In the salons and green rooms of our public discourse, there is a collar-fiddling aversion to discussing the most pivotal sociopolitical (and economic) issue of our time: the declining value of labor. We’ll look at some numbers in a bit — but at the outset, it is important to note that I have no default belief in the inherent nobility of work, nor any sense that the cratering of labor-value is necessarily a bad thing. The dream of a leisurely future has been a staple of both secular and clerical thought for millennia.
There is a subtle ambivalence regarding work baked into the guts of Western capitalism itself, as we are relentlessly told that we must maximize our consumption of labor-saving products and leisure-time entertainment, while simultaneously being reminded by ghostly Puritan whispers that too much down-time is morally dangerous.
But we have reached a point where old saws on the character of labor in an advanced market economy need to be tossed out, or at least massively overhauled. And that is going to be an extremely uncomfortable process, as older forms of community and self-definition have been severely eroded, leaving nothing much to take the place of this displaced work-value. People have been coiling their lives and identities around their careers for so long that it will prove next to impossible to recalibrate. So there is certainly no easy path to this reevaluation of labor. But if it doesn’t happen, then buckle up for some bewildering and disorienting times.
By now, we are all familiar with surging levels of inequality in America. You can see the gruesome details in this October 2014 report from Fed Chairwoman Janet Yellen (http://www.federalreserve.gov/newsevents/speech/yellen20141017a.pdf). Suffice it to say, there are a lot of people who have almost nothing to show economically for their years of hard work. Around half the households in America (62 million of them) have a net worth of around $11K, and around a quarter of that group have zero or negative net worth.
We should also now be used to the lovely ‘jobless recoveries’ that follow our serial economic poopshows. The most recent jobs report (for March 2015) shows anemic job growth, plus downward revisions for January and February. The official unemployment rate sits at 5.5%, but the broader U6 stat (unemployed and involuntarily underemployed) is limply bobbing at 10.9%. That’s more than 1-in-10 workers who can’t get the work they want. Labor force participation, perhaps the broadest of all of the employment stats, is at roughly a 40-year low of 62.7%.
And for the people that do work, wages are stagnant. If you haven’t seen this chart before, take a good, long look. It is probably the simplest and best representation of how work and its market value have diverged in the last 40 years.
So we’ve got declining labor-force participation, high un/underemployment for those still in the workforce, and increasing worker productivity for those working. The result is flat wages. And that is the recipe for, the algorithm beneath, the massive surge in inequality in the US.
The general responses to this scenario are different, depending on where you fall on the political spectrum. Conservatives don’t see inequality as a bad thing in general, as long as it is at a reasonable level. The government is only supposed to foment the conditions for equal opportunity (conveniently defined in a legal way instead of a material one). If the outcome of that equal opportunity is unequal in outcome, then that is just because people have differing levels of skill. No big deal. Accept it as the price you pay for a dynamic economy. Still, most conservatives are probably uncomfortable with the exaggerated nature of the inequalities that exist right at this moment. But they would likely place the blame for this at the doorstep of a profligate and meddling federal government, which squelches business vibrancy with burdensome taxes and regulations, and snuffs out individual responsibility with bloated entitlement programs. If the government would just get out of the way, then individual and entrepreneurial energy would be unleashed, and the outlying extremes of our current situation would go away naturally, as the market works its invisible magic.
On the leftish side of the aisle, there are multiple spots of recommended action. The bloating of the superrich, whether in corporate or personal format, should be deflated with some good old fashioned redistribution (i.e., higher taxes). This tax revenue should then be used to start some vigorous jobs programs, focusing especially on rebuilding the deteriorating American infrastructure. These government programs would provide both immediate stimulus and longer-term workforce improvement, as workers learn the new skills that are valued in the contemporary post-industrial marketplace. Some liberals also urge a rejuvenation of labor unions to bargain wages up, which would go hand-in-hand with the more general push underway around the country for higher, ‘living wages.’
One final response to declining labor-value is exclusively conservative or liberal: the push to improve educational quality and achievement. However it happens (enhanced pre-school, better public schools, vouchers, more standardized tests, union-busting, cheap college, etc.), people across the political spectrum assume that improving education in some way, at some level, is absolutely necessary for future Americans to compete and succeed in the complex global world in which we live.
The problem with all of these approaches is that they expressly refuse to face the brute fact that the value of labor itself, as an overall factor in the economy, is declining, and will continue to decline, no matter what we do. The market has simply developed to a point where the macro-economy does not need a lot of well-paid workers to grow. We don’t really have a problem with our people — with their brains, or their wills, or their morality. And, more difficult to face, we don’t really have a problem with our public polices, our government programs, or our major educational institutions. What we really have is a failure of understanding, a lack of clarity on the macro-collapse of labor as an important input for the global economy as a whole, as well as a grasp of the opportunity that this collapse provides for a wholesale revaluation of work’s place in our overall sociocultural system.
