Is Technological Progress Behind Growing Income Inequality?

By Zsolt Darvas, Associate Professor at the Corvinus University of Budapest. Originally published at Bruegel

There is a growing awareness that income inequality has increased in a number of developed countries. The lucky ones, with high levels of accumulated wealth, assets and top incomes, earn more and more, while those who are at the bottom of the income distribution increasingly see little opportunity for increased spending, buying a house of their own, or going to nice destinations for their holidays.

One possible explanation for these widening inequalities is technological progress, which may reward skilled workers more in comparison with unskilled workers. This idea sounds intuitive: those with higher skills, such as IT developers, are able to generate a great deal more output thanks to new technologies, and so they receive the proportionate remuneration . In contrast, those with lower skills, such as waiters, cannot generate much more value using new technologies and therefore do not receive extra compensation.

What is more, robots are replacing certain types of human labour altogether. Some jobs are more easily robotised than others, but certain low-skilled or routine tasks are the most easily automated. These workers risk finding themselves out of employment.

Globalisation may add a further twist. The immigration of low-skilled workers, a widespread phenomenon in many developed countries, may dampen the wages of local low-skilled workers by increasing the labour supply. Furthermore, offshoring production to low-wage emerging countries, as well imports of goods from these emerging economies, may supplant local jobs and further dampen the wages of local low-skilled workers.

So runs the argument. However, our recent research casts doubt on the hypothesis that technology-driven developments were a major factor behind rising inequalities in advanced countries.

Let me start with some facts about jobs. Both the European Union and the United States are characterised by strikingly similar labour force developments. In both regions, there has been a decline in the number of jobs for workers with low levels of educational attainment over the past 25 years. Meanwhile, there has been a tremendous increase in jobs for workers with tertiary education, and this is the only job category that expanded after 2008, even in several countries that were hit hard by the recent global and European financial and economic crises. While underemployment, when a worker takes a job for which they are over-qualified, is a prevailing phenomenon, it tends to be temporary.

If a greater share of jobs are only open to tertiary-educated workers, it could contribute to increasing inequality, if tertiary-educated workers earn ever more, relative to lower educated colleagues. Data shows that this has been the case in the United States and China, and to a much more limited extent in Germany. However, exactly the opposite has happened in many other countries during the past two decades, including the United Kingdom, Italy, Spain, France, Sweden and Japan. In these countries the so called ‘skills premium’ has actually fallen.

So, what can explain this divergence in wage developments for tertiary-educated workers between the United States and most of Europe, when the market of available jobs developed so similarly? One possible explanation could be the supply of workers: if there is a shortage of certain types of workers, their wages go up. But such labour shortages do not provide a sufficient explanation, since the number of new graduates increased at the same rate at both sides of the Atlantic.

Moreover, a statistical relationship can be established between the share of tertiary-educated workers and their wages relative to lower-educated peers, and also between the unemployment rate of tertiary-educated workers and their pay rises. The United States is an exception to both of these statistical observations: its relatively high share of tertiary-educated workers is associated with a relatively high skills premium, while the wage growth of tertiary-educated workers was much faster than what their unemployment rate would have implied.

Clearly, something special was going on in the United States, which contributed to the rising rate of compensation of tertiary-educated workers, which in turn boosted income inequality. Technological progress cannot really be an explanation, since technology also impacts Europe, but most European economies saw a relative wage decline of tertiary-educated workers. That is, the skills premium actually fell in most European countries. Also, job offer developments for high- and low-educated workers were so similar across the Atlantic, and technology likely played a role in this, but wages were on very different trends.

Instead, the explanation may be related to public policies and the formal protection of certain occupations. In the United States, a rather small fraction of the top one per cent of earners comes from high-tech industries such as ICT and manufacturing. The bulk of top earners are lawyers, doctors, dentists and financial sector professionals. Some of these industries enjoy a relatively high level of protection, while the impact of technological change may still be comparatively modest. Europe tells a different story. In many European countries, a much higher share of the top one percent of earners than in the United States is in the manufacturing sector.

Public policies, such as redistribution, education and labour market policies, may also play a role. Redistribution from the rich to the poor is at a much lower level in the United States than in Europe. Certainly, the national redistribution system could be made more effective in a number of European countries, but overall redistribution and social protection is much stronger in the EU.

