Professional Jobs and the Middle Class
Do you think that in the US, as long as there are professional jobs that the middle class will exist. Eg, middle class = jobs that require degrees. Doctors, lawyers, IT people, office jobs, etc.
I believe this will be true, but I guess it is a matter of will these jobs become scarce in the near future because of a future recession?
July 16th, 2007 2:01pm
Doctors and Lawyers aren't really middle class, they're upper class. If they live in fancy houses, drive fancy cars, go to fancy dinners, go on fancy vacations, and still have fancy bank account balances, they're fancy people.
Middle Class has this very fuzzy definition where pretty much everyone in America defines themselves as Middle Class.
July 16th, 2007 2:04pm
"Doctors and Lawyers aren't really middle class, they're upper class."
I know a couple of people that work in the medical field; nurses, radiologists, blah, blah. I meant to include them. And know of at least of couple family doctors that are right at middle class. Probably barely scrapping by to keep their practices open. Know of only one friend that has a law degree, passed bar but is more of a paralegal that is certainly middle class.
I think you can be a professional and still be poor.
July 16th, 2007 2:09pm
> Doctors and Lawyers aren't really middle class, they're upper class.
That was true in the 1970s, it is no longer true. Have you ever actually looked to see the average lawyer salary? It is a lot shittier than you would think.
Doctors have a better average, but unless you are a plastic surgeon, you aren't driving a bentley.
July 16th, 2007 2:15pm
July 16th, 2007 2:16pm
The basis of any economy will always be production. Production of food, and production of products. That's where people turn raw materials and work into valuable things to sell. That's the core of "added value" in any economy.
Now, you can build quite a large 'service' economy on top of that core. Those are salesmen, middle-men, shippers, packers, processors, even other manufacturers using the food or processed materials as input into more processed products. But the core has to be there, even if it's only 10% of the whole economy.
I suppose you could get the raw materials from some other country. But it's the work that processes those materials into some consumer good, or some production machine, that provides value to the economy.
And you've got to have "added value" to drive the economy. Otherwise it becomes a zero-sum game, so many dollars chasing so many goods produced elsewhere. At some point people have to eat, to consume SOMETHING. If you're not producing anything, but merely paying service-providing middlemen to shuffle stuff created elsewhere around, in that case you're in a less-than-zero-sum game.
At present, America STILL has lots of blue-collar manufacturing jobs (and agricultural production) to drive our value. As long as that is the case, you have a base population of people who need (and can afford) the services of Doctors and Lawyers and other service providers.
The problem is, with the current emphasis on "outsourcing", companies have an incentive to move their actual production off-shore, and only maintain in America a layer of service-providing middle-men. If that continues far enough, then yes America will have out-sourced its value, and will no longer be a power-house of production and consumerism. We'll have converted ourselves to a third-world supplier of raw materials to manufacturing nations like China, Japan, and India.
July 16th, 2007 2:19pm
'You know what the problem is, Brucie? We used to make shit in this country... build shit. Now we just put our hand in the next guy's pockets.'
-Frank Sobotka, HBO's 'The Wire'
July 16th, 2007 2:25pm
If 90% of an economy is in services then one must adhere to the simplest explanation: that 90% of the added value is NOT being done at production.
I've long thought the product/service divide bunk.
Where is the "production" in medicine? Are pills and pacemakers production, but a doctor's good advice on how to avoid pills and pacemakers, a lowly and "non-productive" service?
What about IT? Is writing software product or service?
I guess if you're using an Inversion of Control architecture (or say an Apache module or a Firefox plugin), you're adding incremental value on top of something else (ie, service), but if you're writing the main() function yourself what you have is a genuine 'product'. Sheesh.
July 16th, 2007 2:33pm
I'd say it is always a service. It takes no raw materials and produces no tangible outputs. It's only manpower invested.
July 16th, 2007 2:36pm
Yup. The only software that I would call "production" would be that used to increase the productivity of a worker -- automating steel mills, automating chicken harvesting, automating robotic assembly of car parts. MAYBE software written that allows orbiting platforms to collect data, or take pictures and rove around on Mars, produces "added value".
