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The Politics of Job Polarization

WASHINGTON, DC – A core problem in the United States today – reflected in Donald Trump’s victory in the presidential election earlier this month – is that too many Americans feel helpless and insecure in the face of the job polarization that has resulted from globalization and new technology. While highly educated people at the top of the income distribution are doing better than ever, people with only a high school education face declining incomes, living standards, and prospects for themselves and their children. The middle class is being torn apart.

Trump won largely because he persuaded voters in Pennsylvania, Michigan, Wisconsin, and elsewhere that his policies will yield better outcomes in communities where manufacturing is declining. In fact, his administration, backed by Republican majorities in both houses of the US Congress, will likely only make things worse for hard-pressed Americans.

The underlying problem is new technology, specifically information technology, and the way it has transformed the nature of work. As David Autor and David Dorn have shown, many middle-skill, middle-income, middle-class jobs have disappeared. The new jobs that have emerged are well paid for highly educated people and poorly paid for people who have only a high school education. A leading symptom – but only a symptom – is the disappearance of well-paid factory jobs. Employment in manufacturing fell by more than two million from 2004 to 2014, and now accounts for just over 8% of total employment – continuing a long decline since the 1950s.

This technology-driven trend has been compounded by the effects of decreased transportation and communication costs, making it cheaper to move goods over long distances. Growing networks of sophisticated suppliers make it easier to move manufacturing activity overseas to lower-wage locations. Many US companies have made this a significant part of their business strategy, with the resulting decline of US manufacturing going hand in hand with a decline in unionization. When people lose a relatively high-wage and high-benefit union job, they often are reemployed at a lower wage and without the same level of benefits.