Polanyi's Paradox and The Shape of Employment Growth

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David H. Aulor
MIT, NIR and }IAL

Augusl 11, 2014
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In 1966, lhe hiIosoher MichaeI IoIanyi observed, We can knov more lhan ve can leII... The
skiII of a driver cannol be reIaced by a lhorough schooIing in lhe lheory of lhe molorcar, lhe
knovIedge I have of my ovn body differs aIlogelher from lhe knovIedge of ils hysioIogy.
IoIanyi's observalion IargeIy redales lhe comuler era, bul lhe aradox he idenlifiedlhal
our lacil knovIedge of hov lhe vorId vorks oflen exceeds our exIicil underslanding
foreleIIs much of lhe hislory of comulerizalion over lhe asl five decades. This aer offers a
conceluaI and emiricaI overviev of lhis evoIulion. I begin by skelching lhe hisloricaI lhinking
aboul machine disIacemenl of human Iabor, and lhen consider lhe conlemorary incarnalion
of lhis disIacemenlIabor markel oIarizalion, meaning lhe simuIlaneous grovlh of high-
educalion, high-vage and Iov-educalion, Iov-vages |obsa manifeslalion of IoIanyi's
aradox. I discuss bolh lhe exIanalory over of lhe oIarizalion henomenon and some key
uzzIes lhal confronl il. I lhen refIecl on hov recenl advances in arlificiaI inleIIigence and
robolics shouId shae our lhinking aboul lhe IikeIy lra|eclory of occualionaI change and
emIoymenl grovlh. A key observalion of lhe aer is lhal |ournaIisls and exerl
commenlalors overslale lhe exlenl of machine subslilulion for human Iabor and ignore lhe
slrong comIemenlarilies. The chaIIenges lo subsliluling machines for vorkers in lasks
requiring adalabiIily, common sense, and crealivily remain immense. Conlemorary
comuler science seeks lo overcome IoIanyi's aradox by buiIding machines lhal Iearn from
human examIes, lhus inferring lhe ruIes lhal ve lacilIy aIy bul do nol exIicilIy undersland.
Keyvords: }ob oIarizalion, lechnoIogicaI change, comulerizalion, |ob lasks, skiII demand
*
This paper is a draft prepared for the Federal Reserve Bank of Kansas Citys economic policy symposium on Re-
Evaluating Labor Market Dynamics, August 21-23 2014, in Jackson Hole, Wyoming. I thank Frank Levy, Brendan
Price, Seth Teller, and participants in the MIT CSAIL/Economists Lunch Seminar, for insights that helped to shape
the paper. I thank Sookyo Jeong and Brendan Price for superb research assistance.
Embargoed until presentation time of 9:30 a.m. Mountain Daylight Time, Friday, August 22, 2014
|. |nirc!uciicn
Thal comulers are ubiquilous in modern Iife is seIf-evidenl. The share of informalion
rocessing equimenl and soflvare in rivale, non-residenliaI inveslmenl rose from
aroximaleIy 8 ercenl lo more lhan 30 ercenl belveen 1950 and 2012, vilh lhe Iargesl Iea
occurring belveen 1990 and 2000.
1
Il is hard lo lhink of a rior hisloricaI eisode vhere a singIe
calegory of cailaI inveslmenl came so raidIy lo dominale aII olhers, nov accounling for cIose
lo one in lhree business inveslmenl doIIars.
2

Given lheir ubiquily, il is lemling lo infer lhal lhere is no lask lo vhich comulers are nol
suiled. ul lhal Iea of Iogic is unfounded. Human lasks lhal have roved mosl amenabIe lo
comulerizalion are lhose lhal foIIov exIicil, codifiabIe roceduressuch as muIliIicalion
vhere comulers nov vaslIy exceed human Iabor in seed, quaIily, accuracy, and cosl
efficiency.
