I just read a fascinating and frightening discussion about what could represent an economic sea change, one that both politicians and mainstream economists in government and business have yet to recognize. Titled "The Hollowing Out," the article suggests that we have entered a new era in economics as far as technology relates to jobs. Whereas in all of history advances in technology have resulted in net increases of jobs, this is no longer the case. In the past, even when new technology eliminated whole classes of work, it created demand for new kinds of employment that replaced those jobs and expanded the workforce as a whole, often giving rise to an expanding middle class, which further fueled demand for more products. Not so today. Advances in technology are no longer linked to job growth. And furthermore, what is happening is that the jobs are being lost almost entirely in the middle of the economic spectrum. While the lowest level workers and the number of top level managers expands, the jobs that used to fuel an expanding middle class are going away for good.
We can see how this relates in the woodworking industry. In the past, a successful custom cabinet shop might have a dozen skilled benchmen with salaries commenserate with their skills and experience. Today, a CNC machine replaces most of those people, needing only a single skilled operator and skilled programmer to run the machine. The operator and programmer might even be the same person. They might be the owner or also handle sales. Less skilled assemblers can put the boxes together. I've talked to many shop owners who cut way back during the recession and emphasized automation over workers. As the economy improves, they are still very hesitant to hire back the staff they let go.
As politicians and economists argue about job growth in the recovering economy, they need to be asking what kinds of jobs will be created. And in the case of a decreasing middle class, where will the demand for new products come to continue to fuel economic growth?