I just read The Meritocracy Trap by Daniel Markovitz. It’s an incredible book and talks at length about the issue in the article.
A word about this:
“What technology and trade have done, however, is displace millions of Americans from their middle-class jobs, and send them hurtling down the income ladder into less remunerative occupations.”
It’s not that simple. It’s not just trade and technology.
The causes of the erosion of good middle-class jobs are extremely complex. I’ll talk about just one here, since I don’t have too much time:
Tax law works to advantage higher tier workers over middle class workers. It costs much less in payroll taxes to hire a single superskilled worker at extremely high compensation than it does to hire a bunch of mid skill workers at middle class comp.
Quoting from the book:
“A simple example illustrates the special burden that the payroll tax imposes specifically on middle-class labor. If a bank deploys midcentury financial technologies to issue home mortgages using twenty mid-skilled loan officers who each earn $100,000 per year, this costs the bank and the workers, taken together, $306,000 in payroll taxes. By contrast, if the bank were to switch to the current mode of production and displace the mid-skilled loan officers with a single Wall Street trader who earns $2 million, this would cost the bank and the trader only about $90,000.
“Where two technologies of production are economically equivalent, but one requires twenty mid-skilled workers while the other requires one super-skilled worker, the mid-skilled approach currently faces an average payroll tax rate over 10 percentage points higher than the meritocratic approach, which produces an aggregate payroll tax burden over three times as great.
“The payroll tax, in other words, substantially suppresses mid-skilled employment and wages and fosters super-skilled employment and wages. (Indeed, if the super-skilled worker can get capital gains treatment for her income, by styling it as founder’s shares or carried interest, the income tax adds a further bias, on the order of 20 percentage points.)”
While 306 vs 90 is nothing to scoff at, we're talking about 200 / 2000 = 10% of a difference, in the extreme and unrealistic case you quoted. So in less extreme cases it would be just a few percentage points.
A word about this:
“What technology and trade have done, however, is displace millions of Americans from their middle-class jobs, and send them hurtling down the income ladder into less remunerative occupations.”
It’s not that simple. It’s not just trade and technology.
The causes of the erosion of good middle-class jobs are extremely complex. I’ll talk about just one here, since I don’t have too much time:
Tax law works to advantage higher tier workers over middle class workers. It costs much less in payroll taxes to hire a single superskilled worker at extremely high compensation than it does to hire a bunch of mid skill workers at middle class comp.
Quoting from the book:
“A simple example illustrates the special burden that the payroll tax imposes specifically on middle-class labor. If a bank deploys midcentury financial technologies to issue home mortgages using twenty mid-skilled loan officers who each earn $100,000 per year, this costs the bank and the workers, taken together, $306,000 in payroll taxes. By contrast, if the bank were to switch to the current mode of production and displace the mid-skilled loan officers with a single Wall Street trader who earns $2 million, this would cost the bank and the trader only about $90,000.
“Where two technologies of production are economically equivalent, but one requires twenty mid-skilled workers while the other requires one super-skilled worker, the mid-skilled approach currently faces an average payroll tax rate over 10 percentage points higher than the meritocratic approach, which produces an aggregate payroll tax burden over three times as great.
“The payroll tax, in other words, substantially suppresses mid-skilled employment and wages and fosters super-skilled employment and wages. (Indeed, if the super-skilled worker can get capital gains treatment for her income, by styling it as founder’s shares or carried interest, the income tax adds a further bias, on the order of 20 percentage points.)”