3
Tasks lhal have roved mosl vexing lo aulomale are lhose lhal demand fIexibiIily,
|udgmenl, and common senseskiIIs lhal ve undersland onIy lacilIyfor examIe, deveIoing
a hyolhesis or organizing a cIosel. In lhese lasks, comulers are oflen Iess sohislicaled lhan
reschooI age chiIdren. The inlerIay belveen machine and human comaralive advanlage
aIIovs comulers lo subslilule for vorkers in erforming rouline, codifiabIe lasks vhiIe
amIifying lhe comaralive advanlage of vorkers in suIying robIem soIving skiIIs,
adalabiIily, and crealivily. Underslanding lhis inlerIay is cenlraI lo inlerreling and
forecasling lhe changing slruclure of emIoymenl in lhe U.S. and olher induslriaIized counlries.
This underslanding is aIso is al lhe hearl of lhe increasingIy rominenl debale aboul vhelher
lhe raid ace of aulomalion lhrealens lo render lhe demand for human Iabor obsoIele over lhe
nexl severaI decades.

1
Aulhor's caIcuIalions based on ureau of Iconomic AnaIysis NalionaI Income and Iroducl Accounl
dala.
2
Iences used lo demarcale roerly Iines and secure Iiveslock may be anolher examIe. In 1872, lhe
vaIue of fencing cailaI slock in lhe Uniled Slales vas roughIy equaI lo lhe vaIue of aII Iiveslock, lhe
nalionaI debl, or lhe raiIroads, and annuaI fencing reair cosls vere grealer lhan combined annuaI lax
receils al aII IeveIs of governmenl (Hornbeck, 2010).
3
Al lhe exlreme, lhere are lasks lhal comulers reguIarIy erform lhal couId nol be accomIished by
human Iabor al any rice, for examIe, guiding a missiIe lo inlercel anolher missiIe in mid-fIighl.
2
This aer offers a conceluaI and emiricaI overviev of lhe evoIving reIalionshi belveen
comuler caabiIily and human skiII demands. I begin by skelching lhe hisloricaI lhinking
aboul machine disIacemenl of human Iabor, and lhen consider lhe conlemorary incarnalion
of lhis disIacemenlIabor markel oIarizalion, meaning lhe simuIlaneous grovlh of high-
educalion, high-vage and Iov-educalion, Iov-vages |obsa manifeslalion of IoIanyi's
aradox. I discuss bolh lhe exIanalory over of lhe oIarizalion henomenon and some key
uzzIes lhal confronl il. I finaIIy refIecl on hov recenl advances in arlificiaI inleIIigence and
robolics shouId shae our lhinking aboul lhe IikeIy lra|eclory of occualionaI change and
emIoymenl grovlh.
A key observalion of lhe aer is lhal |ournaIisls and exerl commenlalors overslale lhe exlenl
of machine subslilulion for human Iabor and ignore lhe slrong comIemenlarilies lhal increase
roduclivily, raise earnings, and augmenl demand for skiIIed Iabor. The chaIIenges lo
subsliluling machines for vorkers in lasks requiring fIexibiIily, |udgmenl, and common sense
remain immense. Conlemorary comuler science seeks lo overcome IoIanyi's aradox by
buiIding machines lhal Iearn from human examIes, lhus inferring lhe ruIes lhal ve lacilIy
aIy bul do nol exIicilIy undersland.
||. A Bricj Hisicrq cj Auicnaiicn Anxiciq
Anxiely aboul lhe adverse effecls of lechnoIogicaI change on emIoymenl has a venerabIe
hislory.
