August 25, 2014
The usually astute Matthew Yglesias falls off the track with his discussion of David Autor’s latest paper on technology and wages. For background, Autor is the guru of the job polarization story: the idea that technology is destroying middle-paying jobs leaving only those at the top and bottom. He presented a new paper at the Fed’s annual conference at Jackson Hole which reassesses his prior work.
Matt’s take on this paper has Autor telling us that robots may not take our jobs, but they will cut our pay. That isn’t the story as I see it. Technology always devalues some jobs while increasing the productivity and wages of other jobs (that’s why average wages are higher today than they were 100 years ago). New technologies like robots will not be different in this respect.
What’s new and newsworthy in the Autor paper is the acknowledgement that his occupation story really cannot explain trends in wage inequality. Here’s a figure from Autor’s paper that Matt uses in his post.
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Note that there is no job polarization in the period 2000-2007 and only very modest high end job growth in the period 2007-2012. The main story in these periods is the growth in the share of low-end occupations. Yet we continued to see a sharp increase in high end wages relative to everyone else.
This is a problem not only for the post-2000 period, but for the whole period. If high-end wages increase relative to other wages when their occupation share is not rising in the period 2000-2012, why would we think that the mix of occupations explains wage trends in earlier periods? And of course the sharpest increase in shares is for occupations at the bottom end of the skills distribution, the workers who have seen the sharpest drop in relative wages in the years since 2000 as well as the longer period since 1979.
In other words, there is no link between changes in occupation shares and wage trends, a point that my friends and colleagues, Larry Mishel, John Schmitt, and Heidi Shierholz, have been making for several years. These points in Autor’s new paper appeared in their paper, Don’t Blame the Robots. (Autor was a discussant of an earlier version of this paper at the American Economic Association meetings in 2013, although it is not cited in his new paper.)
Anyhow, given the eagerness with which the punditry embraced Autor’s hollowing out of the middle story, the fact that he has now moved away from it should be big news. This means that the economics profession does not have a way to blame the growth of wage inequality on technology. And if it wasn’t technology that gave us inequality, then we might start thinking about policy.
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