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The Ordeal of Labor

The Imact of Technology on Employment

by Kirkpatrick SaleRebels Against the Future
February 10th, 1997


The impact of technology on employment in all industrial nations has been dramatic and severe for the last two decades, but by the mid-1990s it was clear that what had been happening was evidence not of "a transitional or temporary or cyclical problem," as Stephen Roach, the chief economist of Morgan Stanley, has put it, but of "a lasting and structural problem." The problem is technology.

It is an axiom of capitalism that employers will try to lessen the expense of production in order to increase profits, and historically the easiest way has been to reduce labor costs, either by cutting the workforce or paying it less. With the advent of industrial technology in the 19th century it became possible to do both, and with the development of computer technology it became possible to do so across a wide range of employment and on a global scale. The story of the last quarter century in the West is this "lasting and structural" displacement of labor by ever more sophisticated forms of automation, an acute reduction in farm and manufacturing jobs (U.S. manufacturing employment shrank from 29 percent of the workforce to less that 16 percent), and an increase in largely nonproductive "service" employment (16 percent to 27 percent), much of it low-paying, temporary, and insecure.

For most of the time the effect of this displacement has been disguised by government funding and government employment -- the public trough, as it might be called -- fueled by increasingly onerous debts. In the United States for example, there was a steady expansion of jobs in all levels of government, in government services like schools, hospitals, prisons, and welfare, and in public boondoggles like the defense, aerospace, and computer industries. Those who were not absorbed by those means were kept by greatly expanded welfare, training, and entitlement programs. This took an immense amount of money, naturally, and it quickly drove the United States into becoming the world's largest debtor nation by 1985, as it ran up debts in quite mind-boggling trillion-dollar figures to try to keep it all together.

But the Ponzi scheme obviously couldn't last, and sometime in the mid-1980s it began to unravel, here and throughout the industrial world, effectively collapsing entirely with the end of the Cold War in 1989. Governments could no longer sustain their bloated budgets and mounting deficits, corporations under pressure from environmental and social obligations reduced payrolls further and sent job overseas, unemployment payouts and welfare costs grew steadily, and worldwide recession rolled across the industrial landscape. Beginning in about 1986, unemployment rates soared to 10 and 15 and in some cases 20 percent of the workforce, discouraged and no-longer-looking percentages were thought to be at least two to three times those figures, and underemployment and involuntary part-time work was pushing toward 50 percent. Technology and its relentless drive toward automation, coupled with its ability to move and control employment anywhere in the world, could finally be seen as the culprit, eliminating, as it was always intended to do, the annoying cost of production known as labor.

Now in theory -- the theory first propounded during the British Industrial Revolution -- technology, however many jobs it may eliminate in the short run, is supposed to increase them in the long. Factories and offices are supposed to be more productive, turning out more for less and less, stimulating a demand that should eventually require new jobs, either in the shops that expand to meet the new demand or in those that arise to produce and improve the new technologies themselves. (Or as Bill Clinton has put it, "We cannot turn away from the idea that modernization is the key to employment.") As we have seen, the cruel fact is that this theory does not work and never has -- but in the crisis of the last decade it is clearer than ever that the technological trade-off is quite mythical.

To begin with it is indisputable that automation has eliminated vast numbers of job across all sectors of the economy in all industrial nations, maybe 35 million of them in the last decade. The example of the United States, still the leading economic power in the world, is revealing. From 1988 to 1994 the number of jobs lost was estimated to be 6.5 million, far higher than in any other postwar period, and fully 85 percent of them are thought to be permanently lost to machines and overseas transfers. Automation is held to be responsible for the loss of half a million manufacturing jobs every year in this period and close to 3 million in the decade before -- the completely automated factory in only a few quarters away -- but it has also begun to make deep cuts into service jobs and seems likely to make its biggest future impact there. Most routinized service jobs have already been mechanized -- bank tellers, data clerks, back-office filers, messengers, receptionists, elevator operators, gas pumpers, dishwashers -- and new technologies will shortly displace at least 100,000 telephone operators and maybe as many as 3 million data typists, post office sorters, and other human impedimenta. In fact, a 1992 Carnegie Institute study concluded that 6 million more manufacturing and no fewer than 38 million office jobs were at risk to automation with no sign that anyone has any idea where to fit the displaced workers. As Wassily Leontief, the Nobel economist, has put it trenchantly, "The role of humans as the most important factor of production is bound to diminish" -- and, he adds, "in the same way that the role of the horse in agriculture production was first diminished then eliminated by the introduction of tractors."