4
In lhe earIy 19lh cenlury, a grou of IngIish lexliIe arlisans caIIing lhemseIves lhe
Luddiles slaged a machine-lrashing rebeIIion in rolesl of lhe raid aulomalion of lexliIe
roduclion, vhich lhey feared |eoardized lheir IiveIihoods. Their aclions earned lhe lerm
Luddile an (unfIallering) enlry in lhe ouIar Iexicon. Iconomisls have hisloricaIIy re|ecled lhe
concerns of lhe Luddiles as an examIe of lhe Ium of Iabor faIIacy, lhe suosilion lhal an
increase in Iabor roduclivily inevilabIy reduces emIoymenl because lhere is onIy a finile
amounl of vork lo do. WhiIe inluiliveIy aeaIing, lhe nolion lhal roduclivily gains reduce
emIoymenl has received IillIe hisloricaI suorl. The emIoymenl-lo-ouIalion ralio, for

4
This seclion of lhe aer dravs heaviIy on Aulor (2014a), vilh some aragrahs quoled direclIy.
3
examIe, rose over lhe course of lhe 20lh cenlury as vomen moved from home lo markel, and
lhe unemIoymenl rale fIuclualed cycIicaIIy, vilh no Iong-lerm increase.
Yel, desile suslained increases in maleriaI slandards of Iiving, fear of lhe adverse emIoymenl
consequences of lechnoIogicaI advancemenl has recurred reealedIy in lhe 20lh cenlury. In his
videIy discussed Deression-era essay Iconomic IossibiIilies for our GrandchiIdren, }ohn
Maynard Keynes (1930) foresav lhal in a cenlury's lime, ve may be abIe lo erform aII lhe
oeralions of agricuIlure, mining, and manufaclure vilh a quarler of lhe human efforl lo vhich
ve have been accuslomed. Keynes vieved lhese deveIomenls as osing shorl-lerm
chaIIenges, Ior lhe momenl lhe very raidily of lhese changes is hurling us and bringing
difficuIl robIems lo soIve. . . . We are being affIicled vilh a nev disease of vhich some readers
may nol yel have heard lhe name, bul of vhich lhey viII hear a greal deaI in lhe years lo
comenameIy, iccnnc|cgica| uncnp|cqncni. ul Keynes vas sanguine aboul lhe Iong run,
oining lhal lhis is onIy a lemorary hase of maIad|uslmenl, and redicling lhal lhe fifleen-
hour vorkveek (suorling a high slandard of Iiving) vouId be commonIace in a cenlury's
lime.
Keynes' ro|eclion lhal lhe maIad|uslmenl vas lemorary vas a boId one given lhal he vas
vriling during lhe Greal Deression. ul lhe end of lhe Second WorId War seemed lo affirm
lhe rising roserily lhal Keynes had foreseen. Ierhas more surrising is lhal aulomalion
anxiely recurred lvo decades afler lhe Second WorId War, during vhal vas arguabIy lhe
heighl of American economic reeminence. In 1964, Iresidenl }ohnson emaneIed a Iue-
Ribbon NalionaI Commission on TechnoIogy, Aulomalion, and Iconomic Irogress vhose
charge vas lo idenlify and assess lhe asl effecls and lhe currenl and roseclive roIe and
ace of lechnoIogicaI change, lo idenlify and describe lhe imacl of lechnoIogicaI and economic
change on roduclion and emIoymenl, incIuding nev |ob requiremenls and lhe ma|or lyes of
vorker disIacemenl, bolh lechnoIogicaIIy and economic, vhich are IikeIy lo occur during lhe
nexl 10 years.
WhiIe lhe commission uIlimaleIy concIuded lhal aulomalion did nol lhrealen emIoymenl al
lhal lime, il recommended as insurance againsl lhis ossibiIily, a guaranleed minimum income
4
for each famiIy, using lhe governmenl as lhe emIoyer of Iasl resorl for lhe hard core |obIess,
lvo years of free educalion in eilher communily or vocalionaI coIIeges, a fuIIy adminislered
federaI emIoymenl service, and individuaI IederaI Reserve ank sonsorshi in area economic
deveIomenl free from lhe Ied's nalionaI headquarlers (Tnc Hcra|! Pcsi, 1966).
