Toro
Diamond Member
Great article.
stone: Our White Collar Nation
As a percentage of the workforce, White Collar occupations grew from 18% to 60% of employees over the course of the 20th century, as show in this graph:
What does this mean?
Farm productivity has exploded, increasing 1.9% per year over the last half of the century. At that rate, every 100 years, the same inputs on a farm produce 6.5 times as much foodstuffs. The percentage of the population engaged in farming dropped from 40% to under 2%, and yet we became a great exporting power in agricultural products.
Similarly, manufacturing productivity rose 1.3%, on average, over the course of the second half of the 20th century. A brief list of 20th century mechanical engineering achievements is instructive. From better distribution (automotive), to better storage (air conditioning), to better production (glass, paper, metal), to better power generation (energy), the list of advances in making "stuff" has meant that we produce more and better stuff each year, with fewer costs and materials per unit.
Consider your TV, car, refrigerator, stove, and calculator in the 1970s compared to what you have today. They are better, faster, safer, and more effective.
The end result of our being able to make things more readily is that we've found we need fewer and fewer people to actually make stuff.
This is the process of commoditization, and it is a good thing for our economy.
If you think about it, all human endeavors become commoditized. Newton and Liebniz, in the 17th century, were the only guys in the entire world who were smart enough to figure out the calculus. Today, it's something bright high schoolers master before going to college.
If you had told J.P. Morgan, at the turn of the last century, that someday his specialized field -- that of pricing risk on debt to corporations -- would be profitably pursued by over 100,000 professionals in the United States, we can forgive his lack of foresight for scoffing at you.
Indeed, in every field we see the body of knowledge progress from discovery, to experimentation, to mastery, to routinization.
And because we've commoditized the skills behind production, it is easy for labor in foreign lands to master it, and earn the lower wages that come with routine skills.
What does that leave for us? Will we end up a nation bereft of earnings power, the equivalent of a couch potato uncle, past his prime? No.
In the United States, the increase in white collar labor means that we are becoming a nation of thinkers -- web designers, engineers, marketers, IP lawyers, deal guys, inventors, dreamers, and mavericks.
So while that iPod "counts" as $150 on China's export ledger, in reality, the majority of the profitability of the iPod goes to Apple, and to the national distribution channels through which it is shipped.
Really, it should be no surprise that final assembly is the least valuable, and the design genius of Apple the most valuable, work that go into an iPod, iPhone, or (coming soon!) iTablet. It's been that way all along.
What the 20th century statistics don't capture about the departure of our manufacturing base is it's always been that way.
The implementation of all of those fantastic mechanical engineering feats above, and the rise in productivity thereby produced, always meant that some marginal labor was being replaced by automated processes. But because it all previously occurred within the confines of a firm, it was difficult to piece out that value created at a GE was increasingly coming from the Masters of Crotonville and less and less from the factory floor.
Today, with the ability to componentize a company, and separate its marketing from its production from its distribution, it's more obvious when the jobs have shipped to another state, or another country. But the history of work in America is an inexorable, inevitable shift to the work of the mind.
And I, for one, think that's a good thing. Because the more people we have engaged in medical research, or designing great electronics, or simply making trenchant observations on our internet economy, the better for us.
We are a White Collar nation, and our future is very bright.
stone: Our White Collar Nation
