they are shipped to the united states so it looks in terms of the international accounts that it looks as if it's all coming from china but no in terms of actually who is paid for what and that's what we're getting at today who is paid for what mainland china doesn't get in the mainland chinese don't get very much of your dollar which really gets us to a taxonomy of of jobs now when i say a taxonomy of jobs what i really mean is this you want to categorize jobs you want to understand the jobs of the future you want to understand how jobs have evolved what do all of everything we've talked about in terms of globalization and technological change but also what we talked about last week in terms of the shift from stakeholder to shareholder capitalism uh what actually has been the effect on jobs and and three categories of jobs which are which are most important one category before you answer this don't answer yet let me explain one job category here in the united states uh let's call routine production it's repetitive it's predictable it could be in the service sector it's mostly in manufacturing but it's just repetitive people do the same task over and over and over and over and over again a second category is personal service jobs uh now personal service jobs have to do you know retail restaurant hotel hospital uh all of these jobs that have to do with personal attention what what's really being given is personal attention and then a third category of job uh i call symbolic analytic jobs because they're problem solving jobs they're creative jobs now this taxonomy and it's just a taxonomy by taxonomy i mean we're just categorizing jobs for the sake of understanding how jobs have evolved why they've evolved who gets them who's paid what and where jobs are going which do you think of these categories has shrunk the most because of globalization and technological change go all right let's see what you say routine production uh most of you say but b there are a lot of you who say it's personal services and then some say symbolic analytic well uh let's take a look at manufacturing output and just looking at from 1990 to 2020 uh what do we see in terms of how much output coming from american manufacturers uh well look at that turns out well in 2020 we had a deep recession because of the pandemic but the general trend has been and then here we had another recession because of the explosion the financial bubble on wall street but generally speaking output that is productivity the number of things stuff that manufacturers american manufacturers are coming out with continues to grow manufacturing real output is extraordinarily high but here's the thing how many jobs in manufacturing take a look at manufacturing employment what we see is manufacturing employment in terms of here thousands of persons involved in manufacturing manufacturing employment continues to drop well it grew a little bit between 2010 and 2020 and then continued to drop what i want to stress with you is that output that is productivity often is inversely related to the number of people doing it in fact almost by definition as each person becomes more productive because they're more machines more equipment more technology then output is going to go up but very often the number of people required is going to drop at the start of the last century in 1900 for example most americans were on the farm in the 1950s i grew up in a community a little farm community most of my friends were farmers now what happened to all of those farm jobs they dropped precipitously starting in about 1900 continuing why did they drop precipitously part of the reason was that farming became so much more productive american agriculture output soared you didn't need that many people to do farming a lot of the farms where i grew up have been consolidated into much larger farms or the land has been converted into what condominiums and all sorts of suburban housing so the point is manufacturing employment has plummeted routine production in manufacturing and that's most of routine production has dropped very very fast if you look at the percentage of u.s employment and manufacturing versus non-manufacturing what do you see we're starting here in 1940 i was growing up here in the 50s non-manufacturing keeps on growing as a percentage of total employment we're looking again at jobs not output we're looking at what people are actually doing manufacturing that is the basis of routine production keeps on shrinking in fact if you look at employment in all routine production and this chart goes from january 68 to 2014 and these are jobs that involve primarily routine production manufacturing and all other routine production continues to drop precipitously why because people are more productive there is more machinery there is more technology there is simply the capacity to produce more with fewer you doing don't need all those people and those people therefore have gone elsewhere they didn't vanish but they left routine reduction which gets us to personal service work because many of the people who used to be in routine production have moved into this category and what is this category uh some of it is healthcare nurses nurse practitioners hospital orderlies physicians dentals hygienists dental physical therapists psychoanalysts uh now it's hard to move from the assembly line to being a psychoanalyst don't get me wrong but for example my brother-in-law i used to work in manufacturing he was a he was a line worker he worked on a on a assembly line and then his company closed and his job disappeared and he became a nurse an emergency room nurse caregivers also a very important growing part of personal service work caregivers for children for the elderly for the disabled people who are involved in teaching or providing what we might call learning services k-12 teachers counselors therapists personal coaches so and then retail workers restaurant workers hotel workers bartenders flight attendants retail workers massage therapists we could go on and on and on most work today well i'm going to qualify my statement i was going to say most work today is personal service work but it's changing but personal service work is hugely important it has largely replaced routine production work because technology has made routine production work so efficient and so productive you don't need that many people but you do need all of these people you can't make health care workers that much more productive or caregivers that much more productive because they have to provide personal service it's them and the people they are attending attention and personal attention is a big part of what is being provided you can't mechanize a lot of this some of it you might you can't automate it some of you might it's