The rise of machines is in part to blame for growing income inequality, according to Paul Krugman.
The Nobel Prize-winning economist and New York Times columnist said in an interview with Business Insider that companies’ preference for investing in machines instead of workers is partially to blame for income inequality in the 21st century. That’s a shift from the last two decades of the 20th century when income inequality was mostly about the differences between high-skill and low-skill workers.
“Technology has shifted in a way that really favors capital over labor,” Krugman said. “That makes it possible to replace people with machines.”
Since 1960, income inequality has jumped in the U.S. by more than in any other Western country, according to a November analysis from economics professors.
Even while income inequality soars, workers aren’t catching any breaks. From the start of the economic recovery until June 2011, business spending on equipment and software increased 26 percent, while spending on labor grew by 2 percent, according to The New York Times. In developed countries around the world, millions of middle-class jobs have been lost to technology, the Associated Press reports.
And while companies are hiring fewer workers in favor of more machines, they’re squeezing more out of the workers that do get jobs. S&P 500 companies made $420,000 per worker in 2011, a full ninth more than in 2007.