Employment growth being stymied by the digital advance?

By September 30, 2013

Progress in information technology may be causing long-term job destruction, warns a report from two MIT researchers.

Coined by Joseph Schumpeter, the term ‘creative destruction’ – basically meaning a process whereby the advent of new techniques wipe out whole areas of the economy – has long been part of our lexicon. Now however, two researchers at MIT are sharpening its focus by studying the impact on employment of the surge in computerization. The research findings of Brynjolfsson and McAfee are all the more troubling since they seem to confirm that job destruction brought on by such advances as software development and robotics is proving to be greater than the job creation which such progress often entails. They point to an overall ‘decoupling’ of the two trends, suggesting that the overspill theory – jobs from one sector being displaced or transferred to another when new technology appears – as formulated by French economist Alfred Sauvy, no longer applies. This trend, if it were to continue, might even lead to the resurgence of a Luddite-type movement ideologically opposed to any technical progress which eliminated human jobs.

Productivity increases coupled with widespread job destruction

The two economists point to the conjunction of two trends, which they believe to be directly linked: on the one hand an increase in US productivity and, in parallel, ongoing job destruction over the same period of time, which also coincides with the surge of IT-related technology –  robotics, APIs, Big Data etc. There has been clear overall shrinkage in the job market in the United States and in most other developing countries. While the number of jobs in the US grew by around 20% between the late 1970s and the turn of the century, the decade of the 2000s saw the job market contract by 1%. One of the report’s authors, Erik Brynjolfsson, a professor at the MIT Sloan School of Management, underlines: “It’s the great paradox of our era (…). Productivity is at record levels, innovation has never been faster, and yet at the same time we have a falling median income and the labor participation rate, the share of workers that are in the workforce out of the total population, has fallen off a cliff.” According to former Stanford University economics professor Brian Arthur, we are witnessing the emergence of the ‘autonomous economy’, which involves “digital processes talking to other digital processes and creating new processes”, thus reducing the central role of the human worker in both the production and decision-making chains.

New paradigm calls for appropriate training

One of the factors discussed by the two MIT researchers is the lack of training – vital to prepare people for the transition to jobs which are more focused on the new technologies and require appropriate skillsets – on offer. We are seeing a definite polarization, with on the one hand an increase in well-paid jobs that require creative thinking and the ability to solve complex problems; and on the other hand a growing need for workers to fill very low-qualified jobs. In this situation, middle-echelon jobs, including those involving basic administrative tasks, are gradually disappearing. For example, a software developer who creates a computer program to automate tax preparation might see his income triple in a short space of time, while eliminating the need for countless accountants. Thus we are seeing a new class of ‘digital losers’ who are not able to take advantage of the opportunities afforded by the IT advance. However, now that industrial robots are being simplified and their safety and flexibility enhanced, the factory is also changing into a hybrid workplace featuring increased direct collaboration between humans and machines. Some tasks still remain the exclusive preserve of humans, as John Leonard, Professor of Mechanical and Ocean Engineering at MIT points out: “People and robots working together can happen much more quickly than robots simply replacing humans.”  Which means that education systems and training programmes will need to be improved and re-focused if the productivity gains achieved by the transition to digital are to be more fairly shared.


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