Automation once again is causing wage stagnation

A Brooking Institute report by David Autor and Anna Solomons explains why American wages have been largely stagnant despite one of the tightest job markets in decades. And no one knows how long the gap will last — when workers displaced by the new automation revolution will find employment at gainful wages.

“Automation is redistributing income from workers to owners.” David  Autor

Is automation a labor-displacing force? This possibility is both an age-old concern and at the heart of a new theoretical literature considering how labor immiseration may result from a wave of “brilliant machines,” which is in part motivated by declining labor shares in many developed countries.

This partly explains why American wages have been largely stagnant despite one of the tightest job markets in decades. And no one knows how long the gap will last — when workers displaced by the new automation revolution will find employment at gainful wages.

According to the report, blue-collar problems goes back to the 1980s, when such workers began to suffer job, wage and benefit cuts. But in the late 1990s or early 2000s, they were hit by a new phenomenon: the divvying up of the total economic pie — steady for decades — suddenly changed, and labor’s share dropped.

Autor, who presented the paper last week at the Brookings Institution, said he doesn’t know what caused the gap to open.

The report notes that people are too focused on the potential for jobs to be wiped out. “The concern should not be about the number of jobs,” he said, “but whether those are jobs that can support a reasonable standard of living and what set of people have access to them.”

While there are an unprecedented number of “creative, rich, rewarding and well-remunerated jobs,” Autor said, low-skilled jobs are among the most rapidly growing — in personal services, food services, cleaning, security, home health, and so on. These, he said, “are not well-paid, are not stable, and don’t offer a very good standard of living.”

Autor said, “So you could say on the one hand, ‘Great we have a lot of jobs.’ On the other hand, those are not the jobs we’d most like to have. So I think the concern ought to be about what is the comparative advantage of human labor in an increasingly automated world.”