July 16, 2010

Information Technology Is Not the Savior of the Unemployed

Michael Feldman

The IT recovery is underway, but it left the jobs behind.

As a journalist focused on supercomputing, I’m used to singing the praises of high-tech and the wondrous applications it delivers. The recent advances in fields like genomics, climate simulation, astrophysics and computer-aided manufacturing would be impossible without the latest computer wizardry. But one of the darker sides to IT is its negative impact on employment.

That might seem counter-intuitive. New applications should encourage new industries and demand for workers. But it hasn’t worked out that way. At least not yet. In his 2008 book, The Big Switch: Rewiring the World, from Edison to Google, author Nicholas Carr describes how the Information Technology Revolution is different from the Industrial Revolution that proceeded it:

The distinguished Columbia University economist Jagdish Bhagwati argues that computerization is the main cause behind the 2-decades long stagnation of middle class wages. ‘There are assembly lines today, but they are without workers. They are managed by computers in a glass cage above, with highly skilled engineers in charge.’ Normally the introduction of labor-saving technology would erode wages only briefly before the resulting boost in productivity pushed them back up again. Unlike earlier technologies that caused ‘discrete changes’ such as the steam engine, the ongoing advances in computer technology offer workers no respite. The displacement of workers is continuous now and the pressure on wages becomes relentless.

It’s common sense that automation reduces labor demand. And information technology just happens to be the perfect tool for doing this. Software is excellent at doing the same thing over and over again. (That’s why God invented the for-loop.) But it’s also good at making decisions based upon past events. (That’s why God invented the if-statement.) So it’s not just industrial robots pounding rivets into sheet metal in an automobile factory, and making auto workers obsolete. It’s also HPC-style clusters doing business intelligence that was once under the purview of white-collar office workers. History suggests that anything that can be automated eventually will be.

Even techies themselves are at risk. Despite the almost non-stop reports that we are going to need a gazillion new computer scientists to feed the IT workforce over the next several years, computer engineer salaries are stagnant. A recent AP article reports that salaries have even dropped slightly for computer science and engineer majors in the US.

The situation for CS laborers looks even worse in the UK. According to a BBC report, 17 percent of computer science majors who graduated last year are unemployed. Engineers fared only slightly better at 13 percent. The lowest unemployment rates among UK grads were in medicine (0 percent), education (5 percent), and law (6 percent) — not exactly your high-tech fields.

Of course, we’re in the midst of a global recession, and outsourcing has moved a lot of IT jobs to China, India, and other low-cost labor markets. So techies are under assault on a couple of fronts right now. Despite that, the IT sector is outperforming the overall economy. Intel, for example, just reported its best quarter in 42 years, with record sales ($10.77 billion) and profits ($2.89 billion). Rival AMD just reported record revenue ($1.65 billion) as well.

It’s worth noting that neither company needed to ramp up its workforce to accomplish this. In fact, the hub of the US IT industry, Silicon Valley, is not exactly a job factory these days. Unemployment in the Valley is hovering at over 11 percent these days, almost two points above the national average. Yet, many of its companies are forecasting healthy growth over the next 12 months, expecting pent-up consumer and corporate demand to drive revenue.

A tech recovery, though, is unlikely to reignite employment, at least in the US. Most hardware manufacturing, and quite a bit of software development, has now moved overseas. Former Intel CEO and chairman Andy Grove decries the situation, writing in Bloomberg that the US needs to get back in the manufacturing game if it wants to continue to be a center for innovation. Grove puts it this way:

[O]ur pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs — we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.

He recommends government investment to develop domestic manufacturing and implement import levies to discourage offshoring production and labor. In essence, craft a job-centric economic policy that revolves around factories that are going to build the mass-produced products of the 21st century — things like consumer electronics, advanced batteries, and solar panels.

This might seem strange coming from a guy who helped build one of the biggest computer tech companies in the world, but it is Intel’s chip manufacturing prowess that drives its huge employment base. The idea that everyone can move up the IT food chain is a losing strategy for jobs. The reality is there are only so many senior computer scientists, VPs, and marketing directors required in the world. Or as Grove says: “…what kind of a society are we going to have if it consists of highly paid people doing high-value-added work — and masses of unemployed?”

Of course, if Carr’s calculation is correct, even factory-based jobs will be swept away by IT. Eventually we’ll have to come up with an economy based on labor that can’t be automated away by machines, software, or communication networks. Or maybe we’ll be forced to come up with an economy based on something other than labor. Hmmm… maybe information technology will save us after all.

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