Do Americans really miss the unions?


Every wage earner contributes to three kinds of wage earning effort: Knowledge and its use (A); Information work (B) and Physical Labor (C).

Labor Productivity as judged by the employer = A / (A + B + C)

There are claims that the current low wage economic climate in US is a refection of poor US education, need for higher college degrees, weak unions, …. These traditional arguments miss a couple of fundamental issues. They are:

  1. The role of IT (and broadly Digital Technology) in eliminating the need for human centered activities (labor);
  2. Failure of the nations to invest heavily in new technologies – beyond DT
  3.  Meaningful programs to convert them into new economic activities and jobs;
  4. Failure of students, educators, universities and parents to point out the need for a three legged balanced education (which will be the only way to find high wage jobs in the new Binary Economy).

Weakness in all of the four points are leading to a low or stagnant wage labor, with a collapsing middle class.

We address this fourth point in this essay as it pertains to the role of strong/weak labor unions. When the labor is strong in terms of its direct and identifiable contribution to the GDP, then unions will find their role and strength. It is like blaming the security guard in a bank, when there is no money left in the vault! The money is not stolen, but it has been used up and not replenished.

Following is a quote from a recent NYT article.

More than 151 million Americans count themselves employed, a number that has risen sharply in the last few years. The question is this: What are they doing all day? Because whatever it is, it barely seems to be registering in economic output. The number of hours Americans worked rose 1.9 percent in the year ended in March. New data released Thursday showed that gross domestic production the first quarter was up 1.9 percent over the previous year. Despite constant advances in software, equipment and management practices to try to make corporate America more efficient, actual economic output is merely moving in lock step with the number of hours people put in, rather than rising as it has throughout modern history.

Productivity is one of the most important yet least understood areas of economics. Over long periods, it is the only pathway toward higher levels of prosperity; the reason an American worker makes much more today than a century ago is that each hour of labor produces much more in goods and services. 

In our opinion this confusion exists because of the long held conventional views on labor productivity.

There is a traditional view that everything that is done to increase the productivity in one nation has to reflect in the GDP of that nation. If this were true that the rate of growth in GDP in countries like India and China will reflect a far larger labor productivity in these countries  than that in USA.

According to a report from Oxford.  ” the basis of U.S. manufacturing’s continued strong competitive position is increasing productivity. The productivity of U.S. manufacturers has risen by 40% since 2003, outpacing competitors such as Germany (23%), the UK (30%), and Mexico (18%). While productivity of manufacturers in China and India has more than doubled over the same period, the report notes, U.S. manufacturers in 2016 are still nine times as productive per employee than manufacturers in China”

Why is this dichotomy?

Today labor productivity – PE Score – can be measured as the value added effort by the employee / Total Effort. Value addition is achieved through the skills of the work force to create “New Solutions”. Value addition can also be through their workers in terms of their contribution to pass along information or pick and place or move things (Physical labor). This later kind of labor activity which is disappearing is illustrated well in the GE Commercial.  

New Solutions can be created and implemented  using labor and the productivity here will be much higher. This can be judged by the output / employee in companies like Apple, Google, Tesla, Space X. The labor productivity in manufacturers in USA are much higher (as noted above) because of the very low content of information work and physical effort (replaced by IT systems and automation) per employee.

What does this mean in terms of graduates and their earning potential? Simply graduating from colleges and looking for new jobs is not enough. They need a collection of three sets of knowledge: Academic education from the college, application oriented experience or training and Transformational Skills to identify, develop and implement New Solutions.

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Career Strategies for success: It is a game plan using System Thinking and Transformational Skills.

According to the analysis, in a recent blog post: These 150 People Are Ridiculously Successful and All Have the Same Career Path: None the site reports: The real lesson is not some shared attribute that contributes to career success. The lesson is that for these 150, and surely for the hundreds of others who could also have joined this list, what matters is personal passion and vision, not some paint-by-numbers guide. In fact, few if any of these individuals followed a familiar playbook and that might just be the real key. The greatest success comes from the indelible marriage of a unique idea with uncommon individuals addressing needs that are widely shared. This Next Wave may find their futures bright, and they may encounter more turbulence as they flow into the next stage of their careers. But all of them are addressing real needs that someone will address and solve if not them and if not now. We can thank our collective lucky stars that for all the troubles that swirl through the world, so many are striving with such determination, vision and skill to improve the collective us.

