The Underclass

I made the point the other day, in a rare response to a Post article, that the world has grown much to complex for simplistic solutions.  This appeared yesterday:

Maybe everyone is overcomplicating America's economic challenges today.  Maybe there are no deep mysteries behind the slow growth, the stagnation incomes and the widespread economic anxieties that have given rise to populist movements on the left and right.  Maybe the problem is simple: too many workers.

This appeared in a blog post by Tankersly.  I do think he's right, or rather Daniel Alpert of Third Way is right.  The basic premise is this:  economies are "demand" driven.  Unemployment, but especially underemployment, dampens demand.  Consequently, even though a good number of low wage or part time gigs are available, those that are available do not provide enough "demand" in the form of disposable wages to really jump start the economy.  The answer:  a public Rooseveltian infrastructure project, which would create the jobs, which would create the wages, which would create the demand, which in turn would encourage employers in the private sector to invest the money that they are currently sitting on, creating the virtuous cycle of more jobs, more demand, et cetera.  The general structure of Alpert's argument is, I think, correct, but here's my take one step at a time.  Whether a public infrastructure project could help solve a "global" problem is debatable, but then employment is always right here, right now, so I say nothing ventured nothing gained.

On several occasions, I have referred to a more or less permanent "underclass," in some ways not unlike the servant class of the mid-19th century, except today there is no compelling need for domestic servants.  My thinking on this would take a full series of posts, but it goes like this: technology has changed, and will continue to change, the fundamental nature of work.  As a hypothetical, if shipping and other costs drive manufacturing back to America, it won't be assembly line of the past.  Robotics, CNC, and other technologies will be "employed" to help reduce personnel costs.  There will be jobs, and they will be higher paying jobs, but they will be far fewer, and they will require an up-front investment in education.

I could go on about "education," but let me just say that "education," such as it is today, tends to reproduce the "parent," in level of attainment, in level of economic viability, and the like.  This shouldn't be surprising, in part because more and more of that "up-front investment" is borne by the student and parent.  At the secondary level, setting aside private schools, the quality of schooling depends heavily upon where one lives.  Nothing has changed since Kozol's Savage Inequalities and if anything, with charter school movements and the like, it has grown worse.  At the post secondary level, with state legislators cutting funding to public universities, tuition rates have sky-rocketed in compensation.   The up front investment is either case is steep, and getting steeper.  That "education" tends to reproduce the social class of the parent runs counter to the horatio alger myth that "getting an education" will lift one out of the "underclass" into the middle or upper classes.  There are always enough exceptions to help fuel the myth, but for the vast majority, it nevertheless remains much more a myth than a reality.

Those beginning their education in the "underclass" are much less likely to complete their education.   Even if they do complete, they are much much much less likely to complete it at anything resembling an "elite" institution, even the better state institutions, that would make a significant difference in their job search.  Members of the "underclass" are more likely to emerge from an underfunded secondary system, start at the local community college, or fourth tier state university, and then drift out of higher education altogether.   The educators at these institutions are often dedicated and idealistic, but ultimately calculous is calculous, and it often takes an understanding at the level of calculous to run that CNC machine.  It's not that the underclass students are fundamentally incapable, though long socialization and poor preparation have rendered them so, and we are asking them to expend enormous intellectual energy and defer expectations in preparation for a job that isn't fun, doesn't fulfill "a dream," and is for the most part socially inconceivable to them.  What is life like as a CNC operator?  Who knows, but it doesn't sound fun.  It's easier to imagine one's self as the next entertainment or sports star, a delusion fueled by reality TV, among other things.

Although good, high-wage jobs might exist, that they go un-filled simply means that employers are competing for those employees, which means they are in "short supply."  There seems to be, however, no shortage of workers prepared for underemployment, part time, poorly paid work in the service industries that don't require an understanding at the level of calculous.   Although employers will complain about turn-over, low work ethic, et cetera, the employer nevertheless has the competitive edge.  The wages don't go up, despite the high turn over, because they don't have much trouble filling those jobs.  There's always someone else who can, so to speak, flip the burger.  Now add the millions upon millions of under-employed in china and india.  For the most part the service industry is not exportable.  Other industries, however, are exportable, as the donald will attest, and it's cheaper to make ties in indonesia than indiana, which means there are even fewer jobs that don't require an understanding at the level of calculous.  Tariffs?  Better trade deals?  Both are dangerous and neither will help.  As I said, even the manufacturer does return, it won't be the assembly line of your grandfather.

Bottom line, when you are making little better than minimum wage, you are living at or near poverty, and those living at or near poverty do not consume in ways that fuel the economy.   I don't think we're on the edge of collapse, at least not yet, but I do think we're in for a long, ever-so-slow, decline.  Basic argument is this:  the so-called billionaire class is already sitting on boat loads of money.  They are unwilling to invest it in the sorts of ventures that will create jobs because, well, there is insufficient demand.  Unlike China, we will not be building cities that go uninhabited, or factories that sit idle, so the money sits in investments that produce "rent" in the economist's sense, or worse just sits, zen like, doing nothing in off-shore, tax-avoidance accounts.  Conservatives who listen to the billionaire class do not support infrastructure projects that will create jobs that might help fuel the economy, because, well, where will the money come from?  The answer to that question is the obvious one: out of the off shore accounts of the billionaire class.   Over the long haul, it might help them, but not in the next quarter, and the next quarter, after all is said and done, is what we live for ...