It seems to me…
“Our technological powers increase, but the side effects and potential hazards also escalate.” ~ Alvin Toffler.
Both politicians and economists lament the decline of the middle-class in the U.S. and suggest various alternatives to reverse that decline. An additional question is whether information technology is at least partially to blame. 3.5 percent of the U.S. unemployed feel they have been displaced by technology. This is somewhat credible as 44 percent of the U.S. firms that have reduced employment claim those reductions at least partly resulted from automation.
Similar to other technological advances, computerization and automation do result in employment displacement. In and of themselves, they do not create jobs but create the potential for jobs in entirely new employment categories. Journalists and expert commentators frequently overstate the extent of machine substitution for human labor and ignore the strong complementarities.
At this time, automation has only limited potential to replace human labor as many jobs require adaptability, common sense, and creativity[i]. Other job categories, which could easily be automated; e.g., food preparation, probably will not be automated within the near future as it is not currently economically justifiable. Low-skill jobs requiring human interaction and unstructured physical movement are most safe at this time. Workers performing repetitive unskilled tasks will not be replaced simply because their labor cost is too low; frequently being too little for them to live on their earnings. That said, 47 percent of U.S. jobs are potentially at high risk of being automated within next 20 years.
Historically, the introduction of machines displaces human labor. The contemporary incarnation of this displacement is that it results in labor market polarization; i.e., the simultaneous growth of high-education, high-wage and low-education, low-wages jobs; which is a manifestation of what is known as “Polanyi’s Paradox” in that many skill sets are not easily transferrable.
Michael Polanyi[ii], in his book The Tacit Dimension, stated “We can know more than we can tell…. The skill of a driver cannot be replaced by a thorough schooling in the theory of the motorcar; the knowledge I have of my own body differs altogether from the knowledge of its physiology.”
There are two implications of Polanyi’s Paradox: (technical) we cannot automate what we do not explicitly understand, and (economic) tasks that are not substituted by machines are typically complemented by machines. One of the difficulties associated with development of artificial intelligence (AI) is that “our tacit knowledge of how the world works often exceeds our explicit understanding”[iii]. Contemporary computer science seeks to overcome Polanyi’s paradox by building machines that learn from human examples, thus inferring the rules that we tacitly apply but do not explicitly understand.
Information technology is resulting in increased polarization in labor markets and bifurcation of employment availability into high-skill/high-compensation and low-skill/low-compensation categories. The resulting economic disparity has become a major political issue within the developed world.
The corporate world is reaping the benefits of automation while the public sector is left with debt and responsibility for its social costs. This is not new. Luddites have protested automation since 19th century England. One of the areas most affected is agriculture where employment has fallen from about 70 percent of the population in 1840 to only 2 percent today.
Transitioning to a digital economic base has had a profound effect on employment by creating demand in higher skill employment categories while correspondingly decreasing demand in middle-class areas. Middle-income employment in sales, office work, and manufacturing traditionally accounted for the majority of jobs but that share has been significantly reduced in the past decade – especially following the 2009 recession. The nation’s middle-class has been the primary economic motivation in our nation’s growth but it is the middle-class that has been most affected by the so-called “digital revolution”.
Income levels have increased significantly in abstract task-intensive professional, technical, and managerial categories where labor is complemented by machines. Relatedly, a U.S. Bureau of Labor Statistics employment forecast projects a continued significant demand for workers in information technology indicating probable long-term continuation of this trend.
People that are intelligent, well educated, and entrepreneurial will do well but others need educational system improvements, workforce training (retraining), and a better social safety net to catch those experiencing difficulties[iv].
That’s what I think, what about you?
[i] Vardi, MosheY. Is Information Technology Destroying the Middle Class, Communications of the ACM, February, 2015, p5.
[iii] Autor, David. Polanyi’s Paradox and the Shape of Employment Growth, http://www.kc.frb.org/publicat/sympos/2014/093014.pdf, 11 August 2014.
[iv] Foroohar, Rana. Hard Math in the New Economy, Time, 16 March 2015, p32.