
Automation is set to hit workers in developing countries hard - jgrahamc
https://theoutline.com/post/1316/fourth-industrial-revolution-developing-economies
======
mc32
Societies will need to tread carefully here.

Brexit, Trump and other national retrenchment movements are looking more like
canaries in the coal mine --a bracing for the waves of displaced workers
looking to displace the ebbing but expensive workforces in mature
industrialized countries (EU, US, Japan, SK, CA, AU, etc) for less as the need
for cheap labor by mature industrialized economies evaporates due to quickly
slacking demand caused by automation. [We don't need factories overseas making
things to sell in Wal __*mart if we can have robots make them "in-house".]

Question 1 is how will mature economies offer their own population a way to
make a living [keep their standard of living]. Question 2. is while
globalization enabled billions to emerge from extreme poverty, a pause in
demand for labor combined with growing populations in developing countries
will result in big messes. If the first world finds it hard to provide for
itself, there will be little they do for what were developing economies and
even less the governments of those economies will do for their own.

We might see some economies ban automation as a way to stave off untenable
unemployment in economies with little tax revenue.

Interesting times.

~~~
manmal
I haven't thought enough about this, but perhaps cheap automation could lead
to self-sufficiency of nations. Apart from rare resources (which could be
recycled?) * , goods could be produced where they are needed. If a state is
more or less self sufficient, it can create a bubble in which its citizens are
provided for even if they don't work. Or am I missing something?

* This would probably look like the UDSSR or WW-II Germany, but without the downsides caused by ideology. Workers could concentrate on improving automation ever further. The obvious downside would be that ideology would not die out, and nations would still strive to grow bigger > war.

~~~
jdietrich
Comparative advantage. Self-sufficiency would make us all worse off.

[https://en.wikipedia.org/wiki/Comparative_advantage](https://en.wikipedia.org/wiki/Comparative_advantage)

~~~
sprafa
Comparative advantage is a capitalism reasoning for Competition. It's actual
logic in a post-scarcity world is dubious.

------
ranman
Having recently spent some time in India where labor is absurdly cheap I do
not believe the incentive to automate exists in most places. At least... not
yet. I believe automation will eventually take place at a large scale but I
don't believe it will happen in the next 5-10 years in India.

~~~
Arizhel
The problem with that idea is that even if the human labor is absurdly cheap,
that doesn't make it good. Would you want a car built by hand, or a car built
by robots? The latter is going to be better built and have fewer defects. Many
jobs can't even be done decently by humans (think of modern cellphone
circuitry assembly).

~~~
MrBuddyCasino
And yet Toyota relies on people more than any other car maker and at the same
time leads the reliability statistics.

~~~
Arizhel
Relies on people how? Citation?

Any modern car is going to have an enormous amount of robotic assembly
involved. Having humans can give you more flexibility (robots take time to set
up), but expose you to more quality problems because they're inconsistent. But
many things just can't be done that well by humans.

------
dcw303
Maybe I've just played too much Civ, but I don't understand why space
colonization isn't our top priority.

It changes everything.

It won't matter if a large percentage of jobs have been automated. The ones
that haven't will go up in demand with every habitable planet that is settled.

~~~
nradov
No matter how much we invest in space colonization, only a minuscule fraction
of humans will ever be able to leave earth within the next ~100 years. The
cost is simply too high, and technologies like reusable rockets will only
bring that down marginally. Only a technology breakthrough in propulsion or
materials science will change this equation, and making those areas a higher
priority won't necessarily accelerate progress much.

~~~
YCode
Sort of reminds me of the Drell[1] from Mass Effect.

They nearly went extinct because their population outgrew their planet, and
probably would have if they didn't make contact with the Hanar, a species that
had achieved interstellar flight who took a few hundred thousand home with
them before the rest died off.

[1]
[http://masseffect.wikia.com/wiki/Drell](http://masseffect.wikia.com/wiki/Drell)

------
S_A_P
Are we sure this is the case? I imagine that automation can allow humans to
increase the breadth of "problems" they address in everyday life. It will
certainly change the employment landscape, but we can now address new issues
that are nice to have and not necessity items.

~~~
prvnsmpth
A good thought, but the problem is, the strata of society that will be
affected the most by this kind of automation do not necessarily have the right
skill-set to transition to these jobs that tackle these "nice to solve"
problems. Think of your average truck driver - what will he do when trucks are
suddenly driving themselves? Automation may not hit all of these kinds of
sectors all at once, so he might find something to do in the short-term, but
over time it will take over most of the jobs that don't require human
ingenuity.

