Hollowing Out What?

Hollowing out refers to a country’s manufacturing industry deteriorating as firms choose low-cost facilities abroad. Eliminating this employment has benefited the affluent, weakened the middle class, and increased working-class and lower-class households.

Knowing Hollowing Out

Outsourcing manufacturing employment to lower-wage nations like China and Bangladesh has led to the decline of many major economies in recent decades. Under 12 million U.S. manufacturing jobs existed in 2020, down from 19 million in 1979.

Other advanced economies have seen a similar trend. Manufacturing employment in Japan has fallen since reaching over 28% in the 1970s. In 2012, 16.6% of people worked in the sector, and nothing has changed. This has disproportionately affected urban and rural populations that relied on local factories for employment.

Not all economists agree that exporting production and job losses harm society overall. Some believe it offers a chance for the domestic economy to shift towards high-skill, high-wage industries like product design and marketing. Some say customers benefit from buying things created elsewhere due to reduced pricing.

Moravec Paradox

Robots and other labor-saving technology may significantly reduce middle-class jobs. The phenomenon is known as Moravec’s paradox.

In the 1980s, AI specialists learned that robots find hard things easy and simple things hard. One AI researcher, Hans Moravec, remarked, “It is comparatively easy to make computers exhibit adult-level performance on intelligence tests or playing checkers, but difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility.”

You would use a computer to beat Magnus Carlsen, the global chess champion. Choose a person to clean the chess pieces after the game.

Data Hollowing

Income inequality is a primary concern worldwide, including in the U.S. Numerous studies show that middle-class disposable incomes decrease as the wealthy become wealthier.

According to the Pew Research Center, middle-class families lost 62% of aggregate income from 1970 to 2018, while upper-income households gained 29% to 48%. This has reduced the American middle class from 61% in 1971 to 51% in 2019.

The Pew Research Center states that the middle class is shrinking despite the complex dynamics. Some households fell into lower income brackets, while others rose to higher ones.

The OECD reached a similar conclusion across the globe. From the mid-1980s to the mid-2010s, OECD nations’ middle incomes rose by a third less than the wealthiest 10%, including labor market changes and rising living costs.

Why did the middle-class fall?

Labor-saving technology, outsourcing, and growing education, healthcare, and housing prices have all contributed to the middle class’s squeeze.

How Much Has the Middle-Class Shrunk?

Several studies have examined the dwindling middle class. Results vary by nation, era, and research criteria. The Pew Research Center reported in 2020 that middle-income American people dropped from 61% in 1971 to 51% in 2019. In 2019, the OECD reported that middle-income households earning 75% to 200% of the median national income fell from 64% in the mid-1980s to 61% in the mid-2010s.

How does a shrinking middle class affect the economy?

There is evidence that a decreasing middle class negatively impacts economic growth. Spending by this segment has historically driven demand for goods and services and kept the economy going.

Conclusion

• As socioeconomic inequality increases, middle-class manufacturing jobs and spending power evaporate.
• This increases working-class and lower-class households and wealth concentration among the rich.
• Economic experts attribute this to outsourcing, labor-saving technology, and demographic shifts.