For 40 years, the U.S.
led global economy has produced an enormous
improvement in human welfare.
Since 1981, the proportion of the world's
population living in extreme poverty on less than
a $1.90
per day has fallen from 42 percent ,to 10 percent.
But in countries with advanced economies,
inequality of income and wealth has surged.
And nowhere has it surged more than in the U.S.
where reliance on free market forces has been
strongest. That magnifies rewards for those at
the top and leaves most others behind.
The trend helps those with higher levels of
education and hurts the less educated.
It lifts residents of major cities while leaving
those in small towns behind.
For growing numbers of Americans it's just harder
to get ahead.
Why is this happened and what are the
consequences? Here are five causes.
The digital revolution creates enormous wealth for
those with the skills and preparation to take
advantage. But it eliminates what economists call
"middle-skill jobs."
Computer software and industrial machines now
fill roles from clerical tasks to routine
manufacturing that once produced middle class
incomes for workers without college degrees.
One of those forces is technological progress that
has increased the value of an abstract problem
solving, interpersonal communication or
organizational skills.
Things that highly educated workers tend to be
very capable of and has simultaneously devalued a
lot of cognitively intensive but repetitive tasks
in offices and production lines and so kind of
hollowed out the set of job activities available
to non-college workers and sort of pushed them
arguably downward into personal services, food
services, cleaning, security, transportation,
repair where their skills are more
interchangeable with other workers and where
there is less of a return to experience over the
lifecycle.
And so that has contributed downward pressure and
wage pressure and economic insecurity for the
less educated.
So it's really kind of created a great world for
the highly educated and a much less economically
secure and inviting world for people who don't
have high levels of education.
Competition from emerging economies like China's
combined with reduced trade barriers have further
reduced prospects for workers without advanced
skills. That's had devastating consequences in
sectors such as textiles and furniture and
leather goods.
The biggest economic story of really of the
century and certainly of the last 50 years has
been China's rise.
China going from a poor and backward country in
perpetual political and economic crisis to a
frontier manufacturer with pretty well-educated,
highly available skilled labor using modern
technology. So China marched up the productivity
technology frontier between 1980 and the present
at a rate almost unseen in history and because it
was so vast, because it had so many people, so
many resources, so much land, it could become you
know a manufacturer for now at this point more
than 20 percent of all world manufacturing value
added. And that's not just a function.
That's not a function of trade deals.
That's primarily a function of internal
developments in China.
The decision to allow free mobility of labour to
adopt Western technology and foreign direct
investment and to start trading with the world.
And that had a big effect on United States even
in the 90s.
But when China joined in 2001 that further opened
the floodgates.
And that had a dramatic accelerant effect on the
rate at which competition entered the U.S.
market for manufactured goods.
And the rate of decline of U.S.
manufacturing employment as a result of that.
Over the course of just seven years about 20
percent of all U.S.
manufacturing jobs disappeared.
And then they fell it fell by another cumulative
eleven percentage points during the Great
Recession. So effectively one-in-three
manufacturing jobs no longer existed that had
existed around 2000.
Breakthrough firms such as Apple and Amazon now
attract revenue across the world, which produces
immense jackpots for the executives who lead
them. And for the American cities they call home.
You create the innovation and you have the global
product market.
You're going to have much larger earnings than in
a previous generation.
There is increasingly divergence and economic
growth and economic outcomes across
places in the U.S..
And so there are just you know along with these
superstar workers and these superstar firms when
you have superstar cities in our increasingly
winner take all economy.
Meanwhile, the share of workers represented by
labor unions has dropped by half, shrinking their
power. The lowest paid workers have seen the
buying power of the minimum wage drop as the
government has not increased it to keep pace with
inflation.
Fewer than 70 percent of men with a high school
degree or less are working.
The eroded value of the minimum wage in many
cases, the decline in unionization, things that
have otherwise sort of hurt workers bargaining
power in ways that amplified their weakened
bargaining power are just coming from these
external forces where they were already competing
with technology or workers from lower wage
countries for example.
The shifting power balance has rewarded the
wealthiest even more through policies in
government and private institutions.
From tax changes that increased their income to
college admissions procedures that opened doors
for their children above others.
Actresses Felicity Huffman and Lori Loughlin are
headed from the red carpet to federal court.
13 parents and one coach who have pled pleaded
guilty.
The market incentives inequality creates for hard
work and risk taking helps make America's economy
dynamic but it also imposes costs.
You need some inequality.
The problem is when that dynamism at a point in
time gives rise to dynasticism such that the
next generation doesn't get an equal footing. Such
that kids of affluent parents even if there are
mediocre talent get to go to the best schools and
get access to the you know the most after school
investment, the most training and so on.
And you know talented kids from less affluent
families don't get to go to these schools.
They don't get invested in in the same way.
And that's a loss for all of us.
That's not just a loss for them.
That means our society will be less productive.
And it fuels the nonstop turmoil in American
politics. Voters have thrown out the party in
control of the White House or one chamber of
Congress in six of the past seven national
elections.
2020 promises to be just as contentious.
I think we're seeing that loud and clearly in the
sort of politics of the past few years.
People are increasingly likely to report that
they believe the system is rigged against them.
This is damaging both for the functioning of our
democracy. But I actually think also for the
functioning of our economy.
We're going to see people in increasing numbers
sort of dropping out of our mainstream climb to
economic success and so we've got this economic
malaise. And now we have this social malaise
going along with it.
And and it's leaving the political I mean large,
loud political cries for completely, I think,
upending our capitalist system.