A Bit More on Technology, Jobs, and Wages

I couldn’t jam everything I’ve been thinking about these questions about technology, work and wages into a single piece, so just a few (tantalizing) bullet points on other dimensions of what I think is a fascinating line of inquiry.

–A lot of how people think about these issues is impressionistic, based on amazing advances in consumer electronics.  The absolutely remarkable things that this small, thin smartphone in my pocket (the quite awesome Samsung Galaxy 3, fyi) can do must be economically transformative, right?  That’s certainly the Tom Friedman view of the world, but it’s largely assertion that doesn’t always match up with the facts.

–That is, the argument that technology is driving wage or employment trends is a lot more elusive than you’d think.  As Larry Mishel points out here, the wage trends don’t consistently move the way the tech story predicts.  Research associated with economist David Autor initially made a compelling case that technology was displacing workers in the middle of the occupation scale.  But while that theory roughly fit the data in the 1990s (see first two figures here), it doesn’t work in the 1980s or, more importantly given the subsequent dispersion of technology, the 2000s (see Autor’s own Figure 1 here).

–There’s newer research suggesting that the demand for skilled workers has actually decelerated in recent years. Beaudry, Green, and Sand present an exhaustive and rigorous statistical analysis of skill demands over the last three decades.  They look at tasks, jobs, and earnings, and find that the demand for skilled workers “underwent a reversal” around 2000.  The growth in the share of high-skill, high “cognition” (using Autor’s tasks framework), and high-wage occupations stagnated in the 2000s, where the share of college grads kept growing.  “That means,” as Green told me, “that the probability that a newly graduating BA will get one of these jobs is declining sharply.”  And as more highly skilled workers are displaced, they moved down the job scale, hurting the job prospects of less-skilled workers who now have to compete with those “…displaced from cognitive occupations.”

All of which is highly inconsistent with the idea that underlies all of this tech stuff: we’re surrounded by amazing devices with massive informational and communications capacity.  Surely, their ascendency has changed skill demands, wage trends, and reduced the employability of many.

In fact, there’s of course some truth to that, but it’s highly dynamic—like the wage trends, there’s evidence for the tech story in some periods but not in others—and it’s but one factor in play.  After all, we achieved full employment in the latter 1990s, including rising wages for the low- and middle-wage workers at a time when tech was booming (in fact, bubbling) and the skills of the workforce were little different than they are today.

Two more points.

First, while much of the above argues for assigning a lesser role to tech in driving economic developments, there’s also an important way in which economists understate the impact of tech on our lives: consumer surplus.  I don’t like to depend on anecdotes, but they abound in this space and I can’t imagine how I could be wrong about this.  EG, I just met this couple with a newly adopted (adorable) 10-year old girl from China.  Of course, she speaks Mandarin, but they’ve been successfully using Google translator, which is, of course, essentially free.  (Yes, there’s bundling and ads and internet costs, but I’m counting them in my assumptions re consumer surplus.)  I guarantee you they’d pay a ton for this translator, but they don’t have to.

To be clear, I’m not saying, as some do, that this somehow replaces wage and income stagnation.  It does not.  But the proliferation of consumer technology has made us better off in ways we don’t always count.

Second, why am I going on about all this—what are its policy implications?

Well, you know my methods, Watson.  It’s precisely because of the policy implications.  Simply put, the tech diagnosis leads almost exclusively to the education prescription.  Now, the problem with that is not more education, which is of course essential, especially for those locked out by inequality/opportunity barriers.  It’s the “exclusively” part.  The tech diagnosis shifts the emphasis from macro to micro, from institutional power imbalances to individual shortcomings, from demand-side to supply-side, from financial market oversight to “the problems with our schools,” even from stimulus to deficits.

Again, that doesn’t mean the tech story is wholly wrong by any means, though its advocates tend not to deal with challenges like those I’ve ticked through above.  But it is clearly incomplete and that has serious, negative policy implications.

via:http://jaredbernsteinblog.com/a-bit-more-on-technology-jobs-and-wages/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JaredBernstein+%28Jared+Bernstein%29