If only tech solved things like it used to

The reasons for this decoupling are a subject of considerable debate. What’s clear, though, is that economic growth no longer leads necessarily to broadly-shared income growth, Kenworthy said. And not only are the benefits from technology no longer widely shared, technology is part of the problem itself.

Hollowing out

David Autor is an economist at the Massachusetts Institute of Technology who has focused his research on the effect of new technologies on the labor market. What he’s found over the last few years is disturbing.

Technological gains have always affected workers differently, a process known in economic parlance as “skill-biased technological change.” The most common example is the widespread move of labor, at the beginning of the 20th century, from the farm to the factory. Because new factory technology required some skills that farm workers did not have, the farm workers were not able to fluidly make the transition.

“We see these scenes in ‘The Grapes of Wrath’ that show the issues that resulted from an excess in the supply of farm labor,” Autor said. But although a lot of people suffered in the short-run, most were eventually reintegrated into the workforce by learning the skills necessary to work in factories and other sectors of the economy.

“Today, we have a somewhat romanticized notion of what farm work means,” Autor said. “Really, farm labor was extremely physically intensive and extremely insecure. Factory work was no picnic, but it paid better and provided better security.”

This cycle has repeated itself in various forms over the course of the last century: a new “skill-biased” technology is developed that displaces some low-skill workers temporarily, but, in the long run, those workers and their children learn the skills required for the new jobs that are created, which pay more than the ones that were lost.

But Autor has found evidence that in the past two decades, the introduction of computers has displaced middle-class workers and left them with no place to go but down.

“Computers are doing tasks that used to require a non-trivial amount of skill — anything from factory work to accounting,” Autor said.

That has benefited those in high-skill, managerial jobs: these workers, Autor says, can rely on computers instead of colleagues earning middle class pay, and the pay and numbers of these upper tier jobs has grown.

In Autor’s telling, the people in high skill jobs create other jobs (primarily in service occupations) when they spend their money.  Thus, the number of low-wage service jobs has continued to grow.

But jobs with middle class pay continue to vanish: “It’s no longer the case that workers without a lot of skills and education can go work at the GM plant or the typing pool at the insurance company and get paid a decent wage,” Autor said.

Job growth at both ends of the economic spectrum and losses in the middle is what Autor calls a “hollowing out” of the labor market.

In the past, displaced workers could be educated for new jobs of equal or higher skill that were created. But now, with many of the jobs that are lost are being replaced with lower-wage jobs, if they are being replaced at all, education alone may not be enough to fix the problem (see box).

Trickle-down technological change

Autor said that there is no reason to believe that the increasing polarization of society will stop on its own. “It is certainly the case that these trends could continue and even get worse,” he said.

While Autor didn’t raise it, one of the questions that appears to emerge when considering a future in which companies become accustomed to not sharing the benefits of technological advancement with labor is whether large numbers of citizens will be looking not at low skill jobs but at no jobs at all.

Autor did say that the dislocations in the U.S. that have occurred due to technology in the last 30 years are not inevitable. “Many other countries face the same challenges that we do, but the degree to which that results in vast degrees of inequality vary tremendously.”

While evidence of hollowing out — even before the recession  — was found in the U.K., Germany, the Netherlands, Spain, and elsewhere, countries like Italy, France and Denmark have managed to grow their highest-wage occupations while shrinking their low- and middle-wage occupations at a proportional rate.