tymshft

There is nothing new under the sun…turn, turn, turn

The American Enterprise Institute on the future of the middle class

A discussion on Google+ started with a link to a post on Simulacrum. The post began with a brief discussion of an “unconditional basic income,” in which all citizens/residents would receive some type of income, regardless of what they did or didn’t do.

As any right-thinking person knows, this is a Communistic idea that threatens the very principles upon which the United States was founded.

The author, Lui, believes that the implementation of an unconditional basic income is inevitable due to three reasons, the first of which is the freefall of the middle classes.

As Jaron Lanier points out, Kodak once provided 140,000 middle class jobs, and in the smouldering ruins of that company’s bankruptcy we have Instagram, with 13 employees. It’s an extreme example….

Perhaps an extreme example, but you see these types of dislocations everywhere, not only due to technological advances, but also due to offshore production.

And all the beads we made by hand
Are nowadays made in Japan

(Paul Revere and the Raiders, “Indian Reservation”)

And these days, even Japan is too expensive for manufacturing. And China’s beginning to get too expensive for manufacturing.

However, I wondered if the middle classes truly are in freefall. Yes, there’s a lot of economic dislocation today. In the past, when entire industries have disappeared, brand new industries have sprung up to employ the dislocated workers, and these new industries have been able to support middle class wages. Won’t the same thing happen now? Not necessarily, according to Arnold Kling of the American Enterprise Institute, a think tank that is demonstrably NOT a Communistic organization.

The economy today differs from that of a generation ago. Mortgage and consumer loan underwriters have been replaced by credit scoring. Record stores have been replaced by music downloads. Book stores are closing, while sales of books on electronic readers have increased. Data entry has been moved off shore. Routine customer support also has been outsourced overseas.

These trends serve to limit the availability of well-defined jobs. If a job can be characterized by a precise set of instructions, then that job is a candidate to be automated or outsourced to modestly educated workers in developing countries.

The result is what David Autor calls the polarization of the American job market.

What type of polarization? Well, in decidedly non-AEI terms, there is emerging a 99% and a 1%, with nothing in between.

Perhaps the middle-class affluence that emerged during the latter part of the industrial age is not going to be a feature of the information age. Instead, we could be headed into an era of highly unequal economic classes. People at the bottom will have access to food, healthcare, and electronic entertainment, but the rich will live in an exclusive world of exotic homes and extravagant personal services. The most popular bands in the world will play house concerts for the rich, while everyone else can afford music downloads but no live music.

Well, that’s enough for now. More later.

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