The Work Of the Future

David Autor, "The Labor Market Impacts of Technological Change: From Unbridled Enthusiasm to Qualified Optimism to Vast Uncertainty,"National Bureau Of Economic Research, June 2022, https://www.nber.org/papers/w30074

Autor, “…I began by asking what the role of technology—digital or otherwise—is in determining wages and shaping wage inequality. I presented four answers corresponding to four strands of thinking on this topic: the education race, the task-polarization model, the automation-reinstatement race, and the era of AI uncertainty.. Fundamentally, technological change expands the frontier of human possibilities, but one should expect it to create many winners and many losers, and to pose vast societal challenges and opportunities along the way. What are the policy implications of these observations? The question is so broad that almost any answer is bound to appear vague and inadequate. One can reliably predict that technological innovations will foster new ways of accomplishing existing work, new business models, and entirely new industries, and these in turn will generate new jobs and spur some productivity gains. But absent complementary institutional investments, technological innovation alone will not generate broadly shared gains. sketch a long-form policy vision of what form these investments may take, focusing on three domains: education and training; labor market institutions; and innovation policy itself. I provide a capsule summary of those conclusions here, stopping short of policy recommendations. As a starting point, educating and training the workforce to meet the demands of the moment can improve access to good jobs for workers who would otherwise face barriers and boost the quality of existing jobs by creating opportunities for career ladders. While boosting the supply of skills is never controversial, pure supply-side policies are inadequate to meet the gravity of the labor market challenge. In 1979, 60% of U.S. males at the median of the wage distribution possessed high school or lower education, whereas 21% had some college, and 20% held a bachelor’s degree or above. By 2019, 31% of males at the median of the earnings distribution had some college, 36% had attained at least a four-year college degree — a 75% increase — and only one-third had high school or less education. Despite this dramatic skill upgrading, the real earnings of the median male rose by only 10% in these forty years. More broadly, over more than four decades, the link between rising productivity and commensurate improvements in job opportunities and earnings has decoupled for the majority of U.S. workers. The poor quality of jobs available to workers lacking four-year college degrees or specialized credentials provides one of the starkest examples of this failure. Low-wage U.S. workers earn substantially less than low-wage workers in almost all other wealthy industrialized countries. The divergence between the upward path of productivity growth and the near plateauing of median wage growth among U.S. workers was not an inevitable consequence of technology, globalization, or market forcesRather, a set of U.S.-specific institutional and policy choices failed to blunt—and in some cases magnified—the consequences of technological and globalization pressures on the U.S. labor market. To contend effectively with these challenges would require institutional and policy reforms that realign labor market opportunities with the rising productivity and societal wealth that the U.S. has reaped from decades of innovation and investments in human and physical capital. Thus, a second locus for investment would be to revitalize the governmental, nongovernmental, and private sector institutions that translate—or fail to translate—rising productivity into shared prosperity. Some such steps might include updating and more vigorously enforcing labor standards, recalibrating federal minimum wage policies, extending the scope and flexibility of the unemployment insurance system, and transforming the U.S. employer-based health insurance provision into a system with portable benefits. further call for reevaluating the U.S.’ uncritical embrace of pure shareholder capitalism. While shareholder capitalism can plausibly be credited with some of the productive dynamism of the U.S. economy, it has also arguably helped fuel the drive to curtail wages and benefits for low-wage workers and, more broadly A third potential domain for policy is to directly shape innovation itself to speed productivity growth and complement the skills of the labor force. It is well known that the U.S. has a strong national innovation system, fueled by federal R&D investments, to develop fundamental science and new technologies, that has led to scientific leadership and new industries Less recognized, however, is the crucial link between those new industries as complements to the inevitable loss of jobs that results from productivity-enhancing technologies. New industries grew out of a flourishing innovation ecosystem that created new companies and new applications, alongside older industries that increased mechanization and automation as they matured. Arguably, the U.S. has let those important R&D investments wither Through increased and targeted R&D investments supported by a reinvigorated federal R&D program, as well as a tax policy that keeps workers and social challenges at the forefront, the country’s innovation system could be put to work for a broader number of people and regions than it has in recent decades Although I would prefer to end this essay with optimistic assurances,I will instead end with one uncertainty, one certainty, and one admonition. The uncertainty is that we have less clarity about our technological future than we did two decades ago. AI has extended the frontier of technological possibility towards boundaries that are barely visible at present. The tasks that machines will be able to accomplish, the rate at which new innovations may emerge, and the speed with which socially impactful technological innovations may diffuse is unknown. But the range of possibilities has surely gotten broader, and our certainty about the boundaries has accordingly diminished. Conversely, the certainty is that these technological advances will expand the set of desirable possibilities that are within the reach of humanity. Artificial Intelligence has the potential to help humanity tackle some of its most pressing challenges: climate change, disease, poverty, malnutrition, and inadequate education. But whether societies will successfully realize this potential, or instead squander it or, worse, disastrously misuse it, is highly uncertain and, I would argue, fundamentally indeterminate. The admonition is this: given the potential applicability of AI to a vast set of purposes, we collectively (meaning individuals, organizations, and governments) should not simply be asking what AI will accomplish but what we want it to accomplish. How can we use AI most productively to complement workers, raise productivity, and more broadly, tackle humanity’s most pressing challenges? Simultaneously, how can we blunt or reshape the commercial incentives to use AI for socially counterproductive objectives such as displacing workers, preying upon people’s cognitive and emotional frailties, or consolidating the power of governments or corporations to exercise social control As we ponder our uncertain AI future, our goal should not merely be to predict that future but to create it….”

