Eduardo Porter

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The recent Presidential election revealed that U.S. citizens either have a terrible understanding of economics or they’re willing to surrender their security in the name of identity politics. Both are likely true to a significant extent.

Immigrants were blamed for the downgrading of the American worker on the trail while automation was never discussed, and Michigan voters swung to Trump, largely because Washington had supposedly forgotten about them, after the Obama Administration wagered $79 billion on bailing out the Detroit auto industry. Not too long after that salvage job by the federal branch, the state’s populace voted in an anti-union governor in Rick Snyder. The locals may have forgotten about themselves more than D.C. ever did.

Another vital topic of discussion that was never broached during the campaign was the role that contracted work has played in shrinking middle class. For several decades, American companies have been outsourcing mail-room work, maintenance, security and other “non-core” tasks to subcontractors who would save them some money by lowering salaries and reducing benefits to laborers. This shift created a separate class. Executive pay ballooned while those with more modest pay stubs took the elevator downward, further exacerbating wealth inequality.

I’ve written before about this destabilizing phenomenon. More from Eduardo Porter of the New York Times:

…Mr. Trump is missing a more critical workplace transformation: the vast outsourcing of many tasks — including running the cafeteria, building maintenance and security — to low-margin, low-wage subcontractors within the United States.

This reorganization of employment is playing a big role in keeping a lid on wages — and in driving income inequality — across a much broader swath of the economy than globalization can account for.

David Weil, who headed the Labor Department’s wage and hour division at the end of the Obama administration, calls this process the “fissuring” of the workplace. He traces it to the 1980s, when corporations under pressure to raise quarterly profits started shedding “noncore” tasks.

The trend grew as the spread of information technology made it easier for companies to standardize and monitor the quality of outsourced work. Many employers took to outsourcing to avoid the messy consequences — like unions and workplace regulations — of employing workers directly.

“It’s an incredibly important part of the story that we haven’t paid attention to,” Mr. Weil told me.

“Lead businesses — the firms that continue to directly employ workers who provide the goods and services in the economy recognized by consumers — remain highly profitable and may continue to provide generous pay for their work force,” he noted. “The workers whose jobs have been shed to other, subordinate businesses face far more competitive market conditions.”

The trend is hard to measure, since subcontracting can take many forms. But it is big.•

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President Obama ran the most pro-Labor Administration of the past fifty years, which led to great gains in household income for middle-class and impoverished citizens. That went almost ignored, especially during the recent election. But his measures didn’t in any way curb wealth inequality, which actually accelerated during his tenure. Some argue that an increasingly yawning gap between haves and have-nots is fine as long as those at the bottom are progressing, but that’s nonsense. Having such a disparity erodes democracy and allows some to further game the system for themselves.

In “A Dilemma for Humanity: Stark Inequality or Total War,” Eduardo Porter cites Walter Scheidel’s new book, The Great Leveler, as he wonders if anything can corral runaway inequity, arguing that history says such a situation only ends through violent upheaval of one kind or another.

I do believe policy could counteract current wealth inequality as it did during the Gilded Age, but it would take the best of circumstances politically, and for the next four years at least we’re going to have the worst. If the choice of Andy Puzder today as Labor Secretary is any indication, it will be catastrophic. He’s just the latest joke on the white working-class voters who trusted Trump, whose victory has quickly revealed itself to be the single biggest troll of our time.

From Porter:

History — from Ancient Rome through the Gilded Age; from the Russian Revolution to the Great Compression of incomes across the West in the middle of the 20th century — suggests that reversing the trend toward greater concentrations of income, in the United States and across the world, might be, in fact, nearly impossible.

That’s the bleak argument of Walter Scheidel, a professor of history at Stanford, whose new book, The Great Leveler (Princeton University Press), is due out next month. He goes so far as to state that “only all-out thermonuclear war might fundamentally reset the existing distribution of resources.” If history is anything to go by, he writes, “peaceful policy reform may well prove unequal to the growing challenges ahead.”

Professor Scheidel does not offer a grand unified theory of inequality. But scouring through the historical record, he detects a pattern: From the Stone Age to the present, ever since humankind produced a surplus to hoard, economic development has almost always led to greater inequality. There is one big thing with the power to stop this dynamic, but it’s not pretty: violence.

The big equalizing moments in history may not have always have the same cause, he writes, “but they shared one common root: massive and violent disruptions of the established order.”•

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Serious discussion about Guaranteed Basic Income in America stretches back at least as far as Richard Nixon, whose administration’s advocacy for it and universal health insurance would today make the 37th President a sort of Sanders-esque figure.

When people initially learn Silicon Valley technologists are fully in favor of GBI, they’re often surprised and grateful, but this largesse comes with a caveat. To a good degree, it’s driven by a Libertarian streak that aims to vanish social safety nets (the welfare state, as it’s often referred to) and the bureaucracy that attends it. That would include all forms of government healthcare. That’s a problem since, as we’ve seen, health insurance left to the free market is an unmanageable expense for many, and that would be true even with an income floor.

In a NYT conversation about basic income between columnists Farhad Manjoo and Eduardo Porter, the latter questions whether we’re headed for an Utopian work-free world or one with plenty of poorly paid drudgery in which the BGI math doesn’t add up. An excerpt:

I read your very interesting column about the universal basic income, the quasi-magical tool to ensure some basic standard of living for everybody when there are no more jobs for people to do. What strikes me about this notion is that it relies on a view of the future that seems to have jelled into a certainty, at least among the technorati on the West Coast.

But the economic numbers that we see today don’t support this view. If robots were eating our lunch, it would show up as fast productivity growth. But as Robert Gordon points out in his new book, “The Rise and Fall of American Growth,” productivity has slowed sharply. He argues pretty convincingly that future productivity growth will remain fairly modest, much slower than during the burst of American prosperity in mid-20th century.

A problem I have with the idea of a universal basic income — as opposed to, say, wage subsidies or wage insurance to top up the earnings of people who lose their job and must settle for a new job at a lower wage — is that it relies on an unlikely future. It’s not a future with a lot of crummy work for low pay, but essentially a future with little or no paid work at all.

The former seems to me a not unreasonable forecast — we’ve been losing good jobs for decades, while low-wage employment in the service sector has grown. But no paid work? That’s more a dream (or a nightmare) than a forecast. Even George Jetson takes his briefcase to work every day.•

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