[ExI] How Technology Wrecks the Middle Class

[Eugen Leitl]

http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-the-middle-class/?_r=1&&pagewanted=print

AUGUST 24, 2013, 2:35 PM

How Technology Wrecks the Middle Class

By DAVID H. AUTOR AND DAVID DORN

In the four years since the Great Recession officially ended, the
productivity of American workers — those lucky enough to have jobs — has
risen smartly. But the United States still has two million fewer jobs than
before the downturn, the unemployment rate is stuck at levels not seen since
the early 1990s and the proportion of adults who are working is four
percentage points off its peak in 2000.

This job drought has spurred pundits to wonder whether a profound employment
sickness has overtaken us. And from there, it’s only a short leap to ask
whether that illness isn’t productivity itself. Have we mechanized and
computerized ourselves into obsolescence?

Are we in danger of losing the “race against the machine,” as the M.I.T.
scholars Erik Brynjolfsson and Andrew McAfee argue in a recent book? Are we
becoming enslaved to our “robot overlords,” as the journalist Kevin Drum
warned in Mother Jones? Do “smart machines” threaten us with “long-term
misery,” as the economists Jeffrey D. Sachs and Laurence J. Kotlikoff
prophesied earlier this year? Have we reached “the end of labor,” as Noah
Smith laments in The Atlantic?

Of course, anxiety, and even hysteria, about the adverse effects of
technological change on employment have a venerable history. In the early
19th century a group of English textile artisans calling themselves the
Luddites staged a machine-trashing rebellion. Their brashness earned them a
place (rarely positive) in the lexicon, but they had legitimate reasons for
concern.

Economists have historically rejected what we call the “lump of labor”
fallacy: the supposition that an increase in labor productivity inevitably
reduces employment because there is only a finite amount of work to do. While
intuitively appealing, this idea is demonstrably false. In 1900, for example,
41 percent of the United States work force was in agriculture. By 2000, that
share had fallen to 2 percent, after the Green Revolution transformed crop
yields. But the employment-to-population ratio rose over the 20th century as
women moved from home to market, and the unemployment rate fluctuated
cyclically, with no long-term increase.

Labor-saving technological change necessarily displaces workers performing
certain tasks — that’s where the gains in productivity come from — but over
the long run, it generates new products and services that raise national
income and increase the overall demand for labor. In 1900, no one could
foresee that a century later, health care, finance, information technology,
consumer electronics, hospitality, leisure and entertainment would employ far
more workers than agriculture. Of course, as societies grow more prosperous,
citizens often choose to work shorter days, take longer vacations and retire
earlier — but that too is progress.

So if technological advances don’t threaten employment, does that mean
workers have nothing to fear from “smart machines”? Actually, no — and here’s
where the Luddites had a point. Although many 19th-century Britons benefited
from the introduction of newer and better automated looms — unskilled
laborers were hired as loom operators, and a growing middle class could now
afford mass-produced fabrics — it’s unlikely that skilled textile workers
benefited on the whole.

Fast-forward to the present. The multi-trillionfold decline in the cost of
computing since the 1970s has created enormous incentives for employers to
substitute increasingly cheap and capable computers for expensive labor.
These rapid advances — which confront us daily as we check in at airports,
order books online, pay bills on our banks’ Web sites or consult our
smartphones for driving directions — have reawakened fears that workers will
be displaced by machinery. Will this time be different?

A starting point for discussion is the observation that although computers
are ubiquitous, they cannot do everything. A computer’s ability to accomplish
a task quickly and cheaply depends upon a human programmer’s ability to write
procedures or rules that direct the machine to take the correct steps at each
contingency. Computers excel at “routine” tasks: organizing, storing,
retrieving and manipulating information, or executing exactly defined
physical movements in production processes. These tasks are most pervasive in
middle-skill jobs like bookkeeping, clerical work and repetitive production
and quality-assurance jobs.

Logically, computerization has reduced the demand for these jobs, but it has
boosted demand for workers who perform “nonroutine” tasks that complement the
automated activities. Those tasks happen to lie on opposite ends of the
occupational skill distribution.

At one end are so-called abstract tasks that require problem-solving,
intuition, persuasion and creativity. These tasks are characteristic of
professional, managerial, technical and creative occupations, like law,
medicine, science, engineering, advertising and design. People in these jobs
typically have high levels of education and analytical capability, and they
benefit from computers that facilitate the transmission, organization and
processing of information.

On the other end are so-called manual tasks, which require situational
adaptability, visual and language recognition, and in-person interaction.
Preparing a meal, driving a truck through city traffic or cleaning a hotel
room present mind-bogglingly complex challenges for computers. But they are
straightforward for humans, requiring primarily innate abilities like
dexterity, sightedness and language recognition, as well as modest training.
These workers can’t be replaced by robots, but their skills are not scarce,
so they usually make low wages.

Computerization has therefore fostered a polarization of employment, with job
growth concentrated in both the highest- and lowest-paid occupations, while
jobs in the middle have declined. Surprisingly, overall employment rates have
largely been unaffected in states and cities undergoing this rapid
polarization. Rather, as employment in routine jobs has ebbed, employment has
risen both in high-wage managerial, professional and technical occupations
and in low-wage, in-person service occupations.

So computerization is not reducing the quantity of jobs, but rather degrading
the quality of jobs for a significant subset of workers. Demand for highly
educated workers who excel in abstract tasks is robust, but the middle of the
labor market, where the routine task-intensive jobs lie, is sagging. Workers
without college education therefore concentrate in manual task-intensive jobs
— like food services, cleaning and security — which are numerous but offer
low wages, precarious job security and few prospects for upward mobility.
This bifurcation of job opportunities has contributed to the historic rise in
income inequality.

HOW can we help workers ride the wave of technological change rather than be
swamped by it? One common recommendation is that citizens should invest more
in their education. Spurred by growing demand for workers performing abstract
job tasks, the payoff for college and professional degrees has soared;
despite its formidable price tag, higher education has perhaps never been a
better investment. But it is far from a comprehensive solution to our labor
market problems. Not all high school graduates — let alone displaced mid- and
late-career workers — are academically or temperamentally prepared to pursue
a four-year college degree. Only 40 percent of Americans enroll in a
four-year college after graduating from high school, and more than 30 percent
of those who enroll do not complete the degree within eight years.

The good news, however, is that middle-education, middle-wage jobs are not
slated to disappear completely. While many middle-skill jobs are susceptible
to automation, others demand a mixture of tasks that take advantage of human
flexibility. To take one prominent example, medical paraprofessional jobs —
radiology technician, phlebotomist, nurse technician — are a rapidly growing
category of relatively well-paid, middle-skill occupations. While these
paraprofessions do not typically require a four-year college degree, they do
demand some postsecondary vocational training.

These middle-skill jobs will persist, and potentially grow, because they
involve tasks that cannot readily be unbundled without a substantial drop in
quality. Consider, for example, the frustration of calling a software firm
for technical support, only to discover that the technician knows nothing
more than the standard answers shown on his or her computer screen — that is,
the technician is a mouthpiece reading from a script, not a problem-solver.
This is not generally a productive form of work organization because it fails
to harness the complementarities between technical and interpersonal skills.
Simply put, the quality of a service within any occupation will improve when
a worker combines routine (technical) and nonroutine (flexible) tasks.

Following this logic, we predict that the middle-skill jobs that survive will
combine routine technical tasks with abstract and manual tasks in which
workers have a comparative advantage — interpersonal interaction,
adaptability and problem-solving. Along with medical paraprofessionals, this
category includes numerous jobs for people in the skilled trades and repair:
plumbers; builders; electricians; heating, ventilation and air-conditioning
installers; automotive technicians; customer-service representatives; and
even clerical workers who are required to do more than type and file. Indeed,
even as formerly middle-skill occupations are being “deskilled,” or stripped
of their routine technical tasks (brokering stocks, for example), other
formerly high-end occupations are becoming accessible to workers with less
esoteric technical mastery (for example, the work of the nurse practitioner,
who increasingly diagnoses illness and prescribes drugs in lieu of a
physician). Lawrence F. Katz, a labor economist at Harvard, memorably called
those who fruitfully combine the foundational skills of a high school
education with specific vocational skills the “new artisans.”

The outlook for workers who haven’t finished college is uncertain, but not
devoid of hope. There will be job opportunities in middle-skill jobs, but not
in the traditional blue-collar production and white-collar office jobs of the
past. Rather, we expect to see growing employment among the ranks of the “new
artisans”: licensed practical nurses and medical assistants; teachers, tutors
and learning guides at all educational levels; kitchen designers,
construction supervisors and skilled tradespeople of every variety; expert
repair and support technicians; and the many people who offer personal
training and assistance, like physical therapists, personal trainers, coaches
and guides. These workers will adeptly combine technical skills with
interpersonal interaction, flexibility and adaptability to offer services
that are uniquely human.

David H. Autor is a professor of economics at the Massachusetts Institute of
Technology. David Dorn is an assistant professor of economics at the Center
for Monetary and Financial Studies in Madrid.