Opinion

Is the internet killing middle class jobs?

A response to Bill Davidow

The robopocalypse for workers may be inevitable. In this vision of the future, super-smart machines will best humans in pretty much every task. A few of us will own the machines, a few will work a bit — perhaps providing "Made by Man" artisanal goods — while the rest will live off a government-provided income. Silicon-based superintelligence and robots will dramatically alter labor markets — to name but one example, the most common job in most U.S. states probably will no longer be truck driver.

But what about right now? If you're unemployed or working part-time instead of full-time, or haven't seen a raise in years, should you blame technology?

Yes, says venture capitalist and former Intel executive Bill Davidow. In a provocative piece for Harvard Business Review, "The Internet Has Been a Colossal Economic Disappointment," Davidow makes a strong claim: "For all its economic virtues, the internet has been long on job displacement and short on job creation. As a result, it is playing a central role in wage stagnation and the decline of the middle class."

Just look at how Amazon is disrupting brick-and-mortar retailing. And even though tech firms such as Google and Facebook generate huge revenues, they employ comparatively few people versus industrial giants of the past, such as IBM or General Motors. In the 1970s, General Motors employed more than 600,000 people, 10 times more Google and Facebook combined.

To accept Davidow's broad conclusion, though, one also has to believe workers across many sectors would be a lot better off today if the internet had not been invented. That's an unlikely counterfactual. Just look at how the labor market has been doing. The U.S. economy has generated 3.3 million jobs over the past year, the best 12-month performance since 2000. And accelerating job growth has pushed down the unemployment rate to 5.5 percent, within the range the Federal Reserve considers full employment.

Now it's true that the low jobless rate has been accompanied by declining labor force participation. If you're not "participating" in the job market by actively seeking work, you aren't counted as unemployed. Indeed, if the labor force participation rate was where it was in 2007, the jobless rate would be 10 percent. But most economists mainly blame lower participation on Baby Boomer retirements and the slow recovery — the latter is typical following financial crises — not the internet.

Of course, the 2000s overall have seen weak job and wage growth. But David Autor, one of the leading researchers on the interplay between automation and jobs, doubts the internet or robots are to blame. As Autor writes in a recent paper:

My suspicion is that the deceleration of the U.S. labor market after 2000, and further after 2007, is more closely associated with two other macroeconomic events. A first is the bursting of the "dot-com" bubble, followed by the collapse of the housing market and the ensuing financial crisis, both of which curtailed investment and innovative activity. A second is the employment dislocations in the U.S. labor market brought about by rapid globalization, particularly the sharp rise of import penetration from China following its accession to the World Trade Organization in 2001.

None of this is to say technology isn't having a harmful impact on certain workers. Autor's own research has noted a decline in "middle skill" jobs, including clerical work and some sorts of repetitive factory work, due to automation. But the rise of the machines appears a secondary cause of worker woes, at least for now.

As for tomorrow, who knows? Thankfully, many of the best ideas to help workers deal with advancing automation are also applicable in a "great stagnation" scenario. Expanding wage subsidies like the Earned Income Tax Credit is a smart way to make work pay more, and Davidow is right to recommend it. Same goes for eliminating excessive occupational licensing regulations that make it hard to start the sort of businesses — interior design, hair-dressing, beauty treatment — that are robot-resilient and provide a first step up the opportunity ladder.

There's no economic law that technology always makes workers better off, even in the long run. We should be preparing now just in case it doesn't.

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