How technology has affected wages over the last 200 years

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great paradox is that we feel the influence of technology everywhere - in our cars, our phones, supermarkets, doctor’s office, everywhere except the level of our salaries. We work in a different way, communicate with each other in a different way, create in a different way and have fun in a different way - all thanks to new technologies. However, since the start of the personal computer revolution three decades ago, average wages have remained the same.

Over the past two hundred years, thanks to technological advances, wages have increased by about ten times. Some argue that technology works against us today, constantly eliminating middle-class jobs and portending a future expansion of economic inequality. The cure for this is a policy of redistributing wealth.

But are we really at the point of historical bifurcation?

No, in fact, the present is not much different from the past. Throughout history, fundamental new technologies have initially been accompanied by stagnation in wage levels and rising inequality. Both during the industrial revolution at the beginning of the nineteenth century, and during the wave of electrification, which began in the late nineteenth century. However, after decades of stagnation, these patterns are reversed; a large number of ordinary workers will eventually catch up with wage growth thanks to new technologies.

Of course, today the circumstances are different. Information technology automates the work of white-collar workers and the pace is accelerating, but the key tasks of the workforce are the same as in the past. And then, and now, in order to implement fundamental new technologies, a large number of people had to gain new skills and knowledge. Learning turned out to be surprisingly slow and difficult, but was the key to higher wages. Today, workers must overcome this barrier before they can benefit from new technologies.

Too often, when people think about technology, they only think about the initial invention. In the animated version, the technology consists of inventions “developed by geniuses for idiots”. However, most fundamental innovations have been developed over decades, and a fair number of people learn to apply, adapt, and improve the original invention. The invention of the machine is one of the transforming technologies of the industrial revolution, automating weaving tasks and allowing to produce twice as much fabric. But over the next century, weavers improved their skills and mechanics, managers adapted and improved business processes, began to produce twenty times more finished products.

It took considerable time to bring the technology to mind. Similar progressive processes took place in the areas of steam engines, electrification and oil refining. And very recently it seems that it took decades to bring computer technologies to mind.

During the industrial revolution, employers sometimes went to great lengths to enhance the intellectual abilities of the workforce. In Lowell, Massachusetts, Silicon Valley of the day, employers began hiring young women, offering them something of a college internship.

For manufacturers, these measures may seem surprising, because even today workers with a low level of education are often considered to be "unskilled" labor. Ultimately, specialization and education made it possible to squeeze the most out of relevant technologies. Experienced technical skills allowed blue-collar workers with a low level of education to enter the middle class.

However, this process took a long time. Many workers were not able to study at work. It was very hard to work at the first textile mills, so many workers quit after the first month of work. Necessary skills were not taught in schools, as technology changed too quickly for implementation. The first schools teaching the necessary skills were created only after the Civil War. One of the important reasons for this lag was the lack of incentive for training workers, because initially the labor market was very limited. In the 1830s, textile mills mainly hired workers with no experience. The experience gained in one factory was not necessarily appreciated in another, since the factories used various technological and organizational processes. After the Civil War, the market for skilled textile workers intensified, and only then did wages begin to increase. The hourly wage of workers in Lowell did not change much between 1830 and 1860, but in 1910 it grew three times at once. This spurt required decades of work of educational institutions, the development of business models and labor markets.

Of course, technology and skills were not the only factors that helped raise wages. The growth of capital investments made workers more productive, wide opportunities appeared that increased the wages of women. Unions also played a role in this process, especially in the 20th century. Studies have shown that union members earned about 15% more than comparable workers who did not participate in union movements. This, of course, is a significant difference, but in comparison with triple growth it looks insignificant. Ultimately, technology had the biggest impact on wage growth.

Thanks to new developments, generations of less educated workers in the manufacturing sector were able to make good money. Now, automation and offshore have eliminated many of these jobs; many skills are outdated. Nevertheless, new opportunities appear, technologies create jobs that require new skills, but the transition to new jobs is difficult and slow.

The computerization of publishing houses almost eliminated typographers and graphic designers who had to face the same problems as workers in the pre-war textile industry. Standards, business models and technologies are constantly changing, requiring continuous training. At first, designers had to learn desktop publishing, then web publishing, and now, with the widespread adoption of smartphones, design for mobile systems. The most capable of them learn on their own, but the rest remain no destiny. At the same time, educational institutions continue to teach obsolete skills. 10% of designers observe a significant increase in their earnings associated with their newly acquired skills, but the salary of the average specialist has not changed for the past three decades.

Since the 1980s, a similar gap has affected many jobs. In professions where most workers use computers, one-tenth of the wages of workers increase, but the average shows a very slight increase. Among scientists, engineering and computer professions with specialized technical skills, average wages are also slowly growing. The difficulty in acquiring new skills affects employers. Surveys show that more than a third of managers find it difficult to find qualified employees. Many companies require workers with critical technical skills who are willing to pay high salaries, but, unfortunately, these are not enough.

Thus, the problem is not that technology eliminates the need for intermediate skills. There are new opportunities, but it’s not easy to take advantage of them, and overcoming this obstacle will take time and require the implementation of strategies that promote technical training and certification of skills, promote employee mobility and increase the reliability of labor markets.

Perhaps in the future, smart cars will radically eliminate average skilled jobs, but today's stagnation of wages is not because of this. Technology has not turned against us. Instead, technology forces us to develop new capabilities, and if we solve this problem, many will benefit greatly from the introduction of new technologies, just as they have been over the past two hundred years.