Every one of the examples cited in the link above highlights individuals who created and implemented “NEW SOLUTIONS”: addressing real needs that someone will address and solve if not them and if not now. So, the success comes to those few who are relentlessly focused on New Solutions as opposed to those who merely execute tasks (do what they are asked to do). We have described this field of opportunity in great detail and the evolving Binary Economy: Success for the few who identify, develop and deploy NEW SOLUTIONS and low wage opportunities for the many who execute tasks required for the REPLICATION SOLUTIONS.

What happens to the millions who are not naturally gifted to identify such New Solutions? Our glamour and adoration of these few naturally gifted successful persons should not become a source of despair and inaction to help the millions who may fall by the wayside (and who are now the economically impoverished middle class?)

Is there a frame work to define what a solution is? How do we frame a need as a New Solution? What happens to those whose economic situation does not permit them to dedicate their life and mortgage their future into a new opportunity? May be every new solutions is not a new startup company? Will not focus, hard word and determination be enough? I posed these questions to my recent class of students, who are being trained and educated on the principles of System Thinking and Transformational Skills.

The class consensus was that, while these are the basic desired qualities, the System Thinking and Transformational Skills provide a platform, a strategy and/or a game plan to identify, develop and execute your efforts for new solutions and potential future success.

  1. Every solution is an Input/Transformation/Output system.
  2. Every New Solution is an unmet need that fills the gap that exists at three levels:
    1. Knowledge, Experience and/or interpersonal relationship for individuals.
    2. Science (or knowledge of the Transformation), Engineering (application or use of the transformation) and/or Management (What? Why? How? and When?) to exploit the Transformation.
  3. Opportunities for any New Solution can come from:
    1. Developing a common language to articulate the need and the solution as a system
    2. Identifying the missing gaps (core capabilities) as mentioned above.
    3. Development and use of Diagnostic tools.
    4. Making such tools available on the go (through Apps. If required)
    5. Promoting a network of users and providers with common needs
  4. Success of the New Solution depends on:
    1. Relentless focus on the entire chain — from beginning to end (Discovery X Development X Use) without any breakage.
    2. Empathy and a willingness to help users to succeed and then make hay out of it (and not in the reverse order).

We can transform common and ordinary individuals -not a rare few by chance, but many by design – with a game plan and a strategy so that success comes to them from the indelible marriage of a unique idea with an uncommon individual skill sets to address the needs that are widely shared.

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Binary Economy and the views of Pope Francis

We have described in our earlier blog posts that the Digital Technology is a two edged sword :

  • One edge that enables enormous opportunities for a few skilled workers (System Thinkers with Transformational Skills) while the other side that de-skills and automates all our work that creates only a vast pool of low wage work (and unsustainable living conditions for a large majority of people).

This development enabled by Digital Technology can also be thought of as a two sided coin:

  • One side of the coin that connects and informs every one across the globe about anything and everything, while the other side isolates people into their narrow subsets and contact lists, specialties and task oriented efforts and SOPs.

Both these modes of developments are inevitable. More pervasive the role and impact of Digital Technology, faster and greater will be the polarization into these extremes with a constantly disappearing middle. We have described this dichotomy as the emerging Binary Economy in our recent book:

Pope Francis seems to perceive this dichotomy as expressed in his views highlighted below.

Taken as a whole, do our technological advances — news in real time, live global communication, access to more information and entertainment (and all the shades in between) than we could ever fully absorb — help or hurt the causes when those causes should be engaging with our lives to the fullest, and fostering peace, love and happiness?

Real relationships with others, with all the challenges they entail,” Pope Francis said, “is giving way to more fickle online relationships and “a new type of contrived emotion which has more to do with devices and displays than with other people and with nature.”

“Nobody is suggesting a return to the Stone Age, but we do need to slow down and look at reality in a different way?”

When media and the digital world become omnipresent, their influence can stop people from learning how to live wisely, to think deeply and to love generously. In this context, the great sages of the past run the risk of going unheard amid the noise and distractions of an information overload.”

