The Atlantic: The Mystery of the Incredible Shrinking American Worker
CHARLES DAVI - Charles is a capital and derivatives markets lawyer at a large firm in New York City and a member of the Policy Committee of Concord51. He received his J.D. from New York University School of Law and B.A. in Computer Science from Hunter College. He also writes the Kalle's Kultur blog.
The Mystery of the Incredible Shrinking American Worker
It could be the most significant economic puzzle of our time: As a declining share of economic growth goes to our workers, are people becoming less valuable to businesses? And why?
The mysterious and growing divide between the rich and the rest in just about every wealthy country on Earth, including the U.S., is really two mysteries wrapped in one. The first mystery is why real wage growth has sped up at the top and slowed down for everybody else. But the second, more recent, and more fascinating problem is why labor's share of the winnings in developed economies has been in decline. It's not just that middle-class wages are falling behind the rich. Overall wages are falling behind something else -- capital.
People are becoming less valuable to companies. Why?
Simply put, the world shrank. Two seemingly unrelated inventions -- the microprocessor and the shipping container -- conspired to create a global market for all assets, including people. A century of achievements in computing power and shipping ushered in an era of global trade so expansive that it completely disaggregated the process of doing business (especially in manufacturing), allowing firms to treat finished goods as a bundle of globally sourced components and services.
As more than a billion new workers flooded a global labor market open to multinational companies, capable workers became less scarce, and therefore, less valuable. In order to understand how all of this happened, we have to dig into recent economy history, exploring the rise of digital technology and global trade.
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