Technology and the Disruption of Higher Education (part 2)

September 17, 2019

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Henry C. Lucas, Jr. introduces himself as “a business school faculty member who has taught full time in the business schools at Stanford University, New York University, and the University of Maryland.” In the latter institution, he played a leading role in the development of an online MBA program.

Lucas believes that new technology “will prove transformational for universities that adopt it and disruptive for those that resist.” He believes especially in the transformational potential of two educational innovations: blended classes and online classes.

Blended classes

A blended class has two parts. The “synchronous” part consists of the time students spend together in class, but that time is less than in a traditional class. Class time is reduced in order to make up for the time students spend online watching videos and exploring other online materials. That’s the “asynchronous” part, since individual students can do that on their own.

Experience has shown that several short videos can be at least as effective as a traditional lecture. Much of the material normally covered in lecture moves online, and class time can be devoted to discussion and other interactive activities that students hopefully find more engaging. (This is similar to the “flipped classroom,” but there the class time remains the same.)

Lucas would like to see the traditional classroom lecture disappear, but not the direct interaction between professor and student. “I feel strongly that interaction between faculty and students in a live setting, which may be a videoconferencing system or a physical meeting place, is an essential part of a high-quality education.”

A good blended class can help promote problem-solving and critical thinking, as opposed to mere retention of lecture material. But it also places more responsibility on students to be active learners, which not all students appreciate.

Online classes

Lucas was originally opposed to fully online classes because many of the earliest ones seemed to put profit before quality. They suffered from two problems:

The first was the lack of interaction between faculty and students. For the most part, any interaction had to occur on discussion boards or via e-mail. (I talked to one student in an online program who had never seen her instructor even on a video.) The second problem with online education is that it has long been associated with for-profit colleges like the University of Phoenix or Strayer University.

Lucas is especially critical of for-profit schools that charge higher tuition than public colleges and enroll mainly low-income students who can attend only by running up excessive debt. He reports that their students are only 13% of the college population but account for almost half of the student loan defaults.

More recently, Lucas has become receptive to incorporating online instruction into regular academic programs, especially at the graduate level. Some of the need for student-faculty interaction can be met through videoconferencing, for which specialized software now exists. If the number of participants is reasonably small at any one time, the instructor and each student can have a live window on the screen. Lucas says that each time he teaches an online MBA course using the Adobe Connect software, “the class comes closer to what happens in a physical, in-person class.”

When he wrote this book, published in 2016, few good online courses were available for undergraduate credit. However, Arizona State University had just announced an online freshman-year curriculum with courses designed by ASU faculty.  Students who completed it could then apply for admission as sophomores.

For students, online classes offer the flexibility of completing a college requirement without being physically present on campus. Lucas doesn’t deny the benefits of the traditional campus experience, but he doesn’t think that it works for students of all ages and situations. For institutions, online classes enable them to reach new markets (but also to lose market share if other colleges can do them better).

Different colleges may choose to be producers of online courses, consumers of online courses produced by others, or both. Private companies can also create courses or assist in their creation. When the University of Maryland developed its online MBA, it “partnered with a firm that helps schools develop online programs, [which] offered to market the program, help applicants complete their application, provide instructional design and multimedia support, provide student counseling, and ensure that 24-7 technical support would be available to faculty and students.”

Another possible use of online courses is to help provide specific skills for the non-college population. “It should be possible to combine step-by-step instructions, as YouTube does, with an overview and concepts provided by a MOOC [Massive Open Online Course] to prepare people for skilled-labor positions rather than college.”

A company called Coursera is the leading developer of online courses, in partnership with a number of universities and businesses. A quick look at their website turned up a number of master’s programs and certificate programs, but only one bachelor’s degree program, in computer science.

In general, Lucas is optimistic about the impact of new technologies on the quality and availability of education:

Now, after I’ve had some experience with MOOCs and blended and online classes, I am even more convinced that these new approaches to instruction will produce a high-quality outcome that equals or exceeds traditional approaches to education. Furthermore, the technology makes a high-quality education available to many more people than the traditional approach, which requires a physical presence on campus.

Lower costs?

Assuming that new technologies can help deliver higher education to more students, can they also help make such an expansion of higher education more affordable? This is a secondary concern for Lucas, but it could be an important consideration for public policy.