We need to reject a magical conception of the market, which would suggest that the problems can be solved simply by an increase in the profits of companies or individuals.”

Recently I met a graduate student from the business school at MIT. He said that he is being mentored by a business leader from a large financial services company. He said, “I am trained to think and act on how I can make the most money every moment I work”! The lack of empathy for those in need or the consequences of such relentless focus on profit at all cost was totally lost in this young person. This example of survival at all cost is also noted in industrial organizations, where leaders do everything for their survival and profits with no regard for the long term impact of their company or organization. Focus on short term profits and results, which used to be a matter of convenience, have increasingly become a badge of honor. Climate change and the increasing gap between the rich and the poor have become a political weapon for one side  vs. another rather than phenomena that need to be addressed and solved for the good of all. For them Pope Francis asks: “What would induce anyone, at this stage, to hold on to power only to be remembered for their inability to take action when it was urgent and necessary to do so?”

What is common between Bernie Sanders and Donald Trump?

There has been huge attendance in the recent Democratic rallies featuring the Vermont Senator Mr. Bernie Sanders. On the  other hand Mr. Donald Trump has been sucking up all the oxygen and attention with his harsh language against immigrants and his fellow presidential candidates in the Republican primaries. The popular support for these candidates may be seen as the pent up anger in the population against the Wall Street and the perceived syphoning of jobs and economic opportunities by the illegal immigrants from the south of the border respectively. This kind of anecdotal explanations by the reporters and political pundits may not serve the nation well for the long term.

In a recent article published in the Washington Post titled: Sorry, but the jobless future isn’t a luddite fallacy  the author makes the point: Policy makers have a big new problem to deal with: the disappearance of human jobs. Not only will there be fewer jobs for people doing manual work, the jobs of knowledge workers will also be replaced by computers. Almost every industry and profession will be impacted and this will create a new set of social problems — because most people can’t adapt to such dramatic change.

The author makes it look like it might be a problem developing into the future. But, reality suggests that the problem started a decade before Regan years, got established through the Clinton years. When the very survival of the economic order was in question due to the financial crisis along with protracted engagements in wars, when Mr. Obama took office, gradual erosion of employable opportunities for the large cross sections of the society has continued but seen merely a side issue. Now as these two national concerns are addressed to some extent, the pent up fear and anger and despair in the population is finding its voice through the emotional appeals of Mr. Sanders and Mr. Trump, even if their tones are completely different.

We have documented this erosion in the meaningful opportunities for employment and economic well being as the Binary Economy well documented in our recent book. Instead of waiting for some one else to fix the problem we have suggested that technical professionals, students and others should systematically cultivate specific skills – Transformational Skills –  to enhance their job and career opportunities. These individual centered initiatives will go only so far. It requires national leaders to comprehend the evolving Binary Economy and develop policies and national consensus for coping with its  impact. Merely cloaking the Digital Technology as “high tech” and glorifying the thief using DT tools as “hackers” does not do well for societies that have succeeded through the use of all sorts of technologies as the backbone for their success.

Absent such policies we see continued isolation and layering of job opportunities. This leaves people in the lower levels of jobs (largely involving physical work or information tasks) with a sense of despair that unless you are born in a well to do family and go to school in a better neighborhood, your opportunities are permanently shut off. The knowledge economy and the skill based economy have become code words for the success of a few while others stagnate. These issues may be the under currents supporting the fan base for Mr. Sanders and Mr. Trump.

Clearly the answer is not the anger and abuse against the immigrants unleashed by Mr. Trump. Raising minimum wage and such social policies for re-distribution of wealth by Mr. Sanders may be temporary fix. But they may not be the sufficient or sustainable long term answers as well.  As noted in the Washington Post article: If we can develop the economic structures necessary to distribute the prosperity we are creating, most people will no longer have to work to sustain themselves. They will be free to pursue other creative endeavors. The problem, however, is that without jobs, they will not have the dignity, social engagement, and sense of fulfillment that comes from work. The life, liberty and pursuit of happiness that the constitution entitles us to won’t be through labor, it will have to be through other means. Is this the way of life we want?