Therefore, even though our analysis suggests that technological change tends to favour those with greater skills, it is hard to see how this has contributed to rising inequality. Other factors such as redistribution and education policies or the regulation of certain professions may be more relevant.

In any case, a new machine age is in the making, and ever more jobs will be replaced by automation. If technology is able to begin dealing with non-routine cognitive tasks, then the next generation of workers must be equipped with skills that benefit from technology rather than being threatened by it. Such skills are likely to emphasise social and creative intelligence. Appropriate shifts in education policy are therefore surely required in order to meet the challenge of technological development.

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  1. Synoia

    Free Trade and not Local Manufacturing was a policy choice. Up until the ’80s, local manufacturing, building domestic industry, was a policy in most countries.

  2. Jesper

    Increased productivity can lead to increased pay and/or less time spent working. Increasing pay is short-term as the increased competition puts down-ward pressure on pay. But, the ‘winnners’, of the rat-race don’t see it that way. The ‘winners’, look down on the people who become unemployed due to the increased productivity with flat demand.
    To have reduction of income-inequality then the obvious path forward seems to be to increase the length of vacation, reduce pension-age and provide more paid time-off for life-events such as: child-birth and the raising of family, care for elderly etc.
    The ‘death by shuffle-board people’, or in other words: the ones whose only purpose in life is to give up control of their day in exchange for money will of course disagree.

    & as for the

    Appropriate shifts in education policy are therefore surely required in order to meet the challenge of technological development.

    it is a very safe and meaningless thing to say. But safe and meaningless is the new normal in the ‘open’ area of research where offering an opinion and debating is seen as antiquated and things of the past.

    1. nothing but the truth

      increased productivity has led to increase in profit and rents paid out to controlling interests.

      real wages have remained stagnant despite increasing productivity.

      asset prices have zoomed. “goodwill” has increased in value. labour share of national income has gone down markedly.

  3. Cry Shop

    Such skills are likely to emphasise social and creative intelligence. Appropriate shifts in education policy are therefore surely required in order to meet the challenge of technological development.

    It’s all the education systems fault, not markets, not capitalism. ffffffff I wanna scream.

    All this crap about fixing jobs, fixing the minimum wage, none of this will address the issue that people want a livelihood, which is a lot more than a bundle of money thrust at them. something pure, naked capitalism does not give a whim about.

    1. knowbuddhau

      > “people want a livelihood

      Bingo! That’s what I’ve been saying. I’ve had so many jobs I’ve lost count. A few of them could’ve been the last I’d ever need. Unprecedented layoffs after 9/11, crony crapitalism (I’ve even got a link for this one:; the tell is “politically connected”), and our shambolic health insurance racket have all pulled the rug out from under me. Pretty hard to save up for retirement when you keep getting knocked back to nothing.

      I’ve got work now (3 different jobs, all janitorial, despite a BA in Psych and a few years of grad school) that I enjoy, do well, and am appreciated for doing. (At our recent Christmas party, I had the great pleasure of having my name chanted when I was thanked for a quantum leap in cleanliness.) But I can’t call it a livelihood because I’m not self-sufficient. The housing wage in NW Washington is a bit over $17/h, and I’m averaging well under that.

      The g*dd*amn mandate just adds insult to injury. It takes 2/3 of my food budget but I’d go bankrupt 3 times over before meeting the deductible.

      It’s for that reason that I take exception to the very first sentence. Those of us at the bottom aren’t remotely considering buying a house. The very modest house my folks bought in ’73 for $35K is now valued at $250K. I can’t even afford to rent a decent place. Buying is way out of reach.

      And as far as vacations go, I’ve heard of those. The closest I get is seeing others take them. Those of us at the bottom are the people who can’t take them so that others can.

      1. Marco

        Not to belittle your circumstances as I am rapidly approaching a similar outcome. But $35k in 1973 is roughly $187k in 2016 dollars. At $250K that’s a 25% return for your folks over 43 years not counting interest on a mortgage, maintenance, taxes, insurance. Housing for the 99% not located on the coasts is/was a horrible long-term investment. If we can convince our comrades to give up the housing con we would bring this economy to a screeching halt. Until that happens I’d rather squat in the Ghost Ship and take my chances.

