The Machines Displacing Middle Wage Jobs: Don't Let the Facts Get in the Way of a Comforting Story

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Sunday, 25 August 2013 10:35

We are hearing endless accounts of how technology is displacing middle wage jobs (e.g. see the piece by David Autor and David Dorn in the NYT today). That would be work like manufacturing jobs, bookkeeping jobs, and other jobs that used to provide a middle class standard of living. It's a comforting story for the people who control the media, but it happens not to be true.

The story told by Autor and Dorn is that technology displaces these jobs putting downward pressure on the wages of formerly middle class workers. At the same time it creates more jobs for the people who program the machines, hence we see higher wages for high end workers.

This story is comforting to the affluent because it means that the upward redistribution of income that we have been seeing is simply an inevitable outcome of technological progress. It might be unfortunate, but what are we supposed to do, smash the machines?

This story should strike people as absurd on its face if they are interested in anything other than a rationale for inequality. After all, how many of the winners in today's economy are actually programming the robots, as the story implies. The group of big winners includes many doctors, lawyers, and dentists, most of whom have no more computer skills than your average high school senior.

They keep their position not by mastering the technology, but rather through the old-fashion way, restricting supply. They use professional barriers and trade restrictions to limit competition. That's much easier than mastering the latest in computer technology.

This sort of abuse of market power applies to a large share, if not the majority, of the winners in today's economy. In fact, if anyone really gave a damn, they could see that the Autor-Dorn story simply does not fit the pattern of job creation that we have seen in the last decade. Their occupation analysis would show that low earning occupations have been the big job gainers since 2000. The employment share of the highest earning occupations has actually fallen slightly over this period.

However that story provides less comfort to the rich and powerful. It implies that upward redistribution is something that they did, rather than something that just happened. Therefore we will not likely see these data featured prominently in news stories and opinion pieces.