Running an Experiment on the Economy

Excerpt from “Tectonic Shifts” in Employment – Information technology is reducing the need for certain jobs faster than new ones are being created.

Technology Review published by MIT – January/February 2012

By David Talbot

New research is showing that advances in workplace automation are being deployed at a faster pace than ever, making it more difficult for workers to adapt and wreaking havoc on the middle class: the clerks, accountants, and production-line workers whose tasks can increasingly be mastered by software and robots. “Do I think we will have permanently high unemployment as a consequence of technology? No,” says Peter Diamond, the MIT economist who won a 2010 Nobel Prize for his work on market imperfections, including those that affect employment.

“What’s different now is that the nature of jobs going away has changed. Communication and computer abilities mean that the type of jobs affected have moved up the income distribution.”

More evidence that technology has reduced the number of good jobs can be found in a working paper by David Autor, an economist at MIT, and David Dorn, an economist at the Center for Monetary and Financial Studies in Madrid. They too point to the crucial years of 2000–2005. Job growth happened mainly at the ends of the spectrum: in lower-paying positions, in areas such as personal care, cleaning services, and security, and in higher-end professional positions for technicians, managers, and the like. For laborers, administrative assistants, production workers, and sales representatives, the job market didn’t grow as fast—or even shrank. Subsequent research showed that things got worse after 2007. During the recession, nearly all the nation’s job losses were in those middle categories—the positions easiest to replace, fully or in part, by technology.

Dramatic shifts have happened before. In 1800, 90 percent of Americans were employed in agriculture. The figure was down to 41 percent by 1900 and stands at 2 percent today. People work, instead, in new industries that were unimaginable in the early 19th century. Such a transformation could happen again. Today’s information technologies, even as they may do short-term harm to some kinds of employees, are clearly a boon to entrepreneurs, who now have cheaper and more powerful tools at their disposal than at any other time in history. As jobs are lost, Brynjolfsson says, “we will be running an experiment on the economy to see if entrepreneurs invent new ways to be productive equally quickly.” As examples, he points to eBay and Amazon Marketplace, which together allow hundreds of thousands of people to make their living hawking items to customers around the world.

The problem, he says, is that not enough people are sufficiently educated or technologically savvy to exploit such rapid advances and develop as-yet-unimagined entrepreneurial niches. He and McAfee conclude their book by arguing that the same technologies now making industry far more productive should be applied to updating and improving the educational system. (In one promising example they cite, 58,000 people went online to take an artificial-intelligence class offered by Stanford University.)

Peter Diamond says that one of the most important things the government can do for employment is to take care of basics, like infrastructure and education. “As long as we have so many idle resources, this is the time when it’s advantageous—and socially less expensive—to engage in public investment,” he says. Eventually, he believes, the economy will adapt and things will work out, once again. “Jobs have been changing and moving around—within the country, out of the country—for a very long time,” he says. “There will be other kinds of jobs that still require people.”