For blended classes, any cost savings for students or colleges should be small. Students still have to live on campus or commute to classes. Faculty spend less time preparing lectures, but more time planning other class activities, creating online materials, or at least organizing their use. Shorter classes mean that the same building can be used for more classes, but not necessarily that the same instructor can be used for more courses.

Large online courses have greater potential for cost savings:

[T]hey are highly scalable and offer the possibility for thousands of people who could never attend a major university to take a course offered by a highly regarded professor. Supporters of MOOCs view them as a way to raise educational levels around the world. Second, there are those who believe that MOOCs may be a first step at reducing college costs because so many students can access the work of a single faculty member; the marginal cost of adding one more student is very low.

Since a course can reach additional students with little added cost, programs can be priced below on-campus tuition. Students can more easily avoid on-campus living expenses and reconcile further study with current employment.

However, these advantages have to be weighed against the initial costs of creating high-quality online materials, which can be substantial. Colleges will need either to create the course content themselves, or else purchase or license them from others. (Colleges that do neither may be at a disadvantage in the competitive marketplace.) In theory, the production of more materials and the low marginal cost of streaming them to more learners ought to bring costs down over time, but Lucas thinks it’s too early to tell.

“The bottom line is that technology-enhanced teaching can produce higher-quality instruction, but it is not going to dramatically reduce the cost of college or generate considerable new revenue in the next three to five years for high-quality programs.” Three to five years is a very short run, of course, especially when three years have already elapsed since he wrote that. The longer-run outlook is uncertain, but I think more promising.

 


Technology and the Disruption of Higher Education

September 13, 2019

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Henry C. Lucas, Jr. Technology and the Disruption of Higher Education. Hackensack, New Jersey: World Scientific, 2016.

My interest in this book grew out of my reflections on the previous book, Frey’s The Technology TrapSeveral of my conclusions were particularly relevant to education:

  1. The jobs that are most vulnerable to being replaced by new technologies are manufacturing and low-wage service jobs.
  2. The jobs most likely to be created or enhanced by technology will be in skilled services.
  3. The economic importance of education is increasing, as the pay gap widens between workers with different levels of education.
  4. Public investments in education can contribute to a thriving economy in several ways: creating good jobs in education, qualifying workers for good jobs generally, and strengthening democracy because successful workers are more politically active and less alienated.

These conclusions lead to the next question: Is an expansion of education feasible? Can we do all these things at once–provide more education to more people, maintain and even improve educational quality, and keep the costs from becoming prohibitive?

Problems of higher education

The story of higher education in the United States is a story of many successes but also many challenges. One third of the adult population now has a bachelor’s degree or higher. That’s better than ever before, but still only a minority.

The most obvious problem is the high cost of college, which has been rising much faster than the general rate of inflation. “The Bureau of Labor Statistics reports that from 1978 to 2014, the price index for college tuition rose nearly 1200%, whereas consumer prices rose less than 300%.” David Brooks has just written a column criticizing the “exclusive meritocracy” of “super-elite” universities, and warning that “if the country doesn’t radically expand its institutions and open access to its bounty, the U.S. will continue to rip apart.”

Higher education exists in a kind of gray area between a luxury and a necessity. Going to college is more common than buying a yacht, but less common than buying an automobile or obtaining health insurance. State support for higher education has been falling for some time, especially since the last recession. Lucas reports, “At an aggregate level, in 2013 states were spending 28% less per student on higher education than in 2008.”

Many colleges are in a financial squeeze, experiencing pressure to cut costs, but also under pressure to compete for the students who can afford to pay a high cost. Often they attract them by building fancier buildings and offering new amenities and support services that keep costs high. Lucas found that in nonprofit colleges, “non-faculty professional staff grew at sixteen times the rate of tenured and tenure-track faculty from 1975 to 2011!”

Those who do go to college graduate with more debt than ever before. “Some economists worry that it is a drag on the economy because they fear that recent graduates are not buying things like houses because they are too concerned with paying down their college debts.” Lucas sees an even bigger problem in the college dropouts who take on debt without finishing their degrees. They usually end up earning no more than other high school grads.

In addition to cost concerns, critics complain that undergraduates are being educationally shortchanged, as colleges save money by increasing the size of classes and relying on more part-time instructors and non-PhDs to teach them. According to Robert Samuels in Why Public Education Should Be Free, only about one-third of undergraduate classes are taught by traditional tenure-track faculty. Another common complaint is that too many classes place higher value on student recall of lecture material than on critical thinking skills. According to Lucas, “The Internet has not eliminated the need for people to have a knowledge base of facts, but it may have changed the nature of what is in that base and the amount of factual information that is necessary to recall on demand.”

The technological potential

Lucas sees several positive potentials of new technologies:

  • to get students “more actively engaged in their education rather than passively watching an instructor lecture”
  • to “reach students who are unable to a come to a physical campus”
  • to provide “instruction for underserved populations and countries”

Lucas is hardly a naive technology enthusiast, however. He devotes considerable attention to the challenges involved in maintaining quality and controlling costs as the technological revolution proceeds. Those will be the subjects of the next post.

Continued


The Technology Trap (part 4)

August 12, 2019

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In the last section of The Technology Trap, Carl Frey looks toward the future, trying to anticipate further impacts of technology on jobs, and suggesting policy measures to ease the transition for affected workers.

Smarter machines

Artificial intelligence is enabling machines to do even more of what humans used to do. “The fundamental difference is that instead of automating tasks by programming a set of instructions, we can now program computers to ‘learn’ from samples of data or ‘experience.’ When the rules of a task are unknown, we can apply statistics and inductive reasoning to let the machine learn by itself.” When a computer beat the world’s best player of the game Go in 2016, it did it not just by following a fixed set of rules, but by inferring its own rules from a series of trials using a large data set.

The range of tasks that smart machines can perform is broadening to include jobs like driving a truck, answering phone calls, picking up and packing products, taking consumer orders and accepting payments.

Still, there remain things that humans do better:

Even if we assume that algorithms at some point will be able to effectively reproduce human social intelligence in basic texts, many jobs center on personal relationships and complex interpersonal communication. Computer programmers consult with managers or clients to clarify intent, identify problems, and suggest changes. Nurses work with patients, families, or communities to design and implement programs to improve overall health. Fund-raisers identify potential donors and build relationships with them. Family therapists counsel clients on unsatisfactory relationships. Astronomers build research collaborations and present their findings in conferences. These tasks are all way beyond the competence of computers.

In 2013, the author and his Oxford colleague Michael Osborne reported on their detailed analysis of tasks and their estimate of the automation possibilities for 702 occupations covering 97% of the American workforce. They found the greatest risk of automation in the occupational categories of office and administrative support, production, transport and logistics, food preparation, and retail jobs. Overall, they classified 47% of jobs as vulnerable to automation.

Other research has yielded somewhat different percentages. But one general principle that has emerged from such research is that a job’s probability of automation varies inversely with the education it requires and the wages it pays. A study by the President’s Council of Economic Advisers found that “83 percent of workers in occupations that paid less than $20 an hour were at high risk of being replaced, while the corresponding figure for workers in occupations that paid more than $40 per hour was only 4 percent.” That could be good news, as long as we can keep expanding the good jobs and help workers acquire the skills they need to do them.

Unemployment, leisure, or new jobs?

Frey describes a “widespread dystopian belief” that technology will create a future of mass unemployment and low wages. Others envision a utopian future in which technology enables us to produce so much so easily that we can work very little and live lives of affluent leisure. Neither mass unemployment nor lives of leisure are evident in today’s society, and Frey doesn’t expect them. Instead people will have jobs for the foreseeable future, both because there remain things people do better than machines, and because people generally choose to take the benefits of high productivity in the form of more goods and services rather than more leisure.

Although new technologies have been replacing more middle-class jobs than they have been creating, Frey suggests that this may be just a “first-order effect.” He believes that the greatest gains in productivity and job creation are yet to come. That reinforces my belief that whether a new technology turns out to be replacing or enabling depends on how we use it in a social context. Replacing existing jobs may happen first because it’s easier than creating new jobs and upgrading skills, which requires some social reorganization. Frey points out that “it took roughly four decades for electricity to appear in the productivity statistics, after the construction of Thomas Edison’s first power station in 1882….[H]arnessing the mysterious force of electricity required a complete reorganization of the factory.” And of society, I would add, considering the changes required to turn workers and their families into affluent consumers of the products coming off the assembly lines.

