From the August 2023 print edition
My family and I just returned from vacationing in the US. We spent one week in Las Vegas, a city that has special meaning for me.
It is where I and my wife got married. It’s a place that has captured the imagination of my seven-year-old son. He loves the place for a variety of reasons. We try to do it on the cheap and one of the ways we save money is by shopping at a Whole Foods just south of the strip (three kilometres south of Mandalay Bay) and dining at fast food restaurants.
This visit we discovered a Panda Express that was a 10-minute walk from our hotel room. There was a “Help Wanted” sign outside, advertising the need for line workers, assistant managers, and store managers, and the wages associated with each position.
I was flabbergasted. The starting pay for line workers is $17 per hour, for assistant mangers $23, and store managers start at $27 an hour.
Why was I so taken aback? At $17 an hour, an individual would gross $680 a week, and it is possible to find reasonable, one-bedroom accommodation in Vegas for less than $1,000 a month.
There’s a simple reason why wages are so high. It’s called supply and demand. Over the past year, US unemployment has ranged from 3.4 to 3.7 per cent. What is so interesting to me is that this is with a Democratic President and a Congress that is also dominated by Dems. Let’s return to pre-COVID times. In the nine months leading up to the onset of the pandemic, when there was
a Republican President and a Republican-dominated Congress, unemployment ranged from 3.5 to 3.7 per cent, then it ultimately spiked to hit 14.7 per cent in April 2020, before it steadily came down to current levels.
Full employment
These are US numbers, but the story in Canada is similar. Our unemployment rate stands at 5.3 per cent while pre-COVID-19 it bottomed at 5.7 per cent. For someone like me, who received his formal training in economics in the late 1970s, this is borderline shocking. We were told that “full employment” in the US meant that there would always be four per cent of the workforce unemployed and it would be closer to six per cent in Canada.
This was considered full employment because some people would be leaving work voluntarily for various reasons, and the creative destruction of capitalism would mean that some folks would be thrown out of work against their will.
There are schools of economic thought that would not be surprised by unemployment being
as low as it is. Classical economists like Adam Smith and John Stuart Mill believed in the “invisible hand” of the marketplace. Economies would adjust naturally to achieve full employment. Then John Maynard Keynes, writing during the Great Depression, argued that in the absence of government intervention the adjustment process would take an unconscionably long period
of time, putting undue suffering on the most vulnerable among us. However, ultimately there
is more agreement than disagreement between the Classicals and Keynesians. Humans are by nature an adaptive species.
What does this mean? We should not be afraid that there will be a dearth of employment opportunities in the foreseeable future.
I have heard concerns that self-driving cars will devastate the trucking industry. I have heard concerns that artificial intelligence (AI) will eliminate a wide swath of occupations. Goldman Sachs direly predicted that AI would eventually affect 300 million people worldwide and displace 20 per cent of the workforce. And the World Economic Forum predicts that 25 per cent of jobs will be “negatively impacted” with clerical and administrative positions being hit most directly.
The role of technology
I’m not denying that there will be upheaval in labour markets. Yet at the same time that technology is the problem, it will simultaneously provide at least a partial solution. It is now possible to deliver training and education more quickly and cheaper than ever before. Technology, properly employed, can simplify tasks that were once very complex. It will be necessary more than ever for workers to be flexible and nimble. In the developed world, at least, something like a guaranteed minimum wage is the next development that will ensure both social cohesion and allow the risk-taking that is essential for economic growth.
I have previously noted that I have a seven-year-old son. I see a future for him that is full of opportunity. I truly hope that he will not waste his time, energy, and money with post-secondary education (and I teach both college and university) unless he’s attending a program like engineering or computer science or he’s picking up a practical trade like plumbing. And look, worst comes to worst, he could start working at a Panda Express while he lives at home, saves his money, and by the time he’s 21, he could be debt-free and own his own condo … maybe just off the Las Vegas strip.