sharpest drop in demand

This is not a hypothetical.

Steven Rattner, who helped restructure the automobile industry, tells the story of getting a new General Motors plant online in Michigan by bringing management and unions together. “The unions agreed to allow 40% of the new plant to operate at $14-an-hour wages,” he says, “which is half of GM’s normal wages. The management agreed to invest in this new plant.

But here’s the problem:

Workers at GM’s Mexican operations make $7 an hour, and today they are as productive as American workers. And think of this: $14 an hour translates into about $35,000 a year. That’s below the median family income. The whole experience left me frightened about the fate of the American worker.”

Service jobs now also exposed:

Since the service sector is a much larger part of the economy, 28 million to 42 million jobs will be ‘susceptible’ to being shipped offshore — jobs such as customer-service representative and stock analyst, which we tend to think of as local.

But, but, but, forget offshoring and outsourcing, forget the recession, immigration and the mortgage industry collapse — when it comes to loss of American jobs, robots are to blame.

Our workforce is splitting in two:

The number of high-skill, high-income jobs (think lawyers or research scientists or managers) is growing. So is the number of low-skill, low-income jobs (think food preparation or security guards). Those jobs in the middle? They’re disappearing.

A leading explanation for the disappearance of the middle class is “ongoing automation and off-shoring of middle-skilled ‘routine’ tasks that were formerly performed primarily by workers with moderate education (a high school diploma but less than a four-year college degree).”

Routine tasks “can be carried out successfully by either a computer executing a program or, alternatively, by a comparatively less-educated worker in a developing country.”

The culprit, in other words, is technology.

The hard truth—and you don’t see it addressed in news reports—is that the middle class is disappearing in large part because technology is rendering middle-class skills obsolete.