Companies that are looking for a good deal aren’t seeing one in new workers.
Workers are getting more expensive while equipment is getting cheaper, and the combination is encouraging companies to spend on machines rather than people.
“I want to have as few people touching our products as possible,” said Dan Mishek, managing director of Vista Technologies in Vadnais Heights, Minn. “Everything should be as automated as it can be. We just can’t afford to compete with countries like China on labor costs, especially when workers are getting even more expensive.”
Vista, which makes plastic products for equipment manufacturers, spent $450,000 on new technology last year. During the same period, it hired just two new workers, whose combined annual salary and benefits are $160,000.
Two years into the recovery, hiring is still painfully slow. The economy is producing as much as it was before the downturn, but with seven million fewer jobs. Since the recovery began, businesses’ spending on employees has grown 2 percent as equipment and software spending has swelled 26 percent, according to the Commerce Department. A capital rebound that sharp and a labor rebound that slow have been recorded only once before — after the 1982 recession.
With equipment prices dropping, and tax incentives to subsidize capital investments, these trends seem likely to continue.
“Firms are just responding to incentives,” said Dean Maki, chief United States economist at Barclays Capital. “And capital has gotten much cheaper relative to labor.”
Indeed, equipment and software prices have dipped 2.4 percent since the recovery began, thanks largely to foreign manufacturing. Labor costs, on the other hand, have risen 6.7 percent, according to the Labor Department. The rising compensation costs are driven in large part by costlier health care benefits, so those lucky workers who do have jobs do not exactly feel richer.
Corporate profits, meanwhile, are at record highs, and companies are hoarding cash. Many of the companies that are considering hiring say they are scared off by the uncertain future costs of health care and other benefits. But with the blessings of their accountants, these same companies are snatching up cheap, tax-subsidized tractors, computers and other goods.
“We had an opportunity to buy equipment at a very discounted rate,” Mr. Mishek explains of his decision to make bigger investments in equipment than in workers. “Now that the economy has turned around a little bit, it made sense to upgrade.”
Hiring has some hidden costs, as well as the expenses of salary and benefits, Mr. Mishek added.
“I dread the process we have to go through when we want to bring somebody on,” he said. “When we have a job posting these days, we get a flurry of résumés from people who aren’t qualified at all: people with misspellings on their résumés, who have never been in the industry and want a career move from real estate or something. It’s a huge distraction to sort through all those.”
This is going to become more and more and more the way it is. As technology, automation and robotics advance – people, per se’ will become more and more a liability to employers.
it’s clear to me that our current capitalistic system will create more and more poor, pissed off, desperate people. Who will feel more and more like they have nothing too loose and everything to gain by going after the the oligarchs and elites. A very dangerous situation since historically this has nearly always lead to bloody chaos. I hesitate to recommend what exact action need to take place. But clearly we need to remake our culture/society/economy so to take better advantage of the resources we have. Also looking toward space as well. This would create more jobs and prepare for the inevitable task of colonization.
But in the mean time we need to scrap the current value system entirely. First of all we have to totally get rid of the current concept of Employment based on the Master/Slave mentality. A whole new paradigm is necessary. The idea of getting up and going to your job, office, shop, business etc. is going the way of button shoes and the Dodo Bird. What we need is an entirely new system where people get credit for what ever they are skilled at and choose to do. The more it is worth to someone, some community, some society – the more credit they get.
Of course the right would have a major coronary with this since it totally eliminates the Master/Slave situation and there would no longer be any rich and powerful.
And they would counter with the meme of “People are lazy. Nobody would work” thing which we all know is total BS of the first order. Since there are millions of computer hackers who do nothing but tear in the code all day long, people who put gobs of time and effort in to restoring shit just to do it, people who garden and cook and build and what not just for the hell of it.
I am not nearly wise enough to come up with how this would work or be implemented but I do know this, the old system is falling apart.