David Autor changed his mind about the job polarization hypothesis that he favored in 2010 which implied that we had a shortage of workers with the required skills:
- We have not seen an increase in the premium paid for college graduates over the last decade.
- Many college grads are forced to take low-skill jobs.
- Most of the rise in unemployment has been in low education service occupations.
- If we have provided more technology to workers they should be more productive but we have not seen a rise in labor productivity. Larry Summers followed up on that point:
- If there are skill shortages we should see rising wages in skilled occupations. Wage growth has been lower than one would expect in high skill occupations
- The core problem is not a shortage of skilled workers, it is a shortage of jobs. Educating more workers will only increase the competition for a finite number of skilled jobs and reduce wage growth even further.
- Profits have been at record levels. That implies a high return on capital which should also increase demand for investment capital and an increase in interest rates. However, interest rates are very low. The high profits must contain a high rent value which suggests a need for a more progressive tax and transfer system to reduce rents.
- If income distribution today was the same as it was in 1979, the top 1% would have $1 trillion less income and the bottom 80% would have $1 trillion more income. That amounts to $11,000 per family. We have a $1 trillion dollar rent problem that can't be addressed by small bore changes. Income redistribution has been going on since 1979 but it has been going from the bottom 80% to the top 1%. Its time to reverse that process.