The bIue-ribbon commission's sanguine concIusions did nol enlireIy aIIay lhe concerns of
conlemorary sociaI crilics. In an oen Ieller lo Iresidenl }ohnson in 1966, lhe seIf-lilIed Ad Hoc
Commillee on lhe TriIe Threal, vhich incIuded NobeI Iaureales Linus IauIing (chemislry) and
Gunnar MyrdaI (economics), as veII as economic hislorian Roberl HeiIbroner, oined lhal The
lradilionaI Iink belveen |obs and incomes is being broken. . . . The economy of abundance can
suslain aII cilizens in comforl and economic securily vhelher or nol lhey engage in vhal is
commonIy reckoned as vork (quoled in Aksl, 2013).
5
Wriling searaleIy in lhe Pu||ic |nicrcsi in
1965, HeiIbroner argued lhal, lhe nev lechnoIogy is lhrealening a vhoIe nev grou of skiIIs
lhe sorling, fiIing, checking, caIcuIaling, remembering, comaring, okaying skiIIslhal are lhe
seciaI reserve of lhe office vorker. . . . In lhe end, as machines conlinue lo invade sociely,
duIicaling grealer and grealer numbers of sociaI lasks, il is human Iabor ilseIfal Ieasl, as ve
nov lhink of Iaborlhal is graduaIIy rendered redundanl (. 3436).
<Inserl Iigure 1 here>
In lhe five decades since lhe Ad Hoc Commillee vrole ils oen Ieller, human Iabor has nol been
rendered redundanl, as lhese schoIars had feared. ul aulomalion anxiely has cIearIy relurned.
Ierhas mosl leIIing is lhe finding of a recenl oII of Ieading academic economisls conducled by
lhe Chicago Inilialive on GIobaI Markels regarding lhe imacl of lechnoIogy on emIoymenl
and earnings.
6
Consislenl vilh lhe canonicaI economic viev lhal lechnoIogy is, in lhe

5
The lhree lhreals erceived by lhe ad hoc commillee vere: lhe cybernalion revoIulion, lhe veaonry
revoIulion, and lhe human righls revoIulion.
6
The IGM vebage describes lhe aneI members as foIIovs: Our aneI vas chosen lo incIude
dislinguished exerls vilh a keen inleresl in ubIic oIicy from lhe ma|or areas of economics, lo be
geograhicaIIy diverse, and lo incIude Democrals, ReubIicans, and Indeendenls as veII as oIder and
younger schoIars. The aneI members are aII senior facuIly al lhe mosl eIile research universilies in lhe
Uniled Slales. The aneI incIudes NobeI Laureales, }ohn ales CIark MedaIisls, feIIovs of lhe
Iconomelric Sociely, asl Iresidenls of bolh lhe American Iconomics Associalion and American Iinance
Associalion, asl Democralic and ReubIican members of lhe Iresidenl's CounciI of Iconomics, and asl
5
memorabIe hrase of }oeI Mokyr, lhe Iever of riches, a fuII 88 ercenl of economisls in lhe oII
eilher agreed or slrongIy agreed vilh lhe slalemenl lhal advancing aulomalion has nol
hisloricaIIy reduced emIoymenl in lhe Uniled Slales (Iigure 1). Yel, surrisingIy, 43 ercenl
of lhose oIIed endorsed (i.e., agreed vilh) lhe slalemenl lhal informalion lechnoIogy and
aulomalion are a cenlraI reason vhy median vages have been slagnanl in lhe US over lhe asl
decade, desile rising roduclivily. In conlrasl, onIy 28 ercenl disagreed or slrongIy
disagreed.
