Inequality is here to stay

Tuesday, November 12th, 2013

There are three main reasons inequality is here to stay, Tyler Cowen argues:

The first is just measurement of worker value. We’re doing a lot to measure what workers are contributing to businesses, and, when you do that, very often you end up paying some people less and other people more.

The second is automation — especially in terms of smart software. Today’s workplaces are often more complicated than, say, a factory for General Motors was in 1962. They require higher skills. People who have those skills are very often doing extremely well, but a lot of people don’t have them, and that increases inequality.

And the third point is globalization. There’s a lot more unskilled labor in the world, and that creates downward pressure on unskilled labor in the United States. On the global level, inequality is down dramatically — we shouldn’t forget that. But within each country, or almost every country, inequality is up.

Comments

  1. I am reminded of the first chapter of Snow Crash, something about the average living approximating “a Pakistani brickmaker’s concept of prosperity.”

  2. David Foster says:

    I was pretty unimpressed with the book and its arguments. Just to take one of Cowen’s three points from the excerpt: “The first is just measurement of worker value. We’re doing a lot to measure what workers are contributing to businesses, and, when you do that, very often you end up paying some people less and other people more.”

    People have been measuring “what workers are contributing” for a long, long time. Did Tyler never hear of piecework? Of sales commissions? Of profit-based bonuses for regional or division executives? All of these things are very old hat.

    Indeed, quite a few manufacturers have decided that it is unwise to take the quantitative measurement of performance down to an individual level, in cases where the work is being done by a closely-coupled team.

  3. David,

    His point is that, on the margin, the measurements are going to get more detailed; their granularity will increase. This is going to increase wage dispersion.

  4. David Foster says:

    Contemplationist, yeah, I understand his point. I don’t agree with it. The fact that I can measure, say, a call-center operator, on 33 different criteria really isn’t going to do anything for the quality of customer service I’m delivering, and may indeed be counterproductive to it.

  5. David Foster says:

    Also: “They require higher skills”

    Automation does not always require higher skills; quite often, it leads to de-skilling. One example is a cashier, who not so long ago had to be able to do simple math. Now, many of them are lost if the POS terminal can’t do their calculations for them. Another example: in a factory, running a CNC machine tool (that has been programmed by someone else) is generally a lower-skill job than operating a manual machine tool. Finally, being a manager in a chain retail store where inventory & ordering are handled centrally (by automated ordering systems with some input from centralized buyers at HQ) is a lower-skill job than being a manager in a retail store where the manager has to manage inventory control directly.

  6. Alrenous says:

    Cowen missed very many opportunities to bring up government. It’s not like he was strapped for space.

    A: Government is growing exponentially. (Though still in the x < 1 regime, if barely.)

    B: Government transferred from poor to rich in every instance we have comprehensive data.

    So was he strapped for historical literacy, or for integrity?

  7. Tschafer says:

    “Today’s workplaces are often more complicated than, say, a factory for General Motors was in 1962″

    I’d like to stick Cowen in a GM factory in 1962, and see how well he could perform this “simple” work. Arrogant buffoon.

Leave a Reply