Public policy

In the end, Frey remains optimistic about technology, but concerned about the divisions between current winners and losers and their immediate effects on society. Mitigating those effects is the main challenge for public policy. Among his recommendations:

  • Investments in education, especially early childhood education to offset the disadvantages of children from low-income, low-education families; such education pays for itself in better health outcomes, higher productivity and reduced crime
  • Wage insurance, especially for middle-aged workers who lose good jobs
  • Expanded tax credits to supplement low wages
  • Easing of licensing requirements that make it too difficult to move into new occupations
  • Vouchers to pay for moving to areas with better job opportunities
  • More affordable housing in thriving communities, supported by an easing of zoning restrictions like minimum lot sizes

I see a role for government not only in helping disadvantaged workers, but in creating economic demand for the good jobs they need. If the manufacturing sector is no longer expanding, and if the low-wage service sector is most vulnerable to the next wave of automation, then that leaves the skilled services as the most likely frontier of job creation. But skilled services like education, health care, counseling, mental health services and quality child care are also what people need to enhance their human capital and qualify for good jobs. Public investment in those services pays off in two ways–better jobs and more qualified workers to do them. It also strengthens democracy because successful workers are more politically active and less alienated.

Why public investment rather than private investment? Because the families most in need of such services often cannot afford them. And because employers have only limited incentive to develop the human capital of their own workers. Employers own the machines they buy, but not the workers they hire. The workers can take their enhanced human capital and go to work for someone else. For that reason, human capital is a public good that cannot be entirely privatized. A healthy, well-educated population is good for all of us. So, of course, are other public goods like a solid infrastructure and renewable energy.

But can the country afford new investments in health or education? If the government seems tapped out, it’s not because the country is poorer than it used to be, but because the wealth and income are so unevenly distributed, and those who have them support such low taxes on themselves. From the Reagan administration on, the tax cuts were supposed to stimulate the economy from the top down, by making more money available for private investment. The results have been disappointing, with slower economic growth than in the mid-twentieth century, when taxes were higher. Now we should consider the possibility that we can grow the economy faster with high domestic spending than with low taxes, if the spending is concentrated on human capital development and needed public goods. In order to make human services affordable for consumers and for the taxpayers, they need to be cost-effective. Providers will need to apply new technologies not to replace labor–which would defeat the purpose of creating jobs–but to enable labor to serve clients as efficiently as possible. In the predominantly service economy, a productivity revolution in skilled services is the key to fulfilling the positive potential of information technology.

Advocates of new government spending have their work cut out for them to mobilize public support. They need to convince the less educated half of the population that they will receive more benefits than costs, since their incomes are too low to be targeted for tax increases. If they can also convince the more educated middle class to vote in the public interest, they can achieve a democratic majority. As Frey says, “Redistributive taxing and spending depend on whether the middle-income voters feel an affinity with people with lower incomes.”

Although my interpretations and policy preferences differ from Frey’s in a few respects, I found this book enormously helpful in thinking through the relationship between technology and employment. I highly recommend it.


The Technology Trap (part 3)

August 11, 2019

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Having described an era in which the middle class expanded and more good jobs were created than destroyed, Frey turns to what he calls the “Great Reversal” in the period since 1980. In recent decades, new technologies have done more to replace workers than enable them, resulting in a shrinking middle class.

The computer revolution

The main difference between the age of automation and the previous era of mechanization is that the automated machine can replace the machine operator. “The great reversal…is in large part a consequence of computers making the skills of machine-tending workers obsolete.”

The most routine forms of work are most easily automated, and that includes some white-collar jobs like mortgage underwriter. Many jobs that paid enough to put their workers into the middle class are routine enough to be reduced to a computer program.

Many other kinds of jobs, however, are harder to automate:

[T]here are many tasks humans are able to perform intuitively but that are hard to automate because we struggle to define rules that describe them. For activities that demand creative thinking, problem solving, judgment, and common sense, we understand the skills only tacitly.

For many of the more creative jobs, computers complement human skills but don’t replace them.

Furthermore, humans have perceptual and manipulative abilities that allow even an unskilled worker to do things that machines have trouble with, such as “distinguishing a pot that is dirty and needs to be cleaned from a pot holding a plant.”

Consider the impact of computer technology on three types of workers:

  1. A highly educated professional uses computer software to become even more productive
  2. A semi-skilled machine operator is replaced by a robot
  3. An unskilled cleaning service worker still has a job, but it’s a low-wage job

That, in a nutshell, is why middle-skill jobs are the ones disappearing, and the middle class has been shrinking. Men have been hit the hardest, since they are most likely to hold the kind of semi-skilled manufacturing jobs that are no longer needed.

