In 2012 US vice president Joe Biden warned against continuing to sacrifice the country’s middle class in order to consolidate the wealth of the richest in society.
This hollowing out of middle-skilled jobs and wage stagnation has been taking place in the US for decades – with the median hourly wage in the US barely changed, growing by just 0.1 percent per year between 1973 and 2011.
This standstill in wages and erosion of mid-skilled jobs has, in the eyes of a number of economists, been fuelled by the increased use of information technology in the workplace.
MIT economist Erik Brynjolfsson refers to the trend as the Great Decoupling: “Economic abundance, as exemplified by GDP and productivity, has remained on an upward trajectory, but the income and job prospects for typical workers have faltered”. He points to technology as the force that is driving this trend in the US and in European countries.
Professor Wojciech Kopczuk of Columbia University, an economist who has written extensively on the topic of income and wealth inequality, said we are witnessing a polarization of the labor force.
“The lower part of the income distribution becomes more condensed, the middle becomes closer to the bottom and the top runs away,” he said.
“I think this has a lot to do with technology because we’re talking about a lot of workers who are not sufficiently skilled to take advantage of the technology.”
The extent to which this trend will continue depends on who you listen to. Predictions as to the extent that automation will continue to disrupt job markets vary: from half of current US jobs – supermarket cashiers and shop assistants, waiters, truck drivers and office admins – being automated in the next couple of decades to overall demand for human labour remaining resistant to technological change.
However, at least some short-term upheaval is on the cards – as businesses find ways of turning advances in fields such as natural language processing, computer vision and big data analytics into systems that can drive vehicles, talk to shoppers and handle office paperwork.
The effects of these changes won’t necessarily be “masses losing their jobs” said Kopczuk but increasing numbers of middle and low-skilled workers could see their wages “not keeping up with the overall economy” as technology makes their skills less valuable.
“They are replaceable in the sense that anybody who will put eight hours in will do the same type of job that they can do, because they are not taking advantage of this connection to technology.”
Meanwhile demand for high-skilled workers who can exploit the information technology at the heart of modern economies should continue to be handsomely rewarded.
“As the economy is growing everybody’s wages will be growing – it’s just skilled individuals are going to be making much more than unskilled individuals.”
The argument that automation will worsen inequality is sometimes rejected on the grounds that business owners won’t act against their own interests. The reasoning goes that if business owners impoverish their workers they undermine those workers’ ability to buy goods and services from that business.
However, Kopczuk says this argument is undercut by there being no simple mechanism for employers to collude to keep workers employed and well-paid in this way.
“It’s a very old argument. I think I would associate it with Henry Ford, 100 years ago. You pay your workers so that they can afford to buy your cars.”
The problem with that argument is twofold, he said, it requires employers to overpay workers and there is no guarantee that workers will use this additional wealth to buy that same employer’s goods.
“So you’ll be overpaying them to afford a lot of other things and not just your own. The economics of it doesn’t work unless you think of somehow everybody coordinating. All business owners coordinating to overpay so that everybody benefits. But that coordination is virtually impossible without government intervention.”
A key issue in Kopczuk’s mind is how to prepare people for these future job shocks, where skills people have spent a lifetime learning are no longer valued.
“These kind of structural problems are serious. We have empirical evidence of the implications of factory closures in small towns in the 1980s and the implications that it had for workers that lived there and they are very dire.”
To resist such shifts in demand for skills, Kopczuk sees the need to educate people in a way that helps them adapt to new roles more easily and that is less-oriented to a specific line of work.
“There’s definitely a strong argument for an education that’s broader. That is not one job specific. If you have skills for one particular job and the job goes away then you don’t have the ability to switch.”
Kopczuk is not alone in seeing a need to refocus education. Brynjolfsson and Andrew Ng, the chief scientist for Chinese search giant Baidu and co-founder of the open online course service Coursera, have expressed similar sentiments.
Brynjolfsson sees the need to look beyond Victorian obsessions with reading, writing and arithmetic to fostering skills that are tricky for computers, such as as ideation (the creation of new ideas), large-frame pattern recognition, and complex communication — as well as making it easier for people to continue to learn throughout their lives.
“From the point of view of the employee you want skills for the job you’re doing but you should also want skills that will serve you 30 years from now as well,” said Kopczuk.
Read more on automation and AI…
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- Chinese factory replaces 90% of humans with robots, production soars
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