Discontent with one’s life and the reactions motivated by that unhappiness have been the source of numerous literary efforts, from Shakespeare to Steinbeck. Today’s political campaigns have revealed a new level of discontent among many people.
Although statistics show the economy has improved since the end of the Great Recession, there are numerous worrisome signs. Incomes – after adjusting for inflation – are down for many. Over 50,000 people in North Carolina can’t find work and have dropped out of the labor force, and another 160,000 are working part-time only because they can’t find full-time work. The proportion of households classified as middle-class is shrinking, and a new report predicts today’s children may not achieve the standard of living of their parents.
What’s causing these problems? Many ominous but non-specific answers have been offered –including a failure of capitalism, a rigged economic system and a decline of national power. While each of these answers has articulate advocates, I look for answers in a different way. I look for broad forces sweeping through our economy and shaping the economic world in which we live. In most cases these forces – on the surface – have big benefits, but underneath the surface they can have adverse unintentional consequences.
The three dominant forces I see today are education, technology and globalization. Each has had an individual impact, but together – I’ll argue – they are changing our economy in the most meaningful way in a century.
We’ve seen a gradual upgrade in educational requirements for workers as the nature of work has changed. At the dawn of the 20th century the most important requirements for a worker were a strong back, strong hands and stamina. Work then was physical and hard. Relatively few jobs required any level of formal education.
Today the tables have been turned. Physical work is increasingly being done by machines. Tractors plow fields, machines assemble products and cranes lift steel. More jobs require analysis and decision-making – that is – brain power. Individuals not getting a college degree are seeing their incomes fall further beyond those with college diplomas. The biggest factor driving income gaps is the pay differences between college-educated and non-college- educated workers.
Beginning with the bow and arrow and extending to today’s computers, tablets and smart phones, technology has impacted what we do and how we do it. Technological advances have always destroyed some jobs while creating others. For example, the automobile reduced jobs for buggy drivers but increased employment for auto factory workers. But some say today is different. Technology is becoming so capable and so pervasive that almost any task capable of being programmed in computer code can be taken away from a human being. And many economists aren’t sure how many new kinds of jobs will be created for the displaced workers.
In economics globalization means the reduction in trade barriers between nations, thereby allowing countries to specialize in what they do best and trade. In theory, increased world trade improves prosperity because resources are used more efficiently. With more prosperity comes added jobs. But in practice, not everyone benefits. Workers who lose their jobs because production has been moved to another country will have to upgrade their skills to those needed in the new economy. Those who don’t re-train will be casualties of globalization.
To compound matters, these three forces have reinforced each other. As technology and globalization have eliminated many middle-income factory and related jobs, the expansion of jobs requiring college degrees has widened income inequality. Similarly, globalization has enlarged the markets for big companies and made the decisions of CEOs more valuable – hence increasing their pay at rates far faster than for other workers.
If education, technology and globalization are behind the discontent of many households, the big question is – what to do about it? Some say “major surgery” to the economy is needed, such as big increases in the minimum wage, empowering unions, placing limits on CEO pay, renegotiating trade treaties and even restraining technological advances that are likely to eliminate large numbers of jobs.
Others say the answer lies in helping people adjust to the changes impacting the economy.
Education is the key to this remedy, including a renewed commitment to improve K-12 performance and broader programs to re-skill workers who find their occupations significantly downsized or eliminated. Also important is helping displaced workers relocate from regions facing declining jobs to areas with rapid job growth. These solutions require resources targeted to education, re-training and relocation.
The scary thing about what’s been happening to jobs and the economy today is that many futurists think the forces I’ve cited will accelerate in the future. Hence, the public leaders we elect will have to decide both the diagnosis and treatment generating our discontent.
Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook, and public policy.