~~~
majewsky
> what will he do when trucks are suddenly driving themselves?

As paid work becomes less available, it hopefully becomes less integral to our
picture of a fulfilled adult's life (particularly a fulfilled man's life). If
that happens, I hope to see a huge uptick in reproductive work: people whose
jobs have been automated away using their daytime to raise their children,
care for their elderly, or serve their community.

------
skuzye
I guess that we'll have to come up with a way of having these workers have
some kind of income. Otherwise, who's going to buy all those robot made
products?

~~~
lacampbell
"We" ? Are you in a developing country?

~~~
hiddencost
Earth?

~~~
lacampbell
It's 100% not my responsibility to somehow give people in countries I've never
been to jobs.

Let's get rid of the saviour complex.

~~~
wavefunction
Don't worry, I don't think anyone is asking you to do anything, and I really
doubt anyone would mistake you for any sort of saviour.

------
diyseguy
Bring the robots, work sucks!

~~~
emodendroket
Destitution sucks worse.

~~~
Kiro
Are you against automation?

~~~
emodendroket
In the abstract no but we currently are heading to a scenario in which
inequality reaches extreme levels.

------
intrasight
Yes, we've had this "problem" for 200 years now.

"The Luddite movement began in Nottingham and culminated in a region-wide
rebellion that lasted from 1811 to 1816. Mill owners took to shooting
protesters and eventually the movement was brutally suppressed with military
force."

[https://en.wikipedia.org/wiki/Luddite](https://en.wikipedia.org/wiki/Luddite)

~~~
erkkie
"This time it's different" sounds a cliche but there's many reasons to believe
this time truly is different wrt the pace and magnitude of change.

~~~
Jabanga
If you understand why previous bouts of automation didn't harm workers, you'll
understand why the pace and magnitude of automation doesn't make a difference
in whether automation is harmful or beneficial to workers.

~~~
erkkie
Elaborate?

~~~
intrasight
He may mean nothing more than "extraordinary claims require extraordinary
proofs"

------
sek
If you think about the amount of problems to solve there are infinite
employment opportunities.

Let alone software, there is an infinite amount of ways how stuff can be
better and more efficient. The same goes for engineering, as long as stuff
costs more than the materials it takes to produce them. Let alone new fields
like material science (graphene) or space exploration.

The demand for those jobs will grow even more to make this robot future
happen.

The only thing that needs to change is education in those fields. Why can't
work the rest of our population in those areas? Just use tools like capital
gains tax (the value those robots produce) and direct those funds into
education. If you say that's impossible, in theory a person with average
intelligence can learn those things by himself with a single computer.

Tell me where the big flaw is here?

~~~
ThomPete
This is were most goes wrong and you fall in the same trap.

You seem to assume there are jobs which 1) AI won't be able to do and sooner
or later 2) that the things that humans will be able to do for a while yet
which AI wont requires specialized education.

But thats not how things work.

As I mentioned somewhere else. A cleaning lady is going to have her job longer
than a radiologist. Everyone can become a cleaning lady and thus there is
going to be oversupply of people who can clean.

~~~
nashashmi
Robots can do a better job of cleaning.

~~~
ThomPete
No they can't because it requires a surprising number of details to be able to
do all the things a cleaning lady actually do. Getting in between the books,
under the rug, up on the shelves, cleaning the toilets etc.

If a robot could do all that we would basically be close to a general purpose
AI. We aren't even close.

------
killjoywashere
This picture from the article is nuts: [https://outline-
prod.imgix.net/20170323-c86vRGKVPsbek3PZXpVw...](https://outline-
prod.imgix.net/20170323-c86vRGKVPsbek3PZXpVw?auto=format&q=60&w=2000&s=7fa68cbcc86ded1ab56b65ad74700aa9)

The engineers and management have already decided. You want a job, I suggest
you get into the robot design business.

~~~
zeppelin101
Mind. Blown. This is something I would have expected to see in a few decades,
but it's already the reality, I guess. Wonder how many American auto workers
are out of a job due to this.

