Gregory Clark’s provocative op-ed in Sunday’s Washington Post has prompted a lot of very smart criticisms. To oversimplify, Clark essentially revives the vision of the future Charles Murray and Richard Herrnstein outlined in The Bell Curve, with a large less-skilled population languishing in “high-tech reservations.”
With the march of technology, the size of a future American underclass dependent on public support for part of its livelihood is hard to predict: 10 million, 20 million, 100 million? We could imagine cities where entire neighborhoods are populated by people on state support. In France, generous welfare has already produced huge suburban housing estates, les banlieues, populated with a substantially unemployed and immigrant population, parts of which have periodically burst into violent protest.
So, how do we operate a society in which a large share of the population is socially needy but economically redundant? There is only one answer. You tax the winners — those with the still uniquely human skills, and those owning the capital and land — to provide for the losers.
Clark argues that while the Industrial Revolution was tremendously beneficial for less-skilled workers, future technological developments will prove far less so as increasingly sophisticated machines displace them.
Is this a plausible vision of the future? Tim Worstall and Will Wilkinson argue emphatically that it’s not. Wilkinson makes a number of excellent points regarding real wages at the bottom of the income distribution (higher than conventional measurements suggest) and the role of work disincentives in deskilling much of the population (for a variety of reasons, including high effective marginal tax rates, the poor work less than the rich, and this in turn reduces the time on task that drives skill accumulation).
As Mike Konczal notes, we’ve seen large numbers of less-skilled workers leaving the labor force. I tend to think that this can be traced in part to high effective marginal tax rates on the poor, which can be attributed to means-tested social programs and effective child support enforcement among other things. Individually, these programs are all very defensible. Yet taken together, they create powerful work disincentives at the bottom of the economic ladder.
Tim Worstall is confident that there will be a new round of job creation. If machines displace workers who perform routine information processing, said workers will find new jobs that we can’t currently imagine. He’s almost certainly right. This won’t happen instantly, however. Inner-city poverty in the contemporary United States can arguably be traced to the long and wrenching transition from a manufacturing-heavy economy to a services-heavy economy. The black-white employment gap widened dramatically in the late 1970s and early 1980s and it hasn’t closed since. New jobs have indeed been created. Yet they’ve been taken up unevenly. We can blame government policies in part — I know I do — but it’s by no means clear that government-created work disincentives are going to suddenly vanish.
Moreover, one can easily imagine a world in which these new jobs pay a very low market-clearing wage — that is, a world in which the ongoing polarization of the labor market continues. Moreover, adding more capital won’t dramatically increase the productivity of teachers or massage therapists, hence Baumol’s cost disease. To provide workers with a “living wage,” to use a term favored by the left, governments might need to implement what the Dutch call a “social wage,” i.e., low-wage employment subsidies. Will is open to this possibility.
If robots can crowd out all low-skilled workers, there is no reason they cannot also crowd out all high-skilled workers. See Hanson. Would this be bad? Growth would proceed so rapidly that the returns to even small amounts of capital should be outrageously high. The gap will be between those with income from capital gains and those with none. To prevent this, some version of Clark’s recommendation might be desirable. I’d recommend Charles Murray’s scheme for replacing the United States’ social insurance apparatus with basic income grants and mandatory retirement and medical savings accounts. In a world of doubling-every-fifteen-minutes Hansonian robot growth, the portion of GDP necessary to fund universal grants sufficient to ensure a modestly lavish level of consumption would be so trifling that no one would even notice.
But here’s the thing: this new world will be defined by new inequalities. Some people will find meaningful, dignity-promoting work. Others will not. My libertarian instincts suggest that Will is right and that an unconditional basic income in a richer world represents an overwhelmingly positive development. My conservative instincts suggest that this freedom from constraint will have very uneven consequences: people with long time horizons will fare well while those with short time horizons will fare very poorly. “Tough luck,” you say. As William Julius Wilson argued in When Work Disappears, a job can give one a sense of order and identity. Long stretches of unemployment have sharply negative consequences for one’s health, including one’s emotional health. In Shop Class as Soulcraft, Matthew Crawford argues that thinkers on the left and right have dedicated too little time to the nature of work and how it gives shape and structure to our lives. I tend to think he’s right.
Another related thought: in Germany, huge numbers of young people spend close to a decade completing their undergraduate degrees. South Korea has the world’s highest proportion of PhDs per capita, and they also have an unusually high number of twentysomethings living at home with their parents. The United States has the highest incarceration rate in the developed world. What’s the common thread? All of these phenomena increase the number of nonemployed persons. I’m guessing we’ll see more of this rather than less.