Saturday, August 12, 2017

The new normal is ... a new slavery?

In graduate school, a professor casually commented that unemployment is a privilege of the rich.  The poor simply cannot afford to be unemployed, he argued.

I had a question right then but did not ask.  I was way too self-conscious about my accent and I worried that I might have to repeat the question in order to be understood.  I stayed quiet.  The question was this: What if people are working but the returns are next to nothing.  You know, like slaves.  Like hamsters running forever but not really going anywhere.

That question continues to bug me.  I have forever worried that the automation means that owners of those digital abstractions will get to hoard way more money than ever before.  This, in a political environment that discourages redistribution of income, will lead to workers working away but ...

The NY Times adds more to my worries, via this chart:


So ...
The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in percentage terms, than the pay of the rich.
In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else.
Megan McArdle, who is by no means left of the political-economic center, writes about the slow wage growth even though unemployment rate is at a low, low 4.3 percent:
So this slow wage growth may simply be what the labor market now looks like. Earlier eras of tight labor markets produced big increases in wages, but those increases were matched by rising worker productivity. Today, employers striving for productivity may replace the worker altogether, either by outsourcing to a lower-wage country or by giving that job to a machine.
So the biggest mystery is not why U.S. wage growth seems stuck even as unemployment falls. The biggest mystery is how we’re going to adjust our economy, our culture and our politics to the new normal.
It is no mystery to me--I have forever blogged about the need for a new social contract.  If only this president and his minions, and the likes of Paul Ryan and Mitch McConnell who manically advocate tax-cuts for the wealthy, will honestly respond to these real trends, instead of inventing their own alternative facts!


Ramesh said...

Yup. We have debated this before. There is no doubt that inequality has risen.

But you have to state your new social contract more explicitly and prepare to defend it. The reason why there isn't a new social contract already is that it is damn hard to create one. More redistribution isn't the sole answer.

Write down an economic manifesto for your country (as I attempted to do for mine before our election). You have blogged about your preferences before but haven't stated a coherent plan in some detail. Let is be critiqued. You would have significantly contributed to the thought process behind the development of a model that might work.

Sriram Khé said...

I don't layout a new social contract ... that is not my job. Writing that contract is what we do as a society, as a country, and we convey our preferences to the appropriate people.

I do believe that "more redistribution" is an integral component of this new social contract. The redistribution does not have to be in terms of cash handouts. It can be through, for instance, a minimum level of healthcare, a minimum level of unemployment insurance, a minimum level of childcare support, ... all these are nothing but redistribution of income--with the money coming from those with plenty to spare.

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