~~~
notahacker
Here's one from 1984...

[https://i.kinja-img.com/gawker-media/image/upload/s--
OKTGFiU...](https://i.kinja-img.com/gawker-media/image/upload/s--
OKTGFiUc--/c_scale,fl_progressive,q_80,w_800/18to91b6najv6jpg.jpg)

------
ChuckMcM
I wonder if we could turn this around a bit by making pharmaceuticals cheaper.
Not to drug the masses rather that much of modern pharmaceuticals are made by
automation today, however generally one type per 'line' in the factory. What
I'm wondering is if you could make a factory which could make what ever drugs
you currently need, whether it is from aspirin to antibiotics to chemotherapy
drugs. No spoilage from drugs being on the shelf too long, local (so fast)
delivery, an excellent aid to resilience from disaster (shorter logistics
nightmares).

~~~
rebootthesystem
The cost of pharmaceuticals isn't necessarily in manufacturing. If you spent
ten billion dollars to get a new drug to market the cost of making the pills
might very well be a rounding error.

You have to pay for that. How do you do it? You can't give away the product.
And, not only do you have to recoup your ten billion investment but you need
money for new product development and the certainty of supporting a constant
flow of lawsuits and legal work that comes with the territory.

Making drugs in the US is incredibly expensive. Scratch that, doing almost
anything in the Medical industry is incredibly expensive. Not only do you have
to want to innovate and fund the R&D, you have to, from day one, get ready for
lawsuits and build-up a war chest. That's a shitty position to be in.

The best thing government could do in order to reduce our medical costs is to
enact sensible and fair tort reform. That, right there, would have a huge
impact on the cost of medicine at all levels.

~~~
gech
Oh those poor lords of capital, somehow found themselves wound up being in the
"shitty position" of choosing to start and run a company above board. Lets
just systematically remove protections for the individual to make it easier
for them. I hope everyone sees right through your ideological push.

~~~
rebootthesystem
I truly don't understand your response. There is no ideology here, just math.
Yeah, the it is a shitty business in that costs are ridiculous. It is in all
of our interests to understand this and try to provide a better operating
environment.

No, this does not mean throwing all regulations out the window and letting
companies put out unsafe product.

There's a huge continuum between the scenario you envision someone like me
"pushing" for and our current reality (which is getting worst every year).
Somewhere in there there's a better place where drug company costs are
reduced, approvals don't cost so much, frivolous lawsuits are reduced and the
regulatory framework achieves a good balance between promoting R&D and serving
the common good.

You are stuck on "they are all evil", which simply does not align with
reality.

Here:

[https://www.forbes.com/sites/matthewherper/2013/08/11/how-
th...](https://www.forbes.com/sites/matthewherper/2013/08/11/how-the-
staggering-cost-of-inventing-new-drugs-is-shaping-the-future-of-
medicine/#589ec97c13c3)

[https://www.fool.com/investing/general/2016/04/30/the-
cost-o...](https://www.fool.com/investing/general/2016/04/30/the-cost-of-
developing-an-fda-approved-drug-is-tru.aspx)

I am astounded at how illiterate our population is about even the most basic
aspects of business. We give our school system our kids for, what, 13 years or
so and they come out without any real skills to hold a job, start a business
or even understand finances. This is truly terrible.

------
Markoff
i stopped reading after they used absolute numbers of robots for biggest
country in this world by population, why they don't show robots per capita
poor robots per total factory output or GDP, i don't like this promoting China
as some country to look up to

------
tmaly
Maybe people end up shunning the companies and goods made by robots. People
return to a barter system.

~~~
ashark
Trend so far has been: lots of very bad but cheap products made by machines
with as little use of materials as possible (we keep getting better at
determining what the smallest amount is, so everything keeps getting worse!),
with some variety in price and quality but all basically crap, and at the far
opposite end much better but very expensive goods, often with at least some
human involvement, if not wholly handmade. Economies of scale and competition
don't kick in enough to reduce the prices on the top end much, and the
potential middle of well-made and designed with good materials, but by
machines and cutting _some_ corners, is a no-man's land where there's no
profit to be had. If there's anyone serving the midrange they're selling a
brand and image mostly, not providing a much better product than the low end,
and just collecting more profit.