        1. Marco

          As an aside I am dreading the endless hours of HGTV playing on the TV in my folks home where the saccharine sweet necessity of American homeownership is drilled into our heads non-stop. If there is one unnamed culprit in the housing crisis it is HGTV as vector in spreading the incessant fetishization of our homes as investment vehicles. Sorry…I’m done ranting.

          1. olga

            Although speaking of HGTV, have you noticed the endless stories of “tiny houses?” I think that sorta sums up where we are now… everybody, scale down your expectations!

            1. Cry Shop

              That in and of itself is not a bad thing, The USA has long led a far too materialist livelihood, and will soon be swimming in it’s outcome.

              What make it bad is that it’s not “everybody” scaling down their expectations, but a bi-polar economy of excess exuberance vs lessened. The hypocracy of DeCaprio making a movie about the impending ecological colapse while parking his huge mega-yatch in Hong Kong, so it’s easy to access by his private jet plane and he can off-shore income to avoid taxes, while he polishes his eco-warrior cred by owning (but not driving often) a Toyota Prius. Meanwhile his gardener is making nearly the same pay as 25 years ago, for the previous owners of his McMansion.

            2. cocomaan

              I have noticed this but I also think it’s a backlash against consumerism in some ways. I have family and friends who are paralyzed by the crap they have accumulated. Most of it is garbage. Examples include: one off appliances, singing trout, cheap fleece blankets, pamphlets, and so on. They cannot clean up their mess because there is too much of it to even begin on.

              There’s a great book about this called Life at Home in the 21st Century.

              As mentioned above, jobs may be replaced by automation, widening income gaps, but people also need to practice consumerism in a responsible way. The anemic 21st century economy is a two way street. It’s not all just a matter of 1% ruling class deep state illuminati woo woo boogeymen trapping people.

              1. animalogic

                A primary symptom of consumerism-as-pathology, is the massive growth in the storage industry. As a child/teenager in the 70-80’s I can’t really recall any massive “Ü-Store-It” types of places: now, of course, they litter the landscape. And, please note: such storage facilities are NOT cheap: it costs a great deal to store all those surplus [?] chattels.(the failure to keep up such storage costs leading to a number Auction “trash or treasure type TV programs– complete with a stable of hero-or-villain bidders)
                I do not know, but I suspect, that the “problem” of hoarding (also the charming subject matter of a number of TV programs) has also become exacerbated over the last 25 odd years

          1. sharonsj

            I agree most with this. I have been complaining about price inflation since 2008, when I saw increases of 25-75%. The media has never covered any of this–it and the government pretend price inflation doesn’t exist.

      2. polecat

        ‘Staycations’ are in everyone’s future ……

        …. as for the elites ….. i think many will be retiring into taking very long dirt naps …..

  4. Disturbed Voter

    In a competitive system, where people start out unequal, and grow up unequal, with unequal access to resources … produces unequal results. Socialism moderates the symptoms of competition, without moderating the causes. Those who benefit from competition (admittedly unfair at that) naturally don’t want socialism, and exploit their inequality to prevail over the majority in the political arena.

    1. Steve H.

      In ‘War and Peace and War’ Turchin shows studies that even when equality is a starting point, iterating pushes the system into inequality. To date, most historical times of equality have resulted from plague, as wars from interelite competition can continue for over a century.

      It seems socialism has the right idea but severely misunderestimates the human capacity for social distinction. I’ve been told by someone who was there, that when Mao tried to enforce equality by such means as uniform clothing, the foreman had a watch and his wife had a ribbon in her hair, and these were enough to provide markers for hierarchy.

      Sure would be nice if we could use our forebrains to figure a better way. MMT provides a means. But I can’t help my concern that MMT would be rather used to fund the $1.7 Trillion F-37 “Diving Hippo” Intraorbital Fighter-Bomber before providing succor to the common folk.

    2. sgt_doom

      Negative, uh un, no, no, no, competition has been missing for far too long, if there were real competition and meritocratic systems in place, America would be far, far ahead in real progress.

      Instead, real competition, real meritocracy, has been sorely missing for my entire lifetime, and I was in the military in Vietnam, dood!

      The closest I’ve ever come to a meritocratic system in my life was the US military — forget anything in the private sector — have never, ever seen it!

