this trend, and has been largely accounted for by slowdowns in the IT-producing and IT-using sectors.4. . More recent studies, however, indicate that computers and information technology may indeed be affecting the productivity of non management workers. 20 A.P. These innovations are being diffused throughout the world. Everything will be shared in online folders which are easy to access! Choudar, 2016, Platform Revolution: How Networked Markets Are Transforming the Economy—And How to Make Them Work For You, W.W. Norton & Company, New York. Switch between the Original Pages, where you can read the report as it appeared in print, and Text Pages for the web version, where you can highlight and search the text. It is generally understood that, by increasing productivity, IT will tend to increase overall income—although without a guarantee that these gains will be evenly distributed. Technological advances can create enormous economic and other benefits, but can also lead to significant changes for workers. How these disparities will shift in the future as a result of technological change is an open question; gender and occupational fields are discussed further in Chapter 4. An overarching theme emerges: economic and societal changes occasioned by technological developments are shaped, not just by the availability of new technologies and their features, but also by ideologies, power structures, and human aspirations and agendas. ments needed to expand usage and performance of self-driving cars. For example, it has been suggested that the decision to develop technologies that automate rather than augment the human role in the machine tool industry was driven by the combined interests of the U.S. Air Force and the Massachusetts Institute of Technology servomechanisms laboratory.42, Consideration of whether technology can replace human workers has prompted discussion about the subtle complexity of human skills. As noted in the previous section, over the past 20 years, the share of people working—the employment-to-population ratio—has declined. Early studies of the effects of computer investment found little or no correlation between information technology investment and productivity. They transcend local boundaries and touches lives of everyone. There will be a need for new types of managerial, diplomatic, and social skills and a concomitant need for a new type of decision making process that will not be accommodated by existing organizational structures. 72 J. Furman and P. Orszag, 2015, “A Firm-Level Perspective on the Role of Rents in the Rise of Inequality,” https://www.whitehouse.gov/sites/default/files/page/files/20151016_firm_level_perspective_on_role_of_rents_in_inequality.pdf. Science and technology are essential ingredients of modern life. New medical imaging technologies are a case in point. SOURCE: (A) D.H. Autor and D. Dorn, 2013, The growth of low-skill service jobs and polarization of the US labor market. This may reflect a combination of factors, including mismeasurement of some of the benefits, reduced dynamism, the inherent lags often associated with the implementation of new technologies, or secular stagnation. FIGURE 3.4 In panels A and B, workers in the middle of the skill distribution have had lower employment growth and wages growth than workers at the top and bottom. On how scarcity might spur innovation, see E. Boserup, 1981, Population and Technological Change: A Study of Long-Term Trends, University of Chicago Press, Chicago, Ill. For the impact of workplace organizations on technology, see E. Brynjolfsson and L. Hitt, 2000, Beyond computation: Information technology, organizational transformation and business performance, Journal of Economic Perspectives 14(4):23-48, and L. Hitt, S. Yang, and E. Brynjolfsson, 2002, Intangible assets: In this chapter, the committee considers the current state of (1) productivity growth, (2) employment, and (3) income distribution. Figure 3.5 illustrates the global decline of the labor share of income. Educational programs, even those in vocational disciplines like business and engineering, may need to add interpersonal and creative skills to their mix of hard analytical skills. Deming, 2015, “The Growing Importance of Social Skills in the Labor Market,” National Bureau of Economic Research, doi: 10.3386/w21473. 75 G.G. The former two attempt to capture the overall output of a given economy from a macro-environmental perspective. However, there are numerous social and cultural as well as technological roadblocks to such an outcome. This report emphasizes the need to understand and track these trends and develop strategies to inform, prepare for, and respond to changes in the labor market. Productivity Slowdown,” mimeo. Hitt, 2003, Computing productivity: Firm-level evidence, Review of Economics and Statistics 85.4: 93-808. Doing so with respect to the fast-changing and dynamic area of technology is even more challenging. This has been a longstanding research challenge, recognized at least since Solow5 and Griliches.6 Griliches noted that the economy has been shifting increasingly to sectors where output and output quality are difficult to measure, such as government, health, and finance. 