What does an America increasingly without middle-skill, middle-wage jobs look like? That America, according to economist Tyler Cowen in his new book Average Is Over, will look like a "hyper-meritocracy," where 10% to 15% of the population lead fantastic, interesting lives, and the rest will be relegated to shantytowns; places with cheap housing, lousy public services, but perhaps free Internet and lots of canned beans to eat.

Cowen argues that U.S. employers took on more middle-wage workers than they needed or could afford.

That is changing with many displaced workers being forced to accept new jobs at lower wages, and legions of others simply dropping out of the workforce.

Further, he says about three quarters of the jobs created in the United States since the great recession pay only a bit more than minimum wage.

Still, the United States has more millionaires and billionaires than any country ever, and we continue to mint them.

In the wake of this growing economic inequality, falling wages, and a declining labor force participation will be two Americas Cowen opines.

At the top will be self-motivating, technologically savvy, high achievers, who know how to work with - and around - smart machines, and can manage and organize others.

Then there will be everyone else, crowding into states such as Texas with zones set aside for cheap living in makeshift structures, "similar to the better dwellings you might find in a Rio de Janeiro favela," he writes. Poor Americans will have to "reshape their tastes" and adjust to living more like those in third world countries.

"It will bring more wealthy people than ever before, but also more poor people, including people who do not always have access to basic public services. Rather than balancing our budget with higher taxes or lower benefits, we will allow the real wages of many workers to fall and thus we will allow the creation of a new underclass."

In this two-tiered America high earners take ever more advantage of machine intelligence while low earners who haven’t committed to learning, to making the most of new technologies, have poor prospects.

"The advances of genius machines come in an uneven and staggered fashion," he writes. "For the foreseeable future, you'll always have to be learning something, reprogramming something, downloading new software, and pushing some buttons, all to have the sometimes dubious privilege of working with these new technological wonders."

Of course it's always easier to point out problems than it is to offer solutions. And for all of Cowen's dire predictions, he doesn't really offer any antidotes to this increasing polarization.

Quite to the contrary in fact. His final chapter is called, "A New Social Contract?"

"We will move from a society based on the pretense that everyone is given an okay standard of living to a society in which people are expected to fend for themselves much more than they do now." The top 10% will have it better than ever. The majority will suffer stagnant or falling wages but have more opportunities for cheap education and cheap fun. The rest will fall by the wayside, with government less and less able to take care of them. It will be dazzling at the top, and 'meh' to miserable for the rest."

Yikes. Is Cowen's vision of a permanent underclass the way we are headed? If so, how can we prevent it?

Tags: News, Tyler Cowen, Great Recession, Hyper-meritocracy, The disappearing middle class, The permanent underclass, Middle-wage workers, Shantytowns