Average is Over (1)

I have just read Average is Over by Tyler Cowen. He gives his vision of America beyond the great stagnation.

The main point of the book is that high earners are taking advantage of computing power and improving their position. Low income earners who are not competent with technology are losing. The middle is getting thinner and thinner.

Cowen says that the lower classes have suffered as jobs have been exported to low wage countries. He argues that the process has only started. More and more middle class professional jobs will come under competition from Asia. The safe careers of lawyers and engineers will come under pressure from cheap international competitors with similar skills. The proof of this change is the fact that the labour share of national income has been declining for the last thirty years.

Most of the book expands on this theme, but the final chapter called A New Social Contract describes, his vision for the future of America. It is a disturbing vision.

The forces outlined in this book, especially for labor markets will force a rewriting of the social contract, even if it is not explicitly recognised as such. We will move from a society based on the pretense that everyone is given an okay standard of living to a society in which people are expected to fend for themselves much more than they do now. I imagine a world where, say, 10 to 15 percent of the citizenry is extremely wealth and has fantastically comfortable and stimulating lives, the equivalent of current-day millionaires, albeit with better health care.

Much of the rest of the country will have stagnant or maybe even falling wages in dollar terms, but a lot more opportunities for cheap fun and also cheap education. Many of these people will live quite well, and those will be the people who have the discipline to benefit from all the free or near-free services that modern technology has made available. Others will fall by the wayside (229-230)

The majority of people will experience declining incomes. They will learn to get by on less and less. Support from the government will decline too, as the wealth classes use their political power to get taxes reduced. The only good thing is that entertainment will be cheap via the internet. More circuses but less bread.