If the share of income going to labor continues to decline, how should we respond?:
Sympathy for the Luddites, by Paul Krugman, Commentary, NY Times: In 1786, the cloth workers of Leeds, a wool-industry center in northern England, issued a protest against the growing use of “scribbling” machines, which were taking over a task formerly performed by skilled labor. “How are those men, thus thrown out of employ to provide for their families?” asked the petitioners. “And what are they to put their children apprentice to?”
Those weren’t foolish questions. Mechanization eventually ... led to a broad rise in British living standards. But it’s far from clear whether typical workers reaped any benefits during the early stages of the Industrial Revolution; many workers were clearly hurt. And often the workers hurt most were those who had, with effort, acquired valuable skills — only to find those skills suddenly devalued.
So are we living in another such era? ... The McKinsey Global Institute recently released a report on a dozen major new technologies that it considers likely to be “disruptive”... and ... some of the victims of disruption will be workers who are currently considered highly skilled...
So should workers simply be prepared to acquire new skills? The woolworkers of 18th-century Leeds addressed this issue back in 1786: “Who will maintain our families, whilst we undertake the arduous task” of learning a new trade? Also, they asked, what will happen if the new trade, in turn, gets devalued by further technological advance?
And the modern counterparts of those woolworkers might well ask further, what will happen to us if, like so many students, we go deep into debt to acquire the skills we’re told we need, only to learn that the economy no longer wants those skills?
Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).
So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.
I can already hear conservatives shouting about the evils of “redistribution.” But what, exactly, would they propose instead?