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As part of his continuing coverage of Making Sen$e of financial news, Paul Solman reports on why more good jobs haven't been created in recent years. Can new technological innovations create widespread job growth as past generations have seen?
Now to a second economic story, this one exploring why more good jobs have not been created in recent years.
Economics correspondent Paul Solman has our report as part of his series Making Sense of financial news.
America's seemingly chronic economic crunch: stagnant wages, high unemployment, the endless job fair lines we have been showing you for years. But why is it happening?
Economist Tyler Cowen's controversial answer has been making news. In a recent e-book, the New York Times columnist and longtime blogger blames the great stagnation on a slowdown in technological growth.
TYLER COWEN, "The Great Stagnation": If I think of the life of my grandmother, who was born in 1905, from the beginning of her life, even to the midway point, she saw enormous change — the coming of electricity, the flush toilet, the automobile, radio, television, the typewriter, massive gains. The whole world changed.
If I think of my own life, I was born in 1962, there's the Internet and computers, but not that much has changed. The rate of progress has slowed down. And this is our central economic problem today.
Sure, high-tech gadgetry abounds, says Cowen, but it hasn't transformed our economy and created new high-paying jobs, as past so-called industrial revolutions have.
Take the ubiquitous iPod. It's created less than 14,000 jobs in the U.S., Internet giant Google, 20,000 employees, Twitter, a mere 300.
We have these series of myths. Because we have Internet or iPhone or a cell phone, we think we are, as a society, phenomenally innovative. But in terms of revenue and jobs, the Internet has not added as much value as most people think. The decade in which we have had the Internet, macroeconomically, has been our most miserable decade since the 1930s.
Want proof, says Cowen? Just look in his kitchen.
The core elements of this kitchen, the electricity, the sink, the cabinets, the oven, the stove, they all were common by the 1930s.
Wait. Wait a second, a microwave not in the 1930s.
Common in the 1970s. I hardly use that microwave. I do it just fine on the burners.
Oh, wait. Teflon, easy to use, washes that scrambled eggs right off.
Well, that's OK, but I use the wood, too. And these work just fine.
You mean to tell me that there's no improvement in a kitchen in the last 50, 60, 70 years?
There are improvements, but they're small improvements. Keep in mind, the 19th century kitchen was built around a live fireplace. Then, we had electricity, pumped water, gas and electric heating come in. Those were massive improvements.
Cowen thinks we have pretty much exhausted the last great wave of invention, or, to use an economics metaphor, plucked the low-hanging fruit.
The low-hanging fruit, it is the stuff that's easy to get. Earlier in our history, it was all that free fertile land. Later, it was fossil fuels. Later, it was sending all those smart kids through high school who had never been before.
But the once-easy pickings are now slim, says Cowen. Innovations take more effort than they used to.
Not so easy to get to. It's like all the science we have done that we have not yet turned into useful products.
Products that proliferated in the past and spurred the economy.
And cars are improving slowly, but not as rapidly as the car was an improvement over the horse.
Cowen points to recent visions of a future that's never materialized: the hoverboard, imagined as a 21st century staple in the 1980s film "Back to the Future II."
KEIR DULLEA, actor:
Do you read me, HAL?
DOUGLAS RAIN, actor:
Affirmative, Dave. I read you.
Space odysseys to Jupiter predicted for 2001, already a decade behind schedule, jet packs like the one high-flying 007 sported way back in the 1960s.
And the big breakthroughs we have heard so much about like nanotechnology, gene therapy?
How close is nanotech to being a reality? No one knows, but it's not going to come tomorrow. The sequencing of the human genome. 10 years ago, people thought it would be done by now and creating a lot of useful products. It has been done. It's a great breakthrough. It deserves tremendous respect, but converting it into useful products has been very hard.
OK, bold thesis boldly made.
But, if you're skeptical, you're not alone.
ANDREW MCAFEE, MIT Sloan School of Management: IBM, Watson, people are already talking about the different markets where that could be applied, the different industries and job functions.
These MIT scholars are researching the digital economy, and think Cowen is dead wrong.
ERIK BRYNJOLFSSON, Center for Digital Business, MIT Sloan School of Management: If anything the rate of change is not slowing down, it's accelerating.
Erik Brynjolfsson, who runs MIT's Center for Digital Business, thinks a new industrial revolution is in full swing. And if the jet pack hasn't yet transformed travel, it's now on the drawing board and in prototype, as are a host of once-futuristic technologies.
Every technology goes through an S-curve, which means that, at first, it grows fairly slowly. Then there is a faster phase and then things get mature and level off. Tyler Cowen and a lot of the people who are focused on the great stagnation, I think, are sort of backward-looking at the mature technologies that are the peak of their S-curve, rather than the new technologies that are just emerging.
Brynjolfsson also thinks Cowen has the stagnation story backwards.
The problem is not that we have had a stagnation of technology. Ironically, part of the problem is that technology is rushing ahead so fast that people are having trouble keeping up.
Today's high technology, that is, creates high-paying jobs, but mainly for the high-skilled. Just look at MIT's Media Lab.
My name is Nexi. What's your name?
An expressive robot, a car with robotic wheels that spins on a dime, folds up, and stacks eight to a current parking space — soon to come, self-parking.
KENT LARSON, MIT Media Lab:
So, you would pull up to your building, you would pat the car, turn it loose, and it would go and park itself.
Then there's the snap-on device to go with an eye exam app for your cell phone.
RAMESH RASKAR, MIT Media Lab:
You look through it, and after clicking on a few buttons, it can scan for your cataract. And it can also gives you data for the prescription for your eyeglasses.
Reactive ping-pong that senses where the ball hits the table, and, finally, the MIT Mood Meter, reading faces to assess state of mind, in this first version, reading your smile, however forced.
Now I'm going to start smiling, and I'm going to smile broadly and more and more broadly. Is it in the green? Have I got to the green yet?
If I squint…
You're doing great. It's almost 100 percent.
Almost 100 percent.
This work promises to be able to read everything from depression to lying. But, if it and when it does, the jobs created, as with all the other projects here, will be for the high-tech few, not the semi-skilled many.
It's a big error to think that technology automatically improves everyone's lives evenly. It's entirely possible for technology to make the pie bigger, but not have that pie evenly divided.
What's happened with the most recent wave of technology is what economists call skill-biased technical change, technology that benefits relatively more skilled workers and hurts the livelihoods of people who maybe have high school educations. As a result, the median income has stagnated, even though overall wealth in the economy has grown quite substantially.
Tyler Cowen, of course, sees the problem differently: an innovation drought, relative to the industrial revolutions of the past and to other countries today.
The problem is, we have not come up with the bigger and better endeavors to reemploy people, power our own growth and have us be leaders in new and important areas.
But to Erik Brynjolfsson, the problem is the nature of progress itself these days.
I'm an optimist about technological progress, but I'm not nearly as optimistic about our ability to keep up with it.
We have got some real problems. I just want to make it clear that the problem is not stagnation. The problem is more serious in some ways, which is our basic human ability to keep up with technological progress. That problem is going to get worse and worse as technology speeds faster and faster.
Not a happy thought. But, then, neither is Tyler Cowen's. And, no matter who you believe, one thing is clear: Technology isn't creating jobs the way it used to.
A hard copy of the book "The Great Stagnation" comes out next month.
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