Thursday, December 20, 2012

Stagnation of the middle

I saw this prior to the election.  To be honest, I am not sure where I was going to go with this.  The New York Times is supposed to be a "liberal" paper, but is extremely status quo (a supposedly conservative attribute) much of the time.  However, they do seem to be taking a stab at the notion that all is not well, and that there may not be a simple political fix.

David Leonhardt, New York Times, 23 October 2012 (not ht)

Many of the bedrock assumptions of American culture — about work, progress, fairness and optimism — are being shaken as successive generations worry about the prospect of declining living standards. No question, perhaps, is more central to the country’s global standing than whether the economy will perform better on that score in the future than it has in the recent past.

The causes of income stagnation are varied and lack the political simplicity of calls to bring down the deficit or avert another Wall Street meltdown. They cannot be quickly remedied through legislation from Washington. The biggest causes, according to interviews with economists over the last several months, are not the issues that dominate the political debate.

At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans.

Not much further down the list is education, probably the country’s most diffuse, localized area of government policy. As skill levels have become even more important for prosperity, the United States has lost its once-large global lead in educational attainment.

They give immigration a white wash.  Ignoring its effect in specific areas –construction in particular – buy lumping in the data with larger aggregate totals that dilute rather large effects into mere percentage points.  In construction immigrants tended to dominate in fast growing markets, markets that would have seen worker shortages, and would boost wages in those areas and causing a ripple effect to more outlying areas.

They note the increased income gap based on education levels, but ignore that not all low-education jobs can be easily outsourced.

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