Recession, technology combine to make middle-class jobs vanish
EDITOR’S NOTE:
Experts warn that this “hollowing out” of the middle-class workforce is far from over. They predict the loss of millions more jobs as technology becomes even more sophisticated and reaches deeper into our lives. Maarten Goos, an economist at the University of Leuven in Belgium, says Europe could double its middleclass job losses.
Some occupations are beneficiaries of the march of technology, such as software engineers and app designers for smartphones and tablet computers. Overall, though, technology is eliminating far more jobs than it is creating.
To understand the impact technology is having on middle-class jobs in developed countries, the AP analyzed employment data from 20 countries; tracked changes in hiring by industry, pay and task; compared job losses and gains during recessions and expansions over the past four decades; and interviewed economists, technology experts, robot manufacturers, software developers, entrepreneurs and people in the labor force who ranged from CEOs to the unemployed.
The AP’s key findings:
For more than three decades, technology has reduced the number of jobs in manufacturing. Robots and other machines controlled by computer programs work faster and make fewer mistakes than humans. Now, that same efficiency is being unleashed in the service economy, which employs more than two-thirds of the workforce in developed countries. Technology is eliminating jobs in office buildings, retail establishments and other businesses consumers deal with every day.
Technology is being adopted by every kind of organization that employs people. It’s replacing workers in large corporations and small businesses, established companies and start-ups. It’s being used by schools, colleges and universities; hospitals and other medical facilities; nonprofit organizations and the military.
The most vulnerable workers are doing repetitive tasks that programmers can write software for — an accountant checking a list of numbers, an office manager filing forms, a paralegal reviewing documents for key words to help in a case. As software becomes even more sophisticated, victims are expected to include those who juggle tasks, such as supervisors and managers — workers who thought they were protected by a college degree.
Thanks to technology, companies in the Standard & Poor’s 500 stock index reported one-third more profit the past year than they earned the year before the Great Recession. They’ve also expanded their businesses, but total employment, at 21.1 million, has declined by a half-million.
Start-ups account for much of the job growth in developed economies, but software is allowing entrepreneurs to launch businesses with a third fewer employees than in the 1990s. There is less need for administrative support and back-office jobs that handle accounting, payroll and benefits.
It’s becoming a self- serve world. Instead of relying on someone else in the workplace or our personal lives, we use technology to do tasks ourselves. Some find this frustrating; others like the feeling of control.
Technology is replacing workers in developed countries regardless of their politics, policies and laws. Union rules and labor laws may slow the dismissal of employees, but no country is attempting to prohibit organizations from using technology that allows them to operate more efficiently — and with fewer employees.
Some analysts reject the idea that technology has been a big job killer. They note that the collapse of the housing market in the U.S., Ireland, Spain and other countries and the ensuing global recession wiped out millions of construction and factory jobs. In their view, governments could bring many of the jobs back if they would put aside worries about their heavy debts and spend more.
But to the extent technology has played a role, it raises the specter of high unemployment even after economic growth accelerates. Some economists say millions of middle-class workers must be retrained to do other jobs if they hope to get work again. Others are more hopeful. They note that technological change over the centuries eventually has created more jobs than it destroyed, though the wait can be long and painful.
‘Jobless recovery’
In the U.S., the economic recovery that started in June 2009 has been called the third straight “jobless recovery.”
But that’s a misnomer. The jobs came back after the first two.
Most recessions since World War II were followed by a surge in new jobs as consumers started spending again and companies hired to meet the new demand. In the months after recessions ended in 1991 and 2001, there was no familiar snap-back, but all the jobs had returned in less than three years.
But 42 months after the Great Recession ended, the U.S. has gained only 3.5 million, or 47 percent, of the 7.5 million jobs that were lost. The 17 countries that use the euro had 3.5 million fewer jobs last June than in December 2007.
This has truly been a jobless recovery, and the lack of midpay jobs is almost entirely to blame.
Fifty percent of the U.S. jobs lost were in midpay industries, but Moody’s Analytics, a research firm, says just 2 percent of the 3.5 million jobs gained are in that category. After the four previous recessions, at least 30 percent of jobs created — and as many as 46 percent — were in midpay industries.
Other studies that group jobs differently show a similar drop in middle-class work.
Some of the most startling studies have focused on midskill, midpay jobs that require tasks that follow well-defined procedures and are repeated throughout the day. Think travel agents, salespeople in stores, office assistants and back-office workers like benefits managers and payroll clerks, as well as machine operators and other factory jobs. An August 2012 paper by economists Henry Siu of the University of British Columbia and Nir Jaimovich of Duke University found these kinds of jobs comprise fewer than half of all jobs, yet accounted for nine of 10 of all losses in the Great Recession. And they have kept disappearing in the recovery.
Webb Wheel Products makes parts for truck brakes, which involves plenty of repetitive work. Its newest employee is the Doosan V550M, and it’s a marvel. It can spin a 130pound brake drum like a child’s top, smooth its metal surface, then drill holes — all without missing a beat. And it doesn’t take vacations or “complain about anything,” says Dwayne Ricketts, presi- dent of the Cullman, Ala., company.
Thanks to computerized machines, Webb Wheel hasn’t added a factory worker in three years, though it’s making 300,000 more drums annually, a 25 percent increase.
“Everyone is waiting for the unemployment rate to drop, but I don’t know if it will much,” Ricketts says. “Companies in the recession learned to be more efficient, and they’re not going to go back.”
Developing economies have been spared the technological onslaught — for now. Countries like Brazil and China are still growing middle-class jobs because they’re shifting from export-driven to consumerbased economies. But even they are beginning to use more machines in manufacturing. The cheap labor they relied on to make goods from apparel to electronics is no longer so cheap as their living standards rise.
Most jobs never left
Candidates
for
U.S. president last year never tired of telling Americans how jobs were being shipped overseas. China, with its vast army of cheaper labor and low-value currency, was easy to blame.
But most jobs cut in the U.S. and Europe weren’t moved. No one got them. They vanished. And the villain in this story — a clever software engineer working in Silicon Valley or the high-tech hub around Heidelberg, Germany — isn’t so easy to hate.
“It doesn’t have political appeal to say the reason we have a problem is we’re so successful in technology,” says Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University. “There’s no enemy there.”
Use a self-checkout lane? A worker behind a cash register used to do that.
Buy clothes without visiting a store? No need for a salesman.
Click “accept” in an email meeting invitation? You’ve pushed an assistant closer to unemployment.