Transcript The Job Drought?

What Has Caused the Job
Drought?
Computer Technology?
Lack of Aggregate Demand?
Globalization?
http://www.davegranlund.com/cartoons/2011/07
/12/job-drought/
Job Drought: Employment Population Ratio
and Labor Market Participation Rate
http://www.crgraphs.com/2011/10/employment-graphs.html
Job Drought: All Workers vs. Prime Age Workers
All Adults
Prime Age Workers
http://www.crgraphs.com/2011/10/employment-graphs.html
Job Drought:
Part-time for Economic Reasons
http://www.crgraphs.com/2011/10/employment-graphs.html
• How Technology Wrecks the Middle Class
• By DAVID H. AUTOR AND DAVID DORN
– NYTimes Sunday, August 25, 2013
– http://opinionator.blogs.nytimes.com/2013/08/24/ho
w-technology-wrecks-the-middleclass/?ref=todayspaper
– David H. Autor is a professor of economics at the
Massachusetts Institute of Technology. David Dorn is
an assistant professor of economics at the Center for
Monetary and Financial Studies in Madrid.
• In the four years since the Great Recession
officially ended, the productivity of American
workers — those lucky enough to have jobs —
has risen smartly.
• But the United States still has two million fewer
jobs than before the downturn,
• the unemployment rate is stuck at levels not seen
since the early 1990s
• and the proportion of adults who are working is
four percentage points off its peak in 2000.
http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-themiddle-class/?ref=todayspaper
http://research.stlouisfed.org/fred2/graph/
Have we mechanized and computerized
ourselves into obsolescence?
Luddites
http://gizmodo.com/5837029/hereswhere-the-word-luddite-really-comesfrom
• Economists have
historically rejected
what we call the “lump
of labor” fallacy: the
supposition that an
increase in labor
productivity inevitably
reduces employment
because there is only a
finite amount of work
to do.
• The multi-trillionfold decline in the cost of
computing since the 1970s has created enormous
incentives for employers to substitute
increasingly cheap and capable computers for
expensive labor.
• Labor-saving technological change necessarily
displaces workers performing certain tasks —
that’s where the gains in productivity come from
• but over the long run, it generates new products
and services that raise national income and
increase the overall demand for labor.
http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-themiddle-class/?ref=todayspaper
Real GPD per Hour Worked and Employment to
Population Ratio 1970-2013
http://research.stlouisfed.org/fred2/graph/
http://research.stlouisfed.org/fred2/graph/
http://research.stlouisfed.org/fred2/graph/
http://research.stlouisfed.org/fred2/graph/
Winners and Losers
• Computers excel at
“routine” tasks: organizing,
storing, retrieving and
manipulating information,
or executing exactly defined
physical movements in
production processes.
These tasks are most
pervasive in middle-skill
jobs like bookkeeping,
clerical work and repetitive
production and qualityassurance jobs.
• [Computers have] boosted
demand for workers who
perform “nonroutine” tasks
that complement the
automated activities. Those
tasks happen to lie on
opposite ends of the
occupational skill
distribution.
http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-themiddle-class/?ref=todayspaper
The Winners
High-end workers
Low-end workers
• At one end are so-called abstract
tasks that require problemsolving, intuition, persuasion and
creativity. These tasks are
characteristic of professional,
managerial, technical and
creative occupations, like law,
medicine, science, engineering,
advertising and design. People in
these jobs typically have high
levels of education and analytical
capability, and they benefit from
computers that facilitate the
transmission, organization and
processing of information.
• On the other end are so-called
manual tasks, which require
situational adaptability, visual
and language recognition, and
in-person interaction.
Preparing a meal, driving a
truck through city traffic or
cleaning a hotel room present
mind-bogglingly complex
challenges for computers
http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-themiddle-class/?ref=todayspaper
• Managerial
• Sales
• Service
• Office & Admin
Support
• Construction
• Computerization has therefore fostered a
polarization of employment, with job growth
concentrated in both the highest- and lowestpaid occupations, while jobs in the middle have
declined.
• So computerization is not reducing the quantity
of jobs, but rather degrading the quality of jobs
for a significant subset of workers.
• This bifurcation of job opportunities has
contributed to the historic rise in income
inequality.
http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-themiddle-class/?ref=todayspaper
US Investment in Computers 19582013 (not deflated)
US Investment in Computers 1958-2013
Not deflated
Deflated (1982 dollars)
Rising Inequality:
US Gini Ratio (Family Income-all races)
1947-2011
The Surviving Middle Class Will Be “The New Artisans”
• [M]iddle-skill jobs will persist, and potentially
grow, [if] they involve tasks that cannot readily be
unbundled without a substantial drop in
quality…[if] the quality of a service within any
occupation will improve when a worker combines
routine (technical) and nonroutine (flexible)
tasks.
• [These jobs] will combine routine technical tasks
with abstract and manual tasks in which workers
have a comparative advantage — interpersonal
interaction, adaptability and problem-solving.
http://opinionator.blogs.nytimes.com/2013/08/24/how-technology-wrecks-themiddle-class/?ref=todayspaper
Structural Humbug (Paul Krugman)
• [C]onventional wisdom has clearly swung to
the view that our high unemployment is
“structural”, not something that could be
solved simply by boosting demand.
• Indeed: one strong indicator that the problem
isn’t structural is that as the economy has
(partially) recovered, the recovery has tended
to be fastest in precisely the same regions and
occupations that were initially hit hardest.
http://krugman.blogs.nytimes.com/2013/08/03/structural-humbug/
Not Structural Because Jobs Hurts
Worse Are Coming Back Fastest
changes in unemployment rates from the 2007 business cycle peak to the
unemployment peak in 2009-10, and then the subsequent decline… the
occupations that took the biggest hit have had the strongest recoveries.
Unemployment increase from 2007 to 2009 =>
Unemployment rate 2009-2013
Technological Humbug (Ziad & Peter)
• The US has integrated into a global economy
in ways that have (to this point) exposed the
producers of transportable commodities (i.e.
manufacturing) to greater competition than
either high-end or low-end labor.
• This has led to falling blue collar wages, falling
unionization and a shrinking middle class.
Exports and Imports as a Percent of
GDP (Red Line) Compared to
Computer Investment (Blue Line)
Summary Conclusions
• Us labor force participation rates and employment
populations ratios are declining
• US income inequality is rising
• Autor & Dorn argue that computer technology has hit
the middle class jobs the hardest—the job drought is a
technological problem
• Krugman argues against job/skill-mismatch—says
inadquate aggregate demand is the problem
• Ziad & Philips argue that globalization has hit blue
collar jobs harder
• What is the cause of the job drought?