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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?