      Please don’t talk TV, talk reality!

    3. animalogic

      Actually, “socialism” can moderate the “causes” of inequality in a number of ways .Universal health care removes that massive cost from the backs of working people. Well funded public education will also help (plus removing most of the subsidies from private education). “Socialism” may also legislate to moderate disparities in wages & wealth: ie living minimum wages; Estate taxes; greater progressive taxation & equalization of taxes on wages & capital gains; general enforcement of existing taxes on corporations; removal of tax advantages accruing to Trusts etc etc.
      You are correct — some inequality is inherent (to varying degrees)to the nature of humans & society, but against that, our current drive to ever greater inequality is the outcome of deliberate, conscious policy choices by our elites. Per Adam Smith: “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.

  5. mle detroit

    And then there’s “assortive mating.” The doctor used the marry a nurse; the lawyer married (his) secretary. Now they meet in med school or law school, et voila! Two protected professional salaries.

  6. cnchal

    Look what we have here.

    One possible explanation for these widening inequalities is technological progress, which may reward skilled workers more in comparison with unskilled workers. This idea sounds intuitive: those with higher skills, such as IT developers, are able to generate a great deal more output thanks to new technologies, and so they receive the proportionate remuneration.

    From a link Takara Kane kindly left yesterday is this article: where the fatuous preening of IT “gurus” is on full display.

    Before you go there, be warned that there is a nasty email harvester popup without an obvious close button, typical of IT jerks, which I suggest you fill with expletives such as youdickhead@screwoff.youjerk

    Amidst the anxious grumbling of his audience at last week’s Structure Conference in San Francisco, billionaire Vinod Khosla asserted that 80% of jobs in an IT department could be replaced by AI-type systems. “I think that’s exciting,” added Khosla, founder of Sun Microsystems and Silicon Valley venture firm, Khosla Ventures. That, of course, is an odd statement to make about job loss.

    Khosla believes that artificial intelligence will make its way to server rooms and data centers everywhere, taking over jobs from human IT staff. He explained that companies spend a lot on keeping a sizable IT department, a cost that can be significantly lessened with automation.

    Khosla’s musings were welcomed with a bit of unease, especially since predictions of AI taking over jobs have been quite worrisome for many people. Khosla was quick to calm his audience, telling them not to worry because “we’re all in the other 20%, not the 80% that’s automated.”

    IT departments are just like accounting departments. Massive overhead that subtracts from the bottom line, and now we know that the IT worker that invested in, or capitalized, their education through massive debt won’t have a jawb down the road either, unless they are in Khosla’s class, which is the same phenomenon that stupid (I am calling a spade a spade – unskilled is elite code for stupid) people experience, when no matter how intelligently you work, or how diligent and loyal you are to the “company”, decisions made by some executive sitting in an office two thousand miles away that doesn’t even care you exist turns your life upside down.

    Now IT workers get to experience what stupid factory workers have been dealing with for decades.

    Welcome to the club.

    1. Ranger Rick

      Isn’t Khosla the billionaire who got successfully sued for trying to steal a public beach? I guess dollars can’t buy sense.

    2. dw

      well those It folks started loosing their jobs long before now. but that was offshoring. and that hasnt really changed either. been going on for over a decade (or 2) now.

    3. lyman alpha blob

      Yes those damn people with all their added costs do make things difficult for capitalism. It would be so much easier if capitalism could just make money by selling its money to other money,

    4. MG

      Another ridiculous assertion by Khosla. He told me 5 years ago at a healthcare conference that by 2020 almost all doctors would be eliminated as AI diagnosis and treatment recommendations had taken over. As if he knows anything about differential diagnosis let alone meta-analysis. Doesn’t stop him then and hasn’t since about making these kinds of bold and blanket predictions.

      IBM Watson has made some promising forays into oncology and been able to match oncologists recommendations but this is essentially 0% chance that what he described happens in any advanced healthcare economy let alone other undeveloped countries.

      Khosla does this kind stuff to get attention and keep his name out in the spotlight. Even among a tech community with large egos he stands out as being a loud-mouth jerk with boorish behavior.