Maybe some simulation software, that improves manufacturing processes, would provide "added value". But most software produced supports the service industry.
You can ignore the "Production / Service" dichotomy all you want. I'd assert if America successfully outsources all its Production, you'll lose your job pretty quickly to some Chinese/Japanese/Indian/whatever guy able to do your job MUCH cheaper than you can. But they won't send your kids to college, either.
July 16th, 2007 2:45pm
"If 90% of an economy is in services then one must adhere to the simplest explanation: that 90% of the added value is NOT being done at production."
No, one can take the simple explanation that 90% of the COST of anything is the COST of services to get it to your door. But that the VALUE of that thing, the REASON you want it at your door, comes from that first 10% of the cost.
And the 10%/90% thing was an estimate, anyway.
July 16th, 2007 2:48pm
"The only software that..."
Then a business efficiency consultant provides a product? If they streamline coal mining, or chicken-wing cutting, isn't it the same thing even though they didn't write software to do it?
July 16th, 2007 2:52pm
"Have you ever actually looked to see the average lawyer salary? It is a lot shittier than you would think. "
Around $100k last time I looked. Doctors are closer to $200k, and among doctors Anesthesiologists make the best salary - around 1/3 of a million on average.
These averages are calculated per-job, so if someone works for a hospital and has a private practice, they count twice.
$200k/12 = $16.6k per month, or a new car every month. They're not driving Rolls Royce's, but they're either buying a car a month or a house a year.
The US Census bureau calculates median salary at $46.3k and 17.2% of households earn over $100k. *
So for what definition of "middle" is the doctor's class?
July 16th, 2007 2:56pm
Eh. You're drawing the distinctions pretty fine, there. The 'product' is the coal, or whatever is being produced by the business. If you increase the productivity of the worker, through automation, then more 'product' can be produced for unit cost. You've lowered the 'cost' of the product, but the product still has the same 'value'. You ARE getting more 'value' per unit time, though.
So, that's the end 'effect'. Now, was creating that software a product or a service? If it's a product, it's a trivial product compared to the increase in production the worker can put out (hopefully -- otherwise, why spend so much money on automation?). If it's a service, then it's a service. The 'good' the software product has done is still in the increase in productivity of the worker.
July 16th, 2007 3:00pm
"What definition of 'middle' is the Doctor's class?"
Depends on how much of their income they get to keep, doesn't it? If 20% of it goes for mal-practice insurance, then they could be no better off than a software engineer making $80,000 per year, but who doesn't have the malpractice insurance bills.
July 16th, 2007 3:02pm
Doctors who live where there is no economy are in the upper class. Doctors living in Silicon Valley or Manhattan are distinctly middle class. I guess my perspective is skewed living in San Francisco, where I've doomed myself to being upper-lower class.
July 16th, 2007 3:21pm
STH, I think we're disagreeing what 'added value' is. I believe I'm taking the simplest approach: the market one. Anything that makes a difference in price on the market, is by definition of 'value,' an 'added value'.
So take a pound of wheat that sells for $1 per pound, 'service' it with yeast and make it into vodka and you get an added value of $10 per original pound. Wrap the vodka with a few drops of vermouth, a pearl onion, a shapely clean glass (and shapely, clean waitstaff) and a nice ambiance, and now we're at $100 per pound. I dare say the market gives most of the worth to the well-tended Gibson served at the end, not the beginning: the 99X original grain (or 9X original vodka) must be added value of some sort or people wouldn't pay for it. No?
It's a little how Mugabe and Co thinks there's insignificant added value to processing or merchandising, and all the value of something is in the raw resources.
> You can ignore the "Production / Service" dichotomy all you want.
Good. I won't ignore. Because the good money is at the top of the food chain. Ask a gardener what he'd wish his kids to work with: hedges or hedge funds.
