Beware the Robots and Robber Barons

While Washington obsesses about what high-thirties number will be our top tax rate come January 1, I worry about what jobs will be available come the next few decades and what incomes they will provide.  Our American prescription for success — get more education than your parents — may not work anymore.

From “Robots And Robber Barons,” Paul Krugman, NYT:

[T]he wage gap between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn’t changed much since then.  Indeed, recent college graduates had stagnant incomes even before the financial crisis struck.  Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.

“[T[here are two plausible explanations, both of which could be true to some extent.  One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power.  Think of these two stories as emphasizing robots on one side, robber barons on the other.

[M]any of the jobs being displaced [by robots] are high-skill and high-wage; the downside of technology isn’t limited to menial workers.

What about robber barons? …  [I]ncreasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.”  Emphasis added.

We may be heading for a jobs cliff much scarier than the fiscal cliff. 

Krugman 1, Brooks 0

I posted recently disagreeing with a David Brooks column  in the NYT where he said that the economic cyclicalists (a reference to Paul Krugman) were wrong and the economic structuralists (including himself) were right.

Today’s Krugman column, “Easy Useless Economics,” is a “right back atcha” to Brooks.

“A few days ago, I read an authoritative-sounding paper in the American Economic Review, one of the leading journals in the field, arguing at length that the nation’s high unemployment rate had deep structural roots and wasn’t amenable to any quick solution.  The author’s diagnosis was that the U. S. economy just wasn’t flexible enough to cope with rapid technological change.  The paper was especially critical of programs like unemployment insurance, which it argued actually hurt workers because they reduced the incentive to adjust.

“O.K., there’s something I didn’t tell you:  The paper in question was published in June 1939.

“And, once again, authoritative-sounding figures [like you, David Brooks] insist that our problems are ‘structural,’ that they can’t be fixed quickly.  We must focus on the long-run, such people say, believing that they are being responsible.  But the reality is that they’re being deeply irresponsible.

“What does it mean to say that we have a structural unemployment problem?  The usual version involves the claim that American workers are stuck in the wrong industries or with the wrong skills.

“Instead, the economy has bled jobs across the board, in just about every sector and every occupation, just as it did in the 1930s.  Also, if the problem was that many workers have the wrong skills or are in the wrong place, you’d expect workers with the right skills in the right place to be getting big wage increases;  in reality, there are very few winners in the work force.

“Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn’t the future burden of debt….  It is, rather, the lack of jobs, which is preventing many graduates from getting started on their working lives.”

At the bottom of Krugman’s column, it says, “David Brooks is off today.”  I think Krugman would argue that Brooks is “off” every day.