No.

4

2015
The Rise of the Machines
David Dorn

How computers have changed work

The so-called “Rise of the Machines” has fundamentally transformed the organization of work during the last four decades. While enthusiasts are captivated by the new technologies, many worry that these machines will eventually lead to mass unemployment, as robots and computers substitute for human labor.

This Public Paper shows that these concerns are likely to be exaggerated. Despite rapid technological progress and automation, unemployment has not dramatically expanded over time. Instead, employment shifted from the most highly automated sectors to other sectors that experienced less technological progress, as well as emerging sectors that were created by new technology.

While computers have little impact on overall employment, however, they contribute to rising inequality. Machines have overtaken humans in their capability to execute well-defined routine tasks precisely, and many of the production and clerical jobs that specialize in these tasks have been irreversibly lost. As a result, the employment structure of labor markets in developed countries has become increasingly polarized as employment concentrates in a set of highly paid and a set of lowly paid occupations, both of which are difficult to automate.

As computerization changes the composition of human labor rather than decreasing its overall amount, policymakers should not be primarily concerned about mass unemployment. Instead, the more immanent policy challenges caused by computerization result from changing skill demands in the labor market and rising economic inequality among workers.

The so-called “Rise of the Machines” has fundamentally transformed the organization of work during the last four decades. While enthusiasts are captivated by the new technologies, many worry that these machines will eventually lead to mass unemployment, as robots and computers substitute for human labor.

This Public Paper shows that these concerns are likely to be exaggerated. Despite rapid technological progress and automation, unemployment has not dramatically expanded over time. Instead, employment shifted from the most highly automated sectors to other sectors that experienced less technological progress, as well as emerging sectors that were created by new technology.

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Key implications

The fact that computers failed to eliminate most human labor in the past four decades despite predictions to the opposite invites a healthy skepticism about renewed claims that robots are just about to take over from humans.
Humans retain an advantage over machines when it comes to problem solving, creativity, and interaction with other humans.

Introduction

The first fifteen years of the 21st century have been a difficult period for workers in developed economies. In many wealthy European, North American, and East Asian countries, the share of population holding a job has declined, and wage growth for the average worker has slowed or even turned negative. The “Great Recession” of the years 2007– 2009 is to blame for an important part of this decline in workers’ fortunes. However, the employment rate in the United States had already been falling for several years prior to this crisis, and labor markets in many countries remained depressed for a remarkably long time after the recession had officially ended. New evidence also suggests that the fraction of national income obtained by workers has been declining for at least three decades in developed countries.

It is therefore natural to hypothesize that labor markets are not just in a temporary slump, but instead face a fundamental force that increasingly deteriorates workers’ outlook for finding a job. Computer technology is an obvious candidate for that role. Whether one enters an office building or a factory, the widespread use of personal computers, communication devices, computer-guided machines, and robots is a striking feature of the workplace of the 21st century. Computer technology often replaces work tasks that humans previously executed, and one thus wonders whether continued technological development will eventually lead to the obsolescence of most human labor.

This essay discusses the impact of technology on the labor markets in developed countries. It argues that an imminent large decline in the demand for human labor is far from certain, and that speculation about the long-term evolution of employment is inherently difficult. However, there are already hundreds of years of experience regarding the technological change of the past, and researchers have been able to study the impact of computer technology on the labor market for several decades. I argue that the evidence from the distant and recent past reveals recurring patterns, which may usefully guide expectations about technology’s impact on labor markets in the near future.

The first fifteen years of the 21st century have been a difficult period for workers in developed economies. In many wealthy European, North American, and East Asian countries, the share of population holding a job has declined, and wage growth for the average worker has slowed or even turned negative. The “Great Recession” of the years 2007– 2009 is to blame for an important part of this decline in workers’ fortunes. However, the employment rate in the United States had already been falling for several years prior to this crisis, and labor markets in many countries remained depressed for a remarkably long time after the recession had officially ended. New evidence also suggests that the fraction of national income obtained by workers has been declining for at least three decades in developed countries.

