Ominous Trends in the U.S.

Recently, industry has become more information-intensive, which has led to higher productivity but also higher unemployment and inequality.

Learning Objective

Examine how the Information Age is leading to higher productivity but fewer jobs, which lead to polarization between incomes of the rich and poor

Key Points

Industry is becoming more information-intensive, less labor-intensive, and less capital-intensive. Jobs traditionally associated with the middle class are beginning to disappear, either through outsourcing or automation.
Automation and computerization have resulted in higher productivity, but they have also led to higher unemployment and a net job loss.
Individuals who lose their jobs can respond in several ways. They can either specialize, and join a group of "mind workers," or settle for low-skill, low-wage service jobs. The resulting polarization has led to a growing disparity between incomes of the rich and poor.
Jobs traditionally associated with the middle class are beginning to disappear, either through outsourcing or automation.
Individuals who lose their jobs must either move up, joining a group of "mind workers," or settle for low-skill, low-wage service jobs.
There is another way in which the Information Age has impacted the workforce: automation and computerization have resulted in higher productivity coupled with net job loss.

Terms

mind workers
A term for Information Age workers such as engineers, attorneys, scientists, professors, executives, journalists, and consultants.
automation
The act or process of converting the controlling of a machine or device to a more automatic system, such as computer or electronic controls.
Information Age
The current era, characterized by the increasing importance and availability of information (especially by means of computers), as opposed to previous eras (such as the Industrial Age) in which most endeavors related to some physical, man-made process or product.

Example

As technology increases productivity, it tends to reduce the demand for labor, eliminating jobs and creating unemployment. This general tendency can be observed in many sectors of the economy, but one of the most stark examples is agriculture. In the 18th and 19th centuries, most farm labor was done by hand or with the help of draft animals. But in the 20th century, technological advances revolutionized agriculture. New machinery, new varieties of crops, and new chemicals made farmers more productive than ever. A single farmer could farm much more land than before, but this meant that agriculture required far fewer laborers than it had in the past. Many farmers went out of business and moved to cities. Until 1920, more than half the U.S. population had lived in rural areas. Today, less than 2% of the population is employed in farming.

Full Text

Industry in the Information Age

In general, industry is becoming more information-intensive, less labor-intensive, and less capital-intensive. These trends have led observers to call the modern era the information age. The trend toward an information-based economy has important implications for the workforce. While productivity stands to increase dramatically, unemployment is also rising, and jobs are increasingly polarized into the following two categories: high-skill, high-wage jobs, and low-skill, low-wage jobs. Additionally, for the first time, workers are being forced to compete in a global job market, in which jobs tend to be attracted by countries with lower wages.

The Disappearance of Manufacturing Jobs

As technology advances, workers are becoming increasingly productive, but the value of labor, and the demand for labor, are both decreasing. Workers who perform easily automated tasks are being replaced by technology that can do the work faster, cheaper, and more efficiently. As a result, automation and computerization have led to both higher productivity and a net job loss. In the United States, from January, 1972 to August, 2010, the number of people employed in manufacturing jobs fell from 17,500,000 to 11,500,000. During the same time period, the value of production from manufacturing increased 270%.

In general, jobs that are traditionally associated with the middle class (assembly line workers, data processors, foremen, and supervisors) are beginning to disappear due to automation. They are also disappearing because of outsourcing, which has become more common in an era of global free trade. Production and service workers in industrialized nations are unable to compete with workers in developing countries, who are willing to tolerate much lower wages. As a result, in industrialized nations like the U.S., those working in production have either lost their jobs or been forced to accept wage cuts.

"Mind Workers"

Individuals who lose their jobs can respond in several ways. They can either settle for low-skill, low-wage jobs, or they can move up, joining a group called "mind workers. " This category includes engineers, attorneys, scientists, professors, executives, journalists, and consultants. Currently, these "mind workers" form about 20% of the workforce. They are able to compete successfully in the world market and command high wages. Increasingly, jobs in countries like the United States are polarized into low-skill, low-wage jobs or the high-skill, high-wage jobs of these "mind workers. " Because of this polarization, there is a growing disparity between the incomes of the rich and poor. In the United States, income inequality began to rise in the 1970s and has increased even more quickly during the 21^st century.

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