The War on Normal People: The Truth about America’s Disappearing Jobs and Why Universal Basic Income Is Our Future
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Automation started out on farms earlier in the century with tractors and then migrated to factories in the 1970s. Manufacturing employment began to slip around 1978 as wage growth began to fall. Median wages used to go up in lockstep with productivity and GDP growth before diverging sharply in the 1970s. Since 1973, productivity has skyrocketed relative to the hourly compensation of the average wage earner:
How workers are compensated and how their companies perform stopped being aligned over the same period. Even as corporate profitability has soared to record highs, workers are earning less. The share of GDP going to wages has fallen from almost 54 percent in 1970 to 44 percent in 2013, while the share going to corporate profits went from about 4 percent to 11 percent. Being a shareholder has been great for your bottom line. Being a worker, not so much.
Today, inequality has surged to historic levels, with benefits flowing increasingly to the top 1 percent and 20 percent of earners due to an aggregation of capital at the top and increased winner-take-all economics. The top 1 percent have accrued 52 percent of the real income growth in America since 2009. Technology is a big part of this story, as it tends to lead to a small handful of winners. Studies have shown that everyone is less happy in an unequal society—even those at the top. The wealthy experience higher levels of depression and suspicion in unequal societies; apparently, being high status is easier when you don’t feel bad about it.
JOBS DON’T GROW LIKE THEY USED TO
Companies can now prosper, grow, and mint record profits without hiring many people or increasing wages. Both job creation and wage growth have been weaker than the top-line economic growth would suggest since the 1970s. In each of the last several decades, the economy has created lower percentages of new jobs, including no new net jobs between 2000 and 2010 due to the Great Recession.
The changing role of labor can be seen in the time it has taken to recover from the past several recessions. The United States has suffered several major recessions since 1980. Each recession has stripped out more jobs and taken longer to recover from than the last.
When new companies do prosper and grow, they don’t tend to employ as many people as they did in the past. The major companies of today employ many fewer workers than the major enterprises of yesteryear.
Number of Employees at Major Companies: Present Day versus Past Years
Company: Amazon
Number of Employees in 2017: 341,400
Company: Walmart
Number of Employees (Year): 1,600,000 (2017)
Company: Apple
Number of Employees in 2017: 80,000
Company: GM
Number of Employees (Year): 660,977 (1964)
Company: Google
Number of Employees in 2017: 57,100
Company: AT&T
Number of Employees (Year): 758,611 (1964)
Company: Microsoft
Number of Employees in 2017: 114,000
Company: IBM
Number of Employees (Year): 434,246 (2012)
Company: Facebook
Number of Employees in 2017: 20,658
Company: GE
Number of Employees (Year): 262,056 (1964)
Company: Snap
Number of Employees in 2017: 1,859
Company: Kodak
Number of Employees (Year): 145,000 (1989)
Company: Airbnb
Number of Employees in 2017: 3,100
Company: Hilton Hotels
Number of Employees (Year): 169,000 (2016)
The companies of the future simply don’t need as many people as the companies of earlier eras, and more of their employees have specialized skills.
If one looks at the numbers they clearly show an economy that is having a harder time creating new jobs at previous levels. They also show stagnant median wages, high corporate profitability, low returns on labor, and high inequality, all of which one would expect if technology and automation were already transforming the economy in fundamental ways. As MIT professor Eryk Brynjolfsson puts it: “People are falling behind because technology is advancing so fast and our skills and our organizations aren’t keeping up.”
The winner-take-all economy has set us up for what’s coming. But rather than recognize the extent to which economic value is diverging more and more from human time and labor, we essentially keep pretending it’s the 1970s. We’ve been able to get away with this pretense for a few decades by loading up on debt and cheap money and putting off future obligations. That has run its course just as technology is really set to take off and render more of our labor obsolete, particularly for normal Americans.
You might be wondering at my choice of terminology in “normal Americans”—we’ll explore that next.
THREE
WHO IS NORMAL IN AMERICA
The future is already here—it’s just unevenly distributed.
—WILLIAM GIBSON
Some of my friends didn’t like the title of this book when I shared it with them. The word “normal” has become freighted, meant to signify a certain perspective or way of life.
When I say “normal,” I mean the average. As in, if you lined up Americans by some quality or trait or classification—education, income, savings, proximity to living in a city, and so on—the person in the middle would be normal. So having a PhD is not normal, but neither is being a junior high dropout.
When I was traveling in New Orleans last year, I had a conversation with my Uber driver that stuck with me. Laurie was a pleasant woman in her late forties who looked like a typical suburban mom. When she found out that I worked in entrepreneurship she exclaimed, “That’s great—I’m an entrepreneur, too!” She had started a kitchen remodeling business a few years earlier. As we talked, it emerged that her business had dried up and that she was driving an Uber to make ends meet. She had two sons, one of whom had special needs, and she teared up talking about trying to find the right school for him. She and her family got by on a partial disability payment that she received on behalf of her husband who had died a few years earlier. “I don’t know what we’d do without that—we’re barely scraping by as it is,” she said, her voice cracking. By the end of the ride, she had composed herself but seemed a little embarrassed as we said our goodbyes.
