Government & Law, Jobs, Other (abstracted) Views

The Polarization of the Labor Force

April 1, 2019

In the past I have commented in these blogs about the disturbing trend of financial polarization.  We are becoming a society of ‘haves’ and ‘have nots’.  The vibrant middle class that has been the core of our democracy’s health is rapidly eroding.  This is alarming.  We are a democracy ‘of, for and by the people’.  If we the people do not share common values, goals and interests, then the discussion and debate that is at the  heart of of our democracy can’t happen.  The statistics are there, the 1% financial elite possess 90% of the wealth in this country.  Their interest is to preserve and grow that wealth – at the expense of the rest of the population.  Their wealth buys the political influence necessary to achieve their goals.  This not a healthy democracy.

There have been assertions that technology will create new jobs, high paying jobs, that will rebuild the vital middle class.  A strong middle class will in turn ensure a more even distribution of wealth, more ‘common interest’, and therefore a healthier democracy.  There was a recent op-ed in the New York Times that concludes that the impact of technology on the labor market may be quite the opposite.  It is well worth the time to read:

Tech is Splitting the U.S. Workforce in Two – NYT

The byline – “A small group of well-educated professionals enjoys rising wages, while most workers toil in low-wage jobs with few chances to advance”

The author writes about Phoenix, but suggests the same is true more broadly across the nation.  Here are some highlights:

Phoenix cannot escape the uncomfortable pattern taking shape across the American economy: Despite all its shiny new high-tech businesses, the vast majority of new jobs are in workaday service industries, like health care, hospitality, retail and building services, where pay is mediocre.  Automation is changing the nature of work, flushing workers without a college degree out of productive industries, like manufacturing and high-tech services, and into tasks with meager wages and no prospect for advancement.

Automation is splitting the American labor force into two worlds. There is a small island of highly educated professionals making good wages at corporations like Intel or Boeing, which reap hundreds of thousands of dollars in profit per employee. That island sits in the middle of a sea of less educated workers who are stuck at businesses like hotels, restaurants and nursing homes that generate much smaller profits per employee and stay viable primarily by keeping wages low.

Some economists have concluded that the use of robots explains the decline in the share of national income going into workers’ paychecks over the last three decades.  Because it pushes workers to the less productive parts of the economy, automation also helps explain one of the economy’s thorniest paradoxes: Despite the spread of information technology, robots and artificial intelligence breakthroughs, overall productivity growth remains sluggish.

The 58 most productive industries in Phoenix — where productivity ranges from $210,000 to $30 million per worker, according to Mr. Muro’s and Mr. Whiton’s analysis — employed only 162,000 people in 2017, 14,000 more than in 2010. Employment in the 58 industries with the lowest productivity, where it tops out at $65,000 per worker, grew 10 times as much over the period, to 673,000.  The same is true across the national economy. Jobs grow in health care, social assistance, accommodation, food services, building administration and waste services. Not only are some of the tasks tough to automate, employers have little financial incentive to replace low-wage workers with machines.  On the other end of the spectrum, the employment footprint of highly productive industries, like finance, manufacturing, information services and wholesale trade, has shrunk over the last 30 years.

In a new study, David Autor of the Massachusetts Institute of Technology and Anna Salomons of Utrecht University found that over the last 40 years, jobs have fallen in every single industry that introduced technologies to enhance productivity.  The only reason employment didn’t fall across the entire economy is that other industries, with less productivity growth, picked up the slack.

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Are we headed for a class based society, one that will be hard pressed to support a healthy democracy?  The trends certainly suggest this.  So what to do?  The nation must address to critical issues.  First, the disparity in wealth distribution.  Tax policy must be addressed.  Second, the role of labor in our society must be given more attention. Labor must be recognized as an equal stakeholder in every enterprise.  Both of these issues require elected representatives that share this thought.  So once again the critical first step is finding the right political representatives and working to get them elected.

Photo by Cory M. Grenier

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