Mind the (Technology) Gap

As technology disappears from the workplace of many people, we may end up missing the machines

Machines often play the role of the bad guy, whether in the movies or in the way in which we think the economy works. Machines, whether robots or computers, are responsible for many jobs becoming obsolete, but we would struggle to make much of our labour without their help. Technology on the job takes on extra importance for those workers who have fewer skills to start with, as their labour requires more help to earn a decent wage. Without the manufacturing sector to provide the low-skilled access to technology in their jobs, we may run the risk of having a large chunk out workforce being left behind.

To earn a good wage, a worker needs to be involved in generating as much output as possible. Doing this with just our own labour is difficult except for the most talented among us. Rather we often need to work as part of a team or with the help of some form of automation. An example of this is how it is easier to grow food on a larger scale with the help of farm machinery rather than each of us trying to do it by ourselves. Whether we work in a factory with machinery or in an office with computers, we produce more when working with others and with machines.

The origins of our modern-day prosperity came with the rise of the machines with the Industrial Revolution. Despite the initial dismal conditions for workers, employment in factories allowed wealth built up as people moved away from eking out a living from the land to gathering together under one roof to make use of the power of machines. Wages for worker rose as the machines became more complicated and required increasingly levels of skills to operate. The rising level of output and the skills built up on the job helped to ensure rising wages for those working in the manufacturing sector and help bring about the middle class.

Yet, further developments of technology meant that the machinery became automated and workers were less necessary. Globalization accelerated the demise of manufacturing in Western, making the change even more dramatic. What made the loss of the manufacturing jobs hurt was the fall in wages as workers looked for jobs elsewhere. This was due, in part, to the tendency for a drop in the level of technology and smaller work teams in the service sector which was the source of new jobs.

Jobs that might be available to those without university education would be in retail, restaurants, transport, and personal services (such as haircuts or retail estate agents). The level of technology for many of these jobs has not changed significantly for more than fifty years. And the scale of operation, in terms of the number of people at the same workplace, is a lot smaller. Think of the buildings that might house a factory compared to a cafe or a barber. Even if supermarkets or warehouses take up a lot of space, the number of machines that workers use is a lot less than would be the case in manufacturing.

This is not to downplay the impact of computers and the Internet which are in many ways even more powerful machines that were ever used in manufacturing. Yet, these “machines” are often separate from the jobs of workers, or are made so simple to operate that workers can easily pick up any task. For example, electronic cash registers and bar codes are a key technological advancement in the retail industry, but are also so simple that even supermarket shoppers themselves can do the job. In this way, service sector workers cannot build up the same levels of what economists call “human capital” which is a crucial determinant of higher wages.

Without some help to make them more productive, a big chunk of workers looks likely to be stuck on low wages. Going back in time may be plausible in the movies but not in terms of reverting back to the older technology in manufacturing to protect “good jobs”. Computers do offer the promise of productivity gains, but the data suggests that progress on productivity have been halting. Many economists expect this to change but technology at the workplace looks set to remain elusive for all but the most educated. A technology gap looks set to open up at work and it may be too few, rather than too many, machines that are to blame.