The U.S. economy is killing off the middle class
nytimes.com
nytimes.com
1. Jobs were you design things (code, graphics, marketing campaigns, franchise models, sales scripts, hedged trades, screenplays, new business models, retail store layouts, art, fashion etc) 2. Jobs were you follow basic instructions (flipping burgers, voice-over artists, uber drivers, sales, retail manager, factory line worker, tax accountants etc)
The first category is a subset of the current middle class, but it's much smaller.
Everyone in the second category is in for a rough ride. They will be constantly competing with machines, algorithms and millions of other people who can all follow the same manual that they have. Even jobs like sales where you'd think there has to be a human involved will be gradually eroded. Human intuition will increasingly be replaced by scoring algorithms and CRM reports. Their persistence in following up with people will be replaced by lifecycle emails, tracking algorithms and chatbots. And ever more transactions will be pushed online anyway.
I also believe that we're at the point of saturating our hierarchy of needs. Some people will try to monetise things like love, acceptance and respect of others (I can already buy a Facebook girlfriend on Fiverr). But I think this will be largely un-monetisable. Meaning we're in for mass unemployment. This is not necessarily a bad thing though, so long as we drop the stigma. People can be kept warm, dry, well fed and entertained with games and box sets, with relatively little cost.
If all Starbucks outlets look the same, sell the same stuff and use the same process, I'd say the manager is largely just following the manual.
As for taxes, mine are already prepared by a computer then just checked over by a human. That's not to say there aren't also high end accountants designing company structures and doing financial planning.
And, congratulations, you can find people who are willing to do voice over work quickly. That doesn't mean it doesn't take a lot of creative work to get the right feel and urgency for the situation. Improvisers sometimes use scripts, too, as a stage gag, and they'll read the things they're using too, but it's them that adds personality, intensity, everything.
And managers, they manage /peeople/. Maintaining a store's stock isn't too bad. Managing people and solving disputes in a pleasing way for all involved, that's a much harder problem.
In the future it will be even cheaper to buy new so there will be less need for repairing or custom work. As for the rest - well computers can drive, why shouldn't they be able to help your wiring your house? Or why shouldn't a single electrician (probably in India) be able to help 10 non-electricians with HoloLens wire a house?
There's a difference between what a cabinetmaker does and assembling IKEA furniture.
Where good education formerly could save you and your family a good living, it now has to be an excellent education, where even both persons in an household have to work, to make ends meet. or in lower income jobs, in the case of Germany, people have to work two or three jobs, or depend on substitutions from the state.
It is economically speaking rational, to automate the bulk of the (middle income) jobs, as there lie the most potential savings. So without regulation this trend will continue (it will on the other hand continue even with regulation, I believe).
Sadly, I have no idea, what can be done about that.
This means that we're going to have to radically re-think how compensation should work and how our future economy is supposed to work given that almost any job can be automated to some extent. The 'automated away' segment is expanding both upward and downward, that 'middle class' that is disappearing is not so much a middle-class as a middle tier, those jobs that were easiest to automate away because they dealt mostly with information management.
But once you go down that road your interfaces 'up' and 'down' just become 'more complex brains' and 'more capable hands' which in turn are touched by artificial intelligence and better robotics. So that middle tier will get ever wider.
This is an extremely challenging problem.
"People" in general is one of those things. We have reached, or are about to reach, the point where it's no longer true that more people = more {wealth, power, progress}.
As a result, there's much less talk about the "decline of the middle class" in Europe. There has been no dramatic change.
Given what happened with Occupy the suppression part is well under way.
The head of the NYPD said he needed to be able to deploy a 150 strong unit with machine guns to deal with protests yesterday.
http://nypost.com/2015/01/30/nypd-to-launch-a-beefed-up-coun...
All those things depend heavily on a solid government budget, with solid income from taxing a strong economy. As we're now seeing with Greece, they're not sustainable if the government "coffers" are emptying up or if the economy is weakening.
So I would gladly have numbers, supporting a different point of view, just to counter these reports.
Is it automation, or is it more competition from other humans? In 50 years, the population of the US almost doubled. In addition, many workers (in most countries, not just the US) now have to compete globally (indirectly, if not directly) with equivalent people from other countries with lower standards of living. Both these phenomena can have negative effects on employment and salaries, IMHO.
Make way to increase the mass of higher education. Diversify education, lower standards and increase the number of graduates, and increase or create new highest standards. Make education less monolithic.