Although new technologies have created some entirely new jobs, such as computer programmers, Frey finds that more middle-class jobs have been lost than gained. “Technological change has become more worker replacing in recent years.”

The impact on incomes

Wage inequality has been increasing, and educational qualifications matter more than ever. Inflation-adjusted wages for college educated workers have been rising, especially for women, while wages for workers with high school degrees or less have been falling, especially for men. Frey quotes Erik Brynjolfsson and Andrew McAfee:

There’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value. However, there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.

While the logical thing for future workers to do is acquire as much education as possible, college education is much more expensive–and becoming more so recently–than secondary education.

During this period, wage growth in general has fallen behind productivity growth, and the share of national income going to labor rather than capital has fallen from around 64% to around 58%.

To me, many of these facts seem to cry out for explanations that go beyond the technology itself to the social context in which we are applying it. Since Frey is focused mainly on the American context, he does not discuss how countries like Finland or Sweden are computerizing at least as fast as we are while maintaining more educational opportunity and economic equality. See, for example, Iversen and Soskice’s Democracy and Prosperity, especially post 3.

Social divisions

Displaced workers tend to be concentrated in certain places, especially economically depressed manufacturing cities. These are often far removed from the places where educated people congregate and create new hi-tech enterprises. As Enrico Moretti said in The New Geography of Jobs:

America’s new economic map shows growing differences, not just between people but between communities. A handful of cities with the “right” industries and a solid base of human capital keep attracting good employers and offering high wages, while those at the other extreme, cities with the “wrong” industries and a limited human capital base, are stuck with dead-end jobs and low average wages.

Communities with large job losses also experience declining marriage rates, rising rates of birth outside of marriage, and rising mortality from suicide and substance abuse. The unemployment rate may remain fairly low, either because downwardly mobile workers settle for jobs in low-wage services, or because they drop out of the labor force and stop being counted.

The downwardly mobile are often the politically alienated as well, feeling that neither political party is responsive to their problems. The Democratic Party was once considered the party of labor, but today it represents many constituencies–people of color, women, the LGBTQ community and environmentalists. Frey notes that Rust Belt states teeming with industrial robots tipped the 2016 election to Trump and the Republicans. I would add, however, that rather than appeal to displaced workers as a class, which would be awkward for the party that still favors capital over labor, Trump Republicans often appeal to them as white males, thus gaining their votes without doing much to address their underlying problems. Job losses in manufacturing have hit black workers hard too, but you don’t see Trump holding rallies in their communities!

The economy still grows as technology marches on, although slower than in the previous era and with far less equally distributed benefits. Frey’s concern is that those who are not benefiting will somehow impede the process, by supporting special taxes on robots or tariffs on foreign goods. Frey’s ideas for having technological progress with more widely shared benefits will be the subject of the final post.

Continued


The Technology Trap (part 2)

August 10, 2019

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Carl Benedikt Frey uses the distinction between labor-replacing and labor-enabling technologies to explain why industrialization can have quite different short-term effects on jobs, wages, and the demand for labor. The Second Industrial Revolution did more than the first to raise labor demand, create good jobs, and increase labor’s share of national income. Here I will take a closer look at that process for the United States in the twentieth century.

New technologies

Based on the research of Michelle Alexopoulos and Jon Cohen, Frey identifies electricity and the internal combustion engine as the most important general-purpose technologies of the Second Industrial Revolution. Both originated in the late nineteenth century but were widely applied in the twentieth. Both were essential to what became the country’s largest industry by 1940, automobile production.

A distinct “American system” of manufacturing was substantially boosting productivity by the 1920s. The model-T Ford was the first product to be assembled without any hand labor for fitting pieces together, since machine tools could now produce completely standardized and interchangeable parts. Another innovation was “unit drive”–machines with their own electric motors–which “allowed factory workflows to be reconfigured to accommodate assembly line techniques, as machinery could now be arranged according to the natural sequence of manufacturing operations.”

Electricity also enabled the production of new home appliances, “such as the iron (first introduced in the market in 1893), vacuum cleaner (1907), washing machine (1907), toaster (1909), refrigerator (1916), dishwasher (1929), and dryer (1938).” These time-savers made it easier for women to enter the labor force, earning money with which to buy more of the products being made.

The internal combustion engine revolutionized transportation, as the share of households with cars went from 2.3% in 1910 to 89.8% in 1930. The share of farms with tractors went from 3.6% in 1920 to 80% in 1960. The Federal Aid Highway Act of 1956 created better highways for cars and trucks to travel. Economists have attributed over a quarter of the increase in productivity between 1950 and 1970 to spending on highways.

