Thursday, November 5, 2015

Productivity and Union Myths

___Unions claim that when productivity increases the wages of workers should increase accordingly. If workers were the sole reason for the increase in productivity, then the argument might be valid. If however the increase in productivity was due to capital investment (automation), then workers claim is false.

___In 1970 the book Future Shock described the economy of the United States since 1607 and predicted the future economy. During the Agricultural Age 98% of Americans were involved in agriculture. As machines and fertilizer increased yields and decreased the need for manual labor, the percentage of Americans who were involved in agriculture dropped to the 2% that we see today. Many of these workers went to work in factories in the Industrial Age. Efficiencies and automation again decreased the need for manual labor, and the percentage of Americans involved in manufacturing has decreased. This has been particularly true in labor-intensive industries where jobs shifted to countries with lower labor costs and more friendly business environments. The invention of the transistor and computers began the Information Age. Many new jobs require a higher technical knowledge than repetitive manufacturing or agricultural jobs. These low-skill jobs are increasingly filled by immigrants - many illegal. We have entered the Global Economy Age where companies from all nations compete for consumer dollars.

___The demographics of the developed nations is working against the increasingly generous federal and state retirement and health care programs. The United States at 1.8 children for the average family is below the 2.1 children needed for replacement. Because the average lifetime is at least a decade longer than in 1935, the funds promised to Social Security and Medicare/Medicaid recipients fall far short of what has been expected. Between the national debt ($18.5T) and unfunded liabilities ($98.9T), payments for these programs will be decreased or stopped entirely. We saw in Greece where this resulted in rioting in the streets. The government's solution to our demographic problem is to open the border to illegal immigration. These illegals will "do the jobs that Americans do not want to do." At the same time taxpayers will pay workers up to 99 weeks not to work.

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