I have been watching an entertaining television programme called Inside the Factory. Two presenters (Greg Wallace and Cherry Healey) look at how popular foodstuffs and household goods are produced, packaged and distributed. It is striking that virtually all the factories they visit process huge quantities of sauces, fish fingers, sausages and so on with hardly a person in sight. There is usually one man or woman charged with keeping an eye on the machines, a man with a forklift truck loading a lorry in the packaging area, and (presumably) a man driving it away. Some factories do employ a few squads of people to sort and load foodstuffs, but it is surely just a matter of time before a new machine is devised to replace them.
This reminds us that mass production is no longer a method for producing cars, washing-machines and other goods, but has been extended to much of the economy. Steel mills, once full of moulders and stokers, now employ very few people. A new mill in Austria produces 500,000 tons of steel a year with just 14 employees. Dockyards once employed hundreds of day labourers to unload ships with picks and shovels. Now there are thousands of containers unloaded by giant cranes, each controlled by a single person. Once the containers have arrived in this country, they are transported to vast automated warehouses, usually located near motorway junctions.
Mass production combined with efficient distribution, nationally and internationally, has radically reduced the price of goods. It costs only £1000 to ship a 40-foot container from one side of the earth to the other, and a container can carry a lot of mobile phones and textiles. As a result, it costs less to transport goods from the Far East to your supermarket than the cost in petrol to get them from the supermarket to your home. Even that stage of distribution is changing, with the expansion of home delivery. In the near future, we will probably see most supermarkets closing their doors to the public and just functioning as bases for vans taking goods to peoples’ homes. The low cost of transporting goods internationally has resulted in fruit and vegetables from around the world becoming available out of season, and shops in Britain selling cheap clothes made by low-cost labour in China and Bangladesh.
But there are sectors in the economy where automation and the consequent gains in production per worker have had less effect. These are the personal services: work such as public order, teaching, healthcare and social care, and the various forms of bodily maintenance (hairdressers, nail-bars etc). Even with all the technological advances in healthcare, 40% of the NHS budget still is allocated to meet the cost of its staff. For residential and domiciliary care of the rapidly-increasing numbers of very old and disabled people, staff costs are probably a much higher proportion of expenditure.
In the past, many personal services were staffed by women, traditionally underpaid. But rises in the minimum wage, court rulings on payment for sleeping-in time, and the shortage of cheap immigrant labour which will follow Brexit all mean that staffing costs will rise in this sector of the economy. We also now have greater expectations of personal care. We no longer tolerate warehousing large numbers of elderly, disabled and mentally-ill people in large understaffed institutions. Better care here requires more staff, which in economic terms means falling productivity per employee. Unlike the production of textiles, this work can not be outsourced to the Far East (although it will no doubt eventually occur to some politician to reduce taxation by deporting the elderly to India). There is also a public demand for more policemen (particularly policemen that can be seen by the public) and smaller class sizes in schools.
There are therefore two contradictory trends, with goods getting cheaper to produce and distribute and the personal services getting more costly to provide. This will tilt the balance of expenditure in the next few decades from goods and to personal services. Since many of these personal services are provided by government, this means that taxes will rise, and rise. Fortunately, most people will be able to afford this because they will be paying less for food, clothing and their motor cars.
The alternative to rising taxes is endless ‘austerity’. Governments which try to maintain taxes at their current level will only be able to achieve this by progressively reducing personal services, to an even greater degree than has been the case since 2010. This would inflict a steady deterioration in the quality of life of the great majority of citizens, with increasingly unsafe streets, poorer healthcare and personal bankruptcy as a consequence of having to pay for their parents’ personal care.
This reminds us that mass production is no longer a method for producing cars, washing-machines and other goods, but has been extended to much of the economy. Steel mills, once full of moulders and stokers, now employ very few people. A new mill in Austria produces 500,000 tons of steel a year with just 14 employees. Dockyards once employed hundreds of day labourers to unload ships with picks and shovels. Now there are thousands of containers unloaded by giant cranes, each controlled by a single person. Once the containers have arrived in this country, they are transported to vast automated warehouses, usually located near motorway junctions.
Mass production combined with efficient distribution, nationally and internationally, has radically reduced the price of goods. It costs only £1000 to ship a 40-foot container from one side of the earth to the other, and a container can carry a lot of mobile phones and textiles. As a result, it costs less to transport goods from the Far East to your supermarket than the cost in petrol to get them from the supermarket to your home. Even that stage of distribution is changing, with the expansion of home delivery. In the near future, we will probably see most supermarkets closing their doors to the public and just functioning as bases for vans taking goods to peoples’ homes. The low cost of transporting goods internationally has resulted in fruit and vegetables from around the world becoming available out of season, and shops in Britain selling cheap clothes made by low-cost labour in China and Bangladesh.
But there are sectors in the economy where automation and the consequent gains in production per worker have had less effect. These are the personal services: work such as public order, teaching, healthcare and social care, and the various forms of bodily maintenance (hairdressers, nail-bars etc). Even with all the technological advances in healthcare, 40% of the NHS budget still is allocated to meet the cost of its staff. For residential and domiciliary care of the rapidly-increasing numbers of very old and disabled people, staff costs are probably a much higher proportion of expenditure.
In the past, many personal services were staffed by women, traditionally underpaid. But rises in the minimum wage, court rulings on payment for sleeping-in time, and the shortage of cheap immigrant labour which will follow Brexit all mean that staffing costs will rise in this sector of the economy. We also now have greater expectations of personal care. We no longer tolerate warehousing large numbers of elderly, disabled and mentally-ill people in large understaffed institutions. Better care here requires more staff, which in economic terms means falling productivity per employee. Unlike the production of textiles, this work can not be outsourced to the Far East (although it will no doubt eventually occur to some politician to reduce taxation by deporting the elderly to India). There is also a public demand for more policemen (particularly policemen that can be seen by the public) and smaller class sizes in schools.
There are therefore two contradictory trends, with goods getting cheaper to produce and distribute and the personal services getting more costly to provide. This will tilt the balance of expenditure in the next few decades from goods and to personal services. Since many of these personal services are provided by government, this means that taxes will rise, and rise. Fortunately, most people will be able to afford this because they will be paying less for food, clothing and their motor cars.
The alternative to rising taxes is endless ‘austerity’. Governments which try to maintain taxes at their current level will only be able to achieve this by progressively reducing personal services, to an even greater degree than has been the case since 2010. This would inflict a steady deterioration in the quality of life of the great majority of citizens, with increasingly unsafe streets, poorer healthcare and personal bankruptcy as a consequence of having to pay for their parents’ personal care.
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