The middle-class America engine is losing fuel.

Middle Class Comic

Barack Obama once said, “It was the labor movement that helped secure so much of what we take for granted today. The 40-hour work week, the minimum wage, family leave, health insurance, Social Security, Medicare, retirement plans. The cornerstones of the middle-class security all bear the union label.” Similar notions reveal that the middle-class of the U.S. is the major engine of American capitalism and its economy, and it is having a large middle class that attributes to large prosperity. But the past few decades, as The New York Times columnist, Paul Krugman describes in his Degrees and Dollars column, “the middle class jobs are being hollowed out.” Essentially, overall high-wage and low-wage employments are increasing, the gap is widening, and the middle class is becoming harder and harder to maintain.

History and economic patterns suggest that ultimately unemployment will ease, despite the current difficult economic conditions and slow recovery. However, the U.S. labor market has polarized considerably, placing significant strain on a great majority, so called middle class, of the American population. David Autor, a labor economist at the Massachusetts Institute of Technology, released a resourceful paper, The Polarization of Job Opportunities in the U.S. Labor Market, wonderfully illustrates this hollowing phenomenon and explains several causes for this.

Outsourcing, one contributor, has been of large concern in the U.S. for many decades now and it has practically become common practice to have a great deal of a business’ production chain to be offshore. Surely, international integration has only made the U.S. labor market almost impossible to compete with in the international labor market, consequently, driving domestic labor demand down. It is this fact that many anti-outsourcing advocates are against offshoring. Not only does it eliminate domestic employment but also it further makes the U.S. labor market even less competitive and advocates argue that, “Potential American jobs are being created in other countries, instead of the U.S.” Effectively, placing significant strain on middle wage and skilled, white and blue-collar jobs. Outsourcing is not only limited to manufacturing, but also call center, bill processing, tax preparation, and other routine information processing type jobs.

As products of globalization, the democratization of information and technology along with the dramatic drop in prices for information technology has skyrocketed automation of many routine type jobs. Autor states, “This process of automation raises the relative demand for nonroutine tasks in which workers hold a comparative advantage.” Reiterating a higher demand for high-skilled workers that can only be provided with higher education, accompanying with analytical and problem solving competencies. Additionally, this put downward pressure on workers with education levels below a four-year degree, fostering the gap even further. Autor further suggests, that the past few decades the earnings of college educated workers have steadily increased relative to non-college educated workers, and that educational attainment has not been able to keep up with educational returns. Consequently, extending the wage gap between college and non-college workers.

So what do we do then to reverse this polarization, especially if the middle class is still thought to be to major driver of prosperity? One of Autor’s recommended responses is to continuously encourage higher education as the demand for higher skilled workers increases. However, Paul Krugman completely argues, “… If we want a society of broadly shared prosperity, education isn’t the answer.” He further suggests that the solution is a more structural concern to restore the bargaining power and essential benefits to ordinary workers. In no way does Krugman convey that education is still not essential, in fact, it has become more competitively essential given the positive attainment rate of college degrees over the past decades.

Educational Attainment

"Educational Attainment in the United States: 2009". U.S. Census Bureau. Attainment statistics are cumulative.

Is this dichotomy of the labor market and income distribution just an inevitable product of globalization? Or can progressive policies replenish our deteriorating middle class?

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~ by Roger Sutton on March 11, 2011.

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