Will the digital revolution destroy the middle class?

Tablet computers , smartphones and other electronic products that are constantly updated have become the standard of middle-class life. When immersed in the comfort and fashion brought by technology, few people would think that the technological development prospects behind these products may launch a fatal blow to their future lives.

Even fewer people have thought that in an era when the market value of mobile phone manufacturers exceeds that of oil companies and Silicon Valley wages exceed those of Wall Street, the rise of the so-called third digital revolution may contribute far less to improving productivity and providing more decent jobs than public expectations.

The development of information technology in the past 20 years has been earth-shaking, but it remains to be seen whether the public can truly share the benefits of technological advancement.

The following is an excerpt from the special report on the Digital Revolution.

The Solow Paradox

Many fans of digital technology in this century may be surprised by these figures: from 1939 to 2000, the U.S. economy experienced a period of rapid economic growth, with an annual per capita productivity growth rate of 2.7%. However, from 2000 to 2013, when social networks, smartphones, and artificial intelligence swept everything, the annual per capita productivity growth rate dropped to 0.9%.

The slowdown in productivity growth over the past decade or so is hard to square with the seemingly rapid development of information technology, but there are historical precedents. For example, most economists would agree that the quality of life in British society did not generally improve in the century after the first industrial revolution; and productivity did not improve much in the Victorian era of the early 20th century, even when inventions such as the electric light bulb were in their heyday.

Robert Solow, an economist who won the Nobel Prize in 1987, proposed the famous "Solow Paradox". This paradox refers to the fact that although companies have invested a lot of resources in IT, they have achieved little in terms of productivity. "We can see computers everywhere, but we can't see them in productivity data."

How to explain the "Solow paradox" has always been controversial in the economics community. Robert Gordon of Northwestern University believes that the substantive progress of scientific and technological innovation in recent years is not as exciting as it seems, and is not enough to offset the negative impact of demographic changes, inequality and the sovereign debt crisis. The core information and communication technology of the so-called third digital revolution is actually less transformative than the invention of electrification, automobiles and wireless communication technology in the second industrial revolution.

The second explanation for the "Solow Paradox" is that the productivity improvement brought about by technology has a long lag effect. This view holds that the past 40 years have been the incubation period of information technology. The essential improvement of information processing capabilities and the significant reduction in costs have opened the curtain for the real era of change, and the second half has just begun.

The hollowing out of the labor market

The impact of digital technology on productivity has not been as expected, nor has it been effective in broadly increasing workers’ wages. Over the past decade or so, the impact of information technology on income distribution has only been to maintain the status quo of most workers’ wages, while allowing huge remuneration to flow to the technical elite.

Between 1991 and 2012, the average annual real wage growth in the UK was 1.5%, and in the US was 1%, far lower than the economic growth rate during the same period; Germany was only 0.6%, and Italy and Japan had almost no growth. However, the wages of the high-income groups in these countries have increased dramatically.

This is because information technology is eroding traditional jobs faster than people imagined. In addition to simple repetitive labor on the assembly line, jobs that were once considered mental labor, such as some legal, statistical and journalistic jobs, have also entered the replaceable sequence.

The problem is that in this round of technological revolution, a large number of intelligent robots have replaced thousands of workers on the assembly lines. However, except for some design and control engineers, no new jobs have been created accordingly. It is also impossible to create a huge new class to share the dividends of technological change like the automotive industry in the past.

Peter Cappelli of the University of Pennsylvania said in a report that over-education has become a persistent problem in developed countries. These countries cannot provide a large number of jobs to absorb these college graduates. Therefore, in the next few decades, the labor market demand will be concentrated on the most elite applicants. These top elites with extraordinary abstract thinking ability, creativity or interpersonal skills - that is, people who are difficult for computers to replace - will attract more customers and receive higher salaries.

This also indicates that the entire labor market will gradually become hollowed out - the labor force will flow to the upper and lower poles, and the middle position where white-collar workers, who belong to the majority of the group, are located, will begin to collapse. These white-collar workers with medium qualifications and medium salaries are the middle class group that has gradually formed in developed countries since the 1970s.

The new inequality

Although technology has been mediocre in terms of increasing productivity and employment, it has helped: Over the past decade or so, the prices of a large number of goods and services, including education and health care, have fallen significantly. Those whose labor markets have been impacted by technology can breathe a sigh of relief, at least in this regard, but some people have benefited more greatly from it.

In this era when learning costs are unprecedentedly low, Tyler Cowen, an economist at George Mason University in the United States , said that those who are highly self-motivated, talented and extremely focused will climb to the top of the pyramid with high rewards, while the remaining 85% to 90% of the people will be at a loss in the face of the new economic structure.

Changes in economic structure are ultimately accompanied by changes in social division of labor. For example, the era of large-scale industry eliminated many skilled craftsmen. The new digital revolution will naturally bring some well-paid professionals down to earth. Some operations that were previously only performed by senior doctors will only require ordinary nurses with the help of smart machines in the future.

Even if these jobs have become less difficult, they still require practitioners to have specially trained skills, such as the ability to operate complex machines and the social skills to communicate with people - this still excludes most ordinary employees.

The “sharing economy”, a major theme of the information technology era, has not achieved its ideal of egalitarianism in many aspects. The more low-skilled jobs are, the easier it is for them to be replaced by machines, which can easily lead to a surplus of low-skilled labor, resulting in unemployment and weak wage growth.

The reins of government

One way to address labor market imbalances is to "increase the productivity of low-skilled jobs, transform low-skilled workers into high-skilled jobs, and provide welfare protection for workers who cannot transform into high-skilled jobs."

This involves adjustments to education, social welfare and other major policies. Each part has a far-reaching impact, but some only require a shift in strategy.

One example is the impact of professional certificates on employment. From 1950 to 2008, the proportion of jobs in the United States that require professional certificates to be employed increased dramatically from 5% to nearly 30%. From teachers and nurses to interior designers and even manicurists, all require professional licenses. This excessive demand for professional licenses has set up obstacles to career mobility. In some countries, the cumbersome policy restrictions in the hiring process have caused headaches for companies that prefer to switch to machine operations.

After all, technology is like a boundless horse because of its purity. It has no preferred agenda setting from the beginning, so it is naturally impossible to expect its impact on society to be completely positive or neutral. Technology just sweeps everything indiscriminately according to its own development laws, making some people fall into poverty or making others suddenly rich. Only when the government uses the reins properly can it be in line with the overall welfare of the general public.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.