Income mobility

The Haves and the Have-Nots: What Happens to the Folks in the Lower Half of the Bell Curve?

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More is better
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I am not endorsing Columbia University economist Jeffrey Sachs' policy prescriptions in his New York Times op-ed today, but his data about what is driving rising income inequality is worth pondering:

Decent jobs for low-skilled workers have virtually disappeared. Some have been relegated to China and emerging economies, while others have been lost to robotics and computerization.

The results of these changes can be seen in two starkly different employment figures: since 2008, 3.1 million new jobs have been created for college graduates as 4.3 million jobs have disappeared for high-school graduates and those without a high school diploma.

Over at the Washington Post, superb economics columnist Robert Samuelson points out in his column today on the underrated benefits of international trade that in fact relatively few low-skilled manufacturing jobs have been "relegated" overseas:

Although imports worsen the secular loss of manufacturing jobs, the perceived impact is probably greater than the actual impact. Suppose, say the two economists, the United States had no manufacturing trade deficit. This would, they estimate, boost U.S. factory jobs by 2.7 million. That's a lot of jobs and would significantly add to manufacturing's total, now about 12 million. Still, it pales beside the Great Recession's employment loss (8.7 million) or total payroll employment (about 135 million).

Even if these factory jobs magically materialized, gains might be temporary. Advancing productivity could soon erode the total. Similarly, it's true that foreign competition puts downward pressure on U.S. wages and has, almost certainly, contributed to growing wage inequality. But the effect seems modest, because trade doesn't dominate the labor market.

Both Samuelson and Sachs point out that modern manufacturing needs fewer and fewer workers anywhere in the world as ever more capable machines handle more repetitive tasks. Sachs thinks that more and better education will help solve the problem of unemployment among the low-skilled. But as jobs become more intellectually demanding, how much can more and better education really help the folks who find themselves in the lower half of the cognitive bell curve? 

For more background, see my article, "Were the Luddites Right?"