26 S.A. Donovan, “2015, An Overview of the Employment-Population Ratio,” Congressional Research Service, May 27, https://www.fas.org/sgp/crs/misc/R44055.pdf. 59 D.H. Autor, L.F. Katz, and M.S. B… For instance, if Wikipedia replaces a paper encyclopedia or a free GPS mapping app replaces a stand-alone GPS device, then consumers can be better off even if output is stagnant or declining.10. For instance, they can shift the allocation of tasks across occupations such that some occupations contract as the work they once performed is shifted onto members of other occupations.39 An instructive example is the advent of word processing technologies and online databases in the context of a typical academic department in the university. Byrne, J.G. See also T. Reddy, 2007, “Fleets Eye Safety Gains to Cut Insurance Costs,” Transport Topics, http://www.ttnews.com/articles/printopt.aspx?storyid=17563, for figures on truck driver hiring and claims of inability to fill positions. 76 J. This is a critical component in understanding the role of technology in productivity, as it is a primary influence on increasing the prospective production possibilities. Instead, the rapid proliferation of digital technology may enable a third class—people who can create and distribute new products, services, and business models—to prosper immensely.78 In addition, there is evidence that pay for top executives, like CEOs, has grown fastest in industries that use IT the most intensively, which is consistent with them being able to gather more detailed information and relay their decisions more effectively across more people and assets. 63 D.H. Autor, L.F. Katz, and M.S. ; and T. Piketty and E. Saez, 2013, Top incomes and the Great Recession: Recent evolutions and policy implications, IMF Economic Review 51 (3):456-478, doi: 10.1057/imfer.2013.14. Economies of scale on the supply side, the demand side, or both tend to a greater prevalence of “winner take all” outcomes where the leading firm in a particular platform does exceptionally well. They find that in the first half of the 1990s, true technology grew at an annual rate of 1.2 percent, but this rate rose to 3.1 … 42 D.F. . Globalization has further eroded the demand for such skills in advanced economies like the United States. sales jobs has fallen sharply, while employment in professional jobs has grown, as shown in Figure 3.1.23, Despite the low unemployment rate, the overall U.S. employment rate (the employment-to-population ratio) remains near a 20-year low. Analyze how changes in technology affect productivity and productivity growth. Visions of a future with fully automated vehicles have captured many people’s imagination. Stiroh, 2007, “Explaining a Productive Decade,” Federal Reserve Board, https://www.federalreserve.gov/pubs/feds/2007/200763/200763pap.pdf; E. Brynjolfsson and L. Hitt, 1995, Computers as a factor of production: The role of differences among firms, Economics of Innovation and New Technology 3:183-199; and L. Hitt, S. Yang, and E. Brynjolfsson, 2002, Intangible assets: Computers and organizational capital, Brookings Papers on Economic Activity 1:137-199; K.J. Technology can help to organize every task that you need to complete and improve productivity along the way. 64 Downloads; Abstract. Great progress was made in the 1990s and 2000s on improving price deflators for the hardware parts of IT,8 but the software side has been more challenging. It is possible that ongoing development of these technologies, including infrastructure, will create more jobs than are lost in the wake of self-driving vehicles, but it is likely that the skills required for such jobs will be quite different from those currently possessed by today’s truckers and taxi drivers. The modern technology incorporates powerful microelectronic devices that increase productivity in the office and factory at lower cost. In particular, workers doing routine tasks (such as production tasks in manufacturing or clerical tasks) have seen their demand decline due to multiple factors, including changing technology. This is often called the skill-biased technological change hypothesis.58,59,60 When new technologies have different skill requirements than older ones, they tend to favor the hiring of workers possessing these skills. Solow, 1959, A contribution to the theory of economic growth, Quarterly Journal of Economics 70(1):65-94, doi: 10.2307/1884513. Keynes, 1933, “Economic Possibilities for Our Grandchildren (1930),” pp. The argument is that earlier innovations were in the form of general purpose technologies that had wide application to many industries.17 Alternatively, some have argued that we are in a period of secular stagnation due to weak aggregate demand.18 The suggestion is that persistently weak aggregate demand is acting as an overall drag on economic growth. Not a MyNAP member yet? In short, programming became part of the machinist’s task.81 More recent technologies like the Baxter and Sawyer robots from Rethink Robotics take this a step further, enabling line workers to “program” the machines simply by physically guiding them through the steps, rather than by writing computer code.82, It bears repeating that this discussion of technology and inequality. Globally, the ability to use technology is an essential skill in the dynamic business environment. 