7
WhiIe I knov of no comarabIe survey dala from a decade earIier, I find lhese oII
resuIls slunning because lhey suggesl lhal a IuraIily of mainslream economisls has acceled
al Ieasl lenlaliveIylhe roosilion lhal a decade of lechnoIogicaI advancemenl has made lhe
median vorker no beller off, and ossibIy vorse off.
|||. |np|cqncni Pc|arizaiicn. A Manijcsiaiicn cj Pc|anqis Para!cx
To undersland lhe veIIsring of lhese concerns, il is usefuI lo slarl from firsl rinciIes. Whal
do comuler do` And hov does lheir videsread adolion change vhal vorkers do` Anyone
vilh chiIdren knovs lhal comulers aear magicaI lo end users. ul anyone vho has
vrillen comuler soflvare knovs lhal rogramming a comuler lo accomIish even lhe mosl
rudimenlary lasks is a ledious chore. Comulers do nol lhink for lhemseIves, do nol have
common sense, do nol comensale for rogrammer oversighls and errors, and do nol imrovise
soIulions for unexecled cases. IundamenlaIIy, comulers foIIov rocedures melicuIousIy Iaid
oul by rogrammers. Ior a comuler lo accomIish a lask, a rogrammer musl firsl fuIIy
undersland lhe sequence of sles required lo erform lhal lask, and lhen musl vrile a rogram
lhal, in effecl, causes lhe machine lo reciseIy simuIale lhese sles.
One earIy examIe of comuler simuIalion vas lhe use of unch card-driven comulers al lhe
Los AIamos NalionaI Laboralory lo caIcuIale lhe hysicaI roerlies of exIosions and

and currenl edilors of lhe Ieading |ournaIs in lhe rofession. Caveal emlor: The aulhor is aIso a
member of lhe aneI.
7
Survey resuIls are found al http://www.igmchicago.org/igm-economic-experts-panel/poll-
results?SurveyID=SV_eKbRnXZWx3jSRBb (accessed 3/26/2014).
6
imIosions during lhe deveIomenl of lhe firsl nucIear varheads.
8
ul lhe scoe of comuler
simuIalion is nol Iimiled lo simuIaling hysicaI rocesses. When a comuler rocesses a
comany's ayroII, aIhabelizes a Iisl of names, or labuIales lhe age dislribulion of residenls in
each Census enumeralion dislricl, il is simuIaling a vork rocess lhal vouId, in a revious
era, have been done by humans using nearIy idenlicaI rocedures.
The rinciIe of comuler simuIalion of vorkIace lasks has nol fundamenlaIIy changed since
lhe davn of lhe comuler era. ul ils cosl has. An ingenious 2007 aer by WiIIiam Nordhaus
eslimales lhal lhe reaI cosl of erforming a slandardized sel of comulalions has faIIen by al
Ieasl 1.7 lriIIion-foId since lhe manuaI comuling era, vilh mosl of lhal decIine occurring since
1980. This remarkabIe cosl decIine creales slrong economic incenlives for firms lo subslilule
ever-cheaer comuling over for reIaliveIy exensive human Iabor, vilh allendanl effecls on
emIoyers' demand for emIoyees. Whal are lhese effecls`
The firsl-order effecl is, of course, subslilulion. As lhe rice of comuling over has faIIen,
comulers have increasingIy disIaced vorkers in accomIishing exIicil, codifiabIe lasks
muIliIicalion, for examIe. Aulor, Levy and Murnane, 2003 (ALM hereafler) lerm lhese
aclivilies as rouline lasks, meaning lasks lhal foIIov an exhauslive sel of ruIes and hence are
readiIy amenabIe lo comulerizalion.
9
Rouline lasks are characlerislic of many middIe-skiIIed
cognilive and manuaI aclivilies, such as bookkeeing, cIericaI vork, and reelilive roduclion
lasks. ecause lhe core lasks of lhese occualions foIIov recise, veII-underslood rocedures,
lhey are increasingIy codified in comuler soflvare and erformed by machines. This force has
Ied lo a subslanliaI decIine in emIoymenl in cIericaI, adminislralive suorl and, lo a Iesser
degree, roduclion and oeralive emIoymenl, as I documenl beIov.

