Wednesday , December 11 2019

How workaholics drive the economic inequality

To the question of who created today’s economic inequality, there is now a new and intriguing answer: the internet. It has apparently turned millions among us into workaholics, lugging around our laptops, ready at a moment’s notice to tackle the latest digital chore. The trouble is that all this extra work — and the income it generates — is heavily skewed towards the economy’s upper stratums. Hence, the leap in inequality.
This change in lifestyles is something most of us have witnessed. The barriers between work and family are collapsing before the relentless demands of algorithms. Work has become a constant companion and an indestructible nag.
Just whether this is good for the national psyche is an open question worthy of scholarly study. What’s less debatable is that this digital imperative is more than a curiosity. It’s not just a reflection of growing economic inequality. It’s also a contributor, says a new study by economists Edward Leamer and J. Rodrigo Fuentes. (The study has been published as a working paper by the National Bureau of Economic Research.)
Leamer and Fuentes, who collaborated on the study at UCLA, noticed that higher-income employees were spending more time working, whether “at the office,” home or somewhere else. The biggest increases were largely confined to workers with bachelor’s or advanced degrees (professional or doctoral degrees).
Here are some numbers. Between 1980 and 2016, the annual average number of working hours for employees with advanced degrees rose from 1,930 to 2,109, an increase of 9%. The gain for those with just bachelor’s degrees was 7%, from 1,872 hours (1980) to 2,009 hours (2016). For other workers — ranked by education — the changes in hours were negligible. The gain in hours for workers with a high-school diploma was less than 1%.
This factor — working hours — Leamer and Fuentes call “effort.” They say it has been underrecognised in explaining inequality. From 1980 to 2016, the average increase in wages for those with advanced degrees was 41%, from $67,349 to $94,967. The gain for college graduates was 17%, from $56,262 to $65,865. For everyone else, inflation-adjusted incomes over the period were negative. Prices increased faster than wages. The loss for high school graduates was 12%.
Hours worked — or not — compounded other effects on inequality, say Leamer and Fuentes. Take the erosion of manufacturing jobs. Since its post-World War II peak of 32% in 1953, the manufacturing sector’s share of total jobs has dropped steadily. It is now about 8 percent, as automation has eliminated traditional factory jobs.
Many of these jobs once commanded high wages — stemming from workers’ role in sustaining expensive production systems. Globalisation and outsourcing amplified the adverse impact on factory workers. As these jobs vanished, workers migrated into lower-wage jobs in retail, health care, and leisure and hospitality.
Meanwhile, the opposite was happening at the top of the economic spectrum. Incomes were rising. Workaholics were multiplying. Write Leamer and Fuentes: “The innovations in personal computing and internet-based communications have allowed individual workers the freedom to choose weekly work hours well in excess of the usual 40 [hours a week] … The benefits … accrue primarily to the few who can use the new technology to create value during the long hours. This requires both natural talent and high levels of education.”
To repeat: The opportunities were strongest among a minority of workers who could take advantage of digital technologies. About 75% of Americans use the internet, report Leamer and Fuentes. But only about 16% of full-time workers over 25 have advanced degrees, while 26% have bachelor’s degrees, according to the Bureau of Labour Statistics.
There are many studies on inequality — what caused it, what the consequences are or might be (political as well as economic) and what should or could be done about it. The Leamer-Fuentes study adds to our understanding by illuminating how these trends are already changing the way labour markets function.
The present trends, if continued, do not bode well for the future. If the labour force splits between well-paid workaholics and everyone else, there is bound to be a backlash — there already is — among people who feel they’re working hard but can’t find the results in their paychecks.
But be forewarned: The cure could be as bad as the disease. One danger is that every economic problem will elicit a similar reaction: Tax the wealthy. It is not that all income redistribution is misguided. It isn’t. But we cannot solve many of the national problems in the US by spending someone else’s money. If the past is any guide, we will simply postpone unpopular choices.

—The Washington Post

Robert J. Samuelson is a journalist for The Washington Post, where
he has written about business and economic issues since 1977

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