[This is the addended transcript of my regular KVMR commentary broadcast on 5 February 2015.]
There is no doubt that America’s income and wage gaps are real, and everyone sees it as a social problem that should not be ignored. Both the Right and Left agree on the reading of that data, but that is where the agreement ends. The Left denounces the gaps as evidence of the country’s rich having robbed the poor through various open market stratagems and legal ‘loop holes’. But it pays to remember that the so-called loop holes are just the artifacts in complex laws carelessly crafted, and often by not very bright people.
We hear a lot about the ‘productivity conundrum’ – why have wages not risen with increasing productivity. A little thought reveals that this is not a conundrum. Rapid technical advances have created machines and methods that can do very complex things faster, cheaper, and with fewer people than before. So the cost of doing and making stuff has gone down along with increased layoffs of the resulting redundant workers. That leaves the fewer highly paid workers and a lot of low paid workers not yet displaced. Therefore productivity goes up while the median wage goes down. You can work this out for yourself on the back of an envelope.
What really is happening is that capital is replacing labor to provide everyone with better and cheaper goods and services, and today this process has no peaceful end in sight. It will end only with riot, revolution, or a mindful restructuring of our economy. President Obama’s ‘middle class economy’ is not one that can afford to transfer enough wealth to those being left behind and still improve everyone’s quality of life. Demogauging himself as a populist Robin Hood will ultimately pauper all but a small autocratic elite who will then rule by the gun.
Here we have been talking about the growth of America’s systemic unemployment that is quietly confirmed by the increasing number of the permanently unemployed and those participating in the workforce. All the while we are told to keep our eye on that dodgy unemployment rate.