There are exceptions, but the world I see as served by capitalism is one of
cheap, frustrating crap that keeps optimizing toward even worse quality, and
overpriced (overpriced compared to an imagined world where the magic of market
efficiency were brought to bear on it) nice things, and little in between. So
much for choice.

So I don't see anyone deciding to pay 10x what the crap costs (no economies of
scale kicking in or it'd be 3-4x, in a perfect world, but hey) and 1/3 what
luxury goods cost for handmade mid-range. They'll bump up and have real
quality plus the public image and ego-boost that goes with it, or have 10x as
much crap-tier stuff instead. This is in part because people want more stuff,
all other thing being equal, and in part because no-one's got the time to
figure out how to evaluate quality in more than a small fraction of what they
buy (this is why the mid-range is a no-man's land—your market is budget
conscious but discerning, educated consumers, which is to say, you're
screwed). The consequence is that without regulation setting a highish floor
on how awful products can be, we get the deep bathtub shaped graph of supply
on the Y and Price/quality on the X, necessarily. There's no room for semi-
affordable goods with a human touch. That's just how it is. :-/

Also, nitpick: per Graeber, barter is where you go _forward_ from money when
money is temporarily not working, not something that you _return to_ from
money, since it didn't, in any meaningful way, represent a step on the way to
money.

~~~
tboyd47
It could be the lack of a mid-range is more of a consequence of people not
having any expendable income after rent, bills, health care, child care, etc.,
than an essential feature of capitalism. If I had a bigger budget for personal
items, I would pay $60 or more for a really nice, durable, comfortable pair of
jeans, as opposed to just going to Walmart and buying the same crappy pair for
$19.99 every month or so. Same goes for most things I buy, like cars,
furniture, food, etc. But somehow, my rent, bills, health care costs, food
costs, etc. just keep getting higher while my monthly income remains roughly
constant. So I keep buying trash.

Also, the ever-rising high-end of the market gets lifted up partially by easy
access to credit. If fewer people had access to credit cards, maybe those
high-end products would gravitate more towards the mid-range as well.

~~~
dublinben
You may be exaggerating, but if you really are buying $20 jeans every month I
think you've fallen into the trap of cheap boots that Vimes described. A
decent pair of jeans may cost several times more, but will last you for years.

~~~
Arizhel
It's weird; I buy $30 Lee jeans from Kohls these days and they easily last a
year or more. Clothing is not something you have to spend a lot of money on to
get something that lasts a reasonable length of time, unless you're really
being penny-wise-pound-foolish by buying the very cheapest thing you can get
just to save 10%, or you're extremely hard on them.

~~~
tboyd47
Thanks, I'll check out Kohl's next time. Honestly clothes shopping is not
something I put a lot of thought into.

~~~
Arizhel
If you shop Kohl's make sure to use coupons. If you pay full price there for
anything, you're paying too much. They always have some kind of deals, and you
can usually "stack" them. So jeans for instance will frequently be something
like "buy 1, get 1 half-price". Then, you can combine that with a 15% or 20%
off coupon, which they run almost every weekend. You can get those on their
website, or on printable-coupons.blogspot.com, and just show that cashier on
your phone at checkout. So, two pairs of $48 jeans will cost you $57.60 (after
20% coupon), or $28.80 each.

Personally, I like Lee these days. They're good quality, not as expensive as
Levi's, and not as crappy as the off-brand stuff, and seem to fit pretty well.

------
Datsundere
here is an idea. we let users make robots and pay the salary to the robot
creators. whoever creates a better/efficient robot will get a higher salary.

~~~
loup-vaillant
Sounds like a winner-take-all situation. This isn't going to end well…

------
rebootthesystem

      EDIT:  If you are going to down-vote this please have the courtesy of reading it
      and replying with a counter-argument based on mathematics.  I went through the 
      trouble of doing the math for you and providing objective support for my claims.
    

Ironically it is populist policies that might push automation past the
inflection point. Yes, I am talking about the $15 per hour minimum wage.

