Reframing the Debate: A Closer Look at Technological Innovation’s Link to Widening Global Inequality – Part II

  • Laura Monti
  • Digital dividends, Policies
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One of the hottest topics at the UN Global Dialogue on the Future of Work We Want this month was technological innovation’s impact on widening global inequality. To continue the conversation, I invite you to read this second of our three-part article delving deeper into the global landscape of inequality in relation to extreme capital (technological and wealth) accumulation. (#ICYMI read Part I)

There are three dominant schools of thought on why economic growth and technological productivity have not been widely shared across society. For further reading, go to the 2015 Roosevelt Institute paper “Technology and the Future of Work: The State of the Debate”.

Job Polarization – Skills-Biased Technological Change

David Autor, a leading MIT economist of job polarization argues that technological innovation has and will continue to have a “hollowing out” effect on the global middle class. In other words, there will be growth in high-skill and low-skill jobs, but a decline in middle-skill ones. Autor argues that technology creates new jobs that continually require greater skills. This view is also endorsed by the World Bank’s 2016 World Development Report.

However, the World Bank also placed a strong emphasis on creating and strengthening “analogue complements” such as institutions and regulations to mitigate the emerging risks of our digital future; more on the emerging risks in Part III.    

Job polarization is a phenomenon that is widely considered to be the result of automation and technological innovation generally. Job polarization has caused concern, as it is akin to other forms of inequality, not least of which wealth and income inequality. There is data that shows that job polarization is already taking hold in the OECD countries and emerging economies.

As mentioned, there has been a decline in the employment share of middle-skill jobs (we can also infer middle-income countries as well). These usually involve routine tasks that are procedural and rule-based, and many have become automated by computers and machines. As for the rise in the share of low-skill occupations, these are often physically demanding jobs that cannot be automated.

Institutionalist – Policy and Politics

Not everyone see job polarization as a threat. The Economic Policy Institute’s Heidi Sheirholz, Larry Mishel, and John Schmitt, argue that technology by itself cannot explain wage inequality. They note that in the United States, employment growth has been concentrated in low-skill, low-wage jobs, while wage growth occurred almost exclusively at the top. In their 2013 paper Mishel et al. found that wage inequality was largely caused by a range of economic policies supported by institutions that promote a certain worldview of fairness.  

Nobel Prize winning economist Joseph Stiglitz and Dean Baker maintain that the role of technology in causing inequality has been overstated. Stiglitz argues that “inequality is a choice” and technological change is a product of rules and regulations that encourage investment in labour-reducing innovations.  

Dean Baker agrees with Mishel et al. findings, but further highlighted the weakening of labour market institutions, most notably the decline of worker unions in the United States. Labour unions in the private sector have dropped from 20 percent of jobs in the private sector in the mid-1980s to less than 7 percent in 2014. Today, the global labour unionization density is only 7%, largely coming in the public sector. Baker also pointed to deregulation, trade agreements and low minimum wage as labour market factors — created by us (and politicians) — that have contributed to inequality and declining wages.

Technology as Shaper, Not Determinant, of Work             

Those who take the view that technology is “a shaper of work” maintain that technological change, the decline in union power, deregulation and the hyper-concentration of wealth are all interacting to increase inequality and hollow out of the global middle-class.  

This third view bridges the job polarization and the institutionalist schools of thought on wage stagnation and rising inequality.  As happened during earlier waves of industrialization, technological change is leading to a vast reorganization of the economy, work, and workers.

Technology has played an important role in changing nature of work but it is not the sole factor. Technology is able to complement workers but it also weakening their bargaining positions. The weakening of workers’ economic and bargaining power, as well as the speed of change, is a matter of political will and political choice.

“We Need Empirical Evidence”

(Global Dialogue on the Future of Work We Want | International Labour Organization)

Presently, Autor’s job polarization view dominants public and academic discourses on technological change. However, during a panel discussion at the UN Global Dialogue on the Future of Work We Want, South African businessman Mthunzi Mdwaba, representing global employers, reminded us that, “[t]here is a lot of theory. We need empirical evidence” in order to shape and navigate the future of work and its emerging risks such as widening global inequality. At this early point, how we frame the technological innovation and inequality debate will shape how we address it. Going forward, ‘we need the imagination, creativity and innovation to know which problems are not just mere imaginations but real’ he said.

As it stands now, developed countries (especially the United States and Germany) are driving the Future of Work discussion because of their technological clout and academic thought leadership. Greater universalization of the Future of Work Centenary Initiative, to meaningfully include developing countries’ perspectives, workers in non-standardized and informal work, as well as the voices of women and girls (see the Gender at Work Initiative), are needed in informing the upcoming High-Level Global Commission on the Future of Work.

Who we listen to and how we frame the interplay between technological innovation and widening global inequality will inform how we understand it and our attempts to address it. Which of these schools of thought do you identify with and, why?  


Further Resources:

Roosevelt Institute (2015): Technology and the Future of Work: The State of the Debate

Figure image “Inequality in Brazil”  is from Oxfam International.