Earlier this year, commentator Paul Wallbank wrote an interesting article questioning whether technological change is killing the the middle-class in developed countries:
Modern technology has taken the global economy through three waves of structural change over the past thirty years, the first wave was manufacturing moving from the first world to emerging economies as global logistic chains became more efficient.
The second wave, which we’re midway through at the moment, is moving service industry jobs and middleman roles onto the net which destroys the basis of many local businesses.
Many local service businesses thrived because they were the only print shop, secretarial service or lawyer in their town or suburb. The net has destroyed that model of scarcity…
The third wave of change lead by robotics and automation will hurt many of those fields that were assumed to be immune to technological forces.
One good example are Australia’s legendary $200,000 mining truck drivers. Almost all their jobs will be automated by the end of the decade. The days of of relatively unskilled workers making huge sums in the mines has almost certainly come to an end.
So where will the jobs come from to replace those occupations we are losing?
A similar theme has been picked-up in the New York Times, which examines computerisation’s affect on various types of jobs, and argues that the middle-class has been hardest hit:
The multi-trillionfold decline in the cost of computing since the 1970s has created enormous incentives for employers to substitute increasingly cheap and capable computers for expensive labor. These rapid advances — which confront us daily as we check in at airports, order books online, pay bills on our banks’ Web sites or consult our smartphones for driving directions — have reawakened fears that workers will be displaced by machinery. Will this time be different?..
Logically, computerization has reduced the demand for these jobs, but it has boosted demand for workers who perform “nonroutine” tasks that complement the automated activities. Those tasks happen to lie on opposite ends of the occupational skill distribution…
Computerization has therefore fostered a polarization of employment, with job growth concentrated in both the highest- and lowest-paid occupations, while jobs in the middle have declined. Surprisingly, overall employment rates have largely been unaffected in states and cities undergoing this rapid polarization. Rather, as employment in routine jobs has ebbed, employment has risen both in high-wage managerial, professional and technical occupations and in low-wage, in-person service occupations.
So computerization is not reducing the quantity of jobs, but rather degrading the quality of jobs for a significant subset of workers. Demand for highly educated workers who excel in abstract tasks is robust, but the middle of the labor market, where the routine task-intensive jobs lie, is sagging.
Finally, US political commentator, Francis Fukuyama, takes a less sanguine view in today’s AFR, arguing that both lower and higher-end jobs are being replaced through technological advancement:
[Fukuyama] said jobs were either being sent overseas to low-cost countries or are ceasing to exist as technology expands.
“It’s not just the low-value jobs; it’s jobs higher up the chain which are simply evaporating”…
Debate over whether technological advancement is killing jobs is as old as the hills. When the automobile was introduced, stagecoach drivers protested at the loss of jobs. Ditto the 19th century mill worker and the 20th century bank teller. In all cases, new jobs were created in areas unthought of at the time. The same will happen again. New jobs will come from somewhere, although for some workers whose skills are made obsolete, they will be forced to take on less financially rewarding work.
Overall, however, creative destruction – the replacement of some prior economic order via innovation – is key to expanding living standards. The important thing is to provide displaced workers with financial assistance and retraining so that they can gain employment in the new industries, whatever they may be.