personal service uh by the way the impact of the pandemic on personal service employment you ought to be aware if you're not already obviously the pandemic has a huge effect has had a huge infect effect on personal service employment particularly with regard to retail restaurant hotel the service industries that we've been talking about for the last i've been talking about for the last 10 minutes uh these have been largely occupied by women by black workers by hispanic workers and these jobs have been dramatically impacted by the pandemic because people don't want personal services during the pandemic because it's too dangerous but the jobs will come back one of the reasons that we have all of these supply bottlenecks right now that are gendering inflation is because so much of the money that consumers have or have saved or have accumulated has been going into goods rather than services instead of going to the restaurant instead of going to uh to the movie theater or retail space uh consumers for the last two years they have been either saving their money or they've been buying stuff and the stuff that they buy particularly now has has created all kinds of shortages the more you want goods rather than services the more you are demanding goods from all over the world and they're you can't just create a lot of manufacturing capacity overnight which gets us to our third category of work i call them symbolic but they've also been known as knowledge workers or creatives and these people spend a lot of their time manipulating symbols or analyzing symbols and whether the symbols are verbal or mathematical or visual what they are doing and very often they're sitting behind a desk at a laptop computer or a desktop computer and they are solving problems or creating new ideas and possibilities and new services and maybe new products by analyzing and manipulating symbols who are symbolic analysts well choose any title from column one on the left add it to any title from column two in the middle and then add finally it to any title from column three on the right and you've got a symbolic analyst in other words you've got a systems strategy designer or a communications application engineer or a product management advisor or a financial applications director or a business research engineer or a resource planning advisor or a product blah blah blah blah blah blah do you get my point it's very hard to tell from the titles of these jobs exactly what they're doing but get behind the titles and what they're doing is remarkably similar they are manipulating analyzing some sorts of symbols and communicating about those manipulations in fact if you look at the american workforce as a whole and just take these three categories routine work and personal service work and symbolic analytic work what you see is a dramatic change over the last 60 70 years here is symbolic analytic work it went from maybe five percent to and it's getting to be close to maybe 20 of the total work in the united states personal service work was already fairly large maybe 20 but it's now much larger it's moving toward 40 percent we're getting to the point where almost all the jobs are either personal service work or symbolic analytic work and look at predict routine production doing the same thing over and over again because of economies of scale it used to be maybe 50 of total work in 1940 but now it's become a much smaller percentage i added in here government work because it officially turns up in different places in terms of statistics and agriculture and mining which was very significant even by 1940 uh it really is agriculture and mining not very significant but these three categories here is what has happened symbolic analytic growing personal service growing routine production shrinking and where do you find symbolic analytic work well one way of analyzing this is looking at where there are patent grants and research universities because symbolic analytic work happens to cluster around where there are a lot of patents inventions innovations a lot of research and what you see is what west coast the bay area a little bit less in los angeles and in seattle and then here the coastal area starting with boston and down through connecticut and new york and washington and then a few spots around these are the centers of symbolic analytic work in america and you don't have to answer this we sort of did already the pandemic has most reduced demand for personal service work but that's temporary education and income over time which racial or ethnic groups income and wealth has dropped the most over the last 30 years relative to the median income and wealth in the united states that's the question which racial or ethnic group's income and wealth has dropped most over the last 30 years relative to the typical workers income and wealth are we talking about black workers without college degrees did their income and wealth drop the most relative to the median or is it latinos the teen x without college degrees or is it white workers without college degrees or maybe it's black workers with college degrees or maybe it's white workers with college degrees what do you think again which of these groups income and wealth dropped the most over the last 30 years relative to the median go all right most of you are saying it's black workers who do not have college degrees and i certainly can understand where you're coming from in terms of what you assume in terms of systemic discrimination in the united states latinx without college degrees a number of you white workers without college degrees there is undoubtedly a major divide between the college and non-college and by now you ought to suspect what that divide is all about and let me just rehearse with you where we've been today because we started out looking at barriers to entry the most important barriers to entry into the modern corporation as opposed to the old corporation modern corporation it's it's innovation by making a better cheaper faster and then we looked at the three job categories symbolic analytic and routine production and personal service work and the one that is most valuable in terms of innovation is symbolic analytic that's where the innovation comes from that's why the coastal areas that we looked at have much higher incomes on average than some of the other places that have been impacted dramatically by chinese imports or by imports or by technology and we saw how the two are very much closely related so in terms of this particular question let's take a look since 1990 changes in income relative to the median by educational attainment and race we're going to be looking at non-college graduates white hispanic and black and then we'll look at college graduates and what we see here if 100 is the