TOPICS > Economy

Is New Technology Chipping Away at Scope of the American Workforce?

April 5, 2013 at 12:00 AM EST
Does new or increased use of technology have a hand in disappointing job growth? Jeffrey Brown takes a closer look at the March numbers and some key longer-term job market trends with Lisa Lynch, former chief economist at the Labor Department, and Andrew McAfee of MIT's Center for Digital Business.
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JEFFREY BROWN: And we take a closer look at today’s numbers and some key longer-term trends in the job market with Lisa Lynch, dean of the Heller School for Social Policy and Management at Brandeis University. She’s a former chief economist at the Labor Department. And Andrew McAfee, principal research scientist at the Center for Digital Business at MIT’s Sloan School of Business and co-author of “Race Against the Machine.”

Lisa Lynch, positive numbers, but much less than hoped for, and even expected, right? What do you see here?

LISA LYNCH, Heller School for Social Policy and Management at Brandeis University: Well, it was, you know, frankly, a miserable report.

We had jobs coming in at less than half of what people had expected. And while there was growth in important sectors, like construction, the health care sector, accounting, we didn’t see the employment increase in manufacturing. It decreased a little bit. And there were big decreases in the retail sector.

JEFFREY BROWN: Just to stay with you, whether you look at sectors or other factors, does anything stand out or jump out at you as telling why there was this less-than-expected number today?

LISA LYNCH: Well, people have been trying to point to maybe some seasonality factors. March was a little snowier, so people didn’t go to the store, to retail stores, or maybe the upward revisions in February’s numbers. Maybe you have to move the two months — merge the two months together to get a picture of the labor market that is a little bit more accurate.

And folks have obviously been pointing to the impact of the sequester. And, there, I think we have more information looking back at what’s happening for growth overall in the economy. Our economy is growing very slowly, at less than half-a-percent. And for that rate of growth, we shouldn’t be surprised with a number like we saw today.

JEFFREY BROWN: Andrew McAfee, we look at the monthly numbers. We try to look for signals. You look longer-term as well. What do you see? What important trends do you see that might help us understand even a monthly figure like this?

ANDREW MCAFEE, MIT Center for Digital Business: And I think that this latest monthly figure is part of a long-term and pretty challenging trend.

About 30 years ago, wage growth for the average American worker started to taper off. And for the past 15 years, it’s actually been negative. About 12 years ago, job growth started to taper off as well. Of course, that took a huge dive during the great recession and has really not recovered at all.

And I look at these longer-term trends, and I think they’re part of a pattern, as are technologies. And especially our digital technologies just continue to get so much more powerful and to demonstrate all these new capabilities. That means that we tend to need human labor a little bit less, as the digital labor gets more and more powerful. That trend, I think, is only going to continue.

JEFFREY BROWN: Yes. Give us a specific example. I mean, we look at the jobs report like this today. Give us an example of how technology, robotics or something might impact a job that might have been there before, but is not there, not showing up today.

ANDREW MCAFEE: Well, for example, retail has been a huge employer in the United States for a long time. The job growth there has really slowed down and in some cases turned negative.

There are a bunch of factors at play there. One of them, though, is that a lot of us buy things online now, and we do self-service. We get our recommendations from recommendations engines, as opposed to clerks. And even when we go to the store, there tend to be fewer people around to man the cash registers because a lot of that becomes more automated as well.

In some stores where I shop these days, I actually check myself out without any human involvement. So we see technology chipping away at the kinds of things that we used to have people doing. And when I look at what robots and cutting-edge artificial intelligence can do, I think we ain’t seen nothing yet.

JEFFREY BROWN: The question — Lisa Lynch, I will come to you on this — is how much of the jobs problem we’re looking at is, as economists like you say, cyclical or structural, part of what Andy McAfee is talking about here? What do you think?

LISA LYNCH: So, as Andy said, we have been seeing a decrease in the labor force participation rates that actually goes back 12 years ago. It started in 2000.

And some of that is made up of cyclical factors. Economists are saying somewhere between a third and a half of that fall in the labor force participation rate is cyclical factors. But there are two other important source of that fall in the labor force participation.

One is the aging of the work force. So more of our workers are getting closer to retirement. So there is a composition issue playing here. Secondly is young people delaying entry into the labor force. They’re in school. They can’t get a job. They get an unpaid internship, so they don’t get counted as an employee.

But then the last source, as Andy was talking about, is this hollowing out of the economy. And part of it is due to globalization, and part of it is due to these technological shocks that are, when somebody loses a job, they can’t find a job back in their same sector.

JEFFREY BROWN: Well, Andy McAfee, at the same time, doesn’t technology create new jobs? I mean, you’re not against technology and not against it in the workplace, I assume.

So where — is it a balancing act? Are you suggesting that longer-term now, we may be at some kind of real strong tipping point that affects the labor market?

ANDREW MCAFEE: Yes, technology is clearly racing ahead.

And I’m a huge technology optimist. I believe it’s taking us into a more abundant future. But as it does, it can leave a lot of people behind. And I don’t know the economic law that says that technology, by definition, has to create as many or more jobs as it destroys. And I think we’re seeing that balance shift these days.

JEFFREY BROWN: Well, Lisa Lynch, does …

LISA LYNCH: But …

JEFFREY BROWN: Oh, go ahead. Go ahead.

LISA LYNCH: But what is interesting is this technology is available around the world. And there are other countries, like Germany, the Netherlands, Norway, Sweden, Denmark, that are not experiencing this same decrease in labor force participation rate. Actually, in some of those countries, it’s actually been rising over the last 12 years.

So there’s something else than just technology. We’re not — technology is not determining our future. And when you look at those other countries, you see institutions in place helping to support workers make the transition from one sector to another that I think frankly are doing a better job than what we have in the United States.

JEFFREY BROWN: Well, Andy McAfee, just one last word on this. Does your argument suggest that it’s harder for policy-makers, harder for the Federal Reserve, for example, to respond to the weakness that we see in the labor market?

ANDREW MCAFEE: Yes, I absolutely agree with Lisa that there are a lot of things we can and should be doing, starting with the good old-fashioned econ 101 playbook of upgrading our education, making life easy for entrepreneurs and job creators and doubling down on infrastructure. That will help us out a lot.

But I do think that our toolkit is going to get more challenged because technology continues to just demonstrate astonishing new capabilities. I have ridden in the Google driverless car. I have tried to play “Jeopardy” against Watson, the world champion supercomputer from IBM. These are astonishing technologies. And they’re going to have labor force implications.

JEFFREY BROWN: All right, short-term, long-term.

Andrew McAfee, Lisa Lynch, thank you both very much.

ANDREW MCAFEE: Thanks.

LISA LYNCH: Thank you.

JUDY WOODRUFF: Economics correspondent Paul Solman offers his own analysis of the unemployment picture. That’s on our Business page.