By Arnold Kling
For over two centuries, economists have spoken of “labor” as if it were homogeneous. Back in the real world, people were learning trades, becoming trained as professionals, starting businesses, and otherwise undertaking to differentiate themselves.
Macroeconomics, as we know it, ignores this. Casey Mulligan points out that it was low-wage workers who took it on the chin this recession. My guess is that the folks who designed the “stimulus” package ignored this. If the stimulus helped people in government and financial services, then my guess is that is not where the help was really needed.
What Alexander Field’s A Great Leap Forward shows is that even in the Great Depression, firms introduced labor-saving improvements in production processes. What we may be seeing today is the acceleration of a number of trends that are troublesome from the standpoint of the unemployed. People without college degrees face increased competition from foreign workers due to globalization. They are frozen out of government, health care, and education by protectionist measures that require educational credentials. And people in the higher-income brackets are imposing their preferences for health insurance on people who have a hard time earning enough to pay for it. (See Tyler Cowen for some similar observations on health care and inequality.)