The happenings "inside" the Wisconsin State Treasury and across the street at the State Capitol

The Economy & You #23: How Technology Affects Employment


When the Industrial Revolution first began in England in the 19th century, a group of people feared that new technology (the mechanized loom) would take away their jobs and their way of life.  The mechanized loom allowed for textiles to be made by cheaper and relatively unskilled labor, which would result in artisans who currently made the fabrics to lose their jobs.  This group, the Luddites, responded to this threat by destroying these machines.

An article by David Talbot in Technology Review outlines how technology is reducing the need for certain jobs faster than new jobs are being created. Our society has continued to witness this process of the elimination of jobs due to technology and innovation while at the same time creating new kinds of work that result in more productivity and higher prosperity, all with little effect on employment.

With the U.S. facing an unemployment rate that is still over 8 percent, and people struggling to find work, many are wondering what role technology plays in all this.  There are several factors that explain changes in the labor market including outsourcing, but according to the Talbot article, automation and technology may be playing the biggest role.

Research indicates that improvements in workplace automation are being utilized at a faster and faster rate which makes it even more difficult for workers to adapt.  More and more jobs that were once handled by a front-line worker are now being accomplished by a machine or software program.  The welding and painting of automobiles are now performed by robots. Complex calculations by engineers and accountants are now being done through software programs.  More and more work is being done by machines.  This has caused worker productivity to continue to rise steadily even with the economic downturn.  The improvement in productivity means that fewer workers are needed to complete a specific task.

This progression can be seen throughout multiple industries.  We are very familiar with the mechanization of agriculture that transformed our society.  In 1800, 90% of Americans were employed in agriculture. In 1900 that number was 41% and today that number is 2%. Still, there are other examples: ATMs have replaced bank tellers, online shopping (EBay and Amazon) has replaced retail sales clerks, and customer support can be done solely through the phone without speaking to a live person.

Because of this automation and advancement, some researchers believe that jobs prospects are disappearing from the middle and migrating to the two ends of the wage spectrum.  Those who have few of the needed modern day skills will only find work in the lower wage positions.  Those in the higher wage bracket will possess professional or technical expertise.  For production workers, sales reps and those in typical middle class jobs, those positions will see slow growth or even a reduction in the labor market because these jobs are the easiest to replace, fully or in part, by technology. The result is that technological advancements are eliminating jobs faster than they can be replaced by new industries.  So unless the economy generates new high-quality jobs, the people in the middle will face the prospect of low-skill, menial job whose wages will actually decline as more people compete for them. In the short run, the old set of skills that once created a lot of value is not useful anymore.

Like the Luddites, we cannot destroy the advances in technology that threaten our present day jobs. Therefore, governments (local, state and federal) need to invest substantially in human capital.  The problem we face is that a large segment of our labor force is not adequately educated in new technologies that will allow us to take advantage of these advances and develop the new and undiscovered industries that will employ our nation’s workers and help sustain our way of life.

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