I’m putting this thought here for myself, as an employer.
Any complex business system built on a bet that cheap labor exists is a broken business.
Complex businesses require skilled labor.
Fewer people means fewer skilled people.
Fewer skilled people means wage demands must be met. The choice between lower margins and closing the doors is unpleasant but obvious.
The solutions are therefore:
- Simple businesses which can use less-skilled people. There are more of them, and they are cheaper.
- Abstract the complexity away from the people so you can use less-skilled people. Automatic transmissions.
- Charge your customers more.
- Re-engineer your customers’ lives. They have complex problems. (The real solution is here—upstream—where the problems exist. Eliminate the customer’s complexity to eliminate the need for your complex services).
- Create skilled labor. (Make shovels for gold miners). (This is another real solution).
But yeah. Expect wage pressure in all areas of life that require skill, training, experience, and judgment.
Maybe it has always been thus. But I doubt it. When the baby boom came after the war there was a surplus of labor. Many kids becoming accountants, lawyers, etc.
Not so much now.
OK Grasshopper. Which way do you hop?
Greetings from 247 W. 36th Street: Culture Espresso.
Related:
[Musk developed] the “idiot index” which calculates how much more costly a finished product was than the cost of its basic materials. If a product had a high idiot index, its cost could be reduced significantly by devising more efficient manufacturing techniques.
Rockets had an extremely high idiot index. Musk began calculating the cost of carbon fiber, metal, fuel, and other materials that went into them. The finished product, using the current manufacturing methods, cost at least 50x more than that.
[…]
The [“idiot index”] was the ratio of the total cost of a component to the cost of its raw materials. Something with a high idiot index-say, a component that cost $1.000 when the aluminum that composed it cost only $100-was likely to have a design that was too complex or a manufacturing process that was too inefficient.
Source: “Elon Musk” by Walter Isaacson (2023)