I was a little embarrassed, too, for a different reason. I thought, Man, my problems are total nonsense compared to her problems. My circles didn’t include many people in her position who were stressed about paying next month’s bills. But the single mom I chatted with in New Orleans driving a car to make ends meet was pretty normal. The Iraq vet working as a security guard in Detroit who talked sports with me is normal; he came home having seen a couple friends die and felt lucky to have found a secure job. The bartender in Cleveland I spoke to who’s trying to save up to go to nursing school is normal. She was taking time off from school to save money.
I’ve found conversations with Americans like these enlightening. Most of my friends and peers in New York and San Francisco have little reason to visit cities in the middle of the country. And even cities like New Orleans, Detroit, Cleveland, Pittsburgh, Birmingham, Baltimore, St. Louis, and Cincinnati are relative pillars of commerce, education, and prosperity compared to their surrounding areas and most of the country.
Most of us live around people like ourselves. What feels normal to each of us is based on our context. Knowing what’s truly normal or average in a big country like America requires some work. Take education for instance—if you are reading this, you are probably a college graduate or student and most of the people you know also graduated from college. That puts you, your friends, and your family in approximately the top third of the U.S. population. If you have a graduate or professional degree, you are in the top 12 percent of the population by educational attainment. The average American achieves something between one credit of college and an associate’s degree; 60.25 percent of Americans 25 years and older have attended some college and 43.51 percent have at least an associate’s degree. These numbe
rs trend slightly upward among younger people. However, it would be entirely accurate to say that the average American is not a college graduate.
Think of your five best friends. The odds of them all being college graduates if you took a random sampling of Americans would be about one-third of 1 percent, or 0.0036. The likelihood of four or more of them being college graduates would be only about 4 percent. If that described you, you’re among the educated class (even without necessarily knowing it; in your context, you’re perfectly normal).
Educational Attainment of People (25 Years and Over) by Sex & Race (2016)
Characteristic: Sex: Male
High school graduate or more: 88%
Some college or more: 58%
Associate’s degree or more: 41%
Bachelor’s degree or more: 32%
Advanced degree: 12%
Characteristic: Sex: Female
High school graduate or more: 89%
Some college or more: 60%
Associate’s degree or more: 43%
Bachelor’s degree or more: 33%
Advanced degree: 12%
Characteristic: Race: White alone
High school graduate or more: 89%
Some college or more: 59%
Associate’s degree or more: 43%
Bachelor’s degree or more: 33%
Advanced degree: 12%
Characteristic: Race: Non-Hispanic White alone
High school graduate or more: 93%
Some college or more: 64%
Associate’s degree or more: 47%
Bachelor’s degree or more: 36%
Advanced degree: 14%
Characteristic: Race: Black alone
High school graduate or more: 87%
Some college or more: 53%
Associate’s degree or more: 32%
Bachelor’s degree or more: 23%
Advanced degree: 8%
Characteristic: Race: Asian alone
High school graduate or more: 89%
Some college or more: 70%
Associate’s degree or more: 60%
Bachelor’s degree or more: 54%
Advanced degree: 21%
Characteristic: Race: Hispanic (of any race)
High school graduate or more: 67%
Some college or more: 37%
Associate’s degree or more: 23%
Bachelor’s degree or more: 16%
Advanced degree: 5%
Source: U.S. Census Bureau, 2016 Current Population Survey.
That’s what’s normal in education. How about wealth and income?
The median household income was $59,309 in 2016. Each household typically consists of multiple family members, however. The median personal income in the U.S. was $31,099 in 2016 and the mean was $46,550. The relevant statistic for seeing how most people live and work is the median, as the mean gets dragged up by the handful of people making millions at the top. The median is the midpoint if you lined everyone up by income. Half of Americans make less than $31,099 and half make more, with 70 percent of individuals making $50K or less.
Here is the median income sorted by education level:
Median Personal Income by Educational Attainment (2015)
Level of Education Attainment: Less than 9th grade
Median income: $16,267
Level of Education Attainment: 9th to 12th grade, no diploma
Median income: $17,116
Level of Education Attainment: High school graduate
Median income: $25,785
Level of Education Attainment: Some college, no degree
Median income: $30,932
Level of Education Attainment: Associate degree
Median income: $35,072
Level of Education Attainment: Bachelor’s degree or more
Median income: $55,071
Level of Education Attainment: Bachelor’s degree
Median income: $49,804
Level of Education Attainment: Master’s degree
Median income: $61,655
Level of Education Attainment: Professional degree
Median income: $91,538
Level of Education Attainment: Doctorate degree
Median income: $79,231
Source: U.S. Census Bureau, Current Population Survey, 2016 Annual Social and Economic Supplement.
Again, if you’re reading this it’s unlikely that 70 percent of the people you know make $50K or less. Among the college graduate crowd, the average is $55K, with higher averages of $61K and $91K for those with a master’s or professional degree, respectively.
