TECHNOLOGY AT WORK

18
Citi GPS: Global Perspectives & Solutions February 2015
The Computer Revolution and the Squeezed Middle
While early 20th century office machines increased demand for clerking workers,
recent developments in computer technology have permitted such tasks to be
automated.
This trend began with the first commercial uses of computers around 1960 and
continued through the development of the World Wide Web in the 1990s. Between
1945 and 1980, as the cost of computing declined at an annual rate of 37%, most
telephone operators were displaced. 35 In addition, the first industrial robot was
introduced in the 1960s, and a decade later airline reservations systems led a wave
of improvements in self-service technology.
Throughout the 1980s and 1990s, the costs of computing fell even more rapidly, on
average by 64% per year. 36 During this period bar-code scanners and cash
machines penetrated retail and financial industries. Furthermore, the advent of the
personal computer (PC) in the early 1980s, and its functions, contributed to the
displacement of many copy typist jobs and allowed repetitive calculations to be
automated.
Employment in middle-skilled manufacturing
and clerical occupations experienced a
secular decline in the 1970s due to the
impact of computers
The impact of computers on labour markets is captured in an influential paper by
David Autor, Frank Levy, and Richard Murnane, showing that middle-skilled
manufacturing and clerical occupations have experienced a secular decline in
employment since the 1970s. 37 The common denominator for these jobs, the
authors document, is that they are intensive in rule-based activities (or routine
tasks) which can be easily specified in computer code.
Hence, the rapid improvements in computer technology over the last few decades
have provided employers with ever cheaper machines that can replace humans in
many middle-skilled activities such as bookkeeping, clerical work and repetitive
production tasks. The result has been a shift in the occupational structure of the
labour market in most developed countries over recent decades, with a hollowingout
of traditional middle income jobs.
Computers and industrial robots together
have substituted for the same type of routine
work, reallocating workers to manual service
occupations
Importantly, as computers and industrial robots have substituted for the same type
of routine work that was once done by thousands of workers on assembly lines,
most of these workers have reallocated to manual service occupations. 38 This is
because, at least in the past, computers and robots have been less capable of
driving trucks, waitressing and cleaning than most humans.
At the same time, with falling prices of computing, problem-solving skills have
become relatively productive, explaining the substantial employment growth in
occupations involving cognitive work where skilled labour holds a comparative
advantage. For example, text and data mining has improved the quality of legal
research as constant access to market information has improved the efficiency of
managerial decision-making — that is, tasks performed by skilled workers at the
higher end of the income distribution.
35 Nordhaus (2007)
36 ibid
37 Autor, Levy and Murnane (2003).
38 Autor and Dorn (2013).
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