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Opinion

How to survive in a tech-driven economy

Technological innovation has made the US economy more productive, but this new economy creates fewer jobs, and wages are suffering. Preparing workers for an era when productivity and employment are no longer linked will be the grand challenge of the next generation.

By Erik Brynjolfsson and Andrew McAfee / December 12, 2012

A person fills out an application at the Fort Lauderdale Career Fair, in Dania Beach, Fla. on Nov. 30. Op-ed contributors Erik Brynjolfsson and Andrew McAfee write: 'As technology races ahead it can leave a lot of workers behind. In the short run we can improve their prospects greatly by investing in infrastructure, reforming education at all levels, and encouraging entrepreneurs to invent the new products, services, and industries that will create new jobs.'

J Pat Carter/AP/file

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Cambridge, Mass.

A wonderful ride has come to an end. For several decades after World War II, the economic statistics we care most about all rose together as if they were tightly coupled. The US gross domestic product – the economy – grew and so did productivity – our ability to get more output from each worker. At the same time, we created millions of jobs, and many of these were the kinds of jobs that allowed the average American worker, who didn’t (and still doesn’t) have a college degree, to enjoy a high and rising standard of living. Productivity growth slowed down in the 1970s – a development that had us rightly worried – but revved up again in the 1990s and has stayed strong most years since.

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But productivity growth and employment growth started to become decoupled from each other at the end of that decade. Economist Jared Bernstein calls the gap that’s opened up the “jaws of the snake,” and they show no signs of closing. We’re creating jobs these days, but not enough of them. The employment-to-population ratio, or percentage of working-age people that have work, dropped more than five points during the Great Recession and has improved only half a point in the almost three and a half years since it ended.

As the jaws of the snake opened, wages suffered even more than job growth did. Adjusted for inflation, the average American household now has lower income than it did in 1997. Wages as a share of GDP are now at an all-time low, even as corporate profits are now at an all-time high. The implicit bargain that gave workers a steady share of the productivity gains has unraveled.

What’s going on? Why have the stats that workers care about – job volumes and wages – become decoupled from the rest of the train of economic progress? There are several explanations for this, including tax and policy changes and the effects of globalization and offshoring. We agree that these matter, but we want to stress another driver of the “Great Decoupling”: the changing nature of technological progress.

As digital devices like computers and robots get more powerful and capable over time thanks to "Moore’s law," they can do more of the work that people used to do. Digital labor, in short, substitutes for human labor. This happens first with more routine tasks (both physical and cognitive), which is a big part of the reason why less educated workers have seen their wages fall the most in recent decades as we moved ever deeper into the computer age.

As we move ahead, the Great Decoupling will only accelerate, for two reasons. First, Moore’s law will continue to operate, and computers will keep getting drastically cheaper over time. Digital labor will become cheaper than human labor not only in the United States and other rich countries, but also in places like China and India. Offshoring, in short, is only a way station on the road to automation.

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