67 D. Acemoglu, 2009, Changes in unemployment and wage inequality: An alternative theory and some evidence, American Economic Review 89(5):1259-1278. Self-driving cars also offer a good illustration of the variable and mixed impact of technology on employment, as well as the long and often uneven march of technology development, which complicates the ability to make accurate long-term projections. Another factor that is important in this context is that advances in IT often involve significant supply-side economies of scale: the cost of making the first copy of a new enterprise system, video game, or mobile app is often significant, but the cost of making an additional copy is very low. First, many new technologies have replaced labor-intensive, routine, and physical tasks and expanded demand for labor in jobs that require social skills, numeracy, abstract thinking, and flexibility.54 This shift is often said to be responsible for higher returns to a college education and the widening income gap between skilled and less. Nevertheless, there is a technological element to such rent-seeking, and to inequality as well. Gal, 2016, “The global productivity slowdown, technology divergence, and public policy: A firm level perspective,” Brookings, https://www.brookings.edu/research/the-global-productivity-slowdown-technology-divergence/, and R.A. Decker, J. Haltiwanger, R.S. Consider self-driving cars. Choices regarding the development of technologies can also be influenced by the same interests and social dynamics. . For instance, in the late 1800s, the replacement of the stagecoach by the railroad went hand in hand with the creation of new work for managers, engineers, machinists, repairmen, and conductors. Lommerud, F. Meland, and O.R. Technologies are not exogenous forces that roll over societies like tsunamis with predetermined results. Consequently, the ways that any particular technology, or a range of new and rapidly changing technologies, will affect employment and income are not predetermined, but rather a function of choices. Oliner, D.E. A graph that shows the various combinations of amounts of two commodities that could be produced using the same fixed total amount of each of the factors of production. low-wage occupations such as food service, personal care, and protective service occupations.67,68. The reductions in real compensation for labor include the decline of. 65 CareerBuilder, “The Shocking Truth about the Skills Gap,” 2014, http://www.careerbuildercommunications.com/pdf/skills-gap-2014.pdf, accessed August 16, 2016. Reinsdorf, 2016, Does the United States have a productivity slowdown or a measurement problem?, Brookings Papers on Economic Activity (forthcoming); C. Syverson, 2016, “Challenges to Mismeasurement Explanations for the U.S. Furthermore, while it is common to focus on average levels of income and income growth, the distribution of those gains can also have an effect on well-being. Heilbroner, 1965, Men and machines in perspective, National Affairs, Fall, pp. The Impact Of Technological Change On Employment: Evidence From A Firm-Level Survey Of Long Island Manufacturers. The remainder of this section discusses open issues and questions as well as possible pathways for resolving them. Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required. There isn’t much sign of looming technological disruption. The history of numerically controlled, or programmed, machine tools is instructive on this point. Improved technology has led to increased connectivity and … Fernald, 2014, Productivity and potential output before, during, and after the Great Recession, NBER Macroeconomics Annual 2014, Volume 29, doi: 10.3386/w20248. The first wave arrived quickly and reflected the adoption of electrification within the existing organization of production. In addition to eliminating some jobs while creating others, technological developments can create new occupations without reducing employment in older occupations. 34 Acemoglu and Restropo, 2016, “The Race Between Machine and Man.”. 4 J.G. Recent evidence suggests that adoption of cloud computing and other changes are even making it more difficult to assess quality changes for hardware.9, A related, but more fundamental, issue is that productivity is neither a measure of technological progress nor welfare. Technological advancement allow for economic growth which is a necessity for an increased … For instance, Larry Katz, an expert on labor studies and editor of the Quarterly Journal of Economics has said, “Over the long haul, clearly automation’s been much more important—it’s not even close.”27. This graph illustrates the varying theoretical takeaways from a PPF chart. This is true not only because absolute levels directly affect the quality of life of particular groups, but also because broad perceptions of unfairness can have a negative psychological impact, and inequality can contribute to sociopolitical tensions. Unless supply changes sufficiently, this will shift wages in favor of the more skilled group.61 In recent decades, the impact of IT has been uneven across the skill distribution.62 Since