January 10, 2018. I’m heading east on Interstate 90/94 towards Madison, watching truck wars play out all around me. Truck wars are where one truck tries to pass another, but does so at such a slow pace that they are bound to hit a hill before the passing is complete. At that point both trucks slow down and traffic backs up behind. I’ve seen this at its worst: eight or ten trucks in the left lane stacked behind each other, like railroad cars, going one or two miles an hour faster than the truck they are trying to pass. They are determined to pass, no doubt about it, and will hang in that passing lane until they do.
It can get pretty bad sometimes. Right now, for instance, here in the hilly Driftless Area of southwest Wisconsin, two trucks have been battling for the right to be in front of the other one for several miles. The interstate rises and drops through a series of eroded valleys in this ancient plateau as old as the Appalachian Mountains. There is now a line of twenty to thirty cars, in both lanes, cooling their heels as the trucks duke it out.
Naturally, you’d expect me to curse the truckers and my unlucky fate to be trapped behind them, but you’d be wrong. I don’t mind…much…because I know those trucks are just part of the rotary economic engine that requires, for its continued operation, things being moved here and there. Truck drivers, moreover, are very good at doing that. They are also paid well for somebody who usually has a high school education. The trans-continental truckers can make over $70,000 a year, and more with bonuses—which far exceeds what I earned for decades despite letters from three degrees trailing after my name.
But the allure of the self-driving vehicle is always lurking. The self-driving semi-truck and trailer outfit would not follow its fellow trucks so closely, nor bolt into the passing lane at 70 miles an hour as cars approached from behind. The artificial intelligence inside that self-driving truck would scan the area around it, search for approaching and nearby objects, evaluate its vehicle’s gas usage, consider the incline—even predict future inclines using the elevation data its GPS system—and perform a host of calculations to decide if passing at this moment was reasonable or not.
I see the appeal. I might have an easier time on the road with this kind of system, designed as it is to reduce the risk of collision to near zero and save money on fuel to boot. I suppose it could even be programmed to also avoid inconveniencing the cars moving up from behind.
Now imagine 3.5 million people—the number of professional truck drivers in our country—making $70,000 and more suddenly put out of work by self-driving trucks. We’d have to find 3.5 million new jobs for them at the same salary if they are to continue making mortgage and car payments, advancing their children’s education, taking vacations, buying a boat and trailer, and so on. With a high school degree, their best option to stay financially even is manufacturing or mining. If they settle for lower pay in retail or leisure and hospitality, they will have to eat out less, cut back on presents at Christmas and birthdays, not buy that new couch for the living room…you get the picture. Self-driving vehicles—and all forms of automation that get rid of people with good-paying jobs, in the interest of reducing costs against the bottom line—shrink the economy by shrinking the income and spending of those put out of work. Yes, the economy may grow in another area of transportation—design of self-driving vehicles, for example—but design takes many fewer people than trans-continental trucking with live drivers. (About 1.5 million jobs of all kinds have been created on average each year since 1939—fewer in recent years—so it would take a while to get back the 3.5 million lost trucker jobs at a salary of $70,000 when the median income in the country is $59,000.)
It is an imperative of American businesses, especially those owned by strangers to a community and operating at a distance, including foreign countries, to seek cost-reductions in operations. Those operations are greatly burdened by the cost of paying people to do things. People are the biggest expense for any company—salary, vacation, 401k match, health insurance share, Social Security and Medicare/Medicaid share—it all adds up. How much could be saved by eliminating people!
The reason expenses must be cut is because the growth of businesses, after the fast-growing start-up phase, is only a few percentage points a year. Inflation over the past 200 years has run at about two percent annually (three percent since 1929 due to a couple weirdly high periods). Population growth has averaged one to two percent. When you add those together, you might see three to four percent growth a year simply due to the momentum of existence. If a business can find cost-savings of an additional two percent—in productivity gains by producing more with less or by cutting expenses—then they can eke out six percent annual growth. That is pretty darned good anywhere in the world as a long term growth trajectory. Many Fortune 500 companies have annual revenue growth from productivity gains and expansion of customers and services of five to six percent, and a net profit of less than that after expenses are accounted for. (Net profit lets you buy equipment, give raises, and invest in new technology.) It’s hard to make a decent net profit. If somebody tells you that they can turn your dollar into a dollar twenty cents in one year, they’re offering something that is either illegal, hurting somebody or something, or of a highly speculative nature.
Given how hard it is to squeeze a few percentage points of profit out of a going concern, cost-cutting is the best tool in the corporate toolbox and it’s wielded effectively across our nation by firms both big and small who don’t value the experience or commitment of their employees. That’s fine if your business uses people who only need basic skills—they must read, write, do simple math, greet people politely, operate simple pieces of equipment, and drive a car. For a lot of good-paying jobs, however, you need at least a college education. For some you need advanced training, which might be learned on the job, up to a point. Other specialties need years of preparation—doctor, lawyer, teacher or college professor, engineer—and a license or certification. To have a society with people who can do all the highly skilled, specialized tasks that need to be done, you must have firms where cost-cutting by layoffs is not the standard way of doing business.