  7. Skip Intro

    It seems like the author does a lot of head scratching about causes without breaking out of the TINA bubble and questioning whether the share of GDP absorbed by the FIRE sector, which basically represents rent extraction from the real economy, could have anything to do growing or differential inequality. Naturally unearned income skimmed by the FIRE sector from the productive economy accrues to the top earners, while impoverishing the rest. This process amplifies itself even without a Piketty imbalance in returns, simply by the power of interest and the difference between being a debtor and being a creditor. While it is praiseworthy that he dismantles the credentialist myth of inequality arising inevitably from technological progress and uneven education, he veers away from the elephant in the room and ends up prescribing education as a remedy after demonstrating that lack of education is not the malady.

    1. Steve Ruis

      Bingo! Our current financial system would be the envy of the mobs who ran Las Vegas. The model was simple: find a large monetary stream and skim, skim, skim. And casinos can’t hold a candle to the U.S. financial economy as a money stream and the mob can’t hold a candle to financial heavyweights when it comes to greed.

    2. Jim Thomson

      This is the real cause. When the 0.01% make billions through rent and value extraction it skews the inequality to the huge values we see today.
      One does pull in millions a year because of tertiary education, but because one is in a position to skim from a very large cash flow stream, thus the FIRE sector.
      This extreme level of extraction can only be possible through government policies, increasing deregulation,
      and non-enforcement of existing laws.
      The GFC merely highlighted one of the many constant and on-going methods of such rent extraction.

  8. Normal

    I have been intimately involved with numerous automation projects.

    The economics of manufacturing automation is far different from outsourcing. Automation is extremely expensive. It is also time consuming. It may take a year to develop automation and when it’s done it rarely works. There is a period of debugging and adjustment before it can be qualified. In a surprising number of cases an automatic machine may be abandoned because it can not be made to work reliably or because of cost escalations.

    Unless the product is extremely complex, outsourcing is a simple and inexpensive process. There are even companies that will do the technology transfer for free in order to get the assembly work.

    Why would a company accept the cost and risk of automation when outsourcing is so easy?

    1. Betty P

      Just saw an example of this recently, while making daily visits to the local health care megacomplex. They recently automated all of their parking garages, laying off most workers. A relative works in IT there, saying it was a very expensive project. The machines take only credit cards and malfunction about half the time. To avoid long lines of cars backing up, customers are forced to push the “help” button, after which the gate rises and they get free parking. Lately, they’ve taken to leaving the gates up, giving everyone free parking, at a complex that sees thousands of visitors every day. The insider also says IT security is poor, as the system is easily hackable. It’s run on a couple of laptops in a nearby unlocked closet . Your credit card info is at risk.

      Talk of extensive automation in these services is part fantasy. The cost of properly implementing a large scale, complex, error-free order and payment system that works for customers would be astronomical. Better to pay the workers a living wage.

      1. Normal

        That’s a good example of a service that can’t be outsourced, so the only viable cost reduction measure is automation. It’s also a great example of the difficulty of automating.

        I would bet that the automation was purchased by non-technical personnel. This is a recipe for disaster, and is reason that the federal government does such a bad job on IT projects. In effect, the specifications for the system are written by lawyers in Congress.

    2. dw

      depends. if its central to the company, they probably wont. its not like out sourcing doesnt have its own issues. like the out source going under, lack of attention by them, mis management (by vendor or company, or both). so automation has risks

      as does out sourcing

  9. From Cold Mountain

    Technology is a lever. A shovel or an iPhone serves the same illusory purpose, to get more work done with less people. The manpower put into making a technology is an investment that needs to have a worthwhile return not just for the owner, but for society as a whole.

    For example, The time we put into making a shovel is an investment and we hope the shovel lasts long enough to help us dig more holes than the people who made it could have. Lets say it takes five people to make a shovel in a day. If those five people could dig a hole in a day without a shovel, that shovel at the very least must let one person dig a hole in one day or the investment was not worth it. The four others therefore could enjoy using the hole while they are free to invest their time doing something else to contribute. There is no profit in this scenario.

    But if I dig the hole but do not let others use it, those four others who helped make the shovel are screwed out of their share of the investment. So the shovel owner profits.

    If people are poor in a highly technological society it is not technologies fault, it is that the profits are not shared equally.

    This is a human spiritual problem and not a problem of technology. The over use of technology is a result of the search for profit and does not always have a worthwhile return.

