Heavily Unionized, Still Stagnating

I recommend:

http://www.economist.com/blogs/democracyinamerica/2011/03/middle-class_stagnation

While the above is primarily a short summary of other columns and blogs, it makes a great point: Western nations with a widely unionized workforce are still experiencing increases in wage disparity between the top 20 and bottom 20 percent (upper and lower classes). The middle class (usually defined as the middle 40-60 percent) is stagnating, as well.

I've written on this blog about the "Superstar Effect" and income. See:

http://www.nytimes.com/2010/12/26/business/26excerpt.html

Also:

http://almostclassical.blogspot.com/2011/01/skills-and-value-concentration.html

The reality is that the marketplace is constantly changing. Technology has, for centuries, eliminated jobs and reduced the "value" of the lowest-level, least-specialized workers. Unions are not going to be able to offset the loss in value within some jobs. Quite bluntly, if there is any chance your job can be automated in any way, via software, robotics, or some other technology, your job will decline in "value" for a time.

Now, oddly enough, there is a point when the "low-value" job becomes high value. This is a reflection of supply and demand, as well as something known as the "exclusivity principle." Here's one example:

Cars used to be built primarily by hand. As a result, pieces were always slightly different. Quality was good, not great. Automation and assembly line techniques improved quality and reduced the "value" of the manual laborer in car assembly. Eventually, companies automated most of the automotive assembly process. Some companies can assemble a car with fewer than ten humans on that assembly line. (Though multiple lines and parts handling still require 1000 or more employees at the most automated car plants in the world.)

But which cars are the most expensive in the world? Cars made by the highest-paid production employees. The hand-assembled Rolls Royce and Lamborghini automobiles come to mind. Rolls Royce even employs some of the best-paid "leathersmiths" to prepare interiors.

It's a paradox: automation undercut the lower- and middle-class workers, to a point. The best of the best, however, improved their standings. The gap between the highly skilled specialist and the "average" worker widened. We see this in automotive plants, and we see this throughout the economy.

I'm not sure there is a solution, other than fewer people. I don't believe for a moment we can or will automate everything, including the repair of the machines, but we might be getting closer than anyone likes to admit. That's going to leave the lower-class at even more of a disadvantage.

Something to ponder.