Frey summarizes:

America’s great inventions of the period 1909–49 were predominantly of the enabling sort. Some jobs were clearly destroyed as new ones appeared, but overall, new technologies boosted job opportunities enormously. Indeed, gigantic new industries emerged, producing automobiles, aircraft, tractors, electrical machinery, telephones, household appliances, and so on, which created an abundance of new jobs. Vacancies rose and unemployment fell as the mysterious force of technology progressed.

Wages and working conditions

In general, wages rose along with productivity from 1870 to 1980. Since this hasn’t been true throughout history–and especially not lately–we have to say that rising productivity is helpful but not sufficient to produce wage increases. Frey suggests that concerns about worker turnover were one motive for employers to raise wages. “[T]he assembly line could be slowed if an experienced worker quit and was replaced by someone who could not initially keep pace.” Keeping labor peace in the face of worker organization and agitation was another motive.

A democratic society can also legislate on behalf of workers, especially if middle-class voters identify with their concerns. That was more the case during the Great Depression, when New Deal legislation supported worker interests. The National Labor Relations Act of 1935 guaranteed the right to organize and bargain with management, and the Fair Labor Standards Act of 1938 defined the standard work week as 40 hours and required employers to pay overtime for additional hours.

New technologies also created safer and less physically demanding workplaces. “Machines meant the end of the most hazardous, dirty, and backbreaking jobs,” and disabling injuries were cut in half. “Belts, gears, and shafts [of the pre-electric factory] were the main sources of factory accidents, posing a constant danger to workers’ fingers, arms, and lives.”

The “Great Leveling”

In retrospect, the twentieth century up until about 1980 is noted not only for its greater prosperity, but its reduction in economic inequality. Inequality had increased between the American Revolution and the Civil War, as artisan jobs had been lost to factories, large fortunes were being amassed, and large wage gaps had opened up between the most successful urban workers and the masses of poor people both on the farms and in the cities. The late nineteenth century is, of course, known as the “Gilded Age” for its conspicuous consumption by wealthy capitalists.

The twentieth century was different:

As Americans in the middle and at the lower end of the income distribution became the prime beneficiaries of progress, inequality went into reverse. Along with every other industrialized nation, America saw the share of income accruing to people at the top, fall.

Here, explanations differ. Thomas Piketty has argued that the general trend of capitalism is toward greater inequality, and it takes some unusual shock to the system to interrupt that process. As summarized by Frey:

In Piketty’s world, there are no forces within capitalism that serve to drive inequality down. From time to time, however, macroeconomic or political shocks may disrupt the normal equilibrium. Two world wars and the Great Depression served to destroy the riches of the wealthy.

Without denying that such shocks have played a role, Frey does see forces within capitalism to generate equality, the first of which is investment in labor-enabling technologies. That creates the potential to empower and enrich workers. A high rate of unionization is helpful for realizing that potential. Beyond that, workers must be able to keep up with the skill demands of new technologies.

“The leading explanation for the great leveling comes from pioneering work by Jan Tinbergen that conceptualized patterns of inequality as a race between technology and education….” The enabling technologies of the twentieth century favored more skilled workers. Jobs like mechanic or electrician paid well, but only for those who had the skills to do them. Semi-skilled assembly-line work could also pay pretty well, for workers with the discipline, stamina and dexterity to keep up. That could have created a wide gap between a skilled few and the unskilled many, except for the fact that so many workers were acquiring at least the basic skills they needed for an advanced industrial economy.

[E]ven if technological progress favors skilled workers, growing wage inequality does not have to be the result. The return to human capital depends on demand as well as supply. As long as the supply of skilled workers keeps pace with the demand for them, the wage gap between skilled and unskilled workers will not widen. While a number of short-run events and government interventions contributed to the great leveling, the most pervasive force—and certainly the best documented one—behind its long-run egalitarian impact was the upskilling of the American workforce, which depressed the skill premium.

The percentage of young people who completed a high-school education went from 9% to 40% just between 1910 and 1935, and proceeded upward from there.

The combination of enabling technology and a more skilled population created the largest middle class the country had ever seen. But that made the shrinking of the middle class that occurred after 1980 all the more surprising and alarming. Frey calls this the “Great Reversal,” and that is the topic of the next post.

Continued