median this is the median income relative to the population what we see here is that white non-college have actually dropped we see also that hispanic non-college have gained a little bit of ground relative to the median and that black workers who are non-college also even though they are still way way behind they have gained a little bit of ground relative to the median make sure you understand the white workers without college degrees are still doing much better than the hispanic or black workers without college degrees but in terms of where they were and relative to the typical worker you can see that the white worker has been on a downward escalator while the hispanic and particularly black worker relative to where they were has been doing better now let's look at college graduates white workers with college degrees have been doing far better than the median and they continue to do better black workers with college degrees actually have not done that well and latinx workers with college degrees did quite well up until the bursting of the financial bubble and then have not done that well since again we're looking at relative to the median typical worker and we're also adding in relative to where they were in 1989 or 1990 same thing with regard to wealth if we looked at changes in wealth we would see something of the same pattern white workers have dropped relative to where they were if they don't have a college degree black workers and hispanic workers still very very far below the white workers not dropping quite as much college graduates white college graduates you can see and black not doing quite so well which gets us to one issue that is often not talked about nearly enough in my view which is to which is the growth of the gig economy but let's look at the contract work uh proportion of the us workforce now when i talk about the gig economy i'm talking about workers who are known as contract workers they don't have a full-time employment contract they are working either part-time or they are working for many different employers some of them are self-employed some of them are temp workers some of them are workers who are like lift workers or uber workers they are working for themselves that's what we say but in 1989 17 of the workforce was contingent like contingent that is their incomes are contingent on somebody else saying yes i want you now 2020 43 of the workforce is in contract work that is as i said either self-employed or they are working part-time or they're working on various jobs they have more than one employer or they are working for themselves but there's an employer in the background like lyft or uber the reason this is important is that much of this contract work is unpredictable you just don't know from one day or one week to the next how much you're going to earn it also is because it's unpredictable it is unstable and insecure and finally because it's unstable and insecure and unpredictable a lot of this work is relatively low wage work i might add that somebody who is a contract worker or a contingent worker or somebody who is in generally the contingent workforce gets no labor protections in the sense that that person is not entitled to social security or to medicare or medicaid through employment or to the affordable care act through employment or to a minimum wage or to the right to collectively bargain as a union member or to any of the other workplace safety laws and regulations in fact none of these workers is covered by the kind of traditional employment contract that was the model for almost all of the labor legislation and labor protections over the last 100 120 years so why the growth in contract worker is it because there's increasing pressure on companies to reduce their costs or is it because there's increasing pressure on companies to be flexible and responsive to changes in consumer demand or is it simply the increasing desire of workers to freelance to start their own businesses what do you think go okay let's see what you think and then i will share with you what we know so 58 of you say increasing pressure on companies to reduce costs and then a lot of you 25 think it's increasing pressure to be flexible and very responsive and then uh 16 of you say it's increasing desire by business by people to start their own businesses well there is some truth in all of this but what the data tend to show is that the major reason for the growth in contract work is because it is much cheaper and it is cheaper for companies because companies don't have to pay unemployment insurance their portion of unemployment insurance they don't have to play pay their their portion of social security they don't have to actually pay anything and they also those of you who voted b they also get a workforce that is available when supply and demand are uncertain when companies don't know how much consumers are going to want or their customers are going to want of whatever they're producing so the contract work helps them in that respect we just went through in california a very big but not very well known drama with regard to contract work and that had to do with workers who in some sense might have chosen to be contract workers but workers who ended up because of the law being deemed full employees is this good or bad which would you prefer uh security that is a stable job predictable wage and benefits but relatively little opportunity to advance and lots of monotony doing the same thing over and over but maybe you want opportunity which comes with an unstable job unpredictable wage and and benefits it's contingent work a lot of it but there are many opportunities to start your own business advance on merit devise new innovations make a killing financially which do you prefer go 56 of you interestingly want security and b 43 of you want opportunity what's interesting to me about your responses is that most of the time for the last uh few years i've been asking this question most students have actually chosen opportunity over security in other words what your your preferences are very similar to the preferences of most americans most americans actually do prefer security over opportunity and some obviously don't know the reason i've always assumed at least over the last few years i've asked this question that berkeley undergraduates opportunity over security is that number one you're young you don't know what it's like the pressures to have a family and to pay the rent and to all have all of these things that maybe require a steady job and security but also secondly because you will have a college degree from a prestigious uh in fact not just prestigious but the best university in the world and so those may make you more prone to take the opportunity over security but the interesting thing