Information Technology and the U.S. Workforce Where Are We and Where Do We Go from Here? (2017) / Chapter Skim
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3 Effects of Information Technology on Productivity, Employment, and Incomes
3 Effects of Information Technology on Productivity, Employment, and Incomes
Pages 54-79
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From page 54... ...
Technologies are not exogenous forces that roll over societies like tsunamis with predetermined results. Rather, our skills, organizations, institutions, and values shape how we develop technologies and how we deploy them once created, along with their final impact.1 1 For the impact of available skills and markets on the direction of technological changes, see D
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From page 55... ...
TECHNOLOGY AND PRODUCTIVITY In his seminal research on economic growth, Robert Solow found that most of the increases in human living standards have come not from working more hours, and not from using more capital or other resources, but from improved productivity -- that is, increases in the efficiency of production as defined by the ratio of output to input. In turn, productivity growth comes from new technologies and new techniques of production and distribution.2 In the mid-1990s, the rate of productivity growth increased significantly in the United States, led by the IT-producing sectors as well as IT-using sectors, a change attributed in part to improvements in the nature and use of IT.3 However, in the past 10 years, U.S.
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From page 56... ...
6 Z Griliches, 1994, Productivity, R&D, and the data constraint, American Economic Review 84(1)
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See also P.A. David, 1990, The dynamo and the computer: An historical perspective on the modern productivity paradox, American Economic Review 80(2)
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From page 58... ...
The argument is that earlier innovations were in the form of general purpose technologies that had wide application to many industries.17 Alternatively, some have argued that we are in a period of secular stagnation due to weak aggregate demand.18 The suggestion is that persistently weak aggregate demand is acting as an overall drag on economic growth. Firm-level evidence for the United States and the Organisation for Economic Co-operation and Development shows a widening gap between the most and least productive firms within industries in the post-2000 period.19 Such widening productivity dispersion may reflect increased 15 E
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From page 59... ...
The latter has been shown to be an important part of the process of productivity growth, and is discussed further in Chapter 4. From this perspective, the hypothesis is that while the changes in technology outlined in Chapter 2 are indeed occurring, they are slow to show up in economic growth due to slowing diffusion or business dynamism.
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From page 60... ...
WORKFORCE FIGURE 3.1 U.S. employment rates for different occupational categories.
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From page 61... ...
More famously, British textile workers 24 Organization for Economic Co-operation and Development, "Employment Rate: Aged 25-54: Males for the United States," retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LREM25MAUSA156S, March 15, 2017.
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From page 62... ...
I do not see that new industries can employ everybody who wants a job."33,34 However, predictions of widespread, technologically induced unemployment have not come to pass, at least so far.35 Technological changes over the last 200 years (and presumably many of those that came before) stimulated demand, created new markets, and fueled wage growth with few adverse consequences for aggregate employment.
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From page 63... ...
What happens depends, in part, on whether new technologies automate and replace workers in existing tasks more rapidly than they create new demands for labor. Which will be the case is difficult to answer, because it is easier to see how new technologies coming down the line will automate existing tasks than it is to imagine tasks that do not yet exist and how new technologies may stimulate greater consumer demand.
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From page 64... ...
Thus, in the case of medical imaging, the overall number 37 Truck driving remains a significant source of employment and middle-class jobs in the United States. In fact, according to a recent analysis by NPR, in 2014, "truck, delivery, and tractor drivers" were the most common occupational category in 29 states, see Q
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From page 65... ...
These and other changes removed certain tasks from administrative assistants and transferred them to faculty, which can be viewed as an instance of "disintermediation."40 Because of the increased efficiency of producing and storing documents and because faculty have assumed the task of producing documents, universities now employ fewer administrative assistants, and some of those who remain have acquired new skills and tasks, such as the maintenance 38 S.R Barley, 1986, Technology as an occasion for structuring: Evidence From observations of CT scanners and the social order of radiology departments, Administrative Science Quarterly 31:78-108; S.R Barley, 1990, The alignment of technology and structure through roles and networks, Administrative Science Quarterly 35:61-103.
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From page 66... ...