Also: what is the 'production' in health care? Are pharmaceuticals products but not doctor's 'services'? What about software that helps doctors dispense pharmaceuticals (*) thereby allowing the doctor to see more patients with fewer errors?
(*) oh, shoot. I need to get back to work, though technically I'm dealing not with doctors and drugs but with HCPs and PBMs. The health care industry has more levels of decoupling than, well, a well-written piece of software.
July 16th, 2007 3:26pm
"You're drawing the distinctions pretty fine, there."
A line is defined by its edges.
*spit* God that sounded like something SoP would throw back at me.
July 16th, 2007 3:27pm
Fair enough, 'straw, that's a good analogy I can agree with.
The only thing it leaves out are the 'non-value-added' steps -- the transportation of the original grain to the distillery, the middle-man who bought the grain in small lots, added some profit margin, and sold the grain in larger lots to the distillery. The 'overhead' costs to the owner of the bar to keep the place open, which he 'rolls' into the cost of each drink.
The confusion factor here is the concept of "value" and how to record that in 'dollars', and "cost" (which is also recorded in 'dollars'). And then how to allocate "Cost" and "Value" to each step. It's easy to track the "Cost", as you did in your example. The "Value" is somewhat harder.
One other point is -- if you didn't grow the grain in your country, then the farmer who would have grown the grain couldn't afford the drink. And if you didn't distill the grain in your country, then the people who would have distilled the grain couldn't afford the drink.
And if you buy all your resources from overseas, and only have the bartender 'service' job in-country, then it's possible the supplier country could want more of that $90 per pound markup.
July 16th, 2007 3:52pm
The US buys lots of things from China and gives them green cotton called 'dollars'.
China does not use the dollars to buy anything back from the US though. The main american products they consume are movies, music and computer software, all three which they pirate rather than buy (which is silly since they have a surplus of dollars, but whatever).
What China does buy is oil from the middle east. Because of our 'special friends' relationship with this area, oil is priced on the world market in dollars.
If that ever changes, the Chinese will not have anything they can buy with dollars and will no longer want to accept them as payment. Then the US will need to buy from China in Yen or Euros, or whatever oil is priced in. But the US won't be able to do so because every Yen and Euro they can find is already being used to try to scrounge up oil from the US.
So you see the weak point in the chain.
And why, even though it is the SAUDI who are coming into iraq and joining al qaeda, the US must instead attack the ancient enemy of Sunni Saudi, Shiite Iran.
There is a religious war going on here, but it is not muslim against jew or christian against muslim.
July 16th, 2007 6:51pm
China DOES use some of their dollars to buy American T-Bills -- in effect, they loan us back our green cotton, at interest, so we can put it back into our economy, so we don't have inflation. Even though our Government is spending 300 billion dollars more every year than we are taking in in taxes -- thus the T-Bills.
But you're absolutely right -- if we de-value the US currency sufficiently, then if everything is priced in Euro's, then the US is up the creek without a paddle.
July 16th, 2007 8:29pm
Oh god, don't mention the war.
Bot - the professional jobs that will survive are those that protect themselves by means fair or foul and for which there is a continuing demand.
Lawyers have to be admitted to the Bar or equivalent to practice. Doctors are registered. Architects and professional engineers are often protected by accreditation but IT seems to spurn such girly protection which makes me wonder if it has actually ever become a recognised profession.
A recession will bite professional practices along with the rest of the population but will first hit office staff and the paraprofessionals. My grandfather was a doctor in the '30s and a lot of his clients could not pay so he had to cut costs by sacking his nurse ...
But don't worry, there might be a bright future in your munition plants shortly.
July 16th, 2007 8:45pm
from the payscale site. lawyer 10 years avg. salary 93K. computer programmer 10 years 58K ouch.
July 16th, 2007 9:03pm
----"If that ever changes, the Chinese will not have anything they can buy with dollars and will no longer want to accept them as payment."-----
If the price of oil is charged in Euros, then the Chinese or whatever will simply change the dollars into euros. Elementary, though so many don't seem to grasp it.
July 17th, 2007 12:57am