Re-Tooling Low Skilled Labor

I grew up in Bakersfield, CA. Anyone who hasn’t heard about Bako, let me tell you we are #1 in a lot of things: teen pregnancy, STDs (including Syphilis) and pollution. We are also last in a few things, like being one of the lowest educated in California. 

When I was graduating high school, many of my friends decided it was better to make $100,000 a year in the oil fields than pay to have an education. They all settled down, had kids and got divorced. Now they are complaining that their jobs are gone. You can’t just make them go to school, they have child support and bills to pay. However, if you put them in a program that allows them to gain new skills, where they get their expenses subsidized, you could convince him to become more skilled. The problem is, it will take a government program to make this happen. I call this program Education and Entrepreneurship Basic Income or EEBI.

Let’s take a look at the math. The average resident of Bakersfield makes under $24,000 a year. The average programmer makes just under $80,000 a year. Bakersfield has a population of 380,000. The aggregate wage of all Bakersfield residents is about $9.1B, if 10% of the Bakersfield population took a year of EEBI and learned to be a programmer, the added income after the costs would add over $1.2 Billion annually to the local economy. 

Bakersfield Population380,000
Average income per capita $‎ 24,000
Bakersfield Workforce 161,500
Income per Worker$‎ 56,471
Percent making less than $30K per year40.6%
Workers making less than $30,000 per year65,569
25% of workers making under $30K16,392
New entrants to the labor market15,000
New Workforce176,500
New Average Income$‎ 60,656
Average Programmer’s Income$‎ 80,000
Cost Per Person (1 year EEBI)$‎ 12,000
Current Aggregate Income$‎ 9,120,000,000
Program Cost$‎ 376,707,000
New Aggregate Income$‎ 10,705,700,000
Net Added Value Before Multiplier$‎ 1,208,993,000
Percentage Increase 13.3%

These dollars are then passed down to local businesses in the form of more sales. Additionally, the reduction of supply of low skilled labor will increase the price the remaining low skilled worker pool can demand for their labor. The increase in sales to local businesses and increase in wages of low skilled labor act as a multiplier to the initial impact of the EEBI program.  

There are countless places that have been skipped over and that need an opportunity to get new skills and reinvent their local economies. Places with populations that have been performing manufacturing work or mining work that need to find new livelihoods because the low skill jobs have moved to lower cost areas or have been automated. 

The advantage of low skill work is that the person performing the work requires little to no education or training, making it a viable option for almost anyone. The problem with this type of work is that it can be done by almost anyone anywhere, and there are always a place to get the work done cheaper. In certain cases the work can be automated and as soon as the capital expenditure and maintenance costs are less than labor, the job will be automated. 

What I’m trying to say is that the vast majority of low skill jobs were great while they lasted but they are gone now. Some may say, “we will always need mechanics and farmers” and that is correct, but I’d argue mechanics are actually a skilled job and farmers are increasingly mechanizing and using technology more generally to maximize yields.  

If you think about the Industrial Revolution in the late 1700’s, many people working in the factories were worried about their jobs being replaced by machines. People were so scared that some started the Luddite movement, destroying manufacturing equipment and burning factories. The Luddites obviously didn’t succeed so as the Industrial Revolution proceeded, new jobs were created. 

The same thing happened when the personal computer was invented. In the late 70s and 80s secretaries and other office workers were terrified of losing their jobs but instead computers opened the door software development, chip development, mobile devices, e-commerce and everything else we take for granted today. The best part of the trade is the new jobs pay more than the old jobs did.

The problem is that it is hard to gain new skills when someone has a house payments and a family to provide for. This is where EEBI comes in, if there was a safety net that allows people to go to school. Just as it has worked in the past, the jobs that require these new skills pay significantly better. 

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