To a politician this $15 per hour battle cry is great. They have nothing
whatsoever to lose. It's something they can promise and buy votes with that
promise. They can even fight to get it implemented and actually have it pass.
Why? Because all politicians need votes and this is an easy way to buy those
votes from the masses.

But, what does this $15 per hour minimum wage do? And, please, do extrapolate
past $15 per hour, because it is in the interest of politicians to keep
feeding the drug, even if it kills the patient. The more miserable the masses
are the better for populist politicians.

Source: No less than the entire history of every Latin American country.

A higher minimum wage is great for politicians. They keep their jobs. They
might even ascend the ranks and make more money.

For workers? Bad idea. Why? Because there's a limit to COGS for a business. We
are in a competitive global economy. You can't sell something for $30 when
others are selling it for $15 or $20. And so, given labor cost hikes, you have
very few choices on the table. Automation and offshoring are two of them.

At $15 per hour is likely to cost an employer about $18 per hour in real
terms. That's $36,000 per year for someone who will work 2,000 hours per year
on average (50 weeks @ 40 hours per week). If you don't understand how this
works, here's a quick article by a CPA explaining the add-ons:

[http://cpainerie.com/how-much-does-your-employee-actually-
co...](http://cpainerie.com/how-much-does-your-employee-actually-cost/)

It goes beyond that. A forced rise in minimum wage will hike all costs in an
organization. Let's take a hypothetical. I'll use Oregon's current $9.75
minimum wage because I was just talking to a friend who lives there. Let's say
you have a company with the following full time labor arrangement:

    
    
      5 warehouse employees at minimum wage ($9.75)
      10 office employees at $15 per hour
      5 managers at $25 per hour
      3 top level managers at $50 per hour
    

Total labor costs for the year, assuming 20% costs above basic wages (see
article link provided above) would be: $1,137,000.

Now give the first tier a raise to $15 per hour. That's a 54% raise.

The second tier won't be happy. You have to give them a raise. How much? Same
percentage or same dollar amount? Let's go with same dollar amount. They go
from $15 per hour to $20.25.

The other groups are affected as well, so wages go up by the same dollar
amount for everyone. In other words, everyone is making $5.25 more per hour.

Total annual labor cost just went up to $1,426,800, about a 25% hike. An
increase of $289,800, of which only $63K was due to the minimum wage workers
getting $15 per hour.

And, BTW, as you fold Obamacare insurance into this, the numbers are
significantly worst.

$289,800 is real money. It's $24,100 per month. Where is that money going to
come from?

What does a business do? In a real competitive environment you can't have your
expenses go up by $24K per month and simply raise your prices. It doesn't work
that way at all.

Oh, yes, let's not forget the other parts of the COGS equation. I won't even
try to quantify this one but I'll mention it because it is important. If you
source materials and services from other US-based companies and all of them
see their wage costs go up by 25% you can bet some of your costs will go up.

At this point you are faced with the two options I mentioned above: Automate
if possible or Offshore. I'll add: Fire a few people to the equation.

Well, guess what? All three of those options produce the same result: People
lose their jobs.

Nobody is going to go to Walmart and pay 25% more for a product when the one
next to it (probably sourced from China) costs less. The same with online
shopping. If your product is sold on, say, Amazon or your own website and your
competition doesn't have to deal with government-imposed COGS hikes, your
products will not sell. People look for good pricing. They won't pay 25% or
50% more so you can keep your employees and pay them more.

That's the heartless mathematical reality of business.

In all of this politicians lose nothing. They get the masses rattled about
inequality and give them the gift of a $15 per hour minimum wage. They get the
votes and continue on a sweet ride in government. In the meantime, the tsunami
starts to build and millions are likely to lose their jobs.

Automation is likely to be a solution for a lot of companies. If a $40K to
$100K robot can replace a $15 per hour employee, work two or three shifts and
not have the management complexities of a human worker. Well, guess what, it
is very likely it will happen wherever that option makes sense. Another group
will ship jobs to China and a small group will hike their retail pricing
because they can and keep the jobs here at a higher wage level.

