More Jared Bernstein on Technology Displacement

       I just wrote a piece on a article he wrote about it. 

       Jared Bernstein on wage stagnation http://diaryofarepublicanhater.blogspot.com/2015/01/jared-bernstein-on-wage-stagnation.html

        However, it's a lengthy piece with a lot to chew on so this is kind of part 2. He talks about a very popular model for looking at TD. 

        "The impact of technology on work and wages is and always has been profoundly important. The most popular economists’ theory about how this plays out is “skill-biased technological change,” or SBTC."

        "The conventional SBTC story is simple. As technology in the workplace evolves, it raises the cognitive demands that employers make of their workers. How that affects individual workers depends on the extent to which they productively interact with the new technologies."

        "In the econo-mese of labor economics, the relevant terms here are complementsand substitutes. If a new machine does what you do but does it for less, you’re a substitute. Not good. But if the nature of your job and the skills you bring to it enable you to use the new machine to produce more or better output than the machine could produce without you, you’re a complement. Tech change is “biased” in your direction. Pass go and collect a hefty paycheck."

       "Is SBTC a useful model? Over the very long term, yes. Over the near term, it can be misleading. It’s a good telescope and a lousy microscope."

        http://prospect.org/article/it%E2%80%99s-not-skills-gap-that%E2%80%99s-holding-wages-down-its-weak-economy-among-other-things

     However, he points out that with an increase of workers that can be substituted, we should see a rise in productivity which is not at all what we've seen. 

     "There are at least two ways to evaluate this concern about increasing technological unemployment: macro and micro. From a macro perspective, if technology were contributing to more output with fewer workers (more precisely, fewer hours of work), productivity growth would accelerate. In fact, as shown in the figure below, the rate of productivity growth appears to have decelerated in recent years (productivity changes are notoriously jumpy so the figure includes a smooth trend to help reveal the recent deceleration)."

      Well, I think there was a temporary rise in productivity from 1995 to 2005 which has since faded. However, it's true that with a TD of workers you should see a rise in productivity. Now he looks at the micro picture:

     "The micro research on this question is particularly interesting. Economist David Autor, along with various co-authors, has taken the most granular look at how tech change is interacting with jobs through the lens of tasks. He breaks these tasks down into three bins: routine, manual, and abstract

     "Autor provides a nice example of what differentiates these two different kinds of jobs/tasks:

Modern automobile plants…employ industrial robots to install windshields on new vehicles as they move through the assembly line. But aftermarket windshield replacement companies employ technicians, not robots, to install replacement windshields. Why not robots? Because removing a broken windshield, preparing the windshield frame to accept a replacement, and fitting a replacement into that frame demand far more real-time adaptability than any contemporary robot can approach.

      "Abstract tasks involve high levels of reasoning, mastery of complicated stuff like statistical analysis, and nuanced communication."

      "Armed with this typology, Autor tackles both ends of the “technological unemployment” thesis and finds it wanting. He finds more techno-complements than substitutes at the high end of the wage/skill spectrum and fewer opportunities for automation at the low end. Repetitive production jobs will continue to go missing, but that’s a very long-term trend. Higher end jobs will continue to complement technology while the inability of computers to replace workers in manual jobs that require “flexibility, judgment, and common sense remain[s] immense.”

        However, this is the impact of technology on employment. My point in the last post was it's impact on wage growth-I argued that the trouble is that we have had less good paying jobs because a number of middle level white collar jobs have been automated-data entry, bookkeeping, etc. 

      What this literature sows on the impact of technology on wages is interesting:

      "When it comes to wage trends, SBTC is even a less useful tool. Generally speaking, SBTC would predict a fanning out of wages by skill levels, with complementarity, or the skill bias, rising as you climb up the pay scale, and ever-increasing substitutability, or a negative bias, as you go down the scale."

        "The problem, as Larry Mishel and colleagues at the Economic Policy Institute have shown, is that this has not been the actual pattern of wages over the past few decades. Both in real and relative terms, actual wage trends have not moved the way SBTC says they should."

       Remember that my point is not to defend-or for that matter criticize SBTC-but rather that technology seems to me to maybe be reducing the number of high paying jobs-even more to the point medium decent paying jobs.  

      In terms of wages what we seem to have is more and more polarization. There are great paying jobs at the top but the number of them is decreasing while average or decent paying jobs are a thing of the past. The data here doesn't seem to me to contradict this narrative I'm drawing. 

    "While wages fanned out as SBTC would predict in the 1980s, they’ve generally failed to do so since. For example, mid-level wages fell relative to low wages throughout much of the 1990s."

     "SBTC would predict that the wage premium of more highly educated workers would continue to rise, yet starting around the mid-1990s, that differential slowed, if not plateaued. This flat trend is inconsistent with the oft-made claim that SBTC is driving post-2000 wage inequality."

      "SBTC would predict productivity gains would be reflected in the wages of workers with complementary skills to the new technologies. But productivity increases have diverged not just from the real pay of the lowest paid workers, but from those of middle and upper-middle wage workers as well."

       "David Autor in particular has tried to save SBTC by coming up with interesting ways in which it could still be tapped to explain these wage patterns. Most prominently, he and colleagues argued that based on the tasks-framework discussed above, SBTC in the 1990s was leading to a polarization of both jobs and wages (as opposed to the more linear impact of traditional SBTC: bad for the bottom, less bad for the middle, good for the top). Routine production jobs, which tend to pay solid, middle-class wages, got whacked because they’re easily mechanized (so they’re substitutes); manual, non-routine jobs at the low end of the wage scale did better because they’re much harder to automate; and high-end, high-paying jobs did well because they’re complementary to the new tech."

      "But things moved around again in the 2000s in ways that forced yet a new morphing of SBTC. Polarization was gone, and Autor wrote that the formerly “U‑shaped growth of occupational employment came increasingly to resemble a downward ramp in the 2000s,” with pretty strong growth at the bottom and not much in either the middle or top."

     You see there are a number of moving parts in this discussion taht can easily be confounded. There is the impact of TD on employment, on wage inequality, on wage stagnation. My main argument is that it seems to me it has contributed to the third item-wage stagnation (WS). 

    Employment itself maybe not: we seem to still be able to create jobs, just not very good ones that pay close the the minimum wage (MW) that are mostly part time-and certainly don't pay overtime-and are dead end jobs in the service-with no chance of advancement. It seems to me that this might describe the median worker in the US today and if so I think technology displacement. 

     If I'm right-and I may well not be-I don't know where this takes us. I for one and anything sooner than a 'Luddite'as I love technology and agree it enables us all to do many wonderful things-for me it enables me to get to gain so much more access to great ideas, thoughts, and books that I surely wouldn't have otherwise. I get to tell the world me thoughts every day and have at least a few folks in the world read them. 

    This is hardly exhaustive and just scratches the surface of how much the Internet and data revolutions have given us. However, it does seem to hurt the average or mean worker-they had better paying options before it seems to me. 

     What can be done about it-if you rule out any Luddite fantasies of smashing the godless machines-I don't know, However, this is how it seems to me.