Wednesday, May 11, 2011

The barbell effect

Andy Kroll has a good editorial on what the recent job numbers mean and how our economy and workforce are changing. One of the terms he uses is the "barbell effect," in which jobs are pushed into lower and lower wage brackets and those at the top get richer and richer. The result is a job market that is heavy on the top and bottom, but practically non-existent in the middle.

From a business perspective, this makes good sense because it means you're spending less money to employ fewer people at lower wages and benefits. You can train them to do a specific job and send them off to do it over and over hundreds of times a day. This is how McDonald's hires people, and so this has come to be known as a McJob. So now, with all these Mcjobs bolstering the employment numbers while people are still struggling to make ends meet, those at the top are making tons of money and businesses are posting record profits.

Being in the lower-middle or working class, I know that one job rarely cuts it anymore. It feels as though the deck is stacked against you when you try to move ahead, like you have to be part of an elite group to get an in. You have to know the right people, or have the right background, but if you don't than you're out of luck.

The problem with having no middle class is that the economy will eventually suffer for the loss of its greatest asset. Those at the top hoard their millions and billions more than they spend it, and their investments are designed to make them more money. Those at the bottom don't have enough money to stimulate an economy because they're constantly paying off debt, cutting household budgets. They don't go on vacations, they don't invest in the stock market, they don't start small businesses, and they don't have the tools for upward movement. They're stuck.

The middle class was once the best of both worlds. You didn't have to pay the high taxes, but you had a good quality of life. You used to own a house, buy a new car once every couple of years, buy new clothes for the new school year, and get a good education. Now, the middle class is disappearing because their jobs are being cut, the pay is being slashed, benefits taken away, and more and more of the tax burden is heaped on them. The barbell effect is the strangling of the middle class, American innovation, and the financial freedom to live comfortably.

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