How technology has affected wages over the past 200 years

_{photo by Harvard Business Review ©}



The great paradox today is that we feel the influence of technology everywhere - in our cars, our phones, supermarkets, doctor's office, everywhere except for the level of our salaries. We work in a different way, communicate with each other in a different way, in a different way we create and have fun in a different way - all thanks to new technologies. However, since the beginning of the personal computer revolution three decades ago, the average wage has remained the same.



Over the past two hundred years, thanks to technological advances, wages have increased about tenfold. Some argue that today technologies are working against us, constantly eliminating middle-class jobs and foreshadowing future expansion of economic inequality. The remedy for this is the policy of redistributing wealth.

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But are we really at the point of historical bifurcation?



No, in fact, the present is not very different from the past. Throughout history, fundamental new technologies are initially accompanied by stagnant wages and rising inequality. As during the industrial revolution in the early nineteenth century, and during the electrification wave that began in the late nineteenth century. However, after decades of stagnation, these patterns are reversed; A large number of ordinary workers will eventually find wage growth thanks to new technologies.



Of course, today circumstances are different. Information technology automates white-collar work and the pace is accelerating, but the key tasks of the workforce are the same as in the past. And then, and now, in order to implement fundamental new technologies, a large number of people had to gain new skills and knowledge. Training was surprisingly slow and difficult, but was the key to higher wages. Today, workers must overcome such a barrier before they can benefit from new technologies.



Too often, when people think of technology, they only think of the initial invention. In the animated version, technologies consist of inventions, “developed by geniuses for idiots”. However, most fundamental innovations have been developed over decades, and a fair number of people learn to apply, adapt, and improve the original invention. The invention of the machine is one of the transformative technologies of the industrial revolution, automating weaving tasks and allowing to produce twice as much fabric. But over the next century, weavers, having improved their skills and mechanics, managers, having adapted and improved business processes, began to produce twenty times more finished products.



It took considerable time to bring the technology to the mind. Similar progressive processes took place in the field of steam engines, electrification and oil refining. And just recently it seems it took decades to bring computer technology to mind.



During the industrial revolution, employers sometimes went to great lengths to improve the intellectual abilities of the workforce. In Lowell, Massachusetts, the Silicon Valley of those days, employers began hiring young women, offering them something like a college internship.



These measures may seem surprising to manufacturers, because even today, workers with low levels of education are often considered "unqualified" labor. Ultimately, specialization and education made it possible to squeeze the most out of the relevant technologies. Experienced technical skills allowed blue-collar workers with a low level of education to enter the middle class.



However, this process took a long time. Many workers did not have the opportunity to study at work. At the first textile factories it was very hard to work, so many workers quit after the first month of work. Skills were not taught in schools, as technology changed too quickly for implementation. The first schools teaching the necessary skills were created only after the civil war. One of the important reasons for this lag was the lack of an incentive to train workers, because initially the labor market was very limited. In the 1830s, textile factories mainly hired workers who had no experience. The experience gained in one factory was not necessarily appreciated by another, since the plants used various technological and organizational processes. After the civil war, the market for skilled textile workers intensified, and only then did wages start to increase. The hourly wage of workers in Lowell changed little between 1830 and 1860, but in 1910 it increased threefold at once. For this breakthrough, it took decades of educational institutions, the development of business models and labor markets.



Of course, technology and skills were not the only factors that helped raise wages. The growth of capital investments has made workers more productive, wide opportunities have appeared, which have increased pay for women. The unions also played a part in this process, especially in the 20th century. Studies have shown that union members earned about 15% more than workers who are comparable in qualifications who are not involved in trade union movements. This is, of course, a significant difference, but compared to a threefold growth it looks insignificant. In the end, technology had the greatest impact on wage growth.



Thanks to new developments, a generation of less-educated industrial workers had the opportunity to make good money. Now, automation and offshorization have eliminated many of these jobs; many skills are obsolete. Nevertheless, there are new opportunities, technologies create jobs that require new skills, but the transition to new jobs is difficult and slow.



Publishers' computerization has practically removed typographers and graphic designers, who were forced to face the same problems as workers of the pre-war textile industry. Standards, business models and technologies are constantly changing, requiring continuous learning. At first, designers had to learn desktop publishing systems, then web publishing tools, and now, with the widespread adoption of smartphones, design for mobile systems. The most capable of them learn themselves, but the rest are not destiny. At the same time, educational institutions continue to teach outdated skills. 10% of designers observe a significant increase in their earnings, due to their newly acquired skills, but the salary of an average specialist has not changed for the past three decades.



Since the 1980s, this gap has affected many jobs. In the professions where the majority of workers use computers, the wage of one tenth of the employees grows, but the average shows very little growth. Among scientists, engineering and computer professions with specialized technical skills, the average wage is also slowly increasing. The difficulty of acquiring new skills also affects employers. Surveys show that over a third of managers have difficulty finding qualified employees. Many companies require employees with critical technical skills who are willing to pay high salaries, but, unfortunately, these are not enough.



Thus, the problem is not that technology eliminates the need for an average qualification of workers. New opportunities are available, but using them is not easy, and overcoming this obstacle will take time and will require the implementation of strategies that promote technical training and certification of skills, encourage mobility of employees and increase the reliability of labor markets.



Perhaps in the future, smart machines will fundamentally eliminate the average skilled jobs, but today's wage stagnation is not because of this. Technology has not turned against us. Instead, technologies force us to develop new opportunities, and if we solve this problem, many will greatly benefit from the introduction of new technologies, just as it has been for the past two hundred years.