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Technology and the Work Force: Work Will Not End

New Technology Restructures, Not Destroys, the Workforce

NOVEMBER 01, 1997 by DONALD JONAS

Mr. Jonas is the Herman Kahn Fellow at the Hudson Institute, in Indianapolis, Indiana.

In his recent provocative book The End of Work, Jeremy Rifkin joins a growing chorus of social pessimists who argue that advanced technology leads to a concentration of wealth in the hands of “the elites” followed by wholesale unemployment for the masses. Some critics contend that if we continue our pattern of adapting technological advances to the work force, in the very near future all work will literally end.

In fact, these techno-pessimists are wrong. Rather than ending, work is evolving. New technologies are changing the skill requirements of workers, not making workers obsolete.

The technocratic straw man constructed by these critics of the absorption of technology is comical in its simplicity. Technology does not, in and of itself, destroy jobs. Nonetheless, we are inundated with heartbreaking stories of individuals pushed out of the job market, usually by ruthless corporate villains intent on using advanced technologies to cut jobs.

One such indictment was Donald Barlett’s and James Steele’s “America: Who Stole the Dream?”, which ran in newspapers across America during the late summer of 1996. The ten-part series relied on anecdotal stories of technologically displaced workers. In virtually every case, Barlett and Steele used a downsized worker to “prove” their unsubstantiated rule. These stories of personal tragedy echo the events of a century ago as Americans left the farm for the factory. At that time, William Jennings Bryan, the Democrats’ nominee for President in 1896, cried, “Burn down your cities and leave our farms, and your cities will spring up again as if by magic, but destroy our farms, and the grass will grow in the streets of every city in the country.” Populists tried in vain to hold on to the agrarian lifestyle by resisting the relentless march of industrialization.

Their attempt failed miserably. Whereas in 1790 farmers comprised 90 percent of our population, by 1900 they accounted for just 38 percent; today, just over two percent of Americans are farmers. But this decline did not represent an “end to work,” and grass does not now grow in our city streets. Although many farmers have felt the pain of job loss, the new opportunities presented by the growing industrial age amply compensated for these short-term dislocations. Today one sees striking parallels between the dislocated farmer at the turn of the twentieth century and the laid-off industrial worker at the dawn of the 21st century. Both cases involve immediate but short-term discomfort for many in the work force while the displaced workers adapt to the new and more profitable opportunities made available by technological change.

Numerous social theorists have tried to describe this social change, calling it a “post-industrial age,” an “information age,” and even a “postmodern era.” In today’s society knowledge and the ability to process information have become central to one’s economic success. Workers who do not measure up to this standard can experience significant anxiety and pains. Nevertheless, the evidence soundly contradicts the apocalyptic ramblings of Rifkin and his associates who fear that advanced technologies will destroy all jobs.

As these writers spread their fatalistic vision of America’s future work opportunities, one should note that we’ve been hearing this refrain repeatedly for hundreds of years. “Technology” (along with its partner in crime, “globalization”) gets blamed for destroying the labor market. But as Perry Pascarella has argued, “Technology is created by humans to assist us in our work . . . technology makes no promises of improving our lives. But it does give us the economic power to improve our lives in economic dimensions.”

Throughout the course of history new technologies have been introduced to the economy that drastically change how we work. Consider these brief examples, cited by Michael Rothschild in Bionomics:

  • Gutenberg’s movable type press in 1440 is often hailed for democratizing information and spreading religion to the masses. From a techno-pessimist viewpoint, however, Gutenberg’s invention was hell on the scribe business, reducing it by 98 percent in a few short years. But this technological advancement opened up previously undreamed-of opportunities for work.
  • The invention of the “power loom” in Britain in the early 1800s allowed steam-driven machines to mass-produce cloth. The hand-loom operators displaced by this new technology, fearful for their livelihood, attempted to stop technological progress by destroying these new machines. The Luddites, as they became known, would have prevented the labor-saving power loom from improving the efficiency of British cloth manufacturing, increasing production, lowering prices, and opening up new markets.
  • The internal combustion engine, while creating thousands of new jobs in the nascent automobile industry at the beginning of the twentieth century, wreaked havoc on the carriage-making industry: between 1909 and 1919, carriage-making employment fell from 70,000 to 26,000. Employment in the new automobile industry, however, soared from 85,000 to 394,000, far outstripping the job losses in the displaced carriage industry.
  • Employment in the telegraph industry peaked at 87,000 workers in 1929 and then declined to a mere 24,000 workers by 1970. Did those jobs just disappear? Glance over to the telephone industry, which by 1970 had created 536,000 new jobs.

It is useful to probe a bit deeper into the thoughts of the modern technological pessimists. Consider:

1. Hype: Jeremy Rifkin claims that “The ranks of the unemployed and underemployed are growing daily in North America.”

Reality: It is simply untrue that unemployment is rising in America. Alan Reynolds reports that unemployment due to job loss is very near a record low, approximately 2.5 percent, and is as low as it was at the peak of past cycles in 1979 and 1989. The overall unemployment rate remains very low and in recent years the U.S. economy has created more jobs than it has displaced. Since 1991 the U.S. economy has lost 14 million jobs and created 15.5 million new ones.

