The economy has evolved over the last 60 years from one in which outputs were more closely related to inputs, to more of a “build it once sell it often” model: this new model requires far fewer middle class roles to operate it and this is, perhaps, the principal social impact that technology and the internet has had on us, for it increases the economic value of the few, relative to that of the many.

To illustrate this, look at a big industry like retail: Sixty years ago, retail was characterized by mom and pop stores and small chains of grocery stores. Each store, as a separate entity, required general managers to operate the whole place; buyers and warehouse management to source and store goods for sale; merchandisers to ensure the display is optimized. Thirty years ago the world of retail had been taken over by companies (like Walmart) who standardized a common retail offer and built world class distribution in support of that offer. Physical stores (and so store management still needed) but one big buying department and warehousing/transportation at HQ, and merchandisers also at HQ dictating interior design and display. Most in store staff either stacked shelves or were check-out clerks. Technology and the internet has changed the model again and all those stores are no longer needed, so no store management needed – Amazon has built a single online buyer experience and a single, highly efficient, distribution system, eliminating the need for thousands of physical stores, instead employing people to operate heavily automated warehouses. This new business model requires masters of the more complex elements of those processes and skilled designers/builders of the core business systems; and, otherwise, people using fewer skills (ultimately dispensable by automation), operating those those automated core processes. This trend is common to almost all markets and the businesses which compete in them: those businesses can, and therefore do, become more and more effective and efficient by concentrating key decision making on a very few, executing those decisions through sophisticated processes (requiring skilled process and system builders), operable by persons using less skills, or by machines.

Opportunity for our citizens who are not operating the complicated bits of the new economy or are not among those designing/building it, is limited: for those individuals, the prospects of financial security and comfort are distant and receding – try buying the American dream, or providing your next generation with the opportunity to achieve that dream, on $7.25 per hour (the federal minimum wage)…

This dynamic comes out in measures of equality in America. This graph plots Gini Coefficients for the major industrialized countries, over time. Perhaps no surprise that the US stands apart from the other, more social democrat countries.

Looking at what has happened inside the US, see this chart from the Pew Research Center, using Bureau of Labor Statistics data – scarcely any of the benefit of the advances in the US economy have accrued to ‘production and non supervisory’ employees (there was probably an uptick in fortunes in 2018 and 2019, as the labor market tightened, but not enough to redress 45 years of stagnation):

Any (crunchy) policy responses to address this issue? Crunchicrant does not really see the creation of opportunity as a role of federal government but looks at two areas where the federal government could impact opportunity, without breaching principles of crunchiness:

1). Taxes – what is fair? – how should we tax the people to pay for the nation’s expenses?

2). A helping hand in early education – society support to provide more opportunity for youngsters, to improve their lot.

Opportunity – can government help?