The cold hard truth is that automation in business is purely about the
mathematics of running a business. In a free market there would always be a
push-pull where people could find jobs at lower wages if they need them. By
having politicians interfere with this (mostly for their own benefit, because
few others will benefit) they probably have succeeded in creating the
conditions to push automation through the inflection point and what's on the
other side isn't going to be pink unicorns for everybody.

Once the genie is out there is no way to stuff it back into the bottle. Even
scarier than that is low wage countries adopting automation as well.

If anyone objects to my conclusion they need to fire-up Excel, go through the
simple math I presented and explain why it is that what I predict is wrong.
Mathematically. I don't care about feelings or theories. You have to show how
this would work at the most rudimentary business level without losing any
jobs.

~~~
JoeAltmaier
Nobody has to explain why a strawman is wrong. The simple history is, minimum
wage used to have regular hikes. This stopped for decades. Now the most
vulnerable among us are given a shamefully low wage for work most of us
wouldn't do.

Its wrong or immoral to say America's economy rides on the premise that we
must pay laborers a miserable below-poverty wage. If that were so, what an
obvious truth Economists have missed all this time! All we have to do is have
a sub-population we treat miserably and the rest of us can have it nice.
Economics solved!

~~~
rebootthesystem
I painted a super simple business scenario. I'd like to understand how you
would manage that scenario, that company, if it were your own.

Show me the math. Not the words.

Your reply sounds good but it provides zero analytical information, even at a
simple level, to support anything at all.

BTW, "free market" does not mean people make "dirt" wages. It does not work
that way at all. People will accept pay in the context of their reality.
People in the US can't work for Chinese wages, it's simply impossible. This
doomsday scenario people like to paint isn't real.

~~~
nsp
Your numbers are way off base. If Walmart retail labor costs went up 25%,
their costs wouldn't go up 25%, a tiny percentage of the cost of goods at
Walmart is in the cost of labor, it's part of why they've been so successful.
Most people making <$15 an hour work in the service industry. If everyone is
forced to bear higher costs simultaneously, it's a lot easier to raise prices
and pass that cost along to the consumer.

~~~
rebootthesystem
> If Walmart retail labor costs went up 25%, their costs wouldn't go up 25%, a
> tiny percentage of the cost of goods at Walmart is in the cost of labor

Oh, please! If you are going to write something like that at least pull-up a
recent Walmart annual report and study it. Do some research and educate
yourself before forming opinions so far out of alignment with reality.

Walmart employs over TWO MILLION people in the US alone. Labor cost is, in
fact, one of Walmart's largest liabilities. There is NOT WAY they could
survive a 25% labor cost hike without rising retail prices AND laying off a
bunch of people because nobody is going to pay tons more for their products.

Please, do yourself a favor and learn to read a financial statement and play
with it in a spreadsheet in order to understand how the real world works.

~~~
JoeAltmaier
Really? Because the other retailers _don 't_ use cheap labor now? Because not
everyone's labor rates will go up? If wages went up by fiat, then everybody is
in the same boat.

I call it 'playing dot-to-dot'. You can string together a sketch that jumps
from point to point and make any case you like. Let me try.

Minimum wage goes up - so folks have _more money to spend_ , so they buy more
from retailers, so profit margins rise, so the economy booms and hiring
increases. Everybody wins!

That story is 'true' too. They all are. Just, its part of a bigger story.
Which is called 'economics' and isn't just some madeup cherry-picked local
case folks like to trot out and say "what about _this!_ " and think they've
got it all figured out.

So anyway, its immoral to freeze just the wage labor is paid, for the sole
purpose of making the rest of us live better. Its simply wrong.

~~~
rebootthesystem
Please go read through the Walmart annual financial statement.

> Minimum wage goes up - so folks have more money to spend, so they buy more
> from retailers, so profit margins rise, so the economy booms and hiring
> increases. Everybody wins!

Fantasy.

You are missing a very important part there that should be obvious to anyone
today: Competition is global, not national.

Let's take your theory up to an extreme. Let's raise minimum wage to, say, $50
an hour. Why not? Per your thinking it's simple. Everyone raises prices and
all is good.

And so, you manufacture product A in the US and now have to sell it for $155
each.

