How has Technology affected Wages over the past 200 years?
The great irony of today is that we feel the impact of technology everywhere – in our cars, our phones, supermarkets, doctors’ offices, everywhere but our paychecks. We work differently, we communicate differently, we create differently and we also play differently – all thanks to new technologies. However, since the start of the PC revolution three decades ago, average wages have stagnated.
In the last two hundred years, thanks to advances in technology, wages have increased nearly tenfold. Some argue that technology is working against us today, permanently eliminating middle-class jobs and heralding rising economic inequality in the future. The remedy for this lies in the policy of redistributing wealth.
But are we really at the Historical Dividing Point?
No, actually, the present is not much different from the past. Throughout history, fundamental new technologies were initially accompanied by stagnant wage levels and rising inequality.
As it happened during the Industrial Revolution at the beginning of the 19th century, so too during the wave of electrification that began at the end of the 19th century. However, after decades of stagnation, these patterns are beginning to reverse; Many frontline workers will eventually see a pay rise thanks to new technologies.
Of course, circumstances are different today. Information technology is automating and accelerating white-collar work, but the core tasks of the workforce are the same as in the past. Then and now, to implement fundamental new technologies, large numbers of people had to acquire new skills and knowledge.
Training proved to be surprisingly slow and difficult, but it was the key to higher wages. Today, workers must overcome a similar barrier before they can benefit from new technologies.
Often when people think of technology, they only think of the initial invention. In the cartoon version, the technology consists of inventions “designed by geniuses for fools”. However, most fundamental innovations were developed over decades and few people learn how to apply, adapt and improve the original invention.
One of the transformative technologies of the Industrial Revolution was the invention of the loom, automating weaving tasks and making it possible to produce twice as much fabric. But over the next century, as weavers improved their skills and machines, adapted managers, and improved business operations, they produced twenty times as many finished products.
It took a long time to bring technology to mind. Similar progressive processes took place in the field of steam engines, electricity and oil refining. More recently, it seems to have taken decades to bring computer technology to mind.
During the Industrial Revolution, employers sometimes went to great lengths to increase the brainpower of the workforce. In Lowell, Massachusetts, the “Silicon Valley” at the time, employers began hiring young women, offering them something like a college internship.
These measures may come as a surprise to factory owners, because even today, poorly educated factory workers are often considered “unskilled” labor. In the end, specialization and education made it possible to make the most of related technologies. Technological skills gained through experience allowed poorly educated blue-collar workers to join the middle class.
However, this process took a long time. Many workers have not had the opportunity to learn on the job. The first textile factories were very difficult, many workers left after the first month of work. The necessary skills were not taught in schools because technology moved too quickly for adoption. The first schools to teach the necessary skills were not established until after the Civil War.
An important reason for this delay was the lack of incentives for training workers, as the labor market was initially very limited. In the 1830s, textile factories hired workers with no experience. Experience gained in one factory was not necessarily appreciated in another, as factories used different technological and organizational processes.
After the Civil War, the market for skilled textile workers intensified, and only then did wages begin to rise. Hourly wages for workers in Lowell changed little between 1830 and 1860, but tripled by 1910. This advance took decades for educational institutions, business models, and labor markets to develop.
Of course, technology and skills weren’t the only factors that helped raise wages. Increased capital investment increased workers’ productivity, and there were many opportunities that raised women’s wages. Trade unions also played an important role in this process, especially in the 20th century.
Studies have shown that union members earn about 15% more than other non-union workers. This, of course, is a significant difference, but compared to a threefold increase, it seems insignificant. In the end, technology had the biggest impact on wage growth.
Thanks to new developments, generations of less educated industrial workers were able to earn good money. Now automation and offshoring have eliminated many of those jobs; Many skills are outdated. However, new opportunities arise, technologies create jobs that require new skills, but the transition to new jobs is difficult and slow.
The computerization of publishing virtually eliminated the press and graphic designers, who had to face the same problems as workers in the textile industry before the war. Standards, business models and technologies are constantly changing, requiring continuous learning.
Designers first had to learn desktop publishing, then web publishing, and now, with the ubiquity of smartphones, mobile design. Most of them are able to learn on their own, but the rest are left out.
At the same time, educational institutions continue to teach obsolete skills. 10% of designers see a significant increase in their earnings related to newly acquired skills, yet the salary of the average specialist has not changed in three decades.
Since the 1980s, a similar gap has affected many jobs. In occupations where most workers use computers, the salary of one-tenth of workers increases, but the average shows very little increase.
Among scientists and engineering and computing professions with specialized technical skills, median salaries are slowly rising. The difficulty of acquiring new skills also affects employers. Surveys show that more than a third of managers have difficulty finding qualified employees.
Many companies require workers with significant technical skills and willing to pay high wages, but unfortunately, there are not enough of them.
So the problem is not that technology eliminates the need for semi-skilled workers. New opportunities exist, but they are not easy to seize, and overcoming this obstacle will take time and will require the implementation of strategies that promote technical training and skills certification, stimulate workers’ mobility and improve the reliability of labor markets.
Perhaps in the future, intelligent machines will radically eliminate semi-skilled jobs, but the current wage stagnation is not due to this. Technology has not turned against us.
Instead, technology forces us to develop new capabilities, and if we can solve this problem, many will benefit greatly from the introduction of new technologies, just as they have for the past two hundred years.