The Bureau of Labor Statistics places the median hourly wage at $17.40, which would mean about 35 hours of paid work per week over 50 weeks. This is consistent with the average of 34.4 hours reported by the OECD. So the average American worker has less than an associate’s degree and makes about $17 per hour.
The last U.S. census mapped 80.1 percent of American people in urban areas and 19.9 percent in rural areas. This is misleading, though; the census classified anything in a metro area, even the most far-flung suburb, as urban. A recent national survey from the online real estate site Trulia found that only 26 percent of people identified their neighborhood as urban, while 53 percent described it as suburban and 21 percent as rural. The consensus view is that about half of Americans live in the suburbs, and that this still represents the most common type of home for most Americans.
Per capita income varies by state and district. In 2016, the District of Columbia had the highest per capita income at $50,567, while Mississippi had the lowest at $22,694. The 25th and 26th ranked states were Ohio and Maine, with an average income of $29,604 and $29,164, respectively. It’s telling that our national capital has the highest income.
You might have seen some of the stories about financial insecurity in the United States. A Bankrate survey in 2017 found that 59 percent of Americans don’t have the savings to pay an unexpected expense of $500 and would need to put it on a credit card, ask for help, or cut back for several months to manage it. A similar Federal Reserve report in 2015 said that 75 percent of Americans could not pay a $400 emergency expense out of their checking or savings accounts.
For average Americans with high school diplomas or some college, the median net worth hovers around $36,000, including home equity—63.7 percent of Americans own their home, down from a high of 69 percent in 2004. However, their net worth goes down to only $9,000–$12,000 if you don’t include home equity, and only $4,000–7,000 if you remove the value of their car.
Median Value of Assets for Households, by Age & Educational Attainment (2013)
Characteristic: Age: Less than 35 years
Net Worth: $ 6,936
Assets at Financial Institutions: $ 2,330
Stocks and Mutual Fund Shares: $ 8,000
Net Worth Excluding Own Home: $ 4,138
Characteristic: Age: 35 to 44 years
Net Worth: $ 45,740
Assets at Financial Institutions: $ 2,800
Stocks and Mutual Fund Shares: $ 16,000
Net Worth Excluding Own Home: $ 18,197
Characteristic: Age: 45 to 54 years
Net Worth: $ 100,404
Assets at Financial Institutions: $ 3,500
Stocks and Mutual Fund Shares: $ 28,000
Net Worth Excluding Own Home: $ 38,626
Characteristic: Age: 55 to 64 years
Net Worth: $ 164,498
Assets at Financial Institutions: $ 4,650
Stocks and Mutual Fund Shares: $ 50,000
Net Worth Excluding Own Home: $ 66,547
Characteristic: Age: 65 years and over
Net Worth: $ 202,950
Assets at Financial Institutions: $ 8,934
Stocks and Mutual Fund Shares: $73,300
Net Worth Excluding Own Home: $ 57,800
Characteristic: Age: 65 to 69 years
Net Worth: $ 193,833
Assets at Financial Institutions: $ 6,749
Stocks and Mutual F
und Shares: $62,000
Net Worth Excluding Own Home: $ 66,168
Characteristic: Age: 70 to 74 years
Net Worth: $ 225,390
Assets at Financial Institutions: $ 9,817
Stocks and Mutual Fund Shares: $ 75,000
Net Worth Excluding Own Home: $ 68,716
Characteristic: Age: 75 and over
Net Worth: $ 197,758
Assets at Financial Institutions: $ 10,001
Stocks and Mutual Fund Shares: $ 78,575
Net Worth Excluding Own Home: $ 46,936
Characteristic: Educational Attainment: No high school
Net Worth: $ 5,038
Assets at Financial Institutions: $ 560
Stocks and Mutual Fund Shares: $ 28,153
Net Worth Excluding Own Home: $ 1,800
Characteristic: Educational Attainment: High school only
Net Worth: $ 36,795
Assets at Financial Institutions: $ 1,500
Stocks and Mutual Fund Shares: $ 20,200
Net Worth Excluding Own Home: $ 9,380
Characteristic: Educational Attainment: Some college
Net Worth: $ 36,729
Assets at Financial Institutions: $ 1,800
Stocks and Mutual Fund Shares: $ 20,500
Net Worth Excluding Own Home: $ 12,119
Characteristic: Educational Attainment: Associate’s degree
Net Worth: $ 66,943
Assets at Financial Institutions: $ 3,000
Stocks and Mutual Fund Shares: $ 21,000
Net Worth Excluding Own Home: $ 22,905
Characteristic: Educational Attainment: Bachelor’s degree
Net Worth: $ 147,578
Assets at Financial Institutions: $ 6,900
Stocks and Mutual Fund Shares: $ 30,000
Net Worth Excluding Own Home: $ 70,300
Characteristic: Educational Attainment: Graduate degree
Net Worth: $ 325,400
Assets at Financial Institutions: $ 15,500
Stocks and Mutual Fund Shares: $ 50,000
Net Worth Excluding Own Home: $ 200,071
Source: U.S. Census Bureau, Survey of Income and Program Participation, 2014 Panel. Wave 1 (available online June 2017).