You Need Skills to Pay the Bills
February 17, 2011, By Tyler Newton 2 comments
The economy has gone haywire and politicians and economists are in total disagreement as to what to do about it. Regardless, the key to getting ahead is to look at the world how it is, and not how it ought to be. The world is tilted toward those that are well-educated or highly skilled and jobs will continue to shift from classic middle-class occupations like manufacturing and back-office work toward technology, education, health care and leisure services. There are two choices: complain about the trend or join it.
The Quadrupling of the World’s Workforce
Around 1990, when the Berlin Wall fell and most “developing” countries joined the capitalist world economy, a major shift occurred. The world economy, which at the time consisted of largely developed countries like the United States, Western Europe and Japan, had billions of new participants from Latin America to Asia to Russia and Eastern Europe. Suddenly unskilled workers in the developed world had to compete with billions of new workers with much lower pay expectations.
The only way to grow an economy over the long term is for its workers to become more productive. Workers become more productive when they become more skilled (trained or educated) and when they are supported by more capital (technology and machines). A developing country has workers with lower skills (and lower income) than a developed country. Capital is allocated to match with workers of the appropriate skill set and income expectations. Less-developed economies, like those in Africa and the Middle East, specialize in providing commodities. Early-stage developing countries like Vietnam or Cambodia attract industries like textiles and low-tech manufacturing. Mid-stage developing countries like China and India attract a mix of low-tech and mid-tech manufacturing.
Do countries like China cheat the system with their cheap currency? Yes they do, but this cheating just accelerates a process that would have happened anyway. If you live in a developed country and have the type of job that competes directly with low-paid workers in developing countries, it’s time to find a new job.
American Productivity
The United States is the most advanced large economy. For the past thirty years, the United States has been in the process of allocating capital away from low-tech manufacturing toward technology, high-tech manufacturing and financial services. At the same time it has been allocating labor away from manufacturing and back-office jobs toward technology, education, health care and leisure services. Manufacturing is going through the same process that agriculture went through in the late 1800s. Manufacturing production in the United States is growing but it is becoming so productive that employment is falling. In addition, the purpose of most software and information technology is to automate office jobs, so being a “white-collar” worker doesn’t necessarily make you immune to these trends.
Get Skilled
The bulk of the fields that are experiencing job and income growth are ones that require a college education or more. If you or your children want to get ahead in the world, education and job training are paramount. Even if you can’t go to college, build the skills to succeed in the leisure services field, whether you intend to be a chef, a personal trainer or a store manager. Wherever possible, use technology to make yourself more productive.
It’s a competitive world. Don’t get left behind.
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