The Great Disruption

If you were about to celebrate the end of the Great Recession and the decline in the unemployment rate, please re-cork the Champagne. The American economy -- much like the economies of other developed nations -- is entering a period of major upheaval in which many middle-class jobs will be lost. The digital revolution is increasingly allowing computers and machines, made smarter through software, to replace many of the better-paying jobs, namely those that require skills and are associated with the middle class.

A telling example is what is beginning to take place in higher education by the introduction of MOOCs. These "massive open online courses" are videos that capture lectures on standard academic fare given by some of the most renowned and articulate professors in the land. The pressure to fire a bunch of local faculty and replace them with MOOCs is very high because of the rapidly rising costs of college education, the great shortfall of public budgets, and the influence of trustees from the business community who are looking to make colleges more efficient.

MOOCs are often very polished, as they draw not merely on top talent but can also afford to invest in a variety of visual aides. For instance, the production of a series of lectures by Michael Sandel, one of Harvard's most popular professors, costs $600,000. Once these videos are produced, students can view them any time they want (rather than having to attend early-morning lectures, God forbid); at their own pace; and as many times over as they need. True, many students benefit from personal contact with the faculty. Hence, some colleges pair the use of MOOCs with discussions led by teaching assistants. However, these instructors are paid little and many MOOC-users do not rely on them. True, so far, MOOCs have run into various problems common to all startups, but the pressure to use them is so intense for the reasons already mentioned that, in one form or another, they are very likely to cut into faculty jobs in the near future. The same holds true for other areas from medicine to editing and translation. The coming Great Disruption is given a full court, excellent treatment, in a just published book, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, by two MIT professors Erik Brynjolfsson and Andrew McAfee.

The Economist, which just dedicated a cover story to what might be called the Great Middle Class Disruption, provides a telling example: thanks to the proliferation of digital photography and cell phone cameras, Kodak has had to fire nearly 90 percent of its 145,000 workers. Instagram, the digital picture sharing service which to some extent replaced Kodak, has served 30 million customers while only employing 13 people!

Indeed, the last three economic recoveries in the US were characterized by high growth without a corresponding increase in employment and with high unemployment persisting longer in each recovery than it did in the previous one. Most importantly, the proportion of people of working age participating in the labor force fell from over 66 percent in 2008 to 62.8 percent by the end of 2013. Recent declines in the unemployment rate in the US are largely due to people who stop looking for jobs rather than finding one.

The Economist, champion of blind faith in capitalism, believes that we can handle the economic, social, and, above all, political effects of the decline of middle class jobs through education, broadly understood, including retraining programs. To see that this is a bogus solution, please consider that the economy loses say 100 old jobs and creates 80 new ones (e.g., top-of-the-line programmers, because routine programming will be done by computers themselves), five of which go unfilled because there are an insufficient number of trained workers. Education would help fill these jobs, but there would still be 20 people left unemployed.

To proceed, we shall need much more radical rethinking. For instance, we may well need more people to work part-time so as to spread around whatever work there is. Part-time workers will need to learn to benefit from using the freed time for other pursuits e.g., parenting, and learn to live with the lower standard of living that will result from working less at gainful pursuits. Some other such repurposing of life may work out but we are most unlikely to find it in seeking well-paying, middle class jobs, for one and all--or even for most.

Reducing inequality -- to the extent it can be achieved, and it always is a political hard road to hoe -- will help ensure that the poor will do better while the brunt of the adjustment will fall on those who can better afford it. However, such reduction -- however justified it may be -- will not deal with the political fallout of large numbers of college educated and graduates of professional schools, going unemployed. We can no longer avoid the question whether the new technologies do not require finding new ways to share more widely the remaining work that must and can be done by humans.