The Appeal of Socialism--Part i: The Hunt For Elusive Jobs

Part I | Part II

Recent polls indicate a ;majority of people under age 30 now believe that Socialism is a desirable form of government and more fair than capitalism. Despite living in a country that has been the world standard for individual freedom, is one of the wealthiest nations, and one that millions of people are willing to risk everything to come to, we have almost two generations who feel the system has abandoned them and drastic changes are needed. Why?

To answer that question, we need to look at our country from their perspective, as best we can manage. When digging into matters, we find a rather odd situation. The most recent generations, mostly generation Z, are economically better off on average than their parents or grandparents were at the same age. They have greater wealth, and are more financially and economically literate than was common in previous generations. Perhaps for those reasons, these generations are more concerned about future prospects, with good reason.

The great majority of people today work at "jobs". This condition is relatively new in the last fifty years or so. While it is true that large numbers of people have always worked for others--essentially the definition of a job--over the last century, the size and remoteness of the firms providing those jobs has grown dramatically. Through a process called corporate concentration. companies have grown larger with many having revenues and valuations that exceed that of many countries.

Small, local businesses that hired people locally have been displaced by corporations, many with global reach. People who are in local labor pools now compete for employment with global workers for the same positions. Economic differences between countries has led to a kind of labor arbitrage, where work can be allocated to those locales with the most favorable conditions. Since labor costs are frequently the most significant factor in cost calculations, even substantial differences in productivity can be offset by sufficient differences in labor costs.

Countries such as India and China, among many others, have taken advantage of this situation. India has focused on providing labor in such areas as software development, and customer service, providing many firms the opportunity to outsource work, supported by global communication networks that largely eliminate distance costs. China has deliberately kept both labor and material costs low in manufacturing areas, which, coupled with reduced transportation costs, have led to increased manufacturing in China, often at the expense of domestic production in many countries, the US, Canada, and Europe included.

The net result has been the transfer of employment opportunities to these countries as well. Proponents of such outsourcing speak of how consumer prices are reduced, while failing to mention that it does not matter how low prices might be if one has no income to purchase those goods.

Tariffs are one of the few tools available to offset the effects of this form of arbitrage by establishing a parity with domestic production. This elimination of much of the advantage is the reason so many large firms oppose tariffs and also why we see little of the predicted inflation of domestic prices due to tariffs. Reductions in availability of offshore goods has promoted domestic production which has also promoted domestic employment. Domestic firms that have had to compete with global firms have had to learn how to be competitive in the face of an arbitrage disadvantage, so when that disadvantage is removed, there is little or no change in domestic prices.

Unrestricted immigration has had a similar arbitrage effect in domestic employment. At the low end of the scale, many low end domestic workers have been displaced by immigrant workers, particularly illegal immigrants. While there are laws against employment of illegals, until lately, there has been low risk to employers because such employment was often overlooked and the laws seldom enforced.

Even when there was enforcement. the penalties were often trivial compared to the advantages of not having to pay various taxes, comply with numerous regulations, and pay wages at legal domestic rates. This puts legal domestic workers at a severe disadvantage especially when competing for the lowest level jobs.

There are many supporters of such illegal employment who claim that these illegal workers are necessary to do the jobs domestic workers won't do. The truth is that the domestic workers never get the chance to do them because the arbitrage advantage of illegals is too great. Current opposition to the deportation of illegals is fueled in large part by those who prefer the quasi-slavery labor of workers who can be controlled through threats of deportation for those who might bargain for free and fair exchange of value.

There is also arbitrage at the high levels of employment as well, Recent attention has been drawn to the H1-B visa programs. Originally intended to provide a way to bring in workers who could provide valuable experience and skills not found domestically, it has become a way for large firms to import lower cost workers to displace domestic ones. Here the salary arbitrage is enforced by the conditions of the visa itself.

If the workers do not accept the salary and conditions the employer imposes, the visa can be revoked and the individual forced to return to their country of origin--often with few or no employment prospects there. Since the visa is tied to the employer, this is a significant power the employer holds over the employee that is not present with domestic employees. Hundreds of thousands of jobs have been closed off to domestic workers through this government supported salary arbitrage.

Ironically, this situation is a result of a form of socialism known as crony capitalism, also called rent seeking, where a business uses political influence to obtain economic benefit through the coercive power of government, usually through rules and regulations that offer an advantage to one firm or industry over would-be competitors. This collusion/cooperation between government and business to the detriment of consumers is an essential part of socialism.

Were these things not enough, the introduction of artificial intelligence, or AI, into the labor market is working to eliminate the middle tier of employment. Jobs that involved routine processing of information, including financial transactions, various recordkeeping, accounting, and many others are now vulnerable to semi-intelligent automation. AI doesn't require lunch breaks, doesn't hold office parties, doesn't sleep, and most importantly, doesn't require a salary, doesn't require payment of employment taxes, doesn't ask for raises or vacations, and doesn't need almost any of the overhead expenses of a human. They also don't complain.

The new generations look at all of this, and justifiably ask what does it mean for them. From the lowest end of the economic scale through the middle, to the highest levels, they see opportunities disappearing daily with global competition for the few that remain. While it is true that new opportunities are also being created that did not exist before, the process is slow, and does not appear to be keeping pace with losses.

Part II will discuss how government actions at all levels from local to national have worked to support current interests in Socialism, often through good intentions and ideas that seem good at the time. As we all know, with just a little more power, all problems can be solved. There never seems to be quite enough power, though.

Ronald Reagan said it well.  "Government is not the solution to our problem; government is the problem." First Inaugural Address on January 20, 1981

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