Income inequality has captured America’s economic debate.
President Donald Trump, elected with the votes of discontented blue-collar workers, slaps tariffs on allies and adversaries alike in the name of restoring yesterday’s middle-class manufacturing jobs. His 2020 Democratic challengers demand an array of federal initiatives, including higher minimum wages, tax hikes on the rich and reshuffling the balance of power between business and labor.
Indeed, the rising gap between the rich and everyone else has fueled unrest across the world, from Europe’s ongoing Brexit crisis to this year’s elections in India. A sharp reduction in extreme poverty globally has not diminished the sense of loss among middle- and working-class citizens of countries with advanced economies.
Why has this happened? And why has it grown so pronounced in the United States?
Here are five causes identified by scholars of the subject:
Technology has altered the nature of work
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.
“That has increased the value of abstract problem solving, interpersonal communication, organization skills — things that highly educated workers tend to be very capable of,” said MIT professor David Autor. “It has simultaneously devalued a lot of cognitively repetitive tasks in offices (and) on production lines. That has contributed to downward pressure and wage pressure and economic insecurity for the less educated.”
Competition from rising economies like China’s, combined with reduced trade barriers, have further reduced prospects for American workers without advanced skills. That has produced devastating consequences for workers in sectors such as textiles, furniture and leather goods.
“The biggest economic story of the last 50 years has been 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,” said Autor. “That’s primarily a function of internal developments in China — the decision to allow free mobility of labor, to adopt Western technology and foreign direct investment, and to start trading throughout the world.