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Home Publications Blogs Beat the Press If Technology Has Increased Unemployment Among the Less Educated, Someone Forgot to Tell the Data

If Technology Has Increased Unemployment Among the Less Educated, Someone Forgot to Tell the Data

Saturday, 05 April 2014 21:52

Tyler Cowen warns us that technology may be making it much harder for less educated workers to get jobs. He highlights a series of changes in the economy then tells readers:

"All of these developments mean a disadvantage for people who don’t like formal education, even if they are otherwise very talented. It’s no surprise that current unemployment has been concentrated among those with lower education levels."

Actually, the data show unemployment has been less concentrated among the less educated in this recovery than was the case twenty years ago. Over the first three months of 2014 the unemployment rate for people over age 25 with at least a college degree averaged 3.3 percent. This is slightly higher than the 3.1 percent average in the first quarter of 1992.

While the unemployment rate for college grads was higher in the most recent period than in 1992, it was lower for both people with just high school degrees and for people who did not graduate high school. For high school grads the unemployment rate averaged 6.4 percent in the most recent quarter, half a percentage point below the 6.9 percent average in the first quarter of 1992. For those without high school degrees the unemployment rate was 9.7 percent in the first quarter of 2014 more than a percentage point lower than the 11.0 percent average in the first quarter of 1992.

There are other measures that may support Cowen's case, but a simple comparison of unemployment rates by education levels shows the opposite.


Note: Typos corrected.


Comments (11)Add Comment
written by Matt P, April 06, 2014 1:17
Quick correction: It's 'Cowen' not 'Cowan'
Quality of education
written by James, April 06, 2014 1:51
I think the percentage of people who have college educations also skyrocketed.

Also have to figure in a lot of the useless degree mills and unaccredited schools, to be a true comparison.

We are drifting in a sea of bad student loans to people going to DeVry/National/Phoenix and other degree mills.
written by DFS, April 06, 2014 2:58
So conservative economists (hubbard, cowan) say there's too few workers and too many of those are uneducated, ergo let's cut funding for education? At least that's the message I'm hearing
Cowen Misses the Elephant in the Room - The Monopsony Labor Market
written by Last Mover, April 06, 2014 5:19

Cowen says,
Many of these labor market problems were brought on by the financial crisis and the collapse of market demand. But it would be a mistake to place all the blame on the business cycle. Before the crisis, for example, business executives and owners didn’t always know who their worst workers were, or didn’t want to engage in the disruptive act of rooting out and firing them. So long as sales were brisk, it was easier to let matters lie. But when money ran out, many businesses had to make the tough decisions — and the axes fell. The financial crisis thus accelerated what would have been a much slower process.

Subsequently, some would-be employers seem to have discriminated against workers who were laid off in the crash. These judgments weren’t always fair, but that stigma isn’t easily overcome, because a lot of employers in fact had reason to identify and fire their less productive workers.

In a nutshell, what we’re facing isn’t your grandfather’s unemployment problem. It does have something to do with modern technology, and it will be with us for some time.

Translation: Employers always hire the most valuable workers first and less valuable later in a full employment economy. When demand falls off employers decide the less valuable are "unproductive" and exploit the situation to let them go.

In earlier times fluctuations were considered part of business risk absorbed by business, not employees. Wages were set accordingly, lower than otherwise to reflect downside risks not born by employees, but also reflect gains on the upside that went to business owners rather than employees. Lower wages were accepted for secure jobs over business cycles.

It doesn't work that way anymore. Now employees take all the risk of a downside with lowered wages and benefits, less employment or no employment, then get no gains on the upside.

It has little to do with technology, education or "unproductive" employees, and far more to do with manufactured business cycles combined with the massive shift in concentrated market power over not just the product and service markets, but the labor market as well as a single buyer monopsony market by owners of large business (who also drive the structure of small business as well).
written by Tom, April 06, 2014 7:06
I think it's true that some jobs in some industries have been lost due to technology. For example, my local Safeway has one person manning 6 self checkout registers. They seldom have more than 2 or 3 registers manned. ATM machines now will take cash and check deposits, thus replacing a teller or 2. However, as more and more retailers go to self checkouts (even Wal-Mart is going that route) and more ATMs get modernized that should increase jobs in making and servicing those machines. The questions is, is it a wash, net loss, or gain in jobs? You cannot deny that technology is not replacing some jobs in some industries. Heck, NASA flies satellites with off shift unmanned flight operations. They let computers take care of it during off shifts and weekends.
written by watermelonpunch, April 06, 2014 7:15

If less educated workers are not getting jobs, it's likely because college educated workers are taking those jobs because nobody needs their degrees now!

What exactly does Tyler Cowen want? A world where you need a 4 year STEM degree to work for minimum wage busing tables at a chain restaurant?

But okay, I haven't been to the Olive Garden in about 6 years - have they installed robots in those restaurants to replace those workers & I just haven't been there to notice?
The Big Lie
written by Larry Signor, April 06, 2014 8:24
Other measures may support Cowen, but they are out-lier measurements that have a strong stylistic component.
The highest UE rate is among workers 16-24 years old. These would probably not be technologically challenged workers. There may be some correlation with educational attainment, but it does not to seem as robust as the age story. UE among the young, who are the feed-stock of the labor market, seems to be an under-appreciated risk. Cowen and his ilk are trying to find a reason to throw up their hands and declare that UE is the fault of the (non)workers, but this pig ain't gonna fly.


The business cycle types are already floating the NAIRU story...
Tell it to the demographics...
written by Sandwichman, April 06, 2014 2:54
I haven't the time or motivation to sift through the data but it seems to me that comparing unemployment rates of high school graduates and non-graduates in 1992 and 2014 is apples and bananas demographically. A "simple comparison of unemployment rates by education levels" is too simple to show anything one way or the other.
written by JSeydl, April 06, 2014 6:03
There are other measures that may support Cowen's case

As in you're starting to buy into the technology-is-displacing-workers story?
written by kharris, April 07, 2014 9:37
"...people who don’t like formal education..."

Tyler is a good writer, so I won't presume to tell him what he meant to say. I will take him at his word. Tyler meant to claim that people who don't have much formal education are themselves to blame, because they don't like formal education. He could have written the same basic idea, without loading it down with bias, simply by writing "people who don't have much formal education" or "people who haven't had much success with formal education".

He wrote what he wrote. We should judge accordingly. Tyler is a "blame the poor" kind of thinker.
Bad assumptions
written by Dave, April 07, 2014 7:37
There are a lot of bad assumptions in the public debate of automation. There's no reason to believe that increasing automation and rising productivity provide anything more than a correlation.

Think about it, people. Some day if we have robots building robots, productivity could be completely flat.

Recent large increases in productivity are due to offshoring. I'm not sure why nobody understands this. I'm getting tired of doing this for free. Do the accounting, people.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.