Are Technological Advances Always Good for Jobs?

The conventional view for a long time has been that technological advances displace jobs in the short term but creates more jobs in the long term. I have also shared this view over the years as an economist.

In a  recent book  two well known MIT scholars, Erik Brynjolfsson and Andrew McAfee, question this view. They  suggest that rapid advances in information technology is enabling business leaders and company founders to reap rich financial rewards by replacing people with software in services businesses and by replacing workers via automation in factories.

They ask the question: why did sixty percent of the wealth created in the US, between 2002 and 2007, go to one percent of the population? Their answer: it did not happen just because of financial deregulation, or Bush era tax breaks; it happened because information technology (IT)  has made  possible far ranging sale of digital products and record expansion of software-aided management.

In an October 2011, article in MIT Technology Review,author David Talbot quotes Eric Brynjolfsson–“Technology lets  superstars—whether Mark Zuckerberg or Lady Gaga or a hedge fund manager—leverage their skills and talents across far more assets than they could have done previously. You can distribute bits—costlessly,globally, instantly—in ways you can’t distribute atoms. Anything that is digital from software to music can reach a much broader global audience. This is also true for the business processes that you embed in software. CEOs and others are leveraging that.”

The salient point in the book is that the dynamics stated above explains how productivity and economy can grow  while employment shrinks. In other words, technology can grow the economic pie, but it does not mean that everyone is better off.

Nobel prize winning economist Robert Solow’s view is that advances in technology always eliminates jobs, but American economic history shows that total employment and wages  always rises over time. He suggests that it may be too soon to tell if that will not happen again.

In 1800, ninety percent of Americans worked in farms, and by 1900 that number had dwindled to forty-one percent as a result of new technology and opening up of fertile farmlands in the Midwest.Workers adapted to this massive structural change, but it took a century. This time around the speed of  IT change  is so fast that our workforce , education and training systems are  not able to keep up with it. The result is the current job crisis that may last several years.

Coping with this massive structural change is one of the great challenges America faces in the second decade of the 21st century.

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