Matthew Yglesias published a good piece this week explaining the economics that drive the expansion of the low-wage service sector. He used Chipotle as an example, explaining how the process of creating a burrito is hard to automate or export, yet remains stubbornly low-value.
Think about it. You, of course, can assemble burritos in a sweatshop in Cambodia, freeze them, put them on boats and trucks and then reheat them. But microwaved frozen burritos, though delightful when pulling an all-nighter in college, are fundamentally pretty gross. While I wouldn’t exactly say that you can’t replace burrito-making humans with burrito-making machines, I’m not sure anyone’s going to bother any time soon.
The problem is how to adapt to this shift. Instead of having an economy dominated by a large number of middle-income jobs with a few lows and highs, global capitalism is giving us a new paradigm. We have a remarkably large (and increasing) percentage of the workforce engaged in work that earns more than almost any jobs in past. But they are still a minority, maybe 15-25% of the workforce. For everyone else, the bottom has dropped out of the economy.
Yglesias’ prescription would make Republicans smile if they could manage to wipe the froth from their mouths and quit screaming hysterically about whatever paranoid fear has grabbed their attention at the moment. In a rare moment of clarity from the left, Yglesias tackles both income support and deregulation as twin prescriptions for poverty relief. This is trend that could bring left and right together toward something useful if we could seize on it.
Real wages and living standards have both a numerator and a denominator. The most sustainable way to tackle the problem of stagnating or falling working-class incomes is to work on the denominator—on the various regulatory privileges used by the wealthy and powerful to entrench their income and raise costs for everyone else. Snob zoning laws that keep mobile homes out of neighborhoods where land is cheap—and that dense apartment buildings and rooming houses out of places where it’s expensive—are a huge part of the problem. So are rules that make it harder to open new bars and restaurants, raising prices by reducing competition while also reducing job opportunities. Of course, taxing the rich to give everyone free money is also a great idea with a solid historical track record.
If, somehow, the Great Republican freakout could end before the Great Democratic Crackup begins, there are a lot of really frustrating problems that we could fairly quickly solve. What are the odds…