THE PROBLEM OF LABOR-MARKET “RESETS:”

Circa 2013, I fear many of the pending reset deals in labor markets. Insiders are often treated quite well, but the next generation of outsiders may never reattain such privileged positions. The average doesn’t change very rapidly, because most of the employed still are insiders. Still, we can see that the reset may be a doozy. After all, labor’s share as a percentage of gdp has been falling in many of the advanced economies around the world.

Even putting cyclicality aside, Greek and Italian youth worry about exactly this problem. Any aspiring academic in the United States should worry about the reset too, with or without MOOCs. Especially in the humanities, the old privileged positions simply aren’t being replicated because for most schools those positions no longer make economic sense. At the same time, few if any tenured professors are taking significant real wage cuts.

Resets show up more quickly in some sectors than others, most of all they come quickly when buyers and sellers have only sporadic and perhaps even anonymous contact with each other. In other words, the reset comes more slowly for the mistress than for the street prostitute. And when you see youth losing relative ground in labor markets, that is another signal that you should be worrying about resets.

Fear the reset. The world will continue to produce much more value, and much more gdp, but who will capture that value is already changing dramatically and will continue to do so.

Ironically, young voters tend to support policies that, in actual application, benefit insiders at their expense.