Labor Saving Technologies And The Demise Of The Working Class

Introduction

The US economy is growing at a healthy pace and unemployment is low. But behind these healthy signs, a large portion of the working class is not doing well. These problems are highlighted in a new study co-authored by the “conservative” American Enterprise Institute and the “progressive” Brookings Institution (AEI/BRI). In what follows, the findings of this study are presented along with earlier work on labor saving automation.

What Has Happened to the Working Class?

Perhaps the most important point registered by the study is how the working class has lost out in recent years. I quote from the study:

Our definition of working class: people with at least a high school diploma but less than a four-year college degree living in households between the 20th and 50th income percentiles—roughly $30,000 to $69,000 a year for a household with two adults and one child.

Since the late 1970s and still today, working-class America is bearing the brunt of automation and globalization: entire industries are disappearing, and wages have been flat since the 1970s. Marriage has declined faster among the working class than in any other group, richer or poorer. Civic institutions that once sustained blue-collar enclaves—churches, union halls, neighborhood associations, the local VFW or Lions Club—are closing their doors or moving elsewhere. And as the social fabric frays, a host of new problems are arising, from Opioid addiction to what Anne Case and Angus Deaton have called “deaths of despair” caused by drugs, alcohol or suicide and correlated with distress and social dysfunction.

Job Losses

Since 1995, US employment has grown 24% to almost 126 million. However, as Table 1 indicates, 4.8 million jobs have been lost in the manufacturing sector with 1.4 million of these losses occurring since 2007. And as I have noted earlier, most of these losses were the results of labor saving technologies and not cheaper foreign producers. Other job losses occurred in the information industry and department store employment as online technologies took hold. Job growth has occurred primarily in the service sectors with professional services and health leading the way.

Table 1. – Job Changes by Sector (in thousands)

(Click on image to enlarge)

Source: Bureau of Labor Statistics

 Income Growth

Wage and salary income is an important indicator of economic well-being. Table 2 traces what has happened since 1979. Income of the top 50% grew at a compounded annual rate of 1.14%. Working class income grew at only a 0.32% rate with the bottom 20% growing at 0.91%. This means that the incomes of working people have barely grown over this period. And since real GDP grew at a compounded annual rate of 2.65%, one can conclude that non-wage income grew far more rapidly than wage and salary income.

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Alpha Stockman 4 months ago Member's comment

Fascinating, the problem is far worse than I imagined. But I think education and more educational/training opportunities is key to solving this problem.