It is therefore natural to hypothesize that labor markets are not just in a temporary slump, but instead face a fundamental force that increasingly deteriorates workers’ outlook for finding a job. Computer technology is an obvious candidate for that role. Whether one enters an office building or a factory, the widespread use of personal computers, communication devices, computer-guided machines, and robots is a striking feature of the workplace of the 21st century. Computer technology often replaces work tasks that humans previously executed, and one thus wonders whether continued technological development will eventually lead to the obsolescence of most human labor.

Conclusions

Computer technology has transformed the organization of work during the last four decades. As robots and computers can substitute for human labor, many observers worry that technological progress will inevitably lead to mass unemployment. Historical evidence suggests that these concerns are likely exaggerated. Despite rapid technological progress and automation since at least the Industrial Revolution, unemployment has not dramatically expanded over time. Instead, employment shifted from the sectors that automated the most to other sectors that experienced less technological progress, as well as emerging sectors that were created by new technology.

Empirical research finds that computers have little impact on overall employment, but contribute to rising labor market inequality. Machines have overtaken humans in their capability to execute welldefined routine tasks precisely, and many of the production and clerical jobs that specialize in such tasks have been irreversibly lost. The employment structure of labor markets in developed countries becomes increasingly polarized as employment concentrates in a set of highly paid and a set of lowly paid occupations that both are difficult to automate. The former set includes managerial and professional occupations that require such skills as leadership, creativity, or problem solving, while the latter include service occupations that combine the tasks of visual recognition, verbal communication, and fine motoric movement.

As computerization changes the composition of human labor rather than decreasing its overall amount, policymakers should not primarily be concerned about mass unemployment. Instead, the more immanent policy challenges caused by computerization result from changing skill demands in the labor market and rising economic inequality among workers.

Computer technology has transformed the organization of work during the last four decades. As robots and computers can substitute for human labor, many observers worry that technological progress will inevitably lead to mass unemployment. Historical evidence suggests that these concerns are likely exaggerated. Despite rapid technological progress and automation since at least the Industrial Revolution, unemployment has not dramatically expanded over time. Instead, employment shifted from the sectors that automated the most to other sectors that experienced less technological progress, as well as emerging sectors that were created by new technology.

Empirical research finds that computers have little impact on overall employment, but contribute to rising labor market inequality. Machines have overtaken humans in their capability to execute welldefined routine tasks precisely, and many of the production and clerical jobs that specialize in such tasks have been irreversibly lost. The employment structure of labor markets in developed countries becomes increasingly polarized as employment concentrates in a set of highly paid and a set of lowly paid occupations that both are difficult to automate. The former set includes managerial and professional occupations that require such skills as leadership, creativity, or problem solving, while the latter include service occupations that combine the tasks of visual recognition, verbal communication, and fine motoric movement.

Authors

UBS Foundation Professor of Globalization and Labor Markets

David Dorn received his doctorate from the University of St. Gallen in 2009. His work studies the impact of globalization and automation on the labor market and society. He showed that rapidly rising import competition from China had more profound impacts on the U.S. labor market than was previously assumed. The relative decline of employment and wages in trade-exposed locations is also associated with falling marriage rates, rising drug mortality, and increased electoral support for politicians with non-moderate ideologies. In other work, he studies how the automation of routine labor and the rise of superstar firms have contributed to various facets of inequality. David’s work has been cited in thousands of academic papers and hundreds of newspaper articles.

UBS Foundation Professor of Globalization and Labor Markets

David Dorn received his doctorate from the University of St. Gallen in 2009. His work studies the impact of globalization and automation on the labor market and society. He showed that rapidly rising import competition from China had more profound impacts on the U.S. labor market than was previously assumed. The relative decline of employment and wages in trade-exposed locations is also associated with falling marriage rates, rising drug mortality, and increased electoral support for politicians with non-moderate ideologies. In other work, he studies how the automation of routine labor and the rise of superstar firms have contributed to various facets of inequality. David’s work has been cited in thousands of academic papers and hundreds of newspaper articles.