the 1970s, males with graduate or college education have seen their wages grow, while those with a high school education or less have seen falling wages63 (see Figure 3.3). Technology is transforming the way we work, play, and interact with others. More and more workers will be replaced by machines. Tech companies have generally fixated on increasing productivity and profits by automating work, and thus eliminating jobs. Orlikowski, 2004, A practice perspective on technology-mediated network relations: The use of Internet-based self-serve technologies, Information Systems Research 5(1):87-106. of websites. However, the existence of technology alone is not enough to enhance productivity. Song, D.J. In sum, new technologies can participate in eliminating occupations, creating new occupations, shifting the distribution of tasks among occupations, and altering the geographical division of labor.83 The dynamics of employment and wage inequality are driven by forces that are not exclusively or even primarily technological in nature: institutional patterns, legal structures, tax structures, and managerial ideologies that emphasize the accumulation of wealth also play a role. Standard data sources typically do not report the technology used; and even if they did, old and new technologies often co-exist within firms, making it difficult to isolate the productivity effects of the latter. Furthermore, with the march of technology, both in terms of advances in imaging and with developments at the intersection of imaging and other areas of biomedical engineering, radiologists began to specialize in particular imaging modalities and in whole new radiology subdisciplines such as “interventional radiology,” extending the range of opportunities for careers within radiology and increasing the need for radiologists.38, Nonetheless, technologies can also have an impact on how tasks are allocated and how job categories and tasks associated with particular organizational forms and structures are designed. We also offer some “back of the envelope” quantification of Chinese import effects on technical change. Evolution of mankind can be seen in terms of technological evolution as well. An important variable for understanding and shaping future developments is the way education and vocational training institutions might ameliorate the mismatch between new technologies and existing skills. MyNAP members SAVE 10% off online. That does not mean that simply investing more in the same sorts of education is the best way to reduce inequality, however. 1 For the impact of available skills and markets on the direction of technological changes, see D. Acemoglu, 1998, Why do new technologies complement skills? In turn, innovation, diffusion, or adoption of technology is the key driver of improvements in productivity. Also as the production increases, the fixed cost is spread over more units, causing the … It offers evaluations of what is known, notes open questions to be addressed, and identifies promising research pathways moving forward. Brynjolfsson and Hitt found evidence that the productivity benefits of large enterprise systems took up to 7 years to be fully realized, as significant organizational and process changes were typically required to make full use of accompanying software and hardware investments.12 The diffusion and adoption of technologies is time- and resource-intensive and requires much experimentation, with failures and variable time lags along the way. These include such factors as consumer trust; the fact that there will be a long period of mixed-use road use, with both autonomous driving and manual driving cars sharing the roads; and the infrastructure require-, 36 Acemoglu and Restrepo also provide evidence that there is a large contribution of new occupations to employment growth in the last three decades: Acemoglu and Restrepo, 2016, “The Race Between Machine and Man.”. Stiroh, 2002, Projecting productivity growth: Lessons from the U.S. growth resurgence, Economic Review Q3:1-13; S.D. Since the mid-1970s, the United States has experienced significant growth in inequality in both income and wealth. Workforce: Where Are We and Where Do We Go from Here? 15 E. Brynjolfsson and L.M. 50 For this and other statistics on wealth inequality, see E.N. This is done through utilizing production function equations and identifying when the output is greater than the supposed input, implying an advance in the external technological environment. 23 P. Restrepo, 2015, “Skill Mismatch and Structural Unemployment,” Massachusetts Institute of Technology, http://pascual.scripts.mit.edu/research/01/PR_jmp.pdf. Indeed, increasing inequality in the United States has a political dimension, a phenomenon that is, of course, not new. Much but not all of these gaps have been explained by varying education and experience, or the fact that different groups participate at different rates in different industries and occupational fields. 