Paul Krugman / Sympathy for the Luddites

New technology spells trouble for the middle class

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Those weren't foolish questions. Mechanization eventually -- that is, after a couple of generations -- led to a broad rise in British living standards. But it's far from clear whether typical workers reaped any benefits during the early stages of the Industrial Revolution; many workers were clearly hurt. And often the workers hurt most were those who had, with effort, acquired valuable skills -- only to find those skills suddenly devalued.


Until recently, the conventional wisdom about the effects of technology on workers was, in a way, comforting. Clearly, many workers weren't sharing fully -- or, in many cases, at all -- in the benefits of rising productivity; instead, the bulk of the gains were going to a minority of the workforce. But this, the story went, was because modern technology was raising the demand for highly educated workers while reducing the demand for less educated workers. And the solution was more education.

Now, there were always problems with this story. Notably, while it could account for a rising gap in wages between those with college degrees and those without, it couldn't explain why a small group -- the famous "one percent" -- was experiencing much bigger gains than highly educated workers in general. Still, there may have been something to this story a decade ago.


I've noted before that the nature of rising inequality in America changed around 2000. Until then, it was all about worker versus worker; the distribution of income between labor and capital -- between wages and profits, if you like -- had been stable for decades. Since then, however, labor's share of the pie has fallen sharply. As it turns out, this is not a uniquely American phenomenon. A new report from the International Labour Organization points out that the same thing has been happening in many other countries, which is what you'd expect to see if global technological trends were turning against workers.






So what is the answer? If the picture I've drawn is at all right, the only way we could have anything resembling a middle-class society -- a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules -- would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

I can already hear conservatives shouting about the evils of "redistribution." But what, exactly, would they propose instead?


Paul Krugman is a syndicated columnist for The New York Times.


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