Automation: The End of the Middle Class?

Automated Factory Machines

Fear of technological progress can be observed throughout history. From British textile workers rioting against labor-economizing techniques in 1811 to John Maynard Keynes warning of “technological unemployment” in 1930, many have worried that new technology would lower wages and eliminate jobs. In reality, while some people lose work temporarily, most are reallocated to new, higher-paying jobs. In the words of French philosopher Frederic Bastiat, “to curse technology is to curse the human mind,” and in the face of these Luddites’ worries, technological process has consistently led to increased productivity, higher incomes and more jobs: all three of these statistics (GDP, median income, total employment) have increased steadily through the end of the twentieth century.

There is intense debate, however, over whether this trend will continue. A recent Pew survey revealed that barely half of technology experts believe that automation will continue to create more jobs than it replaces. The other half believe it will displace “significant numbers of both blue- and white-collar workers” over the next decade, and that it will leave “masses of people who are effectively unemployable.” They think we have reached a point in technological progress where human skills are finally becoming obsolete. Former Treasury Secretary Larry Summers, for instance, compared American workers today to horses in 1910, whose jobs were permanently replaced by automobiles and tractors.

Recent trends in the aforementioned data are indicative of these worries. While GDP has steadily risen over the past sixty years, employment has been mostly stagnant since 2000. Similarly, GDP per capita has more than doubled since 1975 while median household income has barely increased. As MIT economist Erik Brynjolfsson notes, “productivity is at record levels [and] innovation has never been faster,” yet the benefits of the growing economy have not been felt by average workers. Technology, it seems, may be reducing the demand for human labor.

Historically, the victims of technological unemployment and dislocation have been low-skill, low-wage workers. From 1979 to 2010, the number of Americans working in factories declined from 19.5 million to 12 million while total U.S. population increased by almost 100 million. Similarly, the agricultural industry that employed 41 percent of the American workforce in 1900 only employed two percent in 2000.

This historical trend may be coming to an end, however, as technology now poses a huge threat to mid-skill, mid-wage jobs as well. Today, most at risk of automation are well-paid jobs requiring repetitive tasks, such as the work involved with accounting, law, clerical work, medicine and even education. The recession of 2007 likely sped up the destruction of these types of jobs. They “fell off a cliff in the recession” states Henry Siu, an economist at the University of British Columbia, “and there’s been no large rebound.” According to Siu, this type of work, ranging from white-collar jobs in sales and administration to blue-collar jobs in assembly work, makes up about 50 percent of employment in the U.S.

High levels of income inequality in the U.S. today are indicative of the loss of these middle class jobs. In what is termed the “polarization” of U.S. employment, the middle class is “hollowing out” as demand increases for not only high- but also low-level work. Most of the new employment opportunities afforded by recent technological advances have been high-wage jobs, such as software engineers and executives, which require high levels of education. This trend is evident in the growing income gap between high school- and college-educated Americans, which has more than doubled since 1965. Demand has also increased for low-skill jobs such as restaurant workers, janitors, and other service workers, whose work cannot yet be automated. The effects of these changes are exemplified by trends in inflation-adjusted incomes from 1970 to 2010. The upper class share of income has steadily increased and the lower class share has remained stagnant, while the middle class share has decreased nearly to the point of becoming equal to that of the lower class.

MIT economist David Autor argues that this trend does not seem likely to continue and that the scope of technological substitution in middle-skill work is “bounded.” To explain this, Autor cites machines’ inability to acquire tacit knowledge, which involves judgment, common sense and flexibility. He says, “there are many tasks that people understand tacitly and accomplish effortlessly but for which neither computer programmers nor anyone else can enunciate the explicit ‘rules’ or procedures.” Speaking a language, for instance, is learned at a young age without significant instruction in grammar. Yet programming a computer to understand a language (not to mention the nuances of voice inflection and body language) is extremely difficult. Autor uses this concept to argue that the increasing polarization of jobs that has been occurring in the past couple decades may be coming to a close because machines are nowhere near the level of sophistication that would be required to perform a task requiring tacit knowledge.

Recent advances in areas such as machine learning, however, could prove Autor wrong. Computers today are able to accomplish tasks that were once considered impossible to automate, even high-level tasks like writing this article. Such machines are called advanced natural language generation (NLG) platforms and are sold by companies such as Narrative Science. Their program, called Quill, is given data (such as a sports box score or company annual report) and can produce complex, engaging stories that are, based on surveys by the company, indistinguishable from human writing. While this technology is relatively new, it is gaining prominence quickly. Large content producers like Forbes and the Associated Press are already using the service, with many others planning to incorporate it in the future.

Similarly, computers can now drive cars, stock shelves, clean buildings, diagnose illness, detect fraud and prepare briefs for lawyers. Jobs that require tacit knowledge, Autor’s alleged saviors of the middle class, are becoming increasingly easy to automate, begging the question: what is the future of the middle class? In addition to the income stagnation that we have already witnessed, some experts predict widespread unemployment, a long-term displacement of as much as 50 percent of the work force.

It is impossible to accurately predict how dramatically technological progress will affect the labor market, and there are still many experts who doubt the scale of its impact. Nonetheless, evidence suggests that technological progress may permanently supplant a significant portion of the workforce in the future, and it has already replaced a substantial number of American middle class jobs and driven inflation-adjusted income downwards.

Despite the threat it poses to the American labor force, however, the truth remains that technological progress makes work easier and more efficient and that its continuation is a reality of our modern economy. This is best explained by Milton Friedman. When visiting the construction site of a canal in which workers were using shovels instead of modern earth moving equipment, Friedman was told that the project was a jobs program. His response was: “Oh, I thought you were trying to build a canal. If it’s jobs you want, then you should give these workers spoons, not shovels.”