Why Technology Will Make Inequality Much Worse

The debate over inequality tends to focus on things like tax policy, unions, corporate greed, and globalization. Scholars are well aware that technology has been a major driver of inequality -- by allowing the owners of capital to make more money with lower labor costs -- but policy types don't tend to have much to say on this issue. 

That needs to change. All signs suggest that technology is becoming an ever bigger driver of inequality as smarter machines emerge that can do a wider range of jobs -- eliminating the livelihoods of professional and working class Americans alike while generating higher profits for corporations. 

The AP recently did an in-depth investigation of how technology is affecting the labor market, drawing on a range of research studies and expert analysis. It's key findings are deeply alarming and worth presenting here at length:

—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. Either way, this trend will only grow as software permeates our lives.

—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.

All of us can fill in some of the details of this picture. We use the check-in kiosks at airports and the self-service checkout lanes at stores. We talk to increasingly articulate voice-automated customer service machines with less frustration than in the past. We hold executive jobs but have never had a "secretary."

Technology is coming for more and more jobs and the implications are profound. As Martin Ford writes in his chilling book The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future:

The reality is that the free market economy, as we understand it today, simply cannot work without a viable labor market. Jobs are the primary mechanism through which income—and, therefore, purchasing power—is distributed to the people who consume everything the economy produces. If at some point, machines are likely to permanently take over a great deal of the work now performed by human beings, then that will be a threat to the very foundation of our economic system. This is not something that will just work itself out.

Of course, the AP and Martin Ford are just repeating what the sociologist Stanley Aronowitz predicted nearly twenty years ago in his prophetic book, The Jobless Future. 

One implication of all this is clear: Redistribution of wealth via fiscal policy is going to become an increasingly crucial strategy for ensuring a fair society. After all, labor unions won't solve the job displacement problem nor will more restrictive trade policies or more access to education or a higher minimum wage. As giant profits accumulate in the hands of companies with fewer workers, government will have to move more aggressively to tax this wealth and use it to directly create jobs that benefit society, such as building infrastructure, providing better care for the aged and infirm, cleaning up the enviornment, improviing public parks, and so on. 

Such as an expansion of government may seem like a counterintuitive direction for the 21st century. But the alternative could be mass unemployment and inequality far greater than anything we have seen yet.