The Middle Class Shrinks, Again

I published an MIT Tech Review article on the new robotics middle class, tongue-in-cheek, to point out that robots are in fact going to displace the real middle class, and that this bodes poorly for the socio-economic health of the U.S. In today’s New York Times, Eduardo Porter has published an excellent article, America’s Sinking Middle Class, which contains several statistics well worth the read. He notes that the economic welfare of Americans has been, at best, at a standstill if we compare 1988 to today’s 2013, which is truly remarkable. The poverty rate today is slightly worse than in ’88; health care spending per person has more than doubled; college has become far more expensive even adjusting for inflation; and the net worth of the Americans in the middle of the income distribution has actually dropped 6 percent. The poorest fifth of us have even less share of total income; the middle fifth of us also have less share of total income; and, surprise, surprise, the wealthiest fifth of Americans have a greater share of total income.

Porter argues that this is not really a story of stagnation, or a story of temporary trendlines. He argues that we have “a new normal,” in which the middle class, such as it will be, shall have a poorer economic standard of living than before. So, the middle class earns less, obtains a smaller share of total national wealth- and meanwhile the wealthiest derive all the benefit of increasing productivity, spurred forth by the recovery that followed the Great Recession. He quotes Timothy Smeeding at the University of Madison-Wisconsin as saying “Middle-and lower-income families are getting a smaller slice of a smaller economic pie as labor markets have changed drastically during our recovery.”

Note the ‘labor markets’ point that Smeeding makes. Labor markets are changing because the dynamics of automation, productivity and machine skills are constantly shifting in favor of fewer employees, greater machine output and diminished sharing of corporate wealth with the regular corporate citizenry.  Frustratingly, our system of innovation and entrepreneurship has no natural, built-in corrective forces that would push us away from this disastrous pathway; instead we march forth toward a future with ever more concentrated wealth, and labor markets that commit us to a chronically underemployed future.

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