What are the other means for such living, where anything a human can do – read, write, think, analyze, infer, conclude, decide and control – can all be done by computers and IT solutions? Mr. Steven Hawkins has raised this specter and fear one can envision due to irrational deployment of Artificial Intelligence in the future. But, the irrational deployment of digital technology for incremental gains in cost reduction and elimination of human employment has started at least four decades ago. This has been happening in parallel with unprecedented gains in many new areas thanks to advancements in Digital Technology. Are these two sides of the lever balanced? If not how to maintain the balance? These are the questions that have not been addressed for the past four decades.

There is also a need for discussion on another balancing act: Investors – those with capital or money – can work and use all resources across the globe and we call that as global capitalism. Yet national economic policies – of the countries in which the same investors live – are constrained by what the government can do within its shores. When human beings as employable resource  migrate from rural areas of China and India to the urban centers it is considered legal. The same migration of people for the same reasons from poor countries to more affluent regions in their neighborhoods we decry them as illegal labor.

Such balancing act in several fronts are entirely new. This is an open space for any national leader from either party to develop a dialogue and national mandate for future actions. Whoever fills this void may emerge as our next President. Or we may go through another election without any consensus and more shouting and name calling. After all any social  system under great stress needs to find the vent to release its anger and frustration. We see this release of frustration as the common outcome of the campaigns of Mr. Sanders and Mr. Trump at this time.

Some might say “the train has already left the station and it is too late to do anything”. Such pessimism and acceptance of systematic loss of opportunity for large segments of work force and relegate them as un-employable will only fuel the pent up anger. Then we can expect to see even larger crowds at Bernie Sanders rallies or higher poll numbers for Mr. Trump, even though neither of them may win the presidency. But it will also weaken any future president without a mandate to strike the right balance required, as mentioned above.

Are you a good plumber? Then you may be OK as a professional!

Recently, I had a leak in the hot water tank in our house. Fortunately the hot water tank in my house is located on the basement floor. So, the damage was only modest. As one would in a situation like this I called the plumber. The company I contract with is a one man operation. he was away on vacation. But, he had arranged one of his fellow plumbers – another one man operation – to follow up on the calls. The back up plumber came to my house, checked my hot water tank, followed up with my primary contact, got all the paper work, figured out that the tank can be replaced on warranty. He had used the camera in his phone – mobile diagnostic tool – to take pictures and document the details to communicate with the manufacturer. When he informed me of all this it was time for me to travel. He said  not to worry. He offered me a suggestion to turn off the water, while I was away and scheduled the hot water tank replacement work, as soon as I returned. No sooner had I returned the plumber was at my home with the replacement tank, which he had arranged to secure while I was on travel.  He did all the work a plumber does – drain the system, disconnect pipes, connect where needed, solder the and seal the joints as needed, refill and test the system. He could have left right away after that. Instead he asked me to put the system to full duty cycle for nearly thirty minutes. Much to his surprise one of the solder joints, which he had not touched started leaking! As you might know a leaking solder joint can not be fixed with out starting all over again, draining the water in the system. The plumber went through the steps diligently and ensured that I had a fully functioning system – a system that met all my requirements as a user.

You might think that is what the plumber is supposed to do. But the plumber is also rated and the rating is uploaded on to a on-line data base like the Angie’s list. Only those with good ratings get calls from the tech savvy social media dominated population.

What does this have to do with you as a professional? How often do you take on an assignment where the problem is clear, well defined and the user needs clarified up front? Do you then systematically and methodically follow up on all aspects of your work and rely on all your core capabilities: your knowledge, information work and physical labor? Do you check and re-check your work so that the person who relies on your work – like the home owner reliant on the plumber – is fully satisfied with your solution. Do you operate as a single owner company whose livelihood and success are entirely of his own making? Do you have people as back ups in your work that you can rely on, when you have to be away? Do you subject yourself for constant scrutiny and review so that you have a constant pulse on user satisfaction of your work? If you do all of these you will be a successful professional, no matter where you work – may be it is a small start up, a medium sized company or a large enterprise.

We call these collection of skills as Transformational Skills. For more details Contact us.