LESSONS, RE-LEARNED.

The traditional comparative advantage of the United States has been in producing knowledge-intensive products using advanced technology.  That post also noted, "factor-augmenting technical change augments different factors of production differently, and the political economy gets interesting."  Sometimes, the improved technology makes the work-place safer, in part by replacing teams of skilled workers with machinery.

And for all the Popular Perspective of the Gilded Age steel works being a dark, satanic place, the reality of technical change is one of providing safer working conditions in which fewer men can produce tonnages the old-time puddlers and crucible handlers would find inconceivable. And the safer working conditions turned out to be more productive working conditions as well. For instance, in the early Bessemer and open hearth plants, furnace tapping and ingot teeming took place in the same pit. Rearrange the plant and put in travelling cranes to move the larger ladles, now the teeming doesn't have to stop each time a furnace is tapped. Likewise, the early iron furnaces had to be charged by hand, one wheelbarrow at a time, through an open top. And yes, all sorts of toxic gases came out of that open top. Work out a skip hoist and an air lock that can handle the weight of the charge, and one hazard to the furnaceman's health is mitigated.

If, dear reader, you see Luddites arising among those puddlers and crucible handlers, go to the head of the class.  Sometimes, technical change makes it possible for people with fewer specific skills to do the job.  The flying shuttle could be run by school girls, and the melt shop metallurgist could judge the content of tons of steel at a time from a climate controlled lab.

On the other hand, improved technologies can displace people with fewer specific skills.

[T]he industrial technology as the United States became more productive in agriculture was one that lent itself to Fordist division of labor, and nearly anyone could do the work. The techniques involved in designing and building the advanced technology goods of today seem less favorable to such an outcome, although perhaps the presence of reserve armies of people willing to work for less will induce that innovation. The culture wars are likely of second-order importance, if that.

At the moment, the technical change is not turning out in the favor of the least skilled.  "[O]ne component of rising income inequality surely is more employers of high-end skills chasing fewer holders of those skills (at least until labor-augmenting technical change permits less-skilled people to do some of those jobs.)"

I'm pleased to see empirical research in economics tackling that phenomenon.

When using self-checkout machines in supermarkets and drugstores, it is unlikely that you are bagging your purchases as efficiently as checkout clerks used to. The main advantage of automation for large retail chains is that it reduces the cost of bagging.

“If you introduce self-checkout kiosks, it’s not going to change productivity all that much,” says MIT economist Daron Acemoglu. However, in terms of lost wages for employees, he adds, “It’s going to have fairly large distributional effects, especially for low-skill service workers. It’s a labor-shifting device, rather than a productivity-increasing device.”

A newly published study co-authored by Acemoglu [with Pascual Restrepo] quantifies the extent to which automation has contributed to income inequality in the U.S., simply by replacing workers with technology — whether self-checkout machines, call-center systems, assembly-line technology, or other devices. Over the last four decades, the income gap between more- and less-educated workers has grown significantly; the study finds that automation accounts for more than half of that increase.

I'm not one of those people who grouses about self-checkout, because it gives me the ability to select a paper bag without having to ask for it, and to put the heavy items at the bottom by selecting the order in which I scan the items.  I'm not alone in seeing the advantages of automation in retail and fast food.

Yes, and the kiosks reduce the opportunity for the staff to ignore customers (I'm looking at you, Starbucks) or mess up the orders, which popular perspective has McDonald's as the most egregious offender -- I could count on the morning radio talkers out of Milwaukee to gripe regularly about fouled up orders until they apparently took their business elsewhere.  It's interesting how the Arches intend to respond to that shortcoming.

The paper landed in Econometrica, which is a well-regarded economics journal.  The rewards to inventing the technologies, though, go to the people who build and service the devices and the software, but to the disadvantage of the people who used to do the work.

Since 1980 in the U.S., inflation-adjusted incomes of those with college and postgraduate degrees have risen substantially, while inflation-adjusted earnings of men without high school degrees has dropped by 15 percent.

How much of this change is due to automation? Growing income inequality could also stem from, among other things, the declining prevalence of labor unions, market concentration begetting a lack of competition for labor, or other types of technological change.

There are always confounding factors, and there is always opportunity for further research.

Acemoglu and Restrepo conclude that the effects have been profound. Since 1980, for instance, they estimate that automation has reduced the wages of men without a high school degree by 8.8 percent and women without a high school degree by 2.3 percent, adjusted for inflation.

A central conceptual point, Acemoglu says, is that automation should be regarded differently from other forms of innovation, with its own distinct effects in workplaces, and not just lumped in as part of a broader trend toward the implementation of technology in everyday life generally.

Consider again those self-checkout kiosks. Acemoglu calls these types of tools “so-so technology,” or “so-so automation,” because of the tradeoffs they contain: Such innovations are good for the corporate bottom line, bad for service-industry employees, and not hugely important in terms of overall productivity gains, the real marker of an innovation that may improve our overall quality of life.

“Technological change that creates or increases industry productivity, or productivity of one type of labor, creates [those] large productivity gains but does not have huge distributional effects,” Acemoglu says. “In contrast, automation creates very large distributional effects and may not have big productivity effects.”

In that taxonomy, the flying shuttle or the Bessemer converter offered productivity gains to the disadvantage of the hand weavers and iron puddlers of the day, while Fordist methods of manufacturing offered productivity gains that could be shared with workers of relatively modest skills, although the labor organizing efforts at Ford and the other automobile manufacturers suggested there was more than one way to harvest the gains from trade.

Labor economists say the study is an important addition to the literature on automation, work, and inequality, and should be reckoned with in future discussions of these issues.

For their part, in the paper Acemoglu and Restrepo identify multiple directions for future research. That includes investigating the reaction over time by both business and labor to the increase in automation; the quantitative effects of technologies that do create jobs; and the industry competition between firms that quickly adopted automation and those that did not.

No shortage of interesting questions in applied industrial economics, are there?