I manufacture the same product. I fire everyone except for a small sales staff
and take the product to China to manufacture it there. I am able to sell the
same product with equal or better quality for $25.

When people have to choose between your product for $155 or mine, of equal or
better quality, for $25, they will choose mine every single time over yours.
Your sales plummet, you have to fire everyone and close down the company. Or
you fire everyone and go to China just like I was forced to do.

At one point even importing bricks from China becomes a better financial
decisions.

In other words, the scenario you painted is a fantasy.

The vast majority of products sold in the US today are NOT made in the US. We
can raise our wages and prices all we want. It will only serve to create vast
unemployment and further destroy us from within.

Just wait and see what will happen when $15 per hour laws ripple through the
entire nation during the next few years. There are companies already leaving
California because of just this.

Same recommendation as I seem to make all too often on HN: You don't
understand how business works. Please do some reading and fire-up a
spreadsheet and play with numbers. It isn't very complicated at a basic level.

> So anyway, its immoral to freeze just the wage labor is paid

Exactly. That's minimum wage. The free market should determine what that is.
Our local and national economies will determine where the wage floor might be.
In San Francisco this could be $15 per hour minimum wage due to cost of
living. In other parts of the country it could be $7, $10 or $12. Government
intrusion accomplishes only one thing: Job loss.

~~~
cr0sh
> When people have to choose between your product for $155 or mine, of equal
> or better quality, for $25, they will choose mine every single time over
> yours.

Not necessarily:

[https://en.wikipedia.org/wiki/Common_law_of_business_balance](https://en.wikipedia.org/wiki/Common_law_of_business_balance)

...and related with:

[https://en.wikipedia.org/wiki/Veblen_good](https://en.wikipedia.org/wiki/Veblen_good)

You probably already know this, though - and I am not saying that because of
these two things that your premise (or anyone else's) is wrong -or- correct.

I just wanted to inject this, as to many it may be counter-intuitive that by
dropping your price (or selling at a lower price), that sometimes people won't
purchase it.

I think there have been studies done where they've used the exact same
product, but priced it differently, and despite the product being identical in
every way, people purchased the higher-priced item more frequently.

~~~
rebootthesystem
The two links you provided are about something very different.

What's going on with our economy is that people have become very used to
seeing very high quality products made in China. A stroll through Walmart,
Best Buy, Fry's Electronics, Home Depot, Lowe's, Sears, Kohls, Petco, etc. is
all that's required to ascertain this.

Nearly everything sold at those retailers is made in China. In fact, short of
things like obvious US-made products like bricks and lumber products (and I
even hesitate to make that statement) everything else is made outside the US,
mostly in China.

And quality is excellent.

It didn't use to be that way. China was synonymous with cheap junk. Sure,
there's still cheap junk coming out of China but I think it is safe to say
that most of what you can buy at the top retailers in the country is of fairly
decent quality.

And so, when faced with a price difference between a high priced US-made good
and a lower priced Chinese product the effects you linked to don't really
apply. In fact, in some cases the Chinese product is of equal or better
quality when objectively compared to the US-made product.

Here we have a case where paying a low price does, in fact, deliver a good-to-
excellent quality product.

Luxury goods are a different story. They don't necessarily obey the laws of
physics.

We have a problem. A really big problem. I wish I was smart enough to know
what the solution might be. I don't. I know bits and pieces of it. Yet it is
way too complicated. There is one thing I do know, Trump's idea of "bringing
jobs back" sounds great but it is easy to see, given our discussion, that this
is just-about impossible.

Can we start manufacturing excellent iPhones if we build fully automated
factories? Nope. Not a chance.

Why?

Because China has reached a point where labor cost advantages are not the only
advantages they enjoy. I don't have the time to get into the details so I'll
be brief. Manufacturing businesses depend on efficient supply pipelines in
order to produce product at the lowest possible cost. Chinese industrial
cities are setup such that the supply pipelines are very short and efficient.
Everything is an hour or less from the OEM. There are towns that make
microwave ovens and all of the sub-contractors for the microwave oven makers
surround them. Same with other product categories.

This advantage is huge and it is one we do not have. We don't make
semiconductors or motors or almost anything here any more. You'd have to take
the desert in Nevada and build a huge manufacturing town consisting of fully
automated factories producing every component needed to make an iPhone in
order to reach the point where we MIGHT be able to make iPhone on par with
China.

