Friday, January 25, 2013

The Metamorphosis of the Lumpenproletariat

During the years that the Greatest Generation fought in the cities of Europe and the sands of the Pacific, the average American family was living in absolute squalor, comparable to the worst part of the Great Depression. Everything of economic value was rationed. Almost no new houses were built during this time and even fewer cars. Farms sent their food to the GIs overseas. Ford and GM's factories were retooled to build Jeeps and Shermans. And the government encouraged the American people to grow Victory Gardens to help reduce farm output allocations for the home front.

When the boys arrived back home, all of that pent up consumer demand was unleashed. Combine that with the surviving veterans' pay (forced savings on behalf of the war effort) and the deceased veterans' insurance payouts, the majority of America was lifted into middle class comfort over the course of the 50s and 60s. Arguably the biggest beneficiaries of the return to a regular economy, the American auto industry was born anew and entered its golden age.

This period saw Michigan, home of the auto capitol of the world, become the richest state in the union. Teenagers would complete high school (or drop out) and then get a factory job with one of the auto companies based in Detroit and get paid wages that could support the economic needs of an entire family. GM, Ford, and Chrysler were the titans of American industry and the biggest companies in the biggest, most profitable market in the world.

And everybody benefited. But not everybody benefited equally. For Americans with less than a college degree, a factory job was the best job to have. The people who didn't have them were left doing things like tending shops and restaurants, mopping floors, and doing other menial jobs. You know, townie jobs.

But the rest of the world rebuilt from the ashes of WWII. Tariffs were reduced. Prejudices (that prevented Americans from buying German and Japanese cars) softened. And suddenly we were thrust into a brave new world of globalization.

You know how the story ends. Factory jobs become less numerous and paid less. Workers were laid off and gained jobs in other industries that didn't pay as well. And, according to the CPI, median wages for workers have remained stagnant since 1964. And this new round of globalization, combined with high tech robots that can replace manual labor, and software developers (like me) looking to replace jobs that used to require a reasonably intelligent brain with computer algorithms, is scheming to send the rest of society into menial job land.

This is the story that many in academia and journalism love to tell. It also happens to be wrong. Because the majority of American people never had career-track jobs nor menial jobs that paid like career-track jobs. Even in 1950, the heyday of the factory worker, only 1/3 of the non-farm workforce (back during a time when there were still a lot of people who worked on farms) worked in a factory. And a bean canning factory job didn't pay nearly as well as a car manufacturing factory job.

In the 50s and 60s, most of the south was still extraordinarily rural and dirt poor. In the 50s and 60s, most people on the east coast still lived in the city and made their living working in shops and warehouses. And while the high paying factory job is gone, others have taken its place. Government workers are now a bigger percentage of the population than ever, and for the first time ever, their average compensation and benefits now outstrip that of the average private sector worker.

Jobs that didn't even exist in 1950, like software development, have created a new class of high earners (if you need proof, just look at how the purchasing power of software developers have completely upended the San Francisco real estate market) while certain professions in established industries (mostly finance and insurance) experienced tremendous growth in wages due to the changing nature of the economy.

The story of a collapsing middle class is partially true due to the decline of pensions and the gross mismanagement of the retirement vehicles that replaced them (401ks and IRAs). But the rest of it is just overhyped by journalists who are suddenly feeling the very same economic pressures that downsized the American factory worker. Print journalism is collapsing and online journalism doesn't come close to offering the same wage, benefits, and job security that most journalists and reporters were accustomed to in the pre-internet era.

Fundamentally, the lumpenproletariat never really changed. But now a non-STEM college degree is the new high school diploma, student loans aren't dischargeable in bankruptcy, and a large portion of society's opinion-shapers are feeling the squeeze.

Welcome to the suck, journalists.

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