“…How do pretax incomes vary in Europe and the United States today? Table III provides a first answer to this question by displaying the average incomes and income shares of key income groups in Western Europe, Northern Europe, Eastern Europe, and the US in 2017. The average national income per adult stood at e52,700 in the US at purchasing power parity, compared to e44,900 in Northern Europe, e35,300 in Western Europe, and e21,700 in Eastern Europe. In Europe, only Norway (e55,000) and Luxembourg (e102,000) have higher average national incomes than the US.23Things look very different at the bottom of the pretax income distribution. Thebottom 50% earned only about e12,300 in the US in 2017, compared to e21,600 inNorthern Europe and e14,600 in Western Europe. Of the twenty-seven countriesconsidered in this paper, the US thus ranks third in terms of average national incomeper adult but nineteenth when it comes to the average income of the poorest 50%.24On average, pretax income inequality at the bottom is lowest in Northern Europe(with a bottom 50% share of 24%), followed by Western Europe (21%) and EasternEurope (20%). With a bottom 50% pretax income share of only 11.7%, the US is byfar the most unequal of all countries, followed by a distant Serbia (16%) and veryfar from the values observed in the Czech Republic, Iceland, Norway, and Sweden(all above 25%).25These differences appeared even more pronounced at the verybottom of the distribution: the average income of the poorest 20% was e11,600 inNorthern Europe in 2017, more than three times larger than its counterpart in theUnited States (e3,800).The same differences are visible at the top end of the distribution: the top 1% captured 21% of total pretax income in the US in 2017, compared to 12% in Eastern Europe, 11% in Western Europe, and less than 9% in Northern Europe. In 2017, the top 0.001% average pretax income exceeded e92 million in the US, nearly ten times the value observed in Northern Europe. The European countries with lowest top 1% income shares are the Netherlands, Slovenia, Iceland, Belgium, and Finland (less than 9%), while those with highest top income concentration are Germany, the United Kingdom, Greece, and Poland (13-15%).26In summary, while the US stands out as being richer than most European countriestoday, differences in average national incomes mask substantial heterogeneity. With inequality levels surpassing by far those observed in any European country, theUS displays bottom pretax average incomes that barely exceed those observed inpoorer Eastern European countries. In contrast, the lower inequality levels and higheraverage incomes observed in Northern Europe imply significantly better standardsof living for the majority of the population than in the United States….”

Here is Blanchet, “…theUS displays bottom pretax average incomes that barely exceed those observed inpoorer Eastern European countries…”

David Autor, David Mindell and Elizabeth Reynolds, “The Work Of the Future,” MIT, 2020, https://workofthefuture.mit.edu/wp-content/uploads/2021/01/2020-Final-Report4.pdf

Autor, “..By almost every measure of job quality — pay, working environment, prior notice of job termination, and access to paid vacation, sick time, and family leave — less-educated and low-paid U.S. workers fare worse than comparable workers in other wealthy industrialized nations. Figure 7 provides one such benchmark, comparing purchasing-power adjusted gross (pre-tax) hourly pay of low-skill workers in 22 OECD countries in 2015.32 Low-skill U.S. workers earn only 79% as much as low-skill U.K. workers, only 74% as much as low-skill Canadian workers, and only 57% as much as low-skill Germans. While no single metric makes for a complete comparison, numerous analyses support the qualitative picture painted by Figure 7…”