Let’s get back to my dilemma on the highway. There are those truckers ahead, fiercely fighting their truck war. My car and fifty others are backed up, doing less than the speed limit. Do I want those truckers replaced by an artificial brain so that traffic runs more smoothly? I don’t. I know if the 3.5 million truck drivers were let go—given that most have high school degrees, or less, or perhaps some college—it would be challenging to find a job paying $70,000 a year. If you can’t find work in construction or mining, earning $70,000 requires a master’s in business, a college degree in chemical engineering or similar high-demand field, a JD or MD after your name—or a job in government in a technical role. Policy-makers, upper-level managers, fund-raisers and marketing people can make that kind of money, too, with a college degree and a personality suited to marketing, sales, communication, policy, people management, and the like. Most truckers aren’t that kind of person.
If you are driving a truck, what you may like is freedom and seeing new places. You like not sitting at a desk. You like the flexible schedule—interspersed with hard pushes. You like the lifestyle that lets you do things in a business-like manner, but with your own style and preferences. If you have scattered family, you can drop by and see them on one of your runs. If you’ve had a hankering to visit Mount Rushmore, you can work that in. Yes, the hours can be grueling. A lot of truckers struggle to balance it all—some becoming dependent on amphetamines, or pain killers, or they just don’t see their families enough.
But for the most part, it’s a good life and it pays well. Truckers live in families and towns and cities across the country. They get their pay and spread it around their community. There is something called agglomeration and the multiplier effect in our economy. Agglomeration is the gradual accumulation of economic activity in one place—resulting in even more economic activity. With a larger pool of cash washing around in a locale—more capital, in other words—more things can be done there. There will be more tax revenue—enabling city managers to put up a nice entry sign, do a better job of landscaping streets and burnishing the community’s face to the world, and keep the potholes at bay. They can put in a swimming pool or a community center. That city investment makes it more likely that a young family won’t dismiss the town out of hand if offered a job there. Which in turn makes it more likely that a business will get that highly-skilled person for the job that only a highly-skilled person can do—and which otherwise would be filled by lesser talent and make that business less competitive. When that new hire arrives in town, they and their family will start spending money. A snowball effect ensues—money breeds money, businesses breed other businesses, people breed other people (of course), and the town thrives. The multiplier effect is well known: a dollar that is spent and stays in a local economy spurs additional economic activity. It’s magical how that happens, but somehow investment and spending in a community generates more investment and spending, multiplying the original expenditure by a big margin and expanding the size of a local economy.
As an ecologist I know that growth can go on only so long before the human enterprise behaves like a cancer, consuming resources beyond the ability of the surrounding environment (or planet) to sustain. All I am saying here that agglomeration and the multiplier effect are important for the stability of communities and families. That depends, though, on people keeping decent-paying jobs and raising families at a particular place using the income from that good job. If they enjoy driving trucks and have a high school diploma, and even if smart and motivated, there aren’t many jobs they can do that pay as well. Manufacturing used to be the go-to place for people with a high school education who wanted to earn at least $70,000—and over $100,000 with overtime—it was fantastic! For all the reasons we know—automation, lower labor costs overseas, and exclusively bottom-line thinking on the part of owners, top managers and stock-holders—there aren’t enough manufacturing jobs to go around—shrinking as a percentage of our economy, replaced by jobs in the retail and service sectors.
If we put artificial intelligence in every tractor-trailer rig on the road, guess what—we will shrink the number of good-paying jobs in America for people with less than a college degree. Manufacturing won’t pick up the slack. Retail and service jobs are not as fulfilling for many, don’t pay nearly as much, and rarely offer benefits. I call this the Walmartization of America. The Walmart business model is based entirely on cost-cutting: squeeze suppliers to reduce costs, make supply chains exceptionally efficient, and pay low wages with limited benefits. (To be fair, perhaps half of Walmart’s employees–Walmart won’t say how many–who are full-time receive benefits and an average pay of $13-$14 an hour—a pay level forced in 2016 by criticism of its pay scale.)
With these practices, the capital available to community also shrinks—foreclosing revenue which could be invested to better itself—and goes as profit to Bentonville, Arkansas. As a consequence, Walmart employees can’t afford to buy anywhere but Walmart—they are held captive by a weird replica of a coal miner’s company town, while boosting Walmart sales. Meanwhile, if Walmart employees live in rural areas and small towns, their town suffers—only 15 cents of a dollar spent on a Walmart product contributes to their community’s well-being, but 45 cents of the dollar spent at a local store would remain in the community. (My father-in-law owned general stores in small Michigan towns, and he provided benefits, while the world’s largest private employer, Walmart, for all its billions in market value, pays perhaps half of its employees $11 an hour with few benefits. Eventually a Walmart was built in my father-in-law’s town and the general store closed.)
That is the Walmartization process, which other businesses have emulated to increase net profit. They use that profit first and foremost to give larger bonuses and ever more divergent salaries to top managers—who earn 300 times what the average worker gets—and provide bigger share prices for stockholders who agree with the whole scheme. (I admit, of necessity I own stocks as part of my retirement savings—but I’d be happy with a small rate of return and more ethical practices by the companies in my mutual funds.)
Self-driving vehicles are a page out of the Walmart playbook—reduce the people-cost of your business. I reject that. And so I sit here, content in a pack of fifty cars, while trucks jockey for supremacy and the honor of going 72 versus 70 miles an hour. All I can say is, to use that wonderful 60s t-shirt slogan, keep on truckin’! – Kim