Morici: Changing workplace boosts growth but causes pain

New technologies and the changing workplace have great potential to supercharge growth but only if governments do not handcuff businesses.

The mechanization of agriculture and moving assembly line created many more good jobs than they destroyed. However, disruptive innovations often instigate great social upheavals, and how society fares depends on sound government policy.

Nowadays, inexpensive computers and the internet permit businesses to manage widely dispersed suppliers and contingent work forces. These tactics use capital and labor much more efficiently, permit businesses to contain costs and service more customers in the face of skill shortages, and boost growth and incomes.

The Labor Department does not regularly survey the number of contract and on-call employees, but academic studies indicate those accounted for nearly all the 9 million jobs added from 2005 to 2015.

The only major occupational groups largely unaffected were engineers and managers – they control proprietary know-how and manage the process. The latter are like university presidents – they prefer fewer full-time professors but more bureaucrats to express their power.

The high cost of permanent employees – including escalating health insurance premiums, other fringe benefits and government mandated overtime pay, affirmative action and the like – further compel employers to outsource everything from cleaning to accounting services.

Upscale neighborhoods like mine in Alexandria are populated with scores of self-employed business consultants, lawyers and the like. I have collaborated with several and obtained some good paying gigs.

Most are happy, because they possess specialized expertise and are well compensated. With multiple clients, they do not suffer the fickle employer who can fire at whim.

The hard reality is many other workers who Uber or landscape are in commodity occupations and live at the edge – often without decent incomes, affordable health insurance and the financial wherewithal to provide their children with appropriate vocational training or college options. The latter is particularly menacing to future national prosperity.

Concrete examples abound of hospital janitors and medical transcribers who have been financially marginalized by outsourcing. And a contract female limousine driver subject to gender stereotyping or sexual harassment is much less likely to complain than a full-time employee.

Unlike Europe, fringe benefits and worker protections are mostly paid for – or mandated by the government – through individual employers in the United States. Politicians trolling for votes, much as they do with entitlements, often impose prohibitive costs that compel employers to look beyond contingent workers and accelerate automation.

Instead of rethinking mandates to make those less onerous, state and local governments are now compelling businesses to treat contingent workers like full time employees. For example, New York now requires businesses to contribute to sick and paid family leave, health insurance and similar benefits for employees working 20 hours a week or as private contractors.

Democratic Sen. Sherrod Brown is pushing for similar national level legislation.

All these raise the cost of contingent workers and as experience in California with the $15 minimum wage indicates, those force businesses to replace people with machines. So much so that San Francisco Supervisor Jane Kim is campaigning for a tax on robots and software.

No doubt progressives will seize that idea for a national campaign – another great way to give the future to China.

Until recently, the striking characteristic of robotics and artificial intelligence were their focused impact on mid-skilled jobs. Good secretaries, bookkeepers and insurance adjusters are paid well enough to warrant the investment in expensive machines and software. In turn, they become more productive or retool for other occupations requiring similar aptitudes.

As local governments push up the cost of employing counter clerks and supermarket checkers, those workers have fewer alternative employment options. Many will likely end up on Social Security disability or simply very poor.

In France, this sort of thing has absolutely ossified labor markets and stunted growth.

The liberal paradise has much higher unemployment and many more temporary workers than Germany. Recently elected President Macron has defied opposition politicians and unions to roll back the most punitive workplace regulations and somewhat improved business conditions.

If the Democrats in Congress want to make America more like France and a leader who looks more like Mr. Macron than Mr. Trump, then they would do well to spend their next government-paid vacation – aka fact finding trip – in Paris and learn something about free market labor reforms.

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. © 2018, The Washington Times.

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