Take a few minutes to read Thomas Edsall's "Is This the End of Market Democracy?" in the online edition of today's NYT, here. An excerpt, quoting MIT economist David Autor:
Overall, Autor has found that the combination of three trends — automation; the emergence of a trade-based international labor force; and the movement of jobs offshore — has polarized the job market. There is growth at the high and low ends, but the middle collapses:
Concretely, employment and earnings are rising in both high education professional, technical and managerial occupations and, since the late 1980s, in low-education food service, personal care and protective service occupations. Conversely, job opportunities are declining in both middle-skill, white collar clerical, administrative, and sales occupations and in middle-skill, blue-collar production, craft and operative occupations. The decline in middle-skill jobs has been detrimental to the earnings and labor force participation rates of workers without a four-year college education, and differentially so for males, who are increasingly concentrated in low-paying service occupations.
In a detailed study of the effects of imports from China that compares regions where goods from China have replaced those produced locally with regions where imports did not replace local production, Autor and two colleagues found:
Rising exposure (to trade) increases unemployment, lowers labor force participation, and reduces wages in local labor markets. Conservatively, it explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefit payments for unemployment, disability, retirement and healthcare also rise sharply in exposed labor markets. The deadweight loss of financing these transfers is one to two-thirds as large as U.S. gains from trade with China.
The debate over the workings of democracy, the market, technology and globalization remains unresolved. The political system instinctively avoids this debate, despite its salience and centrality, because the political costs of engagement are likely to substantially outweigh any potential gains. At an undetermined point in the not too distant future, however, as the “gale of creative destruction” blows through the heartland, the debate will become inescapable.
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