"The society we live in does not provide a decent standard of living for everyone. We should acknowledge that and fix it."
Our parents grew up in a more stable world. They brought home less money but life was affordable. Most people could get a job that paid enough to cover the bills and, for many, enough left over to buy a house.
We live in very different times. Our lives are more insecure with some of us getting good jobs that pay well whilst many of us struggle to get by. When asked to judge their own financial situation, more than half of British households consider themselves either “not” or “just about” managing. This is not just a British phenomenon. Around a third of Americans are either not or just about getting by whilst half could not cover an emergency $400 bill without borrowing, selling something or not being able to pay it at all.
Many of us, especially those with less education, are finding that working hard just isn’t enough to make ends meet. Inequality has grown and wages have stagnated across the developed world. In the UK, the average household income (after housing costs) has barely grown in the last 15 years (and may fall in the coming year as Brexit bites). In the United States, the average wage has been almost stagnant since 1979 whist productivity more than doubled. Anger and outrage at the status quo is natural when the status quo does not work for you anymore.
And it is was this anger that led to the shocks and horrors of 2016. In the UK, it was areas with lower living standards and with less educated populations that were more likely to vote for Brexit and counties with lower levels of education delivered the US election for Trump.
While the financial crisis did play a role, longer-term forces have helped create nations where those at the top get more whilst the rest of us struggle to get by. Technological change, and automation in particular, have changed the labour market in ways that benefits the better educated.
The former manual worker who used to earn a decent wage at the local factory now sees most (or all) of his former job done by a machine. He’s now taken a lower paying job elsewhere or has stopped looking for work altogether. Automation has replaced routine tasks that could be easily programmed and these are the tasks that were performed by those with less education.
By contrast, automation has benefited those who perform non-routine tasks that cannot be easily replaced by machines and whose work is enhanced by automation. The young analyst, fresh out of university, is able to crunch the numbers far faster and will earn more over his lifetime due to technological change.
There is also a third subset of workers who perform non-routine tasks that can’t be easily programmed but nor are their roles enhanced by automation. Hairdressers who execute complex sensorimotor skills that can’t be automated haven’t seen their jobs change much due to technological change and haven’t been replaced by robots either.
We should not be technological pessimists believing that robots will steal our jobs and impoverish us. They haven’t and probably won’t. Overall, technological change has led to an improvement in living standards with employment rates at an all time high and we produce more per person than ever before.
It is the interaction of technological change and government policy that determines living standards. The UK and US saw dramatic increases in inequality under Thatcher and Reagan in the 80’s as they implemented policies that led to a rise in incomes for the rich and a fall in incomes for the poor. Subsequent Labour and Democratic administrations did not do enough to reverse these damaging trends.
We can change this.
If income inequality is too high, the government can increase in-work benefits to the working poor to reduce it. If people, particularly those with less education, can’t find jobs then the government can provide work for them. If employees can’t get a pay rise whilst profits grow then the government should require that workers sit on company boards and strengthen trade unions to ensure they get the raise they deserve.
The society we live in does not provide a decent standard of living for everyone. We should acknowledge that and fix it.
Jeevun is a Young Fabians member