That's what I call a "gulp" moment. When you realize just how terrible our
position might be in a globally competitive marketplace.

As I said before, an artificially high forced minimum wage only exists
completely disconnected from the context and the realities of what's going on
in the real world. And this, precisely, is the reason it is so destructive.
Companies don't need to pay lower wages because they are greedy. They need to
reduce their costs because they are getting killed right and left by China,
and high government-imposed minimum wages only means one thing: Our government
is helping China force these companies out of business one by one. This is not
what we should be doing.

The argument for protection of the poor sound interesting until you realize
that the more businesses we kill off and the more jobs we export the reality
of high minimum wages is that the very people the idea seeks to help will be
the first to end-up on the street by the millions.

This is a math problem. And politics and politicians are fucking it all up
because they do not suffer direct consequences and their lives are secure. I
mean, look at the Obama's. They are getting paid SIXTY MILLION DOLLARS to
write a couple of books. Their lives are completely decoupled from the
policies they have forced upon us. They are set for life while everyone else
will have to suffer. And that's the way it is.

------
DanielBMarkham
_"...The question is, assuming that this trend toward the networked automation
of factories continues — and there is little evidence to suggest that it won’t
— what happens next?..."_

This is getting rather tiresome.

Let's see. My guess is that "Things that can't be created by automation"
become more scarce, hence more rare. That means their price goes up, demand
increases, and more folks start making that stuff.

Why do rich people buy expensive designer cars? After all, once the model T
came out, the problem of people wanting to go from one place to the other was
solved.

~~~
jdietrich
That is a very glib answer. The economic effects of automation are a very
serious issue. A wage economy based on veblen goods is not a good outcome for
the vast majority of people.

The invention of photography vastly reduced the demand for painters, first by
allowing a photographer to produce vast numbers of portraits quickly and
cheaply, then by allowing consumers to make their own photographs. People
still make paintings for money, but there is a power-law distribution of the
rewards - the vast majority are amateurs or barely scrape a living, while a
tiny handful of artists sell paintings for tens of millions of dollars.

There is a growing economic consensus that automation will lead to substantial
polarization of the labour market. The jobs most threatened by automation are
the skilled but routine jobs that characterise most of the middle class. Some
of the displaced factory workers, truck drivers and clerical workers might
find a good career as an artisanal baker or a professional YouTuber; I suspect
that many more will end up falling into poorly paid and precarious work at the
bottom of the labour market, or dropping out of the labour market entirely.

Ultimately, we're talking about people's lives and livelihoods. It's simply
not good enough to assume that everything will be OK, to hand-wave away
serious doubts being raised by sensible and informed people. There is a strong
possibility that the wave of populism spreading across the western world is
being stoked by increasing economic insecurity resulting from automation. We
on HN are the people responsible for automation; it is incumbent on us to
seriously examine the risks posed by it. If we are not prepared for these
risks, the results could be catastrophic.

~~~
dredmorbius
There's a fair argument that what the industrialised world has _now_ is a wage
economy based on Veblen goods. Though to what extent I'd have to think.

~~~
DanielBMarkham
I think to get a general idea of how much this might be true, consider taking
a person who was just barely surviving in society two thousand years ago. Show
them the modern world. Ask them how much of it is Veblen.

We don't see it because we're immersed in it. To that guy, everything we do is
gold-plated and incredibly decadent. We are far, far beyond creating and
exchanging things simply for survival.

The richest people don't even create or exchange things of any substance. A
guy plays basketball, makes ten million a year. Somebody writes a best-selling
book, never has to work again for life. These things would have made no sense
to the overwhelming majority of people just 150 years ago.

~~~
dredmorbius
You could almost certainly go back only 200 - 300 years.

Hell, in France of the 1950s, the majority of homes outside Paris didn't have
indoor plumbing.

(Consider, as a corrolary, that a major cause of building failure is moisture-
induced rot: if you want to risk-mitigate your construction and reduce a major
source of failure, you'll consolidate plumbing either _outside_ the structure,
or to a subsection of it which is particularly immune to rot.)

