Friday, January 21, 2011

This is a guest post from Hunter Richards, who blogs about online accounting software and other business technology for Software Advice. This article was originally published on Hunter's blog here.

Despite the tremendous benefits of information technology (IT), it comes at a human cost - the displacement of less-skilled employees. As software and systems automate an increasingly large portion of business processes, the displacement is affecting a wider set of workers. So despite an improving economy, 9.5% unemployment might last longer than many think.

Here we walk through a fairly simple story of man versus machine. It’s not a new story, but we went to the effort of pulling together and visualizing the relevant data.

Looks like it's time to hit the books.

IT spending has risen dramatically over the last 40 years...

Rise in IT Expenditures

IT spending has steadily risen since 1970. Trendlines and new opportunities like cloud computing suggest that the current dip in spending is only temporary.

...making us more productive...

Productivity on the Rise

Technology has made labor more productive. There’s a long-term upward trend in labor output rates, and it isn’t slowing down.

...which has led to rapid growth in corporate profits.

Growth in Profits

The resulting productivity has been great for business - greater productivity means higher profits. But these profits don’t benefit everyone. They accrue to the executives and shareholders.

IT is slowly replacing many functions. There’s an ever-widening divide in the labor market between skilled occupations and what one might call “low-level jobs” - simple clerical roles, plant-floor workers, and low-level support roles.

While national unemployment rates have ebbed and flowed...

National Unemployment Rate

...the uneducated are consistently left behind...

Education and Unemployment

This polarization between highly-skilled and less-skilled workers is part of what’s eroding the middle class, pushing more and more people into the low income bracket.

...and wealth has shifted toward the highest earners.

Income Gaps Over Time

The less-educated workers who manage to keep their jobs are falling further and further behind in the national income distribution as the relative value of their services declines.

Alas, high-tech industries are growing...

Tech Pulse Index

So how can you avoid being replaced by a machine? You’ll need to be one of the people who work in an advanced field that still requires highly-skilled human capital. Take the IT field, for example. The Tech Pulse Index tracks the growth of national economic activity in technology by combining data on employment, investment, production, shipments, and consumption. The Tech Pulse Index has risen sharply (with the exception of the dot-com bust around the year 2000), reflecting continued demand for high-tech workers. The same is true in other engineering disciplines, healthcare and finance.

...but an advanced education is required.

Education Enrollment Rates

Are we educating people enough to slow the widening of labor market gaps? The graph above shows the percentage of all 18- to 24-year-olds enrolled in degree-granting institutions since 1970. There’s an upward trend, but is it growing fast enough?

IT is good for society in the long term, but it’s a double-edged sword when considered together with labor market trends. Sure, the current economic despair owes its severity to many different issues - offshoring of jobs, the real estate collapse, and the national debt are just a few - but education and income disparities are long-term problems that demand attention. We must align education growth with productivity growth to close these gaps.

1 comment:

  1. Thats the problem with technology jobs who has an advanced degree.