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James Bessen
April 29, 2015
Today s great paradox is that we feel the impact of technology everywhere in
our cars, our phones, the supermarket, the doctor s office but not in our
paychecks. We work differently, communicate with each other differently, create
differently, and entertain ourselves differently, all thanks to new technology.
Yet since the beginning of the personal computer revolution three decades ago,
the median wage has remained stagnant.
Over the last two hundred years, technological advancements have been
responsible for a ten-fold increase in wages. But some people claim that
technology has now turned against us, permanently eliminating middle class jobs
and portending a future of widening economic inequality. The remedy, they say,
lies in policies to redistribute wealth.
But are we really at an historical turning point? No. In fact, the present is
not so different than the past. Throughout history, major new technologies were
initially accompanied by stagnant wages and rising inequality, too. This was
true during the Industrial Revolution in the early nineteenth century and also
during the wave of electrification that began at the end of the nineteenth
century. However, after decades these patterns reversed; large numbers of
ordinary workers eventually saw robust wage growth thanks to new technology.
Of course, circumstances are different today. Information technology automates
the work of white-collar jobs and the pace of change is faster. But the key
challenge facing the workforce is the same as in the past. Both then and now,
in order to implement major new technologies, large numbers of people had to
learn new skills and knowledge. This learning turned out to be surprisingly
slow and difficult, yet it was the key to higher wages. Today s workforce must
overcome a similar hurdle before it can benefit from new technology.
Too often, when people think about technology, they only think about the
initial invention. In the cartoon version, technology consists of inventions
designed by geniuses to be run by idiots. Yet most major technologies develop
over decades, as large numbers of people learn how to apply, adapt, and improve
the initial invention. The initial power loom one of the transformative
technologies of the Industrial Revolution automated weaving tasks, allowing a
weaver to produce twice as much cloth per hour. But over the next century,
weavers improved their skills and mechanics and managers made adaptations and
improvements, generating a twenty-fold increase in output per hour. Most of the
gains from this technology took a long time to realize, and involved the skills
and knowledge of many people. Similarly slow progress was seen in steam
engines, factory electrification, and petroleum refining. More recently, it
took decades for computers to show up in the productivity statistics.
Because skills were so important during the Industrial Revolution, employers
sometimes went to great lengths to build an intelligent workforce that could
learn on the job. Lowell, Massachusetts, was the Silicon Valley of its day, and
the textile mills of Lowell recruited bright young women by offering them
something like a college experience: the mill owners funded schools, lecture
series, a library, and cultural events. One mill girl, Lucy Larcom, studied
German and botany, and published poems in the mill girls literary magazine
during the 1830s and 1840s; she came to the attention of John Greenleaf
Whittier, who became her mentor.
These measures by the mill owners might seem surprising because even today
factory workers with little education are often considered unskilled.
Although the early mill workers had little formal schooling, they learned
skills on the job, skills that were critical to keeping the strange, new,
expensive machines running efficiently. Their skills were narrow compared to
those of traditional craftsmen, but valuable nonetheless. These skills
eventually allowed factory weavers to earn far more than earlier artisan
weavers; steel workers with narrow skills earned more than craft ironworkers
with broad skills; typographers on the new Linotype machines earned more than
the hand compositors they replaced. Moreover, employers paid these workers well
at a time when unions had little power. Technical skills learned through
experience allowed blue-collar workers with little education to enter the
middle class.
However, this process took a long time. Many workers could not teach themselves
on the job. In the early textile mills, most left after just months on the job,
finding the work too hard to learn or too disagreeable. Nor could these skills
be learned in school. The technology was too uncertain, changing too rapidly
for schools to keep up. The first textile schools were not established until
after the Civil War. More important, workers incentives to learn the new
skills were weak because the labor market was initially quite limited. During
the 1830s, the textile mills mainly hired workers who had no prior experience.
Experience acquired at one mill was not necessarily valuable at another because
mills used different versions of the technology and organized work in different
ways. But without a robust labor market, textile workers could not look forward
to a long career at different workplaces and so they had little reason to
invest in learning. After the Civil War, the market for skilled textile workers
became very active. Only then did wages begin to grow vigorously. Weavers
hourly pay in Lowell changed little between 1830 and 1860, but by 1910 it had
tripled. It took decades for the training institutions, business models, and
labor markets to emerge that unlocked the benefits of technology for ordinary
workers.
Of course, technology and skills were not the only factors that helped boost
wages. Growing capital investments made the workers more productive, and
growing opportunities for women workers helped increase their pay. Unions also
played a role, especially during the 20th century. But consider the magnitude
of these changes: studies have shown that unionized workers earn about 15% more
than comparable nonunionized workers. That s a meaningful difference, but it
looks small compared to the weavers three-fold increase in wages. Ultimately,
the biggest factor in that wage growth was technology, the productivity growth
it unlocked, and the development of mature labor markets that valued the
weavers skills.
Thanks to these developments, generations of less educated manufacturing
workers have been able to earn good pay. Now, however, automation and
offshoring have eliminated many of those jobs for weavers and steelworkers and
typographers; many of the old skills are obsolete. Nevertheless, new
opportunities are emerging because technology creates jobs that demand new
skills. However, the transition to new jobs is slow and difficult.
For example, computer publishing replaced typographers with graphic designers.
Yet today s graphic designers face a challenge acquiring the latest skills, not
unlike the challenge faced by antebellum textile workers. Standards, business
models, and technology keep changing, requiring continuous learning. First
designers had to learn desktop publishing, then web publishing, and now, with
the growth of smartphones, mobile design. The most able designers are able to
teach themselves, but the average designer cannot. Nor have the schools kept
up; many still focusing on print design. The top ten percent of designers have
seen their wages grow strongly along with their new skills, but the median
designer wage has been stagnant for three decades.
Since the 1980s, a similar gap has widened within many jobs. In occupations
where the majority of workers use computers, the wages of the top ten percent
have been growing, but median wages have seen little growth. Even among
scientific, engineering, and computer occupations, the median wage has grown
slowly, but those with specialized technical skills earn a growing bounty from
technology. And the difficulty of acquiring the new skills affects employers as
well. In survey after survey, over a third of managers report difficulty
finding employees who have needed skills; business groups regularly decry the
skills gap. In short, firms have plenty of demand for workers with critical
technical skills, they are willing to pay high wages for workers who have them,
but too few workers do.
Thus the problem isn t that technology has eliminated the need for mid-skill
workers overall. New opportunities are there, but grasping them is difficult.
Overcoming that obstacle will take time as well as policies that promote
technical training, certify skills learned through experience, encourage
employee mobility, and foster robust labor markets.
Perhaps in the future, smart machines will drastically eliminate opportunities
for mid-skill work, but that is not what is behind today s stagnant wages.
Technology has not turned against us; instead, technology challenges us to
develop new capabilities. If we meet that challenge, then large numbers of
ordinary people will benefit substantially from new technology, just as they
have for the past two hundred years.
This article is adapted from the author s recently published book Learning by
Doing: The Real Connection Between Innovation, Wages, and Wealth.
James Bessen, an economist at Boston University School of Law, is the author of
a book about technology and jobs, Learning by Doing: The Real Connection
Between Innovation, Wages, and Wealth. You can follow him on Twitter.