The Hollowing Out Of Middle Class Jobs

Manufacturing output has been growing but manufacturing jobs have been shrinking.  Productivity has been decreasing the need for labor, and offshoring labor to low wage countries has also cut the demand for manufacturing labor in most industrial economies.  The loss of manufacturing jobs also leads to lower demand for jobs that support the manufacturing process.  Many of these jobs are high skilled jobs that provided middle class wages.  These are structural changes in advanced economies for which there are no easy solutions.  This article provides data which describes the problem and it alludes to some of the ways to mitigate the problem.

Some economists argue that we are undergoing changes similar to those that we experienced when we moved from an agricultural economy to an industrial economy.  We needed fewer workers to produce that food that was needed, and those workers were able to take higher paying jobs in manufacturing. That led to rising prosperity and less income inequality.  The structural problems that we now face are very different.  There are few jobs available, that pay middle class wages, to those who are no longer needed in our industrial economy.  Most of the new jobs that have been created are in the lower paying segment of the services economy.  Of course we have more jobs in technology areas that require better educated workers, but the number of high skilled jobs that have been created is small relative to the number of jobs lost in manufacturing and in manufacturing support functions.  Moreover, many jobs in technology are also being offshored to low wage countries.  For example, IBM has almost as many employees in India as it has in the US.  Many large corporations have contracted with service companies, like IBM, for information technology support.  IBM and other information technology service organizations can provide those services at lower cost by doing some of the work in India, and by hiring temporary employees, many of whom are from other countries, at lower cost.  There are large numbers of highly skilled information technology workers in the US who cannot find jobs in their field.  They have been replaced by lower cost workers with the same skill set.

Some of the solutions to these problems discussed in this article will only make things worse.  For example, we can lower the cost of higher education by using information technology to deliver many courses that lend themselves to commodization.  That will increase educational opportunity, but it will also eliminate many jobs in the teaching profession.  Moreover, increasing the number of college graduates does not address the loss of jobs due to rising productivity and globalization.  The real problem that we have is that many of our problems are the result of changes in corporate organization and behavior that governments may not be able to address.  Maintaining political stability as these market forces play themselves out is going to challenge our political system.