GM Vs Apple - illustration of labour market challenge

Adam Tooze compares the output and labour force of GM and Apple to illustrate the labour market problem that faces modern manufacturing. 

In the 2010s a commonly quote set of numbers compared GM and Apple in their prime: In 1955 GM earned revenues of 105 billion in 2010 dollar terms well-nigh identical to Apple’s earnings in 2014. In 1955 GM generated this revenue with an American GM workforce of 470,000 as well as 70,000 staff working overseas in subsidiaries such as Vauxhall, Opel or Holden. It would go on to assemble a peak workforce of over 800,000 in the 1970s. In 2012 Apple, the iconic American firm of the decade, generated $ 108 billion in revenue, with a US staff numbering only 40,000. Overseas only 20,000 were employed directly by Apple. The vast majority of its workforce consisted of 700,000 foreign contract staff. GM was an American company with a clearly identifiable global footprint. Apple, by contrast, is a complex global network with a Californian brain.

In the context of secular stagnation, Larry Summers had written about the reduced cost of capital investments,

The internet revolution has allowed companies like WhatsApp—which had just 55 employees when it was acquired for $19 billion by Facebook in 2014—to reach a higher market valuation than Sony. Growing a multi-billion dollar company used to require hiring lots of workers, constructing offices and factories and so on. Nowadays, all you need is a loft and a couple of Macbooks. Summers also identifies a related problem: the types of capital companies actually do need to invest in—computers and software—have gotten drastically cheaper. The result is that as businesses open or expand, they no longer need to spread their wealth around by purchasing costly machinery.

The declining cost of capital equipment is driven by efficiency (and cost) maximising technological and process changes. While the former is well-known the latter is equally important. The emergence of process innovations like services outsourcing, shared services, Software as Service, and cloud computing has meant that companies can start with limited upfront capital investment. 

The rising capital intensity, decreasing cost of capital goods, and declining labour requirements of emerging technologies (especially compared to the ones they are replacing) coupled with the skill-biased nature of these technologies are the biggest political economy problems of our times. The first minimises labour requirement, and the latter bias it towards certain labour categories. 

In theory the reduced capital intensity, lower labour requirement, and process changes should have lowered entry barriers and increased competition. But this trend has been counteracted by network effects, consumer loyalty, and regulatory forbearance of abusive practices by large incumbents. The digital economy is only the most egregious example. The near-universal trend of business concentration shows that this trend is pervasive. 

So we have a confluence of three trends facing the economy - reduced labour requirement, preference for skilled labour, and increased entry barriers. Each of them run counter to one of arguably the most important economic priority of our time, the creation of lower-skilled jobs.