Middling Performance

Among the many new realities that have arrived with the Information Age has been job polarization.
In the 1970s and 1980s, employment in middle-skilled, middle-income occupations outstripped growth in lower-skilled jobs. But starting in the 1990s, the wages and job prospects of workers in rich nation’s labor markets became increasingly disconnected from their skill levels. So those middle-market workers began to see declines in their prospects, while both the low- and high-skilled ends of the barbell grew. And this was true across many countries, more or less independent of how unionized their labor forces were or how robustly they had structured their welfare programs.
The culprit? Computers. They can’t out-drive a bus driver or out-operate a brain surgeon, but they can, in many situations, out-clerk a clerk. Many functions performed by salespeople, bank tellers, secretaries, machine operators, and factory supervisors can be done more efficiently by a machine with a memory chip. In sum, the middle of the labor market has been the easiest to mechanize.
No, I didn’t figure this out all by myself. As reported in The Economist, David Autor of the Massachusetts Institute of Technology and David Dorn of the Centre for Monetary and Financial Studies in Madrid analyzed figures about job-related tasks from the United States Department of Labor.
They concluded that job polarization in the U.S. in the quarter century ending in 2005 was clearly most pronounced in categories where occupations were most susceptible to automation. And the phenomenon was not unique to the U.S. A more recent study by Guy Michaels, Ashwinit Natraj, and John Van Reenen of the London School of Economics (LSE) examined nine European countries, plus Japan and America, for almost exactly the same span as Autor and Dorn. The result? A strong and direct correlation between a country’s spend on IT services and development, on the one hand, and the drop in demand for middle-skilled laborers on the other.
The cause is not globalized trade, per se. But globalization is indirectly causal. Nicholas Bloom of Stanford University and Mirko Draka of the LSE joined Van Reenen on a study of European IT growth, concluding that the sectors most threatened by imports after China entered the World Trade Organization had responded with innovation. Some 15 percent of technology improvements in Europe between 2000 and 2007, they found, derived from reactions to the rising tiger.
All in all, this presents an enduring challenge to policymakers. We are hardly going to put the genie of technology back in its bottle. So we must grapple with the implication of this hollowing of the middle. Put simply, technology enables some higher-end jobs to be shifted to those nations that have reservoirs of better-educated workers.
It used to be that such offshoring by multinationals provided that most hackneyed of rhetorical delights: a “win-win”. Matthew Slaughter, who served as an advisor to President George W. Bush and who has since decamped to Dartmouth College’s Tuck School of Business, made big news a decade ago with his research finding that every multinational job created abroad resulted in nearly two jobs created in America. But no more, he says. “It’s definitely something to worry about,” he told The Wall Street Journal in April.
While we watch the streets of Athens and Paris and Madison, Wisconsin, brimming with disaffected laborers, we would do well to reflect on the complexity of this causation so that we avoid simplistic responses. The wisest reaction would seem to be more, and better-tailored, technological education. In any case, it is time to stop whistling past the graveyard.
Go back and ruminate on that barbell metaphor for a moment, the one in which the rich end and poor end each gain weight while the bar between enervates. At some point, if the bar continues to dwindle and the ends continue to swell, the whole contraption will break in two.


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