Technology’s double-edged economic sword

Technology’s double-edged economic sword

Technology is driving the U.S. economic recovery, but it is also making it tougher for parts of the labor market to recover.

Research from the Federal Reserve and other entities show job growth in the recovery has been concentrated in either high-skill or low-skill areas, leaving middle-skilled, middle-income jobs below their pre-recession numbers.
Technology has played a persistent role, increasing productivity and making it easier for businesses to make profits but also allowing companies to slow their hiring.


“I don’t think there’s any doubt that you’ve seen, as tech has improved productivity, it’s focused a lot on middle-wage jobs,” said Robert Atkinson, president of the Washington-based Information Technology and Innovation Foundation, a technology think tank.
Middle-skill jobs in manufacturing and clerical work, he told The Hill, were among the modern jobs most easily automated by the computer revolution. In contrast, jobs requiring a great deal or very little skill have proven more resilient.
Technology is also contributing to a growing “casualization” of the workforce, according to San Francisco State University Professor and labor expert John Logan. This means full-time, permanent jobs are increasingly being displaced by part-time and temporary jobs.
It’s obviously not all bad when it comes to technology and the U.S. recovery.
Silicon Valley giants such as Apple and Google have had tremendous growth and have contributed to the economic recovery. And properly exploiting technology is among the best ways to rebalance the job market.
“It’d be great to automate 20 to 25 percent of high-wage jobs,” Atkinson said. “That would help everybody.”
He cited the legal industry as one sector where the public could reap a substantial benefit from widespread automation.
To make such developments happen more rapidly, Atkinson advocates the implementation of a national productivity strategy, which would set goals such as improving productivity by 2.5 percent a year.
The U.S. has no productivity strategy, and Atkinson points out that productivity growth is not matching what technological gains seem to promise.
In several quarters since the recession, productivity growth has actually been negative.
A productivity strategy could start by targeting for elimination policies that protect certain industries from innovation. Atkinson cited as an example state laws that require cars to be purchased from licensed dealers rather than directly from the manufacturer. Such laws have recently caused controversy, with electric car company Tesla trying to operate on a model of direct sales.
“In other countries, you can buy a car on the Internet and have it delivered,” Atkinson said.
He admitted, however, that implementing such a plan would be difficult, both because of ordinary partisan gridlock and also the natural opposition such a plan could arouse in each party, with Republicans fearing intrusive government and Democrats seeing a threat to current workers.
Logan agreed that the U.S. could benefit by promoting more technological innovation, but also emphasized the need for more traditional solutions such as a better-organized vocational training system.
“Countries that have successful, export-driven economies, it’s largely because they have highly successful national policies that provide vocational and technical training,” he said.
The U.S.’s traditional emphasis on four-year degrees, which views vocational training as inferior, is a hindrance, he said.
Even if the government doesn’t pursue a federal productivity plan, however, technology is having a significant effect on how workers acquire skills and find jobs. Atkinson also said that technology is improving how people find work by combating both frictional unemployment and skills mismatch.
Frictional unemployment refers to joblessness that exists even at economic peaks, such as people transitioning from one job to another as part of ordinary turnover. Atkinson said that while it is currently invisible because the economy has not been at full employment for some time, the Internet should help substantially reduce the amount and duration of frictional unemployment, noticeably increasing economic efficiency.
“Both the employer and the employee have a lot more information on choices,” he said. “It’s a lot easier to make the right match.”
Skills mismatch, where jobs exist but lack workers with the abilities needed to fill them, will be combated with the proliferation of online education, said Atkinson.
In particular, he anticipates a major rise in the use of massive open online courses. In such courses, hundreds, thousands, or even tens of thousands of students can be taught online by a single professor.
While some elite universities such as Stanford have been offering massive open online courses, it remains very difficult to earn an accredited degree by taking them. Because of this, they are disadvantaged by financial aid programs as well.
Atkinson says that will change, as rising college costs increase the pressure for new, accessible forms of education.
“If you want to have that question [of effectiveness], then we should just abolish state universities, because they aren’t as good as the elite privates,” Atkinson said.
Even if they don’t measure up to traditional state schools, the online courses offer tremendous value for money and will put a huge variety of learnable skills at the fingertips of workers, he said. The result is a workforce that can better adapt to changing conditions and avoid the damage of major systemic shocks.