Economists disagree how much technology raises demand for workers with pre-existing skills. But technology might affect wages another way: through skills learned on the job. Using instrumental variables on 9 panels of workers from 1989 to 2013, this paper estimates that workers who use information technology (IT) have wage growth that is about 2% greater than non-IT workers, all else equal, implying substantial learning. This effect persists over time, implying sustained productivity growth from IT. Also, it benefits workers both with and without college degrees. Because many more college-educated workers use IT, college wages grow faster, contributing to economic inequality.
"Occupations that use computers grow faster, not slower. This is true even for highly routine and mid-wage occupations. Estimates reject computers as a source of significant net technological unemployment or job polarization. But computerized occupations substitute for other occupations, shifting employment and requiring new skills. Because new skills are costly to learn, computer use is associated with substantially greater within-occupation wage inequality."
Since 1980, US corporate valuations have risen relative to assets and operating margins have grown. The possibility of sustained economic rents has raised concerns about economic dynamism and inequality. But rising profits could come from political rents or, instead, from returns to investments in intangibles. Using new data on Federal regulation and data on lobbying, campaign spending, R&D, and organizational capital, this paper finds that both intangibles and political factors account for a substantial part of the increase in profits, but since 2000 political factors are more important. A difference-in-differences analysis finds that major expansions of regulation increase profits significantly.
At Harvard Business Review: "Economic inequality has become a prominent issue in this year’s U.S. presidential election...By many measures, the gap between high earners and low earners has widened substantially. But is this all the result of nefarious influence-peddling by the 1%? In fact, new research shows that a substantial part of the growth in this wage gap can be attributed to computer technology.
At The Atlantic.com: Automation isn’t just for blue-collar workers anymore. Computers are now taking over tasks performed by professional workers, raising fears of massive unemployment...But these fears are misplaced—what’s happening with automation is not so simple or obvious. It turns out that workers will have greater employment opportunities if their occupation undergoes some degree of computer automation. As long as they can learn to use the new tools, automation will be their friend.
James Bessen in Foreign Affairs
Politics is about balancing competing interests. Opposing factions battle one another but ultimately compromise, each getting something it wants. In recent decades, however, start-ups have consistently lost out. Whereas established interests have the money and lobbying power to buy political influence, newer firms offer only the promise of future profits. As Jim Cooper, a Democratic congressman from Tennessee, has framed the problem, “The future has no lobbyists.”
James Bessen in Harvard Business Review Blog:
“Why are skills sometimes hard to measure and to manage? Because new technologies frequently require specific new skills that schools don’t teach and that labor markets don’t supply. Since information technologies have radically changed much work over the last couple of decades, employers have had persistent difficulty finding workers who can make the most of these new technologies.”
The Week, automation
Wall St. Journal, regulation
Pro-Market Blog, Corp. profits & politics
The Economist, Automation Anxiety
EconTalk on Learning by Doing
NY Times on computer automation and here; also US News
Senator Hatch citing research on patent reform: