TECHNOLOGY AT WORK

22
Citi GPS: Global Perspectives & Solutions February 2015
Lessons from History: What’s Next?
How will technological progress alter the occupational structure of labour markets in
the twenty-first century? Unfortunately, economic history does not necessarily
provide obvious guidance for predicting how technological progress will reshape
labour markets in the future.
Technological progress has shifted the
composition of employment and the demand
for skills
The Computer Revolution led to a shrinking
of employment in the middle and growth in
low-skill and low-income service jobs
There is concern that jobless economic
recoveries have become the new normal
To be sure, over the past century technological progress has vastly shifted the
composition of employment, from agriculture and the artisan shop, to manufacturing
and clerking, to service and management occupations. Doing so, it has also shifted
the demand for skills. But the relationship between new technologies and the
demand for skills has been far from monotonic.
During the Computer Revolution of the 1980s, the invention and diffusion of the PC
favoured workers with a college education, but from the early 1990s that pattern
changed. Although new jobs associated with the computer, such as database
administrators and software engineers, still favoured skilled workers, the US
economy experienced a slowdown in the demand for skills, while the share of
employment in the middle even shrank. In the 2000s the change became more
pronounced: employment among the least-skilled workers soared whereas the
share of jobs held by middle- and high-skill workers declined. Work involving
complex but manual tasks, like cleaning or driving trucks, became more plentiful.
Both in the United States and in Europe, since 2000 low-skill and low-income
service occupations have experienced job growth. At the same time, high-skilled
workers are now taking on jobs traditionally performed by low-skilled workers,
pushing low-skilled workers even further down, and sometimes even out of the
workforce. 42
The decline in routine employment has been additionally spurred by the Great
Financial Crisis, and there is indeed growing concern about the jobless recovery.
Some even predict that jobless recoveries may become the new normal. According
to a recent study, a long-term decline in routine occupations is occurring in spurts as
these jobs are lost during recessions. 43 This implies that future recoveries will likely
be jobless as digital advancements now allow distressed companies to shed
middle-income jobs in favour of automation – something that is happening across
industries, including manufacturing, wholesale and retail trade, financial services,
and even public administration.
While the concern over technological unemployment has so far proven to be
exaggerated, the reason why human labour has prevailed relates to its ability to
adopt and acquire new skills by means of education. Yet as computerisation enters
more cognitive domains this will become increasingly challenging. To predict the
future we therefore need to understand what is happening in technology.
In order to understand technology’s impact
on labour markets, we need to understand
the direction of technological progress
A well-known statement commonly attributed to Niels Bohr, is that “God gave the
easy problems to the physicists.” While most conditions in social sciences are not
timeless, physics is a closed system in which invariant statements can be made
given sufficient boundary conditions. Arguably, technological progress has followed
an evolutionary process whose path can never be predicted in detail, but we do
have some idea of the near term boundary conditions in engineering. To understand
how technology may impact on labour markets in the future, this report will argue
that we need to understand the direction of technological progress, and thus the
near term bottlenecks to our engineering capabilities.
42 Beaudery, Green and Sand (2013).
43 Jaimovich and Siu (2012).
© 2015 Citigroup