      1. From Cold Mountain

        Agreed. I despise farmers for this very reason, even though they are the only reason I am alive right now.

    1. LifelongLib

      If the shovel turns out to not be the right kind for the soil, the people who made the shovel still get paid while the owner is stuck with a useless shovel. The workers get paid whether the shovel works or not. The owner doesn’t.

      1. From Cold Mountain

        nah. The owner of the shovel repackages it, calls it an iShovel, and sells it fir a profit to some sucker.

  10. FedUpPleb

    No. No. No.

    Communication has improved yes, but the only way capital and take advantage of this to flit itself around internationally and amass such wealth is because LAWS HAVE BEEN WRITTEN TO ALLOW THIS.

    Free-marketeers and Randians are fond of making grand proclamations about the inevitablity of the market, etc. But it’s all bunk. In 100% of cases, they lobby for legislation to enable their schemes, and it is the legislation which creates the enviornment in which inequality and systemic dysfunction flourish. Fix the legislation and you fix this problem. To his credit at least it can be said that Trump has a loose understanding of this fact. He can halt the globalisation machine through legislation.

    Of course the system will defend its interests, by propaganda as a rule, by threats and extortion when pressurised, but it is not capable of much more that that. The people need to call the bluff of the global ascendancy and change legislation to tackles the roots of inequality.

  11. Ranger Rick

    I think this is where we can apply the “economy of scale” term. Only in this case it’s not only the production end that becomes cheaper — it’s the potential market that becomes larger. Technological progress is enabling global sales on a scale that people did not even dream of a couple decades ago. So these companies are making a lot more money than they otherwise would, but their fundamental nature (all proceeds accrue to the owners) means that despite this unprecedented prosperity enabled by technology nobody is benefiting except capital.

  12. Patrick

    In an economy where low wage workers have bargaining power, gains at the top create gains at the bottom. Those with increased income still have the same need for waiters and fast food, but they have more money to spend on it. So those with lower incomes should find it easier to negotiate better pay. If they have any leverage to negotiate, that is.

  13. Cameron

    Even worse than this,technology can move competition in the markets so far out and above the reach of small modest companies. This eventually renders the modest companies non-competetive and slows or destroys their propensity to make a profit and inevitably leads to layoffs or bankruptcy. This can naturally lead to a monopolization of the market from the company who can afford the increased cost of production technology brings. In essence, the smaller company dies and all of its assetts, employees, and trade secrets can be up for grabs for the larger company. I will use the entertainment industry as an example, as it is the industry I am in, do you think a small upstart has a chance to ever compete at the level of major studios like Disney? A smaller company would have to have the latest graphics technology and highly skilled workers. Their only hope for sales would be through advertisement and word of mouth, but there is no way they could out market a company of that caliber. Even if the company had modest technology to produce something for sale they would be undermined by the freemium/passion animated markets that exist for free on the internet by people who do not undestand value or economics. So technology can greatly influence some fields and turn them into unassailable markets.

  14. Rosario

    A new machine age with a precarious energy future is what I see. I think the tech people forget that all this technology needs a lot of energy and even if you can squeeze more Joules per kg of an energy source Jevon’s paradox is always there with its ugly mug.

  15. Roland

    In many cases, a tertiary education is necessary to get the job, but is not necessary to do the job.

    In my workplace, nobody gets hired without a degree, but frankly anybody could do what I do without a degree.

    Credentials inflation has happened all the way up, too. My previous boss had three degrees (BA, LLB, LLM). Her replacement has five degrees (BA, MA, JD, LLM, MBA). They do the exact same job.

    My former boss’ predecessor, by the way, back in the 1970’s, had one degree (BA).

    This trend of development represents considerable inefficiency on a society-wide scale. We’re making bigger and bigger investments to obtain the same result. What a waste of the dividends of higher productivity.

    Like the FIRE sector, the tertiary education sector has been over-stimulated. It takes too large a share of social resources for the return that it gives. As in housing, people without capital are forced to take on enormous debt loads in order to compete in the credentials market. However, this “market” is mostly a creature of policy.

    Only people who practice unconventional monetary policy would ever make “markets” such as these.s

    1. Tmink

      So, in reality the apparent rise in openings and salary for credentialed jobs vs ‘unskilled’ jobs may at least partly be from a shift in requirements. You might add in the bias toward making more jobs supervisory so that they’re not subject to wage and overtime roles.

