Monday, May 18, 2015

Why You Should Know the Meaning of “Fungible”

Here is a word that is fairly rare, heard mostly about economic issues.  Fungible means “being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind.”  A close synonym is interchangeable.

This word came to my mind when I heard a radio ad for a company called  They were advertising that you could use their services to hire temporary, project-oriented help for your business, especially for such things as computer programming and web design.  They gave sample hourly prices to show how competitive they are.  Whether these services would originate in the US or somewhere else was not clear.  What I do know is that they could be easily delivered from almost anywhere and apparently low bidders have been signed up.

I am not in the market for such services, so there was no reason for me to pay attention to the details, but it struck me that this word, fungible, which usually refers to commodities – this ounce of gold being just as valuable and interchangeable as another ounce of gold somewhere else – can also apply to skills.  When you think about it that way, some major economic issues become clearer.

It has become clear both from the news and from the accents we encounter when calling for a customer helpline that skills like programming and telephone customer service are fungible skills.  A few websites offer basic legal services, because the filling out of the proper forms can be automated to a large extent – lawyers become valuable for their knowledge and negotiating skills rather than for their ability to follow the steps to draw up a simple will.  Some unions’ workers too have found their skills to be fungible.  Jobs move to Mexico or to new hires at a lower pay scale and with fewer benefits as the seasoned workers retire.  In fact worldwide, not just in America, the wages of the working class have been increasing only modestly due to this concept, the fungible nature of those skills and the ability of companies to find and quickly train a competent workforce elsewhere.  Unions who defend their members against management abuse are doing their job; those who try to protect their members against the reality that their skills are interchangeable in many parts of the globe are fighting a losing battle and, in the long term, harming their members and the companies that pay them.

This should be a warning to every high school student and to all parents who want to see their children succeed.  Common skills are no longer good enough, and as we move into a future with ever-increasing speed and bandwidth of communications, the need to develop more specialized and less easily duplicated skills is essential.  It’s no longer realistic to leave high school and go to work for 30 years in the same factory or mine that daddy and grandpa did.

We can’t let our children grow up with only “commodity” skills.  It should be an obvious conclusion by anyone familiar with the ideas behind supply and demand that the more successful students can be at differentiating themselves from the rest of the population, the greater their earning power will be.  Not everyone can be a star athlete or rap artist.  Education is essential.  Otherwise they will be left with fungible skills, skills that can be duplicated many other places with little effort by people willing to work for less.  The only other option would be total economic isolationism, which every economist knows is a terrible idea.

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