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Saturday, March 30, 2013

Christopher Mims — The Internet Is Making Us Poor [Unequal]

This is an important article. It's a bit longish, so I've pulled out the essence. But I suggest you read the whole thing. This is about the transition to the Information Age and knowledge society from the Industrial Age and factory society, which in turn replaced the Agricultural Age and farm society. What's left for workers who are not knowledge workers in the Information Age is service work that cannot be profitably automated, computerized, or robotized.
One thing all our machines have accomplished, and especially the internet, is the ability to reproduce and distribute good work in record time. Barring market distortions like monopolies, the best software, media, business processes and, increasingly, hardware, can be copied and sold seemingly everywhere at once. This benefits “superstars”—the most skilled engineers or content creators. And it benefits the consumer, who can expect a higher average quality of goods.
But it can also exacerbate income inequality, says Brynjolfsson. This contributes to a phenomenon called “skill-biased technological [or technical] change.” “The idea is that technology in the past 30 years has tended to favor more skilled and educated workers versus less educated workers,” says Brynjolfsson. “It has been a complement for more skilled workers. It makes their labor more valuable. But for less skilled workers, it makes them less necessary—especially those who do routine, repetitive tasks.”
The result is that, with the aid of machines, productivity increases—the overall economic pie gets bigger—but that’s small consolation if all but a few workers are getting a smaller slice. “Certainly the labor market has never been better for very highly-educated workers in the United States, and when I say never, I mean never,” MIT labor economist David Autor told American Public Media’s Marketplace.
The other winners in this scenario are anyone who owns capital. Only about half of Americans own stock at all, and as more companies are taken private or never go public, more and more of that wealth is concentrated in the hands of fewer and fewer people. As Paul Krugman wrote, “This is an old concern in economics; it’s “capital-biased technological change”, which tends to shift the distribution of income away from workers to the owners of capital.”...
“The spread of computers and the Internet will put jobs in two categories,” said Andreessen. “People who tell computers what to do, and people who are told by computers what to do.” It’s a glib remark—but increasingly true....
History is littered with technological transitions. Many of them seemed at the time to threaten mass unemployment of one type of worker or another, whether it was buggy whip makers or, more recently, travel agents. But here’s what’s different about information-processing jobs: The takeover by technology is happening much faster.
From 2000 to 2007, in the years leading up to the great recession, GDP and productivity in the US grew faster than at any point since the 1960s, but job creation did not keep pace. Brynjolfsson thinks he knows why: More and more people were doing work aided by software. And during the great recession, employment growth didn’t just slow. As we saw above, in both manufacturing and information processing, the economy shed jobs, even as employment in the service sector and professional fields remained flat.
Especially in the past ten years, economists have seen a reversal of what they call “the great compression“—that period from the second world war through the 1970s when, in the US at least, more people were crowded into the ranks of the middle class than ever before. There are many reasons why the economy has reversed this “compression,” transforming into an “hourglass economy” with many fewer workers in the middle class and more at either the high or the low end of the income spectrum. But whatever those forces, they are clearly being exacerbated by technological change.
The hourglass represents an income distribution that has been more nearly the norm for most of the history of the US. That it’s coming back should worry anyone who believes that a healthy middle class is an inevitable outcome of economic progress, a mainstay of democracy and a healthy society, or a driver of further economic development.
Business Insider
The Internet Is Making Us Poor
Christopher Mims, Quartz
(h/t Yves Smith at Naked Capitalism)

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