Skilled Nation

Having ridden to power (in part) simply by virtue of not being Republicans, there seems to be a certain degree of excitement amount the new congressional majority as to what they should do now that they're in charge.

Falling back on the "two Americas" rhetoric from the '04 presidential campaign, one answer seems to be: decrease the income gap. How to do this is, of course, tricky. While nearly everyone is ready to speak out against 10mil bonuses for CEO's whose companies are losing money, in order for a tax bracket to make any significant amount of money for the government it has to hit much lower down as well. Taxing the 200k+ bracket is the traditional way of taking it to the rich. Yet while most Americans make much less than 200k (goodness knows I do) a lot of us know people who do make that much, and maybe even aspire to make that much. And as a result, slapping 75% taxes on all income over 200k (which would be the serious wealth re-distribution approach) is not nearly as popular as you might think.

Yet, the income gap, both within our own country, but much more so between our country and other less fortunate countries, is the sort of thing that naturally inspires the desire to "do something".

I would dispute the idea that the gap between rich and poor is wider now than it has ever been. In the first hundred years of our country's existence, the gap between the haves and the have nots was so wide that in some parts of the country, that in some parts of the country more than fifty percent of the human population was owned by the "top ten percent".

However, the income gap is especially apparent right now in part because the middle class is in the process of splitting in two, and the dividing line is that oddly charged term "skilled labor". I feel a trifle odd talking about being on the "skilled" end of the divide when there are a great many things I can't do. A cabinet-maker has an incredible degree of skill which I could not match, and at producing a permanent, well crafted product. I, on the other hand, write web page code and database queries. However, a cabinet maker's income is limited by the maximum profit after materials that he's able to derive from selling the cabinets he makes. If he spends two weeks working on a truly set of cabinets, his personal income relies on how much he's able to charge for the one set of cabinets produced during those two weeks.

The "modern worker" on the other hand often makes his income by skimming a very small percentage of a very large pool of money which is effected by his work. One of the database jobs I've worked on involved evaluating the pricing of 5000 product SKUs every week and making adjustments in order to maximize revenue or margin based on the calculated responsiveness of the products to price changes, and whether the executives want more revenue or more margin at the moment. One week's price changes might produce projected 13-week incremental revenue of 10-20 million, or up to a million in incremental margin. Sure, it took a certain degree of mental skill, but the main thing that made that such well-compensated work was that the monetary results of your work were so large compared to the number of people involved (the team making price changes was only four people) that the case for paying those people a decent income was pretty strong.

Two groups of people seem to me making large amounts of money in the skilled economy: people like doctors and lawyers whose jobs require long and intensive periods of study (which most people lack the time, inclination or ability to go through) and people holding jobs which can effect very large amounts of money with a small number of people.

Unfair though it seems from a cultural perspective, the technicians who build Steinway pianos by hand make significantly less than the advertising and marketing people who have inflicted Bratz dolls upon the world. And in strictly economic terms, this actually makes a fair amount of sense.

Within the world of those whose productivity is limited by physical labor, (either the blue color labor of assembling a product or the white collar labor of answering phones or manning cash registers) those with the higher skills (like the Steinway technicians) do make a good deal more than those without (say, fruit pickers).

Accentuating this divergence between these two groups of workers is the increasingly global economy. Unless one is a hopeless nationalist, it seems hard to justify the claim that someone assembling stuffed bears in a factory inherently deserves to make more because he lives in the United States rather than in Indonesia. If the Indonesian works for $1.75/hr while the American works for $11.75/hr, and your goal is to sell bears for 9.99 a piece, the US worker needs to be significantly more productive than his Indonesian counterpart to win out. For many decades that was the case, with the US on the cutting edge of developing new efficiencies in manufacturing. However, others have learned from our success, and today manufacturing facilities in developing nations are often incredibly high quality infrastructures.

And yet we can't be an entire nation of high skill, high productivity workers. The spectrum of human abilities, personalities and desires is such that it simply cannot be the case that all US workers would could do high skill work while exporting absolutely all manual and low skilled work to other countries. Which leaves the question: is there any just way to keep the income gap between someone who produces one $9.99 stuffed bear every ten minutes and someone who sets pricing for the entire toy line from widening? Should we try to reduce an income gap which is mainly the product, not of the wages of bottom rung workers going down, but of high skill/high productivity workers going up?