Labor’s Income a Growth or Decline?

Foreign competition may pose some threat to American laborers, but this article points out that it is technology that has become the real threat. As factories automate more and more tasks fewer and fewer workers are needed in the industrial production chain. Even as the economies grow, labor sees fewer and fewer gains. There was a 4% decrease in labor incomes between the 2000s and 1990s. The share of income going to labor and capital used to be viewed as fixed; the decrease in labor incomes shows that this theory may not hold true. If gains are increasing in an industry who is receiving this added income?

Owners of capital have received much of the added income while laborers have seen a decline. The fact that labor abroad(China’s Foxconn) does represent 3.3 percent of the 3.9 percent decrease in labor share for Americans. Technology has lead to increases in highly skilled and poorly skilled labor and decreases in middle range skilled jobs.

With the increased expense for many companies of providing insurance for their employees. Automation of labor may actually make more sense with the opportunity cost of one more employee who needs medical insurance in contrast to one more mechanical arm.

Works Cited

http://www.economist.com/news/finance-and-economics/21588900-all-around-world-labour-losing-out-capital-labour-pains

2 thoughts on “Labor’s Income a Growth or Decline?

  1. One interesting aspect of the falling labor share the article points out is that, “the cost of investment goods, relative to consumption goods has dropped 25% over the past 35 years.” Making substitution for labor easier on companies, while has the negative effect of falling labor share, should have benefits to the consumer. Utilizing new technology should reduce costs for firms, of which, at least part should be passed on to consumers. Determining whether or not these benefits outweigh the costs should rely on exactly how the reductions in cost are dealt with among all industries.

  2. I think this trend is part of the broader trend of the Industrial Revolution over the past 200 years. As middle skill jobs in industry disappear, it is important America has the requisite schools and institutions to retool our workers for tertiary sector jobs.

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