By Hunter Richards
(The following is a guest post by Hunter Richards, a blogger for Software Advice. Hunter graduated in 2010 from Washington University in St. Louis with degrees in economics and film studies. Besides business software, his background includes government and non-profit work; he has worked for Senator Blanche Lincoln and the International Dark-Sky Association, a non-profit organization that works to curb light pollution. In 2008, he was an intern for Congresswoman Gabrielle Giffords.Despite the tremendous benefits of information technology (IT), it comes at a human cost - the displacement of less-skilled employees. As software and systems automate an increasingly large portion of business processes, the displacement is affecting a wider set of workers. So despite an improving economy, 9.5% unemployment might last longer than many think.
Here we walk through a fairly simple story of man versus machine. It’s not a new story, but we went to the effort of pulling together and visualizing the relevant data.
Our conclusion? Drop the Wii-mote and hit the books.
IT spending has risen dramatically over the last 40 years...
IT spending has steadily risen since 1970. Trendlines and new opportunities like cloud computing suggest that the current dip in spending is only temporary.
...making us more productive...
Technology has made labor more productive. There’s a long-term upward trend in labor output rates, and it isn’t slowing down.
...which has led to rapid growth in corporate profits.
The resulting productivity has been great for business - greater productivity means higher profits. But these profits don’t benefit everyone. They accrue to the executives and shareholders.
IT is slowly replacing many functions. There’s an ever-widening divide in the labor market between skilled occupations and what one might call “low-level jobs” - simple clerical roles, plant-floor workers, and low-level support roles.
While national unemployment rates have ebbed and flowed...
...the uneducated are consistently left behind...
This polarization between highly-skilled and less-skilled workers is part of what’s eroding the middle class, pushing more and more people into the low income bracket.
...and wealth has shifted toward the highest earners.
The less-educated workers who manage to keep their jobs are falling further and further behind in the national income distribution as the relative value of their services declines.
Alas, high-tech industries are growing...
So how can you avoid being replaced by a machine? You’ll need to be one of the people who work in an advanced field that still requires highly-skilled human capital. Take the IT field, for example. The Tech Pulse Index tracks the growth of national economic activity in technology by combining data on employment, investment, production, shipments, and consumption. The Tech Pulse Index has risen sharply (with the exception of the dot-com bust around the year 2000), reflecting continued demand for high-tech workers. The same is true in other engineering disciplines, healthcare and finance.
...but an advanced education is required.
Are we educating people enough to slow the widening of labor market gaps? The graph above shows the percentage of all 18- to 24-year-olds enrolled in degree-granting institutions since 1970. There’s an upward trend, but is it growing fast enough?
IT is good for society in the long term, but it’s a double-edged sword when considered together with labor market trends. Sure, the current economic despair owes its severity to many different issues - offshoring of jobs, the real estate collapse, and the national debt are just a few - but education and income disparities are long-term problems that demand attention. We must align education growth with productivity growth to close the gaps.
Hunter, a well written article. Very nice.
ReplyDeleteProductivity has been rising for years. The problem is that salaries haven't been rising in step. Education beyond a certain level just determines the pecking order. Sure, you want to be as educated as you can, but that just means you'll get one of the better jobs. If too many people are just as educated as you are, you'll either have to educate up some more or settle for less pay on the job unless you are lucky.
ReplyDeleteThe problem isn't education. It's a bankrupt economic system that even it's supporters can't say much good about. Capitalism, they argue, cannot provide everyone with good medical care, rising living standards, or a leisurely retirement. It's detractors say worse things about it, many of them correct. When even a system's supporters have lost faith, but continue to blindly parrot the slogans, you get something like the old Soviet Union. It's sad to watch, but the Soviet Union only held together for so long.
Rising productivity can sometimes be an indication that fewer workers are on the job and the remaining ones have to work longer hours, but I share your pessimism. We are a nation of slogans, held together by tape and wire and refusing to be honest about it.
ReplyDeleteThis, Octo, is an important topic. Kal said "Productivity has been rising for years." That's not entirely true. The US financial system has been rigging these stats for the last couple of decades by including the US workers' assembly of foreign-made products as actual production. If that was factored out, US productivity would be flat or declining, which would be very bad for the stock market and financial speculators.
ReplyDeleteCapt., you are as astute as always in identifying the culture of slogans taped and wired together.
Technology, without a social counterforce, always creates dislocation and disruption. Read Dickens. It wasn't until the mid-20th Century and two world wars that the American and European workers' future attained some semblance of parity with the managerial-professional classes.
Since the early 1970s that position has been reversing, with corporatism, globalization and technology fueling the inequity.
As to the advanced degrees required and the credentialization, that too is another necessary scam for two reasons: one, to absorb the slack in the underutilized labor pool, and two, that academia itself became infected by corporatism and the "growth" business model. In many ways a rigorous high school education of 50 years ago was/is as effective an education as most undergrad degrees are today.
This entire line of thinking should also be attached to the reality of aging populations in most of the industrialized world. Japan is leading the way and has staggering problems with seniors' poverty, reduced opportunities for youth as aging workers refuse to retire as they can't afford to, and the wholesale offshoring of Japanese industries due to lack of young, motivated semi-skilled workers. The Japanese bought on early to the W. Edwards Deming approach to production (skills, efficiency, maximization of technology), and in the end, no amount of technology is a substitute for a vibrant, working population. A Faustian bargain in the flesh...