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Home Publications Blogs Beat the Press Thomas Friedman Shows Us Average Is Not Over

Thomas Friedman Shows Us Average Is Not Over

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Wednesday, 25 January 2012 04:46

Thomas Friedman has a great sense of irony. In a column titled "Average Is Over" he shows readers that average is clearly not over. 

The column is a tidal wave of confusion about basic economics. The gist of the piece is that technology and globalization will displace all the average workers in the United States. Workers will have to be extraordinary to get decent paying jobs.

Both parts of this story are very poorly argued. Technology does replace many less-skilled jobs. Perhaps we should let Mr. Friedman in on a little secret here. This has always been true. The question is the rate at which technology displaces workers. Productivity growth has certainly be respectable since the pick-up in 1995 (@2.5 percent annually), but it is still below the 3.0 percent rate during the quarter century following World War II, when average was in. (Properly measured, productivity has been growing at closer to a 2.0 percent rate since the 1995 speed-up.)

Friedman apparently doesn't know that technology doesn't just eliminate jobs for less educated workers. The NYT had a piece a few months back on how new search technologies have drastically reduced the need for lawyers to do legal research. New screening devices can allow many medical diagnoses that formerly might have required doctors to be made by less highly trained technicians. Of course since doctors are a powerful interest group they may be able to ignore the development of technology and have rules that require that they still do diagnoses that could be performed instead by people earning one-fifth as much.

The real issues with technology are the rate at which it allows productivity to grow (in general, the faster the better, if the economy is not run by buffoons) and the extent to which it replaces low-skilled workers relative to the pace at which it replaces higher skilled workers. The same story applies to globalization.

We can get our manufactured products more cheaply from China. This is because it is a relatively poor country where people are willing to work hard for lower wages than workers in the United States. However China would also provide us with doctors, lawyers, architects and economists, all for much lower pay than their U.S. counterparts receive. This would drastically reduce the cost of health care, legal services, college education and other services provided by highly paid professionals. That would mean more economic growth and a big increase in living standards for the vast majority of people in the United States.

However, we don't see huge numbers of Chinese taking professional jobs in the United States leaving U.S. born doctors, lawyers, etc. out of work. The reason is that U.S. professionals have much more power than manufacturing workers. They use the government to erect barriers to limit the number of foreign professionals who can work in the United States. This ensures that average can survive and flourish in the highly paid professions.

If anyone doubts this fact, they should take a look at the transcripts from Federal Reserve Board's Open Market Committee Meetings for 2006. (Some of the highlights can be found here.) The transcripts show the people in top economic policy positions completely clueless as the housing bubble is in the process of deflating and the inevitable recession is coming into view. It is worth noting that none of these people have suffered serious career consequences from this failure showing that average (or below) still flourishes in these circles. But Thomas Friedman does a good enough job of demonstrating this directly twice a week in the NYT.

Comments (11)Add Comment
Productivity has a Denominator.
written by John, January 25, 2012 5:20
The issue regarding productivity is that it is production per work hour. Increased productivity means more produced by the same amount of workers working the same amount of time -- or the same produced by fewer workers -- or combination of the two.

As has been repeatedly shown, the gains of productivity have gone exclusively to the wealthy. Blogger rortybomb, for example, shows that the top 20% have gained more than 100% of the wealth gains in the USA, the past 30 years.

http://rortybomb.wordpress.com/2012/01/23/the-wealth-and-income-movements-of-those-at-the-bottom/

Increased productivity due to engineering and technology advances was supposed to produce more leisure time. Instead, it is the one structural thing that produces increased unemployment. Why is the natural rate of unemployment considered to be around 5% instead of 2%?

The solution has to be some kind of method to return the gains of productivity to the actual workers, as opposed to the wealthy overclass sitting heavily on top of us. Perhaps a 20-hour workweek, at $20/hour (perhaps earned-income tax credit), with overtime at $60/hour.
All the Children Can't Be Above Average in Lake Wobegone, Low-rated comment [Show]
You have to gasp at his gall
written by Joe Emersberger, January 25, 2012 6:29
Millions of very well educated english speaking people in India (to name only one poor country) could write a better colmun for a hell of a lot less money than Friedman. The internet should have led guys like him to be outsourced years ago. In his case, well below average is far from over.
Friedman
written by Bart, January 25, 2012 7:31

I don't read Friedman but am thinking that he may have read the piece in his own paper this week on Apple and China.

It is a provocative piece and I would like to see you and Paul Krugman give us your analysis on how we can overcome the issues presented in that article.
...
written by skeptonomist, January 25, 2012 9:29
Technology could eliminate many "highly-skilled" physician jobs. Much of the training of physicians consists of memorizing vast amount of facts about medical conditions and their remedies. Having computers provide this information on demand would be much more efficient than the current system and it would remove many sources of human error. Of course having completely computerized, universally accessible patient records would cut down greatly on the staffs in the offices of physicians and insurance companies.

The hand-loom operators who became luddites were powerless to resist automation, and as a result their standard of living improved through productivity increases. Physicians do have the power to resist automation of their jobs and this is a factor in the increasing cost of health care.
...
written by sherparick, January 25, 2012 9:54
An newspaper columnists would certainly be less dear in China or India. I suspect the "average" Indian on a Mumbai park bench could write a better column than Tom Friedman.
Iraq War Cheerleader
written by Jerry Jones, January 25, 2012 10:00
I remember watching Tom Friedman cheerleading for the invasion of Iraq on the Oprah show. Sad. His columns are drivel, of course, but I still read them from time to time to get a read on the latest views from snob hill.
...
written by Andrew Clearfield, January 25, 2012 11:22
I'm curious how susceptible lawyers really would be to foreign competition. Manufacturing and medicine deal with skills that don't change from country-to-country (the human body and a sewing machine are the same everywhere) but U.S. law is very different from the law anywhere else. Would American businessmen really trust a foreign-trained lawyer to navigate Delaware corporate law?
"foreign" lawyer or "foreign born" lawyer
written by Ethan, January 25, 2012 12:16
Why wouldn't a prospective Delaware corporate client trust a foreign born lawyer if he were a domestic lawyer i.e. admitted to practice in Delaware. After all, California clients trust California lawyers to opine on Delaware corporate law even when they are not admitted in Delaware.
...
written by Andrew Clearfield, January 25, 2012 12:59
I meant (and said) "foreign-trained" not "foreign-born and domestically trained." In other words, I agree with you.
You are brutal
written by Robert Hammond, January 25, 2012 5:27
and refreshing

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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