These articles caught my eye this week. First, in the Atlantic: Bash Brothers: How Globalization and Technology Teamed Up to Crush Middle-Class Workers
Globalizationandtechnology is often referred to like a monolithic thing. A new study shows they're very separate. Globalization increases joblessness. Computers increase inequality.
The article is reporting on a recent economic study: Untangling Trade and Technology: Evidence from Local Labor Markets
… Here's the bumper sticker version of their conclusion: Globalization increases unemployment; technology increases inequality.
Globalization: The authors found that metros with more exposure to Chinese trade — mostly concentrated in the swoosh of states extending from Indiana down to the Gulf of Mexico and up through North Carolina — saw significant job losses, both in manufacturing and overall. For every $1,000 increase in imports per worker, the share of people with jobs declined by 0.7 percentage points — and more for non-college grads. As manufacturing jobs declined, demand for local services would decline, and thus job losses could extend into areas like retail and hotels.
Technology: The computerization of certain tasks hasn't reduced employment, the authors find. But it has reduced the availability of decent-paying, routine-heavy jobs. Middle-class jobs, like clerks and sales people and administration support, have disappeared as computers gradually learned to perform their routines more efficiently. But as those jobs disappeared, cities saw an increase in both high-skill work and lower-paid service sector work, leading to little overall change in employment. …
CNBC has an article (published at Huff Post) Where The 1 Percent Really Get Their Money:
Much of the debate over taxing the wealthy focuses on taxing giant salaries.
But a new study from the nonpartisan Tax Policy Center found that the real money for the wealthy is made from investments and business income—not compensation. …
And Mark Perry recaps this article in the Journal of Economic Perspectives: Stunning new study dismantles Obama's "1% vs. 99%" inequality argument.
The JEP article is here: It's the Market: The Broad-Based Rise in the Return to Top Talent
Perry summarizes:
In their paper, Kaplan and Rauh conclude "it's the market" rather than some class-wafaresque malfeasance at play. Here's why:
1.The increase in pay at the highest income levels is broad-based: Public company executives, private company executives, hedge fund and private equity investors, Wall Street bankers, lawyers, and pro athletes have all experienced big jumps in pay over the past few decades. …
2. Typical measures of high-end income inequality are incomplete. Inequality alarmists typically point to data from Thomas Piketty and Emmanel Saez which show the share of taxable income accruing to the top 1% up markedly since 1980 and at levels not seen since the Roaring '20s. Yet once you add back transfer and taxes, as the Congressional Budget Office does in its analysis, you find that government policy — including the tax code — has already been restraining the rise inequality. Kaplan and Rauh: "In the most recent data from 2009, the aftertax, after-transfer income share of the top 1 percent was around the same level as in 1987–1988, 1996, and 2001."
3. The superrich are getting that way through effort and education — particularly in industries where tech and globalization play a big role — rather than through inheritance: …
It has long been my suspicion that a central player in the rise of inequality is the ongoing race between technological innovation and human capital development. During times of rapid increase in productivity through technological changes, owners of the technology race ahead. Worker education and the formation of human capital are slower to adapt. But technology can only go so far before it must have plentiful workers who have adapted. As this gain from technology runs its course, the demand for new workers increases labor begins to race ahead. I'm no expert on these matters, but it seems that something like that is happening today. It isn't just the U.S. that experiences this, but the whole industrialized world. Something more systemic appears to be afoot.
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