Angus Deaton Discusses Income InequalityThe Wall Street Journal. What sort of jobs “in the middle” have been lost and how can they be replaced? If they aren’t replaced what will happen to people? Angus Deaton says that “inequality is a marker of success.” He also says that “high-school education...are the people who just have not benefited...” What can policy makers do to aid these people without fostering a permanent underclass dependent on government for their survival?

The jobs that are lost are skilled positions where labor can be outsourced; policymakers can focus on preparing people for jobs in America, as well as protecting our nation from outsourcing in a variety of ways.
The jobs that are lost, Angus Deaton says, are those in the middle. He means jobs like coding and manufacturing. They aren't jobs where people are being paid minimum wage. They're traditionally jobs that come with benefits and a living wage that can help a person support a family.
To replace the jobs, either America has to create more jobs or make it easier for people to fill the jobs that already exist. This means either creating new industries or providing a climate that encourages reshoring—this can happen in the form of anything from tariffs to tax breaks to foreign direct investment. Another option is increasing access to education and job training for people without a job. 
He points out that people are being left behind because good jobs that were once available to those with only a high school education are now gone. They were factory and manufacturing jobs that are now being performed overseas in different countries. The inability to get a job with a high school diploma that can support a good standard of living has led to increased rates of substance abuse and early mortality among middle-class white people.
Deaton also points out that inequality can be a good thing when it is synonymous with success; when people work hard and successfully innovate, disproportionate incomes often result. People are inspired to create things that others love and then they're rewarded for that. But inequality can also have a negative effect on society that should be addressed through policy.
To speak to your second point about welfare, Deaton points out that Europe is experiencing similar inequality issues without as steep an increase in mortality and substance abuse. He posits that this difference might actually stem from a stronger social safety net and rules that closely monitor what painkillers are prescribed to people. America could institute similar policies to address the problems of the middle class. Another option that could help would be finding industries that are underserved and need help and then funding education for those industries and helping high school graduates obtain that education.