Tuesday, April 2, 2013

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

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