Agressive Driver

The erosion of the middle of the labor market is easy to misinterpret, because its roots are multiple. During the 1970s, the entry into the work force of an unprecedented number of women and of young adults born during the baby boom resulted in too many workers for the jobs available, and depressed wages. The decline of the middle also has something to do with the explosive growth in world trade since 1960. As manufacturing technologies have become more mobile, and multinational firms more footloose, production jobs have migrated from the U.S. to countries where wages are low. In addition, technology itself has helped to provoke the shifts in the job market. For example, fewer American workers would have been needed to make steel in 1980 than in 1960 even if the pressures of global competition had not been a factor, because new machines have made many of their tasks redundant. Finally, the high rate of unemployment caused by these trends has tended to drive wages down further, especially at the low end, since it forces unskilled workers to compete for their jobs with unemployed people who are willing to do the work for less.

Although demographic shifts, stepped-up world trade, unemployment, and especially the advance of technology all have had an effect on the shape of the job market, middle-level jobs have been disappearing ultimately as a result of the ways in which technological gains are being distributed. When a machine replaces a production worker, both the firm and consumers as a group benefit. The loss falls mainly on the worker who is displaced. If that loss is generalized to millions of high-paid workers, they suffer as a group, and the economy as a whole suffers a loss of worker purchasing power. Thus the lack of a mechanism to distribute some of the financial gains from technology to the work force comes back to haunt the entire economy.