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Dr. House and The Curious Case of the Ailing Jobs Market

by Bob Rice

You know the plot. A healthy young man, bounding through the park on a sunny day, collapses suddenly. He’s barely saved by a last-ditch, massive injection, and all are relieved… until we notice that not only does he fail to fully recover, but begins to degenerate despite aggressive treatment.

Enter Dr. House. The original doctors are put off, of course; they are certain they know exactly what’s going on. But around minute 52, our cranky hero realizes the real problem: the obvious condition has been masking another, more insidious disease. Can the patient still be saved?

That’s the story, and the question, for the jobs market. Dr. Christina Romer, one of the original attending physicians, recently wrote in the N.Y. Times to explain why her unemployment diagnosis is not disproven by sizzling corporate profits. But her contorted attempt to make the theory fit the facts recalled a pre-Copernican scientist struggling to account for the orbit distortions of the stars.

As with any great mystery, clues to the real problem surround us, but we can’t appreciate them because we’re accustomed to analyzing things in a given way. Indeed, none of the usual suspects trotted out by economists (or politicians) is guilty this time. A globalized workforce and currency imbalances hurt, of course; but neither is the real issue. Ditto for weak consumer demand, a horrible housing market, too much government regulation, and too much debt. Nor should we blame poorly set tax rates, decaying infrastructure, health cost uncertainties or the price of oil. Nope; the culprit hidden in plain sight is: technology.

Sorry to be un-academic, but instead of charting money supply and velocity, maybe the great economists should ask themselves: How many secretaries and receptionists are hired these days? Where are the mailroom guys? Who’s my travel agent? What happened to the local bookstore, shoe shop, video rental joint, magazine stand? Or, they could just look at the lowest tech industry around: garbage collection. NYC Sanitation is cutting dispatch jobs because of GPS software systems, and sending out fewer men because volume is down, the mixed blessing of more material going digital.

Typists and sales clerks used to be the backbone of the services middle class; only so many can become real estate agents and waiters. A new issue of the children’s classic “What Do People Do All Day?” might feature the cute characters watching computers perform the jobs illustrated in the original.

And if you’re thinking only low-tech workers are affected, think again. Hewlett Packard recently fired hundreds of supervisors at its computing centers, replacing them with… computers. UPS has taken delivery on a new fleet of planes that require only one pilot. And the motion picture and video production industry led the pack for mass layoffs in the latest report by the US Bureau of Labor Statistics. Technology is relentlessly displacing workers in every field, while making the former employers ever more profitable.

That was the most profound lesson of the Great Recession for thousands upon thousands of U.S. businesses. Pushed to the brink, they were forced to fire longstanding employees who they hated to see go. Many made do by adopting inexpensive technology solutions: they adopted CRM systems and fired marketers; traded bookkeepers for accounting software; and found that file keeping is a lot easier when there are no files. Now, business is coming back, but even small employers understand there’s little need to re-hire. That’s why Dr. Romer’s diagnosis is wrong.

There is an upside to all this. “Creative destruction” is indeed at work, and those same technology marvels that are killing jobs are creating all sorts of new opportunities for entrepreneurial enterprises. Many of these are fueled by an ability to create markets around even the narrowest interests; a broad array of cloud-based services that minimize capital requirements; and powerful collaboration tools that enable virtual, and often part-time, management and development teams.

So, profits do await those who seize the day. Imagine how many new ways we’ll find to use constantly networked mobile devices, with their sophisticated sensors, cameras, and CPUs sporting far more power than those behind the Apollo missions. Unprecedented new opportunities exist in energy, biomedicine, education, and, of course, technology itself. The wildfire of college campus startups, and more than 4,000 deals a month flooding into U.S. angel investment groups, prove that this sector of the economy is vibrant.

But, the phenomenon is far from a panacea. These new opportunities require technology and math skills, creativity, and pure scrappiness – unfortunately uncommon attributes in a society lulled into complacency by the prospect of lifelong jobs with now-vanishing corporate behemoths.

From here, the pace of change will only accelerate. We simply must begin to face this reality and to adjust our expectations, work ethic, educational focus, and risk tolerance. We must rush to address the real causes of joblessness before time runs out. Just ask House.