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The Great Decoupling: How Technology may Affect Your Future Industry

photo by Abdullah Khan via Flickr

Technology continues to change entire industries as we know them, and while new technologies promise increased productivity, cost-effectiveness, and precision accuracy, it may dramatically affect job markets–some of them for the worse.  

Statistical evidence shows that in the past decade, productivity has been increasing while employment and median wages have fallen substantially. Some economists believe this may be in no small part due what’s known as “The Great Decoupling.”

The Great Decoupling

MIT professor and economist Erik Brynjolfsson has drawn attention to what he calls “The Great Decoupling.” In his New York Times analysis, published in 2012, Brynjolfsson’s research shows that, since 2000, productivity and job growth have stopped growing in tandem, a trend which had been ongoing since WWII.

In fact, as Brynjolfsson points out, productivity since then has risen steadily while employment has begun stagnating and even falling.

This disconnect, Brynjolfsson believes, has been fueled by a number of factors, from policy changes, to off-shoring–but these factors are not what make Brynjolfsson’s hypothesis unique. The Great Decoupling posits that the divide may largely be attributed to the automation and technologization of occupations which were once held by humans. His predictions have been mirrored closely by massive job decline in the automotive industry (pdf) which has seen its production processes completely overtaken by robotics. Some researchers even believe that by 2030, half of current jobs may be automated.

How decoupling may only continue

The most alarming prediction of Brynjolfsson’s analysis isn’t just the fact that we’re witnessing a disconnect in productivity and employment, or even that technology has replaced jobs formerly occupied by humans–it’s that these trends may likely only increase in the future.

Brynjolfsson predicts the following:

  • Technology will only become cheaper

Because of the plummeting cost of hard and soft technologies, they will become increasingly more available to U.S. industries, but also to Chinese and Indian job markets where many U.S. goods are already being made. As consumers, we’ve already begun to see price reductions represented in retail markets–namely the arenas of mobile phones and televisions which have dropped considerably in price over the past decade.

  • Technology will become more advanced

Coinciding with Moore’s Law, technology will become smaller, and more powerful in the future. In turn, the capabilities of such technologies will be applicable (not to mention profitable and more efficient) to more and more jobs which were once solely human operated.

This dual effect may lead to further decoupling between employment, wages, and productivity, and as Brynjolfsson points out, “there is no economic law that says digital progress will benefit everyone evenly.”

So what’s next?

While Brynjolfsson’s predictions are disconcerting, his findings are still open to interpretation. The Great Decoupling has been contested by others, namely The Information Technology and Innovation Foundation (ITIF) who believe that such hypotheses are based on “faulty analysis,” of economic literature, and insist that technology will still continue to create more jobs than it kills. When it comes to the ITIF, it may also be worth noting that its funding comes from major tech companies such as Google, Cisco, IBM, and e-Bay.

It comes as no surprise that technology, as it pertains to the job market, continues to create frenzied concern, because as Brynjolfsson readily admits, “…technology has always been creating jobs, and it has always been destroying jobs,” alluding to the 1800s when 90 percent Americans worked on farms (now that number is just 2 percent).

Despite Brynjolfsson’s portrait, technology still has the potential to bring about tremendous growth in global job markets, even in fields that have yet to be created. Among prospective boom industries, are fields like Big Data, which some analysts believe may require 1.9 million more jobs in 2015.

So when it comes to The Great Decoupling, it may be best to decouple ourselves from the results, take a deep breath, and watch things unfold–after all, a robot couldn’t have written this article… Or could it?

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James Pero