To put it more simply, just increase the number of students. Expect to have students as old as 30. Diversify the means people educate themselves, it can also happen inside of a company, it doesn't necessarily have to happen in a school. Many people can learn by themselves if they're encouraged to do so. Education doesn't have to be expensive. Maybe regulating education to have more competition between schools might be an idea ?
Education is long term, but I don't see any other way. That's how society gets better. It's either that or more talks about basic income or more taxes on the 1% or the 0.1%.
To increase wages of middle-class workers, you need to increase the demand for middle-class jobs relative to the supply of workers available. There are three main ways of doing that:
1) Increase demand. Create many more companies, which will force them to compete for talent and raise wages or be left without a labor force. YC and other accelerators have been good for that, and you see what results in San Francisco (although engineer salaries are arguably artificially depressed at the moment because companies form a cartel on wages and nobody has yet defected to try and corner the market).
2.) Decrease supply. Take some workers out of the labor force, either through converting them into employers through entrepreneurship, encouraging families, legislating a shorter work-week, or discouraging education. Note that this also will reduce output, which is a tough sell in a global world.
3.) Join multiple independent workers into one firm. This is basically what labor unions are about, surrendering your autonomy as a free economic agent so that everyone has better bargaining power.
Productivity gains, when spread across a whole class of people, never end up being captured financially by the group they most apply to. All the surplus is competed away, and the people who most benefit are the complements, those goods that everyone in the group depends upon. That's why increasing rates of college attendance - and they have been increasing, dramatically, at least in the U.S. - have resulted mostly in rising tuition and lowered wages.
Also, consider the labor participation rate. At a 36 year low. Less people are working. http://data.bls.gov/timeseries/LNS11300000
Without getting into the whole political argument about whether people should be paid by the government when they do not work, or to the extent robots or cold hearted business barons are killing jobs - or - whether these people can't work or choose not to because they can get by on govt. dole (or working friends/family) - less people working will mean less income.
The survival of middle income families is a very real concern, but I don't find the click bait headlines and exaggeration of what's happening particularly helpful. We have too many areas in American life where instead of taking a sober look at the problem, we stir people up by appealing to their base fears and create narratives to scare people.
https://www.linkedin.com/pulse/20140407131300-5858595-10-rea...
Economic press has created a race among leaderships of nations on who is developed(advanced) i.e. praiseworthy and who is not and many organizations started preaching ways to improve productivity as if productivity only is the ultimate goal of human life. Political leaders cannot dare to advocate alternatives because that is suicidal for them, their countries ...etc.
I think, technology's effect on human life is like inverted bathtub curve i.e. technology advancement to certain level is beneficial to society but beyond that we enter region where costs/losses outweigh benefits if we consider entire society. No doubt, there will be winners any time but as a whole society loses and inequality may rise causing law and order issues and impacting even winners indirectly. In that sense, technology is like level of water in river and beyond certain level, it is not good for humanity.
World is highly decentralized and innovators or cultures who tasted success in innovation won't agree that progress in certain technologies need to be stopped or efforts need to be directed towards other required activities. So technology progress always happen and jobs also gets destroyed as collateral damage.
The history of technology is a long progression of jobs that we don't have to do anymore, freeing us up to both achieve more complicated tasks, and to require fewer hours of human energy to achieve a certain level of pleasant life for everyone.
McDonalds cook, taxi driver, self driver, brick layer, so many jobs today are just on the edge of being unnecessary, and that is a great thing. Those people would be much happier, and society as a whole much safer, if we just gave all these people the money they need to live, and simply ask that they contribute a little civic participation (talk to some old people, supervise children, etc).
The money they need to live? So... from cradle to grave "these people" should simply be given all the food, clothing, shelter, education, entertainment, transportation, etc. that they need and no need to earn any of it?
I assume the plan is to confiscate the money from the other people, the ones that worked for about a century investing their money into developing the technology, processes, and software to bring that level of AI into the world. Pour money into the bottom, it's spent through the system, confiscate it at the top, rinse, repeat?
This doesn't work because it turns out if you can't actually keep the money you earn, you tend not to bother earning it.
http://1.bp.blogspot.com/-q83NyGTLock/UekhmnoX4tI/AAAAAAAABc...
That dicing of all incomes into three brackets including the ridiculous $75k+ bracket (for families!) just shows how you can hide truth with graphs.
