De-industrialization as a cause of growing inequality
The shift of the labor force from manufacturing to the service sector
should increase inequality in two ways:
Loss of middle income jobs:
Many manufacturing jobs, especially in durable goods manufacturing like
steel mills and automobile assembly plants, pay even high school
graduates quite well
(see operators in the list of occupations).
Many service sector jobs, on the other hand, have low wages
(see service workers and
A shift of workers out of these middle income factory jobs to low income
service sectors jobs not only lowers average earnings, but it hollows
out the middle of the income distribution, creating more inequality.
Or, as Danziger and Gottschalk
put it, "There were fewer jobs for auto workers and more jobs for hamburger
Growth of (the more unequal) service sector.
The service sector has a greater income gap between high-paying and
low-paying jobs than does manufacturing. While the service sector includes
"hamburger flippers", retail sales clerks, and parking lot attendants,
it also includes stock brokers, physicians, and professional athletes.
So there is a big gap within the service sector between good jobs and bad
Manufacturing tends to have a more equal distribution of incomes.
Factory managers don't make what stock brokers make and factory workers
make more than hamburger flippers.
So the range of incomes is smaller in manufacturing.
As the economy moves from manufacturing to service, the sector with
the most inequality grows, thus creating more inequality in the whole