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The working class

August 3, 2016

A popular New York Magazine article on liberals and the working class argues that trade policy is responsible for the ebbing wages of whose without college degrees:

Both Republican and Democratic administrations entered trade agreements designed to put downward pressure on the wages of domestic manufacturing workers.

The problem with that emphasis is that manufacturing output has not declined, just manufacturing labor. American manufacturing — ever more automated — competes fine on the global market. Truck drivers likely will go the way of manufacturing workers over the next ten years. The trend to domestic outsourcing lowers wages, because it almost always is a bet that some service adequately managed can be delivered at less cost by lower paid, interchangeable employees with no real attachment to the firm needing the service. Outsourcing derives value from entrepreneurial dexterity and management at the expense of line labor. And it heavily relies on automation to do so, for HR, employee scheduling, employee monitoring, and back-office functions.

These differing explanations for the declining expectations of workers without degrees lead to quite different political conversations. The notion that trade is all to blame plays well to right-wing nativism and gives rise to the hope that the old times will return if only they elect a leader who cuts them better deals. But if the change largely stems from economic and technical innovation, if we are seeing what economists call secular shifts in the labor market, then the problem has longer legs and the needed conversation becomes more complex.

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