70 E. Brynjolfsson and A. McAfee, 2014, The Second Machine Age: Work, Progress, and Prosperity In a Time of Brilliant Technologies, W.W. Norton & Company, New York. Ho, and K.J. slowdown in productivity growth, although the demand for new skills driven by technological change, as well as the impact of an ageing population at times play a role in explaining differences in productivity performance. The shift due to changes in technology represents increased productivity. This can shift the demand for some types of human labor, eliminating some jobs and creating new ones. Davis and J. Haltiwanger, 2014, “Labor Market Fluidity and Economic Performance,” University of Chicago and NBER, and University of Maryland and NBER, http://faculty.chicagobooth.edu/steven.davis/pdf/LaborFluidityandEconomicPerformance26November2014.pdf. In economics, a technological change is an increase in the efficiency of a product or process that results in an increase in output, without an increase in … Measuring the effects of technology on productivity is a difficult pursuit. 32 R.L. A decline in the rate of capital deepening has contributed to the slowdown, and Section 5 Technological advances play a crucial role in improving productivity, and thus the standard of living in a system. Technology will minimize your employees taking unnecessary steps or getting overwhelmed with all the tasks they have to complete. This led some to argue that machinists would be deskilled because management desired to separate cognition from execution. The tools that can be used for productivity, collaboration and communications mean that much more can be done in the workplace, which can nowadays be a completely different space than it was 20 years ago. While productivity is still growing, it does not appear to be growing as rapidly as it did in the late 1990s and early 2000s. Instead, future trends will depend on the invention and deployment of new and improved technologies and on the co-inventions by the workforce, organizations, and institutions needed to effectively use them. This is consistent with the rise of the “innovator class,” which suggests that neither labor nor capital owners will necessarily benefit the most from technological advances. Workforce explores the interactions between technological, economic, and societal trends and identifies possible near-term developments for work. In fact, the average plant showed a gross change of roughly four technologies in achieving an average net increase of less than one new technology. © 2021 National Academy of Sciences. Information Technology and the U.S. View our suggested citation for this chapter. In a related manner, there is evidence that adopting new technologies requires organizational changes and restructuring of business practices that take time.16 For instance, it is easy to imagine significant benefits, eventually, from the widespread digitization of patient data, yet many physicians complain that the adoption process for electronic medical records is slow and cumbersome, with current costs exceeding current benefits. Carnevale, N. Smith, and J. Strohl, 2010, “Help Wanted, Projections of Jobs and Education Requirements Through 2018,” Georgetown University: Center on Education and the Workforce, https://cew.georgetown.edu/wp-content/uploads/2014/12/HelpWanted.ExecutiveSummary.pdf. When technology advances so does the production of units increase which causes the average variable cost, which is the costs that vary with the quantity produced, to decrease. It is generally approached through metrics such as Gross Domestic Product (. As with employment, the case that technological advances have contributed to wage inequality is strong. Measuring the affects of technology on productivity is a difficult pursuit. Technology has helped the definition of the workplace change and has aided … The latter is slightly more interesting, attempting to measure technologically driven advancement through noting increases in overall output without increases in inputs. Indeed, even in the near term, as self-driving technologies are being developed, the occupation of trucking37 is likely to be transformed. According to a recent analysis by the Pew Research Center,80 2015 median hourly earnings for women were just 83 percent of white men’s, and black workers’ only 75 percent of white men’s. The discussion of future research directions in Chapter 6 emphasizes the significance of exploring such critically important questions. But an emphasis on any fixed set of skills might be too backward-looking. To be sure, technologies did and will continue to decimate particular occupations. 53 See T. Piketty, Capital in the Twenty-First Century, Harvard University, Cambridge, Mass, p. 70. Directed technical change and wage inequality, Quarterly Journal of Economics 113(4):1055-1090; D. Acemoglu and P. Restrepo, 2016, “The Race Between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment,” No. owners of the most successful IT firms and entrepreneurs who have introduced new products, business models, and platforms are among the biggest winners. From this perspective, the hypothesis is that while the changes in technology outlined in Chapter 2 are indeed occurring, they are slow to show up in economic growth due to slowing diffusion or business dynamism. Straume, Globalisation and union opposition to technological change, Journal of International Economics 68(1):1-23, 2006. 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