December 8, 2022

The Shrinking Middle and Shrinking Wages

My husband likes to tell a story about his father, Joseph Virchick, who was a pipefitter for the Standard Oil refinery in Bayonne, New Jersey, starting in the 1950s. It was a union job – the Teamsters – paying solid middle-class wages that supported his family in an upscale Levitt development with its own swimming pool.

The point here is that this pipefitter with a high school degree lived about as well as his college-educated neighbors who commuted into nearby Manhattan. Virchick and his wife, Henrietta, who also worked, sent all three kids to college. When he retired in the 1980s, they had a pipefitter’s pension to supplement their Social Security.

Today, only 6 percent of private-sector workers are unionized. Something else is going by the wayside along with unions and company pensions: a thriving middle class.

Boston College economist Geoffrey Sanzenbacher argues in his new book that while the U.S. economy, on a per capita basis, has more than doubled in size since 1975, the typical middle-class man’s income, adjusted for inflation, has shrunk by about $2,500, to $60,375 in 2020. (He tracked men’s wages, because the story about women, who flooded into colleges and into the labor force more recently than men, is messier.)

“During a four-decade stretch, middle-class workers lost ground,” Sanzenbacher writes in “The Six Facts that Matter: Understanding Inequality in the United States.”

The same powerful forces that have caused regular workers’ wages to decline also fueled the widening disparities between middle- and lower-paid workers and the people at the top, whose pay has increased since the 1970s. To be sure, lower-paid workers have gained back some of that ground since the pandemic began, and their wages have risen faster than higher-income workers’ pay. But the large inequities persist.

Sanzenbacher blames two things for the eroding middle class: globalization and technology.Learn More

July 7, 2022

Imagining the End of The Age of Labor

The tension between technology and work is at least as old as the economics profession itself. A question some people are asking now is: if computers run by artificial intelligence can do the job of humans, will work disappear someday?

Two economists are proposing a couple different scenarios in a new paper that is part science fiction and part mathematical models. In one scenario, lower-paid workers who are not highly valued by society – say, McDonald’s hamburger flippers – are more readily replaced by computers than a scientist searching for a cure for Alzheimer’s disease. This will drive down wages for a larger and larger segment of the lower-paid labor force.

In a second sci-fi scenario, machines run by artificial intelligence, or AI, will ultimately be able to do any worker’s job. In that world, work “would cease to play the central role that it currently plays in our society,” the researchers predict. A computer, they muse, could even stand in for a judge. Farfetched? An AI judge might be superior if it “make[s] more accurate and humane judgments than humans, leaving behind the noise, discrimination and biases that have plagued our justice system.”

There are a host of reasons to doubt work will disappear. The economists who reject this worst-case scenario argue that technology is not job-crushing but job-creating. Machines, they say, free up workers from one type of job but open up new opportunities. Only the nature of work changes. It does not disappear. After World War II, for example, new industrial technologies created jobs that lured farmers into the cities. Artificial intelligence shouldn’t be any different.

The authors of this new paper do concede that what they call the End of Labor is far in the future. Supercomputers capable of the most sophisticated AI are extraordinarily expensive. It seems more plausible that jobs involving simple, repetitive tasks will be the ones increasingly replaced by machines. This has already started happening as robots have moved onto factory floors.

But if workers of all types are eventually replaced by machines, how would they buy their groceries, cell phones, and shoes? Something would have to be done to replace their earnings and “avoid mass misery” and “political instability,” the researchers say. They propose a universal basic income. …Learn More

January 28, 2020

Education Could Shield Workers from AI

Not so long ago, computers were incapable of driving a car or translating a traveler’s question from English to Hindi.

Artificial intelligence changed all that.

Computers have advanced beyond the routine work they do so efficiently on assembly lines and in financial company back offices. Today, major advances in artificial intelligence, namely machine learning, have opened up a new pathway to expanding the tasks computers can do – and, potentially, the number of workers who may lose their jobs to progress over the next 20 years.

Machine learning works this way. A computer used to identify a cat by following explicit instructions telling it a cat has pointy ears, fur, and whiskers. Now, a computer can rapidly analyze and synthesize vast amounts of data to recognize a cat, based on millions of images labeled “cat” and “not-cat.” Eventually, the machine “learns” to see a cat.

But is this technological leap fundamentally different than past advances in terms of what it will mean for workers? And what about older workers, who arguably are more vulnerable to progress, because they have less time to see the payoff from updating their outmoded skills?

The answer, according to a third and final report in a series on technology’s impact on the labor market, is that advances in machine learning are likely to affect all workers – regardless of age – in the same way that computers have over the past 40 years.

And the dividing line, according to the Center for Retirement Research, will not be age. The dividing line will continue to be education: job options are expected to narrow for workers lacking a college degree or other specialized training, while jobs requiring these credentials will expand. …Learn More

December 3, 2019

Workers, Machines and Constant Change

Anyone who drives on the nation’s toll roads has used a job-eliminating device: electronic tollgates.

Unemployment due to new technologies – and workers’ resistance to them – are as old as the industrial revolution. In the early 1900s, glassblowers were replaced by mechanized bottle makers. Today, autoworkers are no longer necessary to bolt car parts to carriages – robots do it with speed and precision. Toll takers are the latest disappearing breed.

Workers who lose their jobs to progress face painful transitions, and pessimists throughout history have warned about technologies increasingly rendering human effort obsolete. Indeed, jobs can seem to vanish overnight after an entire industry or occupation adopts a laborsaving machine, presenting displaced individuals with difficult choices. They must either invest in a new skill or move into a low-skill, lower-paying job.

But in the long arc of history, technology is continually creating new jobs to replace the old ones.

“The cycle of job destruction and creation has produced a labor force where, over the long run, workers have generally found jobs – albeit jobs that largely did not exist 100 years ago,” concludes the Center for Retirement Research in the first of three reports on technology’s impact on older workers for the Retirement and Disability Research Consortium.

The changing nature of work encourages new forms of growth by expanding the economic pie.  For example, about a third of U.S. workers used to be on the farm before being largely replaced by agricultural machinery like combines and threshers, the report said. But during and after World War II, new technologies adopted by industry supplied manufacturing and office jobs to the farmers who had migrated to the cities to work. Wages rose and the economy grew rapidly during this period of unprecedented abundance.

Another way that technology helps the economy is by making goods cheaper to produce and buy, freeing up demand for other products. For example, Americans spend 15 percent of their budgets on food – less than half of what they spent in 1900 before farms became fully mechanized. More money for cell phones. …Learn More