How Screwed Are We?
December 12, 2011 in Economics, Income Inequality/Economic Mobility, Justice, Personal Crusades, Unfettered Idealism
The Financial Times ran a piece yesterday that is getting a lot of online attention today. Here is the video summarizing the article, here is the article, and below are some important excerpts:
America used to be exceptional. Postwar, it maintained lower unemployment than the Europeans and a higher rate of jobs turnover, enabling it to get away with more meagre benefits; “a fair day’s work for a fair day’s pay” was within the grasp of most. That gave America a booming middle class that until recently was the most important engine of global demand.
No longer. Today, somewhat remarkably, US joblessness is higher than in much of Europe. And the US consumer is mired in high personal debt…
In the words of David Autor, a leading labour economist at Harvard University, the labour force is suffering from a growing “missing middle”.
In short, the middle-skilled jobs that once formed the ballast of the world’s wealthiest middle class are disappearing. They are being supplanted by relatively low-skilled (and low-paid) jobs that cannot be replaced either by new technology or by offshoring – such as home nursing and landscape gardening. Jobs are also being created for the highly skilled, notably in science, engineering and management.
If there is an explanation as to why middle-class incomes have stagnated in the past generation, this is it: whatever jobs the US is able to create are in the least efficient sectors – the types that neither computers nor China have yet found a way of eliminating.
The article then asks: what needs to be done? The author concludes by arguing that there is consensus about the need to invest more in infrastructure, Research and Development, and Education; but:
Taken together, these reforms would have an impact – but few believe they would transform the picture. “The truth is that we don’t know how to fix the US labour market – we are in uncharted territory,” says Peter Orszag, Mr Obama’s former budget director, now a vice-chairman of Citi. “It would help to spend more on retraining and on infrastructure and to have a more rational immigration system. But these wouldn’t fundamentally transform the situation for the middle class … It is not yet clear what, if anything, could.”
Sounds like we are screwed, right? While I agree with a lot of the FT’s diagnosis of what ails the American Labor Market, I refuse to let this article drag me down. Instead, I view the article as supportive of my most basic view of what needs to be done to save us from unending economic peril. Read the rest of this entry →