OK, that’s a little too breathless for right now. So let’s look a little more closely at what we mean when we talk about the collapse of labor-value. In general, the labor share of both corporate income and overall GDP were stable until the late 70s/early 80s, the same point at which wages and productivity split apart in the graph above. Since then, the proportion of the economy that goes to workers’ wages has been declining, in most countries, and across most industries. It is the global and cross-industrial aspects that are the most telling. This is not a story where American workers are simply getting outperformed, as workers in developing and developed countries are kickin’ our asses. Nope. What we are looking at are major long-term trends in technology, business law, industrial structure, and global finance that are affecting the overall economic landscape everywhere (the key study on this is here: http://faculty.chicagobooth.edu/brent.neiman/research/KN.pdf).
Some might object that recent research by Matt Rognlie at MIT has made the point that capital’s increasing share (and labor’s declining share) of the economic pie can be explained almost entirely by inflated housing costs (higher real estate prices disproportionately accrue to the wealthy, who own more and bigger houses as a class). What we actually have is a bloated landlord class, not a corporate overlord class (see good capsule here: http://www.bloombergview.com/articles/2015-03-27/piketty-s-three-big-mistakes-in-inequality-analysis). Rognlie thus stresses better land-use policy, more land-based taxation, better zoning laws, and increased affordable housing construction. While interesting and worth discussion, it certainly does not address the flat nature of wages and the large pool of underemployed. And as to how to get the wealthy, who control government policy and public discussion, to implement a structural framework that reduces their housing and land wealth….that is still as difficult a problem as any of our current dilemmas. The clean split between virtuous corporate titans and shifty landowners is not really that convincing to me, especially as many of the large landlords are those same corporations anyway.
At this point, let’s circle back to the main idea of all of the above analysis. The future of labor is more of the same: declining value. We cannot educate ourselves out of this trend. We cannot breathe life into labor unions again to fix this. We will not keep pace with overall declining labor-value by piecemeal and slow implementation of higher minimum and living wages. We also will not be able to massively job-train everyone to create a nation of neurosurgeons and smartphone app developers. On a more contemporary note, we also are not going to be able to jobshare and carshare our way out of this, cobbling together a nation of piecework and just-in-time consumer/entrepreneurs. All of the above solutions certainly have some measure of merit in and of themselves, but they will not be able to keep pace with the unrelenting, algorithmic decline of labor’s value in the macroeconomy. And a piecemeal approach will not fill the psychological void left when careerism swirls down the drain of history.
Before we look into the possibility of any prescriptive action, as opposed to the alternative of straight-up collapse, let’s make another point about declining labor-value: there will still be a lot of work to do, and a lot of people will still have jobs. While automation and other technological trends will continue to make more segments of employment obsolete, there will still be many occupations that need to be filled by actual people. There will of course always be some high-paying jobs (surgeons, engineers, systems designers, etc.), just not as many of them. And we still live in a physical world, where things need to get built, maintained, moved, fixed, and upgraded. Also, as the population ages, there will be many open positions in the health and caregiver fields. Lots of people will be working in lots of jobs.
But as a whole, there will be less people working, for less money, in less-secure situations. Work will continue to be routinized and de-skilled, resulting in less bargaining power for workers vis-à-vis capital owners. And the gulf between the haves and the have-nots will continue to widen, as those whose skills prove to be immune to degradation pull further away from those doing routine-but-necessary functions.
Deep down, in the broadest sense, this is nobody’s fault. It’s just the way it is. We can’t continue to play the blame game, pointing fingers at our political enemies for crashing the economy and ruining our children’s futures. And more importantly, we can’t keep pretending that this situation is a moral failing of our citizens and a massive policy failure of our political structures. This approach will keep us locked into the delusion that we can ‘fix it,’ and that we might be just around the corner from everyone being a super well-paid architect or cyber-entrepreneur, if only we can elect the right party, create the right standardized test, or plug in the right jobs bill.
Instead, we’re going to need to come to a wholesale cultural reset, whereby labor becomes detached from personal morality, political power, psychological health, and monetary compensation. In essence, this is following the logic of the marketplace itself. If the economy doesn’t value labor as much as it used to, then we should be giving work less cultural cache as well, filling that vacuum with new approaches to finance, housing, community, and social life in general.
We need to get to a place where a person’s political, social, and economic worth have very little to do with the kind of work that person does. Everyone who contributes in some way to our collective good should be able to have a life replete with security, comfort, peace, and respect, regardless of the value that their labor carries in the marketplace. We are at the point, economically and technologically, where this is possible, if we can find a way to shift our mental and political frames.
Next time, we’ll see how this might happen.