8
In many cases, lhe vorkers vho erformed lhese lasks vere given lhe |ob lilIe of comuler (Grier,
2005). Irior lo lhe Manhallan Iro|ecl, an even earIier examIe of induslriaI-scaIe simuIalion vas lhe use
of mechanicaI labuIalors lo enumerale lhe 1890 Census of IouIalion, vhich vas slored on miIIions of
unched cards.
9
Tasks such as erforming a sel of malhemalicaI caIcuIalions, relrieving, sorling, and sloring slruclured
informalion, and reciseIy execuling a reelilive hysicaI oeralion in an unchanging environmenl, are
rouline in lhe sense of ALM (2003) nol because lhey are mundane bul because lhey can be fuIIy codified
and hence aulomaled.
7
ul lhe scoe for subslilulion is bounded: engineers cannol rogram a comuler lo simuIale a
rocess lhal lhey (or lhe scienlific communily al Iarge) do nol exIicilIy undersland. This
conslrainl is more binding lhan one mighl iniliaIIy surmise because lhere are many lasks lhal
ve undersland lacilIy and accomIish efforlIessIy for vhich ve do nol knov lhe exIicil ruIes
or rocedures. I refer lo lhis conslrainl as IoIanyi's aradox, foIIoving MichaeI IoIanyi's (1966)
observalion lhal, We knov more lhan ve can leII. When ve break an egg over lhe edge of a
mixing bovI, idenlify a dislincl secies of birds based onIy on a fIeeling gIimse, vrile a
ersuasive aragrah, or deveIo a hyolhesis lo exIain a oorIy underslood henomenon,
ve are engaging in lasks lhal ve onIy lacilIy undersland hov lo erform.
10
IoIIoving IoIanyi's
observalion, lhe lasks lhal have roved mosl vexing lo aulomale are lhose demanding
fIexibiIily, |udgmenl, and common senseskiIIs lhal ve undersland onIy lacilIy.
Al a raclicaI IeveI, IoIanyi's aradox means lhal many famiIiar lasks, ranging from lhe
quolidian lo lhe subIime, cannol currenlIy be comulerized because ve don'l knov lhe ruIes.
Al an economic IeveI, IoIanyi's aradox means somelhing more. The facl lhal a lask cannol be
comulerized does nci imIy lhal comulerizalion has no effecl on lhal lask. On lhe conlrary:
lasks lhal cannol be subsliluled by comulerizalion are generaIIy comIemenled by il. This
oinl is as fundamenlaI as il is overIooked. Mosl vork rocesses drav uon a muIlifaceled sel
of inuls: Iabor and cailaI, brains and bravn, crealivily and role reelilion, lechnicaI maslery
and inluilive |udgmenl, ersiralion and insiralion, adherence lo ruIes and |udicious

10
Comuler scienlisls oflen refers lo lhis same henomenon as Moravec's aradox, vhich is defined by
Wikiedia as: lhe discovery by arlificiaI inleIIigence and robolics researchers lhal, conlrary lo lradilionaI
assumlions, high-IeveI reasoning requires very IillIe comulalion, bul Iov-IeveI sensorimolor skiIIs
require enormous comulalionaI resources. The rinciIe vas arlicuIaled by Hans Moravec, Rodney
rooks, Marvin Minsky and olhers in lhe 1980s. As Moravec vriles, 'il is comaraliveIy easy lo make
comulers exhibil aduIl IeveI erformance on inleIIigence lesls or Iaying checkers, and difficuIl or
imossibIe lo give lhem lhe skiIIs of a one-year-oId vhen il comes lo ercelion and mobiIily.'
(hll://en.vikiedia.org/viki/Moravec's_aradox, accessed 8/10/2014). I refer lhe lerm IoIanyi's
aradox lo Moravec's aradox because IoIanyi's observalion aIso exIains unq high-IeveI reasoning is
slraighlforvard lo comulerize and sensorimolor skiIIs are nol. High-IