CullmanTimes.com - Cullman, Alabama

Business

January 23, 2013

NATION: Recession, tech kill middle-class jobs

(Continued)

NEW YORK — What hope is there for the future?

Historically, new companies and new industries have been the incubator of new jobs. Start-up companies no more than five years old are big sources of new jobs in developed economies. In the U.S., they accounted for 99 percent of new private sector jobs in 2005, according to a study by the University of Maryland’s John Haltiwanger and two other economists.

But even these companies are hiring fewer people. The average new business employed 4.7 workers when it opened its doors in 2011, down from 7.6 in the 1990s, according to a Labor Department study released last March.

Technology is probably to blame, wrote the report’s authors, Eleanor Choi and James Spletzer. Entrepreneurs no longer need people to do clerical and administrative tasks to help them get their businesses off the ground.

In the old days — say, 10 years ago — “you’d need an assistant pretty early to coordinate everything — or you’d pay a huge opportunity cost for the entrepreneur or the president to set up a meeting,” says Jeff Connally, CEO of CMIT Solutions, a technology consultancy to small businesses.

Now technology means “you can look at your calendar and everybody else’s calendar and — bing! — you’ve set up a meeting.” So no assistant gets hired.

Entrepreneur Andrew Schrage started the financial advice website Money Crashers in 2009 with a partner and one freelance writer. The bare-bones start-up was only possible, Schrage says, because of technology that allowed the company to get online help with accounting and payroll and other support functions without hiring staff.

“Had I not had access to cloud computing and outsourcing, I estimate that I would have needed 5-10 employees to begin this venture,” Schrage says. “I doubt I would have been able to launch my business.”

Technological innovations have been throwing people out of jobs for centuries. But they eventually created more work, and greater wealth, than they destroyed. Ford, the author and software engineer, thinks there is reason to believe that this time will be different. He sees virtually no end to the inroads of computers into the workplace. Eventually, he says, software will threaten the livelihoods of doctors, lawyers and other highly skilled professionals.

Many economists are encouraged by history and think the gains eventually will outweigh the losses. But even they have doubts.

“What’s different this time is that digital technologies show up in every corner of the economy,” says McAfee, a self-described “digital optimist.” “Your tablet (computer) is just two or three years old, and it’s already taken over our lives.”

Peter Lindert, an economist at the University of California, Davis, says the computer is more destructive than innovations in the Industrial Revolution because the pace at which it is upending industries makes it hard for people to adapt.

Occupations that provided middle-class lifestyles for generations can disappear in a few years. Utility meter readers are just one example. As power companies began installing so-called smart readers outside homes, the number of meter readers in the U.S. plunged from 56,000 in 2001 to 36,000 in 2010, according to the Labor Department.

In 10 years? That number is expected to be zero.

 

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