1 October 2019   Leave a comment

The Federal Reserve Bank of San Francisco has published a paper entitled “Are Workers Losing to Robots?” There is little question that labor has lost a great deal of bargaining power over the last 4 decades. The Bank notes:

“A strong labor market and low unemployment traditionally help boost wages. But in the past two decades, the labor share—the portion of national income going to workers—has declined from about 63% in 2000 to 56% in 2018. This decline accelerated during the Great Recession, and the labor share has remained at historically low levels, even with strong employment growth in recent years.

“One possible cause of the decline in the labor share is that workers have lost bargaining power over the years. The late economist Alan Krueger highlighted several contributing factors, such as declines in union membership, increased outsourcing and offshoring, and noncompete clauses that hinder workers’ mobility across employers and regions (Krueger 2018).

“Another factor to consider is automation. Businesses have more options to automate hard-to-fill positions now than in the past. With rapid advances in robotics and artificial intelligence, robots can perform more jobs and tasks that required human skills only a few years ago. The steady decline in the relative prices of robots and automation equipment over the past few decades have made it increasingly profitable to automate. In this environment, workers may be reluctant to ask for significant pay raises out of fear that an employer will replace their jobs with robots.”

The graph below shows how much labor’s share of national income has declined over the years. The green line shows how much of that decline would be lessened without the effects of automation. Automation clearly has an effect, but the real cause of the decline is the process of globalization which sends jobs overseas.

Protests in Hong Kong escalated as a protester was shot in the chest with live ammunition by riot police. Today was the 70th anniversary of the founding of the People’s Republic of China and the event was celebrated in Beijing by a massive military parade. But the Hong Kong protesters wanted today to mark a sorrowful event and participated in various funeral rites. The Guardian describes the protests:

“Tuesday’s marchers had already defied a police ban to turn out in large numbers. Organisers wanted to mark the 70th anniversary of communist China as a day of mourning not celebration, and tens of thousands came out in response.

“’We want to show people this is not a happy anniversary,’ said Richard Hung, who works in the technology sector. ‘The CCP [Chinese Communist party] has killed or injured so many millions of people already. We have come out today, because if we don’t, we may not have another chance.’

“For the first few hours, the main march through the city centre was peaceful, with protesters dressed largely in black singing ‘glory to Hong Kong’, scattering paper money used for funeral offerings, and scrawling protest slogans on streets, bus stations and shops seen as pro-Beijing.

“Graffiti included anti-China messages mocking the day’s celebrations across the border, calls for freedom and democracy, and a warning with a prophetic ring that has become a protest staple: ‘if you burn, we burn with you’.

“Many families and young children were among the crowds at first. ‘You can see, we don’t have any protective gear,’ said Terrence, a logistics worker walking with his eight-year-old daughter. ‘We want freedom, and don’t want to belong to China.’”

The protests are an embarrassment to President Xi, but it seems as if the central government in Beijing does not know how to respond. The shooting of a protester will undoubtedly make a resolution much more difficult. US President Trump congratulated President Xi and made no mention of the protests in Hong Kong.

Posted October 1, 2019 by vferraro1971 in World Politics

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