Does the historical record suggests that today’s wage stagnation is temporary?

22 05 2015

Yes, according to new research by James Bessen.

Bessen argues that it’s not surprising for new technologies to be associated with stagnant wages. Indeed, something similar happened in America’s first high-tech boom: the textile industry of the mid-1800s. From 1830 to 1860, cloth production skyrocketed; wages barely budged.

But then weavers’ wages started rising. By 1900, they were more than twice their level from 40 years earlier. Bessen argues that this and other historical examples offer important lessons about the state of the labor market today.

Some people, such as economists Erik Brynjolfsson and Andrew McAfee, have portrayed a future in which computers destroy more and more jobs, leaving millions out of work. Bessen is skeptical. Computers obviously do eliminate some jobs, but they almost always create other jobs in the process. The tricky thing is that these new jobs often demand different skills, and workers are struggling to keep up. Still, Bessen paints a basically optimistic view of a future in which technologies mature and create new, higher-paying jobs for ordinary workers.

Hat tip to Timothy B. Lee.

Oh well, another book to put on my summer reading list.

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