End of America

Must-read analysis reveals the real reason your wages have not kept up with inflation

end-of-america
From Azizonomics:
 
There is a popular meme going around, popularised by the likes of Tyler Cowen, Paul Krugman, and Noah Smith that suggests that recent falls in worker compensation as a percentage of GDP is mostly due to the so-called "rise of the robots":
 
For most of modern history, two-thirds of the income of most rich nations has gone to pay salaries and wages for people who work, while one-third has gone to pay dividends, capital gains, interest, rent, etc. to the people who own capital. This two-thirds/one-third division was so stable that people began to believe it would last forever. But in the past ten years, something has changed. Labor's share of income has steadily declined, falling by several percentage points since 2000. It now sits at around 60% or lower. The fall of labor income, and the rise of capital income, has contributed to America’s growing inequality...
 
In past times, technological change always augmented the abilities of human beings. A worker with a machine saw was much more productive than a worker with a hand saw. The fears of "Luddites," who tried to prevent the spread of technology out of fear of losing their jobs, proved unfounded. But that was then, and this is now. Recent technological advances in the area of computers and automation have begun to do some higher cognitive tasks – think of robots building cars, stocking groceries, doing your taxes.
 
Once human cognition is replaced, what else have we got? For the ultimate extreme example, imagine a robot that costs $5 to manufacture and can do everything you do, only better. You would be as obsolete as a horse.
 
Now, humans will never be completely replaced, like horses were. Horses have no property rights or reproductive rights, nor the intelligence to enter into contracts. There will always be something for humans to do for money. But it is quite possible that workers' share of what society produces will continue to go down and down, as our economy becomes more and more capital-intensive.
 
So, does the rise of the robots really explain the stagnation of wages?
 
 
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