2. Hype: Rifkin also contends that “While some new jobs are being created in the U.S. economy, they are in the low-paying sectors and generally temporary employment.”

Reality: During recent years most service-sector job growth has occurred in higher-paying managerial and professional-specialty jobs. Further, according to the Bureau of Labor Statistics (BLS), most of the net growth (68 percent) in full-time jobs between February 1994 and February 1996 occurred in job categories paying above the median wage. Most of these jobs were in occupations in the top third of wage levels.

3. Hype: Peter Cappelli in his 1997 book Change at Work argues that “It has been very difficult for displaced workers to find new jobs since the mid-1980s.”

Reality: According to recent statistics, most displaced workers who lose their jobs quickly end up making more money than before. An August 1996 Federal Reserve survey found that fired executives and managers were finding jobs with the same or better salaries in an average of 2.8 months in 1996, down from 3.2 to 3.3 months in past years.

4. Hype: Donald Barlett and James Steele contend that after the American worker, the “biggest loser has been the small business owner. Unlike multinational corporations that have closed factories and shifted production abroad to take advantage of cheap labor, small companies seldom have that option. These businesses are being squeezed out.”

Reality: Small businesses are a major source of employment in America’s information-age economy. The Small Business Administration notes that businesses with fewer than 500 employees represent 54 percent of all American jobs. Small business firms today account for more than 70 percent of all job growth in the American economy. Cognetics, a Massachusetts market research firm, estimates that there are roughly 300,000 U.S. companies with fewer than 50 employees that are growing at better than 20 percent per year.

5. Hype: Rifkin says that “The fact is that while less than one percent of all U.S. companies employ 500 or more workers, these big firms still employed more than 41 percent of all the workers in the private sector at the end of the last decade. And it is these corporate giants that are re-engineering their operations and letting go a record number of employees.”

Reality: Despite the highly publicized layoffs by large companies such as AT&T, big firms in general are not firing as many employees as many critics think. A recent survey by the American Management Association (AMA) found that although two-thirds of 1,003 major companies surveyed in 1995 had gone through at least one work force reduction since 1989, two-thirds of these 1,003 firms employed as many or more workers in June 1995 as in January 1990.

6. Hype: Rifkin argues that “Men and women who just a few short years ago were taking home wages in excess of $30,000 consider themselves lucky to find jobs as janitors or security guards for $5 an hour. For them and their families, the post-World War II dream of being part of the middle class is over.”

Reality: Citing the University of Michigan’s Panel Survey on Income Dynamics (which has tracked the individual earnings of over 50,000 Americans since the late 1960s), Federal Reserve Bank of Dallas economist W. Michael Cox finds that wages for America’s workers are actually rising. Cox notes that only five percent of those who started out in the lowest income bracket in 1975 remained in this bottom tier by 1991. Furthermore, approximately four out of every five Americans in this lowest bracket had made it into the middle class, and 30 percent of these individuals vaulted into the highest income bracket by the early 1990s.

It is true that earnings for those with at most a high-school diploma have fallen, which suggests that low-skilled people face tremendous challenges that will become even more daunting. But the techno-pessimist interpretation of the economic statistics is one-sided. The terrifying claim that computers are eliminating jobs is simply not supported by the evidence.

The typical pessimistic analysis argues that American workers are being permanently left behind as businesses automate production facilities through the introduction of advanced computers and other sophisticated technological tools. As computers become more integrated into the American work force, the argument goes, workers will become less necessary.

It is too early to argue such a point, however, especially in light of history. A major, transforming tool like the computer may take years to become fully integrated into the economy. Paul David of the Center for Economic Policy Research at Stanford University figures that it took more than 50 years to fully assimilate the shift from steam to electromechanical technology, which began almost a century ago. Some of the most beneficial impacts of electromechanical technology, especially in terms of increased work opportunities, did not arise until nearly two-thirds of the way through the transition. Workers acted on their incentive to retrain for jobs in the newly altered economy, just as they had done during previous economic revolutions. Similarly, today’s computer revolution is restructuring, not destroying, the work force.

Of course, these pessimists believe that, even with massive retraining and re-education, there will not be enough high-tech jobs to go around. But Perry Pascarella argues that pessimism is “an easy game to play” because technological disaster always seems to be just around the corner. Social critics have forever warned of a coming technological catastrophe, be it a nuclear mishap, an environmental disaster, or some other cataclysmic event. But we’re still here.

Admittedly, not all is rosy for America’s short- and long-term economic future. Existing government policies currently pose a barrier to the market process of “creative destruction” that will create new work opportunities in the new economy. There are many wide-ranging proposals, from regulatory reform to competitive educational changes, that we should seriously consider as we exit the industrial age in order to raise America’s growth rate above its currently sluggish levels.

We live in a rapidly changing, globally competitive technological marketplace. Society is in the midst of a major transformation away from the industrial age into the information age. There is real value in peeking into the future. But the technological pessimists are using glasses that are too intellectually biased to yield results that even approach practical reality. Although nothing is certain, one prediction is likely to come true: work has not ended.

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November 1997

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