Thanks for the downvote because statistical facts on income apparently aren't your cup of tea.
Even if it isn't, does that concentration of capital make the whole economic system less efficient than it otherwise could be or happens at the expense of basic living conditions for people in the (100-X)% group?
Didn't downvote you, but you have heard the saying "Lies, damned lies, and statistics", haven't you? Calling a single chart "statistical facts" is laughable at best. Especially when we've seen two versions of that chart (see zaroth's post), with a near identical title (one has "US families", the other "US households") and claiming the same source data from the same blog, showing two very different plots. (Looking more carefully, the trends at least seem similar, so perhaps it is just an issue with the definition of "family" vs. "household"?)
Further, it's pretty clear that simply changing the brackets could result in a very different plot. And that is what we see in the NY Times article, which has the "households" plot but with the income brackets changed slightly and the 2009-2013 data added. In the NYTimes plot it looks like, since 2000, the top bracket has peaked and shrunk, the middle has continued to shrink, and the lower grew. It's a short trend compared to the full graph, but is that the direction we're heading now? So at best, this is all highly subjective, and a perfect example of when "statistical facts" can be manipulated to serve and agenda, populist or otherwise.
In short, nothing was "completely debunked" here, and a great example of why different sides of a debate end up talking past one another instead of acknowledging how complex these things can be. Two groups with different starting positions looked at the same or very similar plots and drew different conclusions. Color me shocked.
http://www.advisorperspectives.com/dshort/charts/census/hous...
Also, I think you would be better linking here, which has several versions with differnt groupings (per @r00fus' point) as well as the full discussion behind it:
http://www.aei.org/publication/census-data-on-income-distrib...
It's interesing data, but also missing the last 5 years which are crucial as this is a recent phenomenon. The 3rd chart in the series I think best shows what economists are calling the "lost decade" where we stopped making real progress in upward mobility. Add another 5 years onto those series and I think you would see we are going backwards now.
Edit: Shouldn't the top graph in my link be the same as your link? Now I'm doubting these graphs are even 'correct' (methodology aside)
We just had the biggest recession since the Great Depression. Taking such a short window will of course show wage deflation. You cannot remove the effects from bubble income and expect to keep bubble income.
The overall trend for most slightly bigger windows is wage increase. If a certain wage level meant middle class in the 1960s, or 1970s, or 1980s, or 1990s, then we have a larger ratio of people in that class, not less.
Of course if you define middle class as also increasing in income, then you can play all sorts of tricks. But the fact remain more people than perhaps any but the last decade are richer than ever. All your graphs point to exactly this.
Remember - bubble popped. It takes a while for those effects to smooth out.
edit: Just to be clear, I'm not making any positive or negative statements about the article, I just wanted to help you work out what it was you had missed, and I think what I described is it.
Increasing the payouts for earning less, not surprisingly, erodes the middle class. Either you are determined enough to work more to earn less and maybe in a few years come out on the other side of the chasm, or you work less and immediately benefit from it.
Check out Figure 1 (page 6) in this CBO report, and note it's worse now than when this was written;
http://www.cbo.gov/sites/default/files/cbofiles/attachments/...
It's amazing how little value you actually gain from the first $60k of earnings! If you prefer a more newsy analysis;
http://www.economist.com/news/united-states/21585010-america...
http://en.wikipedia.org/wiki/List_of_countries_by_total_heal...
But this sounds like politics, so ... article flagged.
-Most jobs are computer-solvable, given enough time and resources.
-From a cost-benefit standpoint, people have strong incentives for automating higher-paying jobs than lower.
-People automating work and people allocating funds to automate said work will reap rewards.
-We as a whole really need to think about a world where a majority of people don't work and figure out how society works and maintains stability given those constraints. (Basic income, etc.)
-For those who haven't settled on what they want yet, they should prolly find work in something that's hard to solve by a robot (that also hopefully provides meaning and sustenance).
The issue doesn't seem to be that people are falling out of the middle class. The real issue looks like, to me, that we're successfully graduating people from middle to high but not from low to middle. The low class has shrunk a teeny bit but is basically flat.
If instead low shrunk, middle stayed flat, and high grew that's be pretty great. It'd mean everyone is moving up.
At least that's whatmy interpretation is. What do y'all think?
The graphs are 1967-2014. If you look closely you can see that the "high" group goes up until 2000, but not after. That is the point they are trying to make.