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:
- A highly educated professional uses computer software to become even more productive
- A semi-skilled machine operator is replaced by a robot
- 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.
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.