Bad enough, but the effects of technology go beyond automation. It is technology, and the fierce global competition it engenders, that forces the abandonment of product lines made unprofitable and the closing of plants made obsolete and indeed the elimination of entire industries made unprofitable -- all with immerse effects on employment, as American steelworkers and coal miners, among others, can attest. It is also this sort of competition that has caused the flight of so many factories and businesses from the industrial metropoles to out posts in East Asia and Latin America in particular, not merely for cheap and more docile workforces but for newer and more efficient plant and machinery; new technology now enables home offices to establish direct and immediate communications with these distant workers, both white- and blue-collar, in any part of the world, effectively doing away with the need for any but a few executive jobs at home. As Western corporate investment overseas has increased dramatically in recent years -- up by nearly 100 percent from 1987 to 1993 -- employment has automatically followed, and seems likely to reach a near stampede in the future if the purposes of the global free-trade agreements are fulfilled.

And all the new jobs that technology is supposed to create at home? They have simply not appeared, except in those few industries still sustained by government boondoggles. "Automation roars ahead, letting industries grow and prosper," as The New York Times said on Labor Day 1993, "but no one sees the emerging industries that can take on the workers they are letting go." In the United States, large firms, even high-tech giants like IBM and Xerox, are getting rid of people at unprecedented rates -- getting higher every year since 1986 and reaching an all-time high of 700,000 in 1994 -- and making it known that they have no intention of filling those slots again.

Moreover, most of the new jobs that have been created in the last decade are part-time and temporary jobs, with lower wages, reduced benefits, fewer hours, and no security -- "disposable" jobs they are called because they exist at the whim of management, there when employers need them and gone as soon as computerization or a sales downturn makes them unnecessary. According to the U.S. Labor Department some 46 million workers were stuck in these disposable jobs as of 1993 -- that's 40 percent of the total workforce -- and at least half of them were in the lowest-paying least-protected slots, typically retail stores, restaurants, sweatshops, warehouses, supermarkets, and nonunion assembly lines. A 1993 New York Times front-page analysis called "Jobs Without Hope" said that what "makes this recovery different from any other" was that the "regular jobs that people would lose in past recessions and reclaim when business picked up" have simply disappeared.

Not quite disappeared: machines have them.

Only one last point need be added about the economic effect of what Time magazine (which a decade earlier had nominated the computer to be its"Machine of the Year") in 1993 called "the relentless and accelerating pace at which technology is changing work as well as every other aspect of life," and that it is the below-the-line finality of income. Everywhere in the industrial world the split between rich and poor, professional and clerical, skilled and unskilled, is wide and widening. Computer technology enables a small number of highly educated and inventive and enterprising people to operate old businesses in new ways and new business in exponential ways, and many of these companies have generated fortunes in the past decade and will continue to do so; it also requires, for a time at least, a sizable workforce at the bottom of the heap in routinized and low-paying jobs in the electronic offices and factories. This produces two clear results. First, as the U.S. Census Bureau keeps reporting, the rich get richer and the poor get poorer: the most affluent 20 percent of the population took in 48 percent of the total income of the nation in 1993, while the bottom 20 percent got less than 4 percent, and this disparity has increased, by as much as 70 percent, every year in the last twenty years. Second, the middle stagnates and declines: median family income adjusted for inflation has not changed at all since 1973 (except for those under the age of 45, who earn about half of what their parents did) and 44 percent of the population had a decline in real income in the 1980-90 decade.

In 1992 -- as typical a year as any other -- 37 million Americans were below the official poverty line, 19 million more were below the line adjusted for real costs, 8 million were officially unemployed, 36 million were said to be discouraged from looking, and 46 million were in disposable jobs: it seems a slim triumph indeed if the nation has bought its microwaves and laptops and ATMs with this.

Reproduced with permission from the author.

Rebels Against the Future CoverRebels Against the Future
The Luddites and Their War on the Industrial Revolution

Lessons for the Computer Age

Kirkpatrick Sale
Addison-Wesley Publishing Company, 1995

Kirkpatrick Sale is a contributing editor of The Nation and the author of many books, including Conquering Paradise: Christopher Columbus and the Columbian Legacy.