For example, it has been suggested that the decision to develop technologies that automate rather than augment the human role in the machine tool industry was driven by the combined interests of the U.S. Air Force and the Massachusetts Institute of Technology servomechanisms laboratory.42 Human Skills Versus Automation Consideration of whether technology can replace human workers has prompted discussion about the subtle complexity of human skills.
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From page 67... ...
46 D.J. Deming, 2015, "The Growing Importance of Social Skills in the Labor Market," National Bureau of Economic Research, doi: 10.3386/w21473.
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From page 68... ...
While this increase has been substantial, with the share of income accruing to the top 1 percent of households increasing from about 10 percent to over 20 percent between 1980 and 2012, there have also been increases in earnings inequality within the other 99 percent, accounted for largely by the increasing skills premium associated with a 4-year college degree. For example, the absolute median earnings gap between those with a high school and a college degree approximately doubled from 1980 to 2012, as the real wages of college graduates rose and those of less educated workers fell through about 2000.48 A related phenomenon is the falling share of GDP paid to labor relative to owners of capital (illustrated in Figure 3.5)
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From page 69... ...
This decline in the labor share of GDP, if sustained, will affect the distribution of wealth as well as that of income, expanding the share of total income flowing to wealth holders.50 Many factors are likely at work in this landscape of inequality; technological change, social biases, increased globalization and trade, the decline in labor union density and power,51 declines in the real minimum wage, changing norms regarding executive compensation, growing economic deregulation, changes in tax rates, and growing oligopoly -- or in some cases, simple monopoly52 -- are among the hypothesized causes of increased inequality of income and wealth over the past 40 years.53 However, for the purposes of this study, the committee focuses on the role of technology in income and wealth distributions. As with employment, the case that technological advances have contributed to wage inequality is strong.
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From page 70... ...
McAfee, "Why the Middle Class is Shrinking," Harvard Business Review, November 5, 2015, https://hbr.org/ video/4598665579001/why-the-middle-class-is-shrinking, accessed April 2016. Data from the Federal Reserve Bank of St.
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From page 71... ...
Katz, 2007, "The Race between Education and Technology: The Evo lution of U.S. Educational Wage Differentials, 1890 to 2005," National Bureau of Economics, doi: 10.3386/w12984.
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Valletta, 2015, "Higher Education, Wages, and Polarization," Federal Reserve Bank of San Francisco, http://www.frbsf.org/economic-research/publications/economicletter/2015/january/wages-education-college-labor-earnings-income/. 65 CareerBuilder, "The Shocking Truth about the Skills Gap," 2014, http://www.career buildercommunications.com/pdf/skills-gap-2014.pdf, accessed August 16, 2016.
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From page 73... ...
Panel B Smoothed changes in real hourly wages by skill percentile, 1980–2005 0.3 0.25 Change in real log hourly wage 0.2 0.15 0.1 0.05 0 20 40 60 80 100 Skill percentile (ranked by 1980 occupational mean wage)
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From page 74... ...
The reductions in real compensation for labor include the decline of 67 D Acemoglu, 2009, Changes in unemployment and wage inequality: An alternative theory and some evidence, American Economic Review 89(5)
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From page 75... ...
von Wachter, 2015, "Firming Up In equality," National Bureau of Economics Research, http://www.nber.org/papers/w21199.
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From page 76... ...
This can amplify their power, importance, and relative pay.79 While the gender wage gap has narrowed since the 1980s, it is important to note that significant wage gaps by both race and gender persist in the United States. According to a recent analysis by the Pew Research Center,80 2015 median hourly earnings for women were just 83 percent of white men's, and black workers' only 75 percent of white men's.
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From page 77... ...
This discussion suggests that for society to make the best use of new technologies without increasing income inequality, adjustments are necessary. Although the heaviest burden of adjustment is likely to fall on the skills, competencies, and flexibility of workers, the perspective that technology is not a force of nature and can be shaped and adapted by societal decisions suggests that technology can have positive societal impacts if it is designed with certain values in mind.
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From page 78... ...
Dorn, and G.H. Hanson, 2013, The China syndrome: Local labor market effects of import competition in the United States, American Economic Review 103.6:2121-2168)
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From page 79... ...
4. New computerized technologies do appear to have contributed to increased income inequality and are likely to continue to do so as long as they replace skills and tasks historically associated with low-wage or middle-wage occupations.
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