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The New Economy and the Middle Class

January 26, 2012

In the debate over the struggling U.S. economy, few are willing to acknowledge the harsh reality: the middle class is slowly dying and may or may not reappear in its former incarnation. Industrial jobs have largely been shipped overseas. These days, even software programming jobs are being shipped to places like China and India, this despite the fact that the demand for truly talented software engineers has never been higher. In a recent (January 21) New York Times article, Charles Duhigg and Keith Bradsher detail how Apple moved most of its product production to Shenzhen in China (I’ll save a discussion of Shenzhen and all of its troubling ramifications for another day). The point: it is not simply more cost-effective to move menial production jobs to places like China, but the work itself is more productive. Why doesn’t everyone move their production overseas?

America is in a serious bind. On the one hand, the American economy is (still) at the forefront of development; it has been and (hopefully) always will be an economy that rewards risk-taking and innovation. On the other hand, because of the loss of its industrial jobs to the overseas market, coupled with the rise of the market for creative and innovative workers, what we see is the steady shrinking of the traditional middle class. As old production jobs (like that of Mr. Saragoza in the NYT article) disappear, new jobs are taking their place. The problem is that few American workers are actually qualified to fill these new jobs – certainly not older, skill-specific workers like Mr. Saragoza.

The source of this profound disparity is our education system. This is not only true of our public education system, but the education system as a whole, all the way up to the very highest levels of academia. The vast majority of America’s public schools are still educating the workers of the early 20th century: Bob the Builder and Rosie the Riveter. In higher education, most major universities are producing knowledge-based skill workers. This is still a safe route: America’s economy is a knowledge economy. However, this is changing. The demand now is not for someone who can program; as I mentioned above, even those jobs are now being shipped overseas. The demand is now for employees who can go above and beyond; who can recognize trends and create innovative solutions to problems. These are not skills taught in schools, although they should be.

This is a scary new reality. Americans should be legitimately concerned about this trend. Instead of focusing on the real source of the problem, politicians are squabbling over taxes, stimulus money, and the debt. That those in the education sector still argue about student testing and teacher accountability is a bad sign. These should already be relics of an old system, long since left behind.

The article crushes any hope that new technologies, particularly energy technologies, can be leveraged into new jobs for the American middle class. One Harvard economist, Lawrence Katz, asks the pertinent question: “New middle-class jobs will eventually emerge. But will someone in his 40s have the skills for them? Or will he be bypassed for a new graduate and never find his way back into the middle class?” The truth is that America’s largest firms will continue to outsource the most menial jobs. Until America’s education system improves, or until members of America’s middle class take the initiative on their own and re-educate themselves1, these jobs will continue to disappear without replacement.

1 I’m reminded of something Rommel once wrote: “The Americans, it is fair to say, profited far more than the British from their experience in Africa, thus confirming the axiom that education is easier than re-education.” Bad news for the new learners.

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