Technology may not reduce employment but still affect jobs

The Pew Research Center yesterday released a report on the future of technology and robotics. The center interviewed about 1,900 experts on the topic and asked them about the effect of future technology on employment. Would new technology create jobs on net or would it destroy jobs?

The results were just about split down the middle, with half of the experts saying technology would be a net job creator and the other half disagreeing. Attempts at projecting the future of our economy don’t have a sterling track record. But the evidence from the effects of past technological change on the labor market points toward a future where technology doesn’t destroy jobs after factoring in the new ones created by technological innovation.

David Autor, an economist at the Massachusetts Institute of Technology, has done some of the leading work on how technological change affects the labor market. He is a leading proponent of the argument that skill-biased technological change, or technological change that complements the skills of highly educated workers, increases demand for those workers. At the same time, this change reduces the demand for workers with skills that are made redundant by technology. These workers don’t end up unemployed, but rather move to a different occupation. Such job polarization contributes to increased economic inequality.

The model has its short comings, but it’s useful for thinking about how technology affects the labor market. This might be easier to understand when compared to another factor, increased international trade. Autor along with his co-authors David Dorn of the Centro de Estudios Monetarios y Financieros in Madrid and Gordon Hanson of the University of California-San Diego have done research trying to untangle the effects of trade and technology on the labor market. In one study, the three economists look at the changes in the labor market from 1990 to 2007—a period where policymakers liberalized trade and technological change was quite rapid.

Autor, Dorn, and Hanson found that trade and technology had very different effects. The authors disentangle these effects by looking at differences across labor markets within the United States. Some markets were more exposed to imports from China while other markets employed more workers in routine occupations. What they found was that areas more exposed to increased imports saw significant declines in manufacturing employment as well as well as total employment. In local labor markets more exposed to technological change, total employment didn’t decline. Rather, declines in routine employment were offset by gains in other areas.

In short, increased foreign trade led to job losses while technology led to job polarization.

Technology is one of the key drivers of long-term economic growth. Advancements in information technology, robotics, and other promising technologies emerging out of the materials sciences and biology offer the promise of increased productivity and therefore economic growth in the years to come. But past technological shifts in the economy have not been so unambiguously positive for workers. The technology changes afoot today may not reduce total employment, but by disrupting current occupations these changes could be a major driver toward rising inequality.

Policymakers need to consider how they can help workers adjust to these shocks and create a labor market where the benefits of increased productivity are broadly shared as new technologies create new employment opportunities and challenges.

August 7, 2014

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