to me again is that most americans want security they take it over opportunity but the trend in our labor force is toward opportunity over security or another way of saying that is toward contingent work over non-contingent work in california 2019 there was a legislative decision a new law which said certain workers who had been classified as independent contractors will be classified as employees if their work is controlled or determined by the company and their work is a core part of the business and the worker doesn't have an independent business now you ought to understand this is all about uber and to a lesser extent about lyft and to a lesser extent about some delivery services but a lot of companies wanted to push their workers off their full-time payrolls as we've seen in order to save money and what the california legislature did is it said no you can't do that in fact these workers we're going to assume are full-time workers entitled to all of the protections of the labor laws if their work fits these three kinds of categories now what was the response of uber and lyft and some of these other companies that wanted to continue to put their workers and classify their workers as independent contractors well it was very simple in california what do you do you put a proposition proposition 22 passed by california voters in 2020 and you can see it just erased it eliminated that law that had been passed and it allowed companies to continue to classify their workers if they wanted to basically as independent contractors uber and lyft and others so under the california law those workers had minimum wage pay but under proposition 2 without that california law and california law is no longer on the books proposition 22 erased it so no minimum wage no overtime pay no unemployment insurance no workers compensation no paid sick days no family family leave but they do have protection against discrimination by the way why is it that californians approved proposition 22 a because it gives workers more flexibility b because urban uber and lyft spent over 200 million dollars selling it to voters or c it's better for the economy it creates more jobs speeds economic growth what do you think go oh you cynical you cynical bunch 78 of you think it's because uber and lyft spent over 200 million dollars selling it to voters well that seems to be correct it may give workers more flexibility and it may be good for the economy maybe it creates more jobs maybe it speeds economic growth but the most obvious precipitating cause of california voters improving was that uber and lyft spent a lot of money selling this to voters because uber and lyft would make even more money with this law no longer on the books proposition 22 erasing it essentially which gets us to politics if you followed today's logic in today's arguments i put in a lot of places laws and regulations uh there is and i'm gonna say something that may strike you as bizarre uh but don't reject it out of hand i'm just gonna say it now and we're gonna get into it in the future there is no free market markets are created by laws and regulations what is property what is contract what can be contracted for what are you liable for what kinds of bankruptcy proceedings if you can't pay your bills are you do you go through or what kind of how is everything enforced what if you what if you buy something and you never pay or what in other words markets are functions of political legal decisions that change over time we will come back to this point but for now i just want you to register that there is no such thing as a free market markets require legal and political decision-making to structure them and enforce them now with that in mind and also in mind all that we've talked about today in terms of the three categories of work the effect of technology globalization the shift from shareholder to stakeholder rather stakeholder to shareholder capitalism again i want to emphasize with you this is the geography of symbolic analysts roughly speaking using as proxies patent grants research universities and so on this again are places in the united states uh that were affected where jobs were lost or uh basically uh jobs in routine manufacturing were replaced by jobs in the service industry that paid less now i don't expect you to memorize these two maps but i want you to know that there has been in the united states over the last 40 years a fundamental fundamental shift here we used to have a lot of routine mostly manufacturing jobs and behind those jobs were unions we haven't talked about unions yet but those were jobs that paid well here we have jobs many of them pay well but large portions of the country no longer have them and you remember what i said about what happened to non-college people generally the premium for having a college degree given this and this the premium for having a college degree has continued to rise symbolic analysts almost all of them have a college degree and so what are some of the political ramifications we're here counties that voted for biden or trump here's joe biden land and here's donald trump land now i don't want to be or leave you with a sense of economic determinism because obviously economics isn't everything jobs are not everything kitchen table economics which i call it the kind of kind of economics that people talk about over the kitchen table not everything but it does affect how people feel about the direction of the nation how people feel about their own futures how they understand the control or lack of control they have over their lives or their futures you can't separate easily any of the threads that we've been talking about if there are vast numbers of people in this country who feel that they're getting nowhere and working hard or are losing their jobs or losing their pay or falling behind and they feel like the game is rigged against them they are going to be frustrated they're going to be angry they're going to be discontented in 2016 and 2020 what we saw is that non-whites and white women college graduates went one direction and whites without college degrees went in another direction and we can see this in every swing state non-whites and white women with college degrees versus white people without college degrees we'll come back to this theme but for now all i want you to stick with and ponder this week is the relationship between the structural changes in the economy that we've looked at the different kinds of jobs that people began to take the effect on the bargaining leverage that they had or lacked to do better and how they understood their political choices in our democracy much to ponder no easy answers but there are some important relationships okay uh we'll see you all very very soon have a good week
2022-03-02