Libertarian econonmist Tyler Cowen comes to the right conclusion but mostly for the wrong reasons. The economics of the world is changing – a reset – and things will never again be like they were. He totally ignores what may be the most most important factor, automation and industrial robots.
In manufacturing, for example, Ford, Chrysler, General Motors, Caterpillar and Navistar (formerly International Harvester) all pay many of their new workers much less. In some of these two-tier structures, the new wage may be as little as half the old one. In addition to this rapid change, the companies also seem to be reducing the ranks of highly paid workers through slow attrition.
This is a best an oversiplification of what’s happening. Industrial robots are doing much of the work that used to be done by skilled workers. Some of this is because of increased effiency and some of it out of necessity. I was a manufacturing engineer in the printed circuit manufacturing industry for 40 years and saw the transition first hand. In the beginning it was point to point assembly. Then there came plated through hole circuit boards and machines/robots and solderwave machines that eliminated much of the work once done by humans. As the technology became more complex surface mount techonolgy was introduced. Circuit boards were almost entirely assembled by robots. With their fine pitch integrated circuits and ball grid arrays the mother board in the device you are using to read this post could not be built by humans. The rapid advancement of 3D prininting will mean fewer and fewer skilled machinists are necessary. The very presient scince fiction writer L.E. Modesitt predicted this in many of his novels – he called them formulators.
Since as a society we are in denial of this new economic reality we have up to this point been unable to deal with the societal implications. There are not going to be enough jobs for everyone who needs or wants one. People who don’t have jobs can’t buy things which will impact the economy.