As explained in today’s online NY Times:
As the financial crisis wanes, economists are shifting their attention toward a more subtle, possibly more upsetting crisis in the United States: the significant increase in income inequality.
Now most of the article is bunk because the “economists” are clueless about the causes of the problem and thus clueless about solutions. But the problem is real, and the reason is because there is an oversupply of labor relative to capital. The oversupply of labor is caused by:
1. Globalization of the labor markets. Not only is all manufacturing outsourced (with China being the most prominent country), lots of jobs that need to be done in this country are being given to a seemingly infinite supply of immigrants. All of the corporate IT departments in New York City are predominantly Indian.
2. Increasing economic importance of industries where the rewards are winner-take-all, enabled by new technologies. (For example, the world only needs one desktop operating system, and the guy who winds up owning the profits from that monopoly becomes a multi-billionaire.)
The coming robot revolution will make these problems a lot worse. Robots theoretically should improve our lives by removing the drudgery of manual labor, but unless we can think of new ways to distribute the goods and services created by the robot economy, the result will be increased income inequality far beyond what we are seeing now.