    2. /L

      The “prize” to be rich is eternal vigilance, to be afraid to lose it. The one percenters that owns the world want accommodating, amenable and compliant people to run their organizations. You don’t go through the educational system if you are a rebel, the system foster adaptable obedience.
      The more education and economic gain foster defenders of the present order.
      As during the Vietnam war the more educated the more people believed and had faith in what the military brass and administration said about the war. As the Milgram experiment showed on obedience to authority.
      What does the one percent care about inefficiency and cost to society, they gladly use 10 of our dollars to protect one of theirs.

  16. Tim

    To state the obvious, step by step:

    Technology improvement is a subset of Productivity Improvements.

    If productivity is increasing, profits are increasing for the asset owners, and vice versa, workers do not participate in this, therefore it is net inflation neutral.

    Wages are established separately from productivity by supply (jobs) and demand (workers)

    However, productivity lessens supply (jobs) which drives down labor rates further, increasing profits for the asset owners, who over time win the profit growth coming and going vs the workers

    So you can see that the elites using this argument is a way of letting the truth out, despite their attempt to deflect blame.

    Janet Yellen made it clear at her post Fed press conference (paraphrased):

    Government investment should only be done to increase productivity (enrich the asset owners), spending money to create jobs will increase worker wages and therefore inflation (which will reduce the value of assets held by the asset owners, which is bad! very, very bad!).

    And to add insult to injury only those with large assets will be able to afford modernization, so the future is set.

  17. /L

    We have had enormous productivity growth during the 20th century. E.g. in Sweden in the late 19th century 75% was occupied in farming and foresting, today less than 2%.
    So suddenly productivity growth should cause inequality. Society was much more unequal before machine and industry age. These micro economic explanations usually miss the big macro view of what’s going on.
    Inequality is all about class war, not automation and machine age, just another thing to keep people on the wrong track.

  18. /L

    Corporate Profits Grow and Wages Slide

    “After-tax corporate profits in 2013 rose to a record of 10 percent of gross domestic product, while total compensation of employees slipped to a 65-year low. Corporate tax rates — under 20 percent of pretax corporate income in three of the last five years — have not been that low since Herbert Hoover was president. During the Obama administration, profits have taken a higher share of national income than during any administration since 1929.
    CORPORATE profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years. /…/
    Until 2010, the highest level of after-tax profits ever recorded was 9.1 percent, in 1929, the first year that the government began calculating the number. /…/
    Before taxes, corporate profits accounted for 12.5 percent of the total economy, tying the previous record that was set in 1942, when World War II pushed up profits for many companies. But in 1942, most of those profits were taxed away. The effective corporate tax rate was nearly 55 percent, in sharp contrast to last year’s figure of under 20 percent.”

    Trump might be present days Herbert Hoover, presiding over the final neoliberal crash. Will a new FDR rise out of the ashes?

  19. LA Mike

    I second what Roland mentions above in that HR and occupational licensing have damaged the workforce dramatically. People act like you need all of these qualifications for all of these jobs and you hardly use any of your schooling in the actual work. It’s nothing short of pathetic.

    But then, why all this fretting about “kinds of jobs”? Who cares? There’s tons of income. How about just spreading that around more?

    Why does the author examine all these job types and make loose generalizations about pay? Even a doctor making $250K in LA, SF, or NY isn’t doing so great these days. Not that they’re hurting either, but meanwhile, the CEO of WellPoint is at $17 million. Why doesn’t he instead examine what different types of jobs used to make ($) in contrast to net income and exec pay? Run a historical analysis on that and then we’ll get somewhere.

    There are plenty of jobs, but the gains don’t make it to many of them. That’s the issue… pay and pay alone. All of this “technology”/”manufacturing” crap is a misdirect over the fact that net income goes only to the very top anymore.

    100 years ago, no exec would take home 800 times the annual salary of the company with a straight face. It would be appalling on the face of it. Today it’s the norm.

    Gains must go to labor… so stop sweating “tech” as if HR, accounting, sales, marketing, engineering, customer service, installation, and management are so directly affected by it. They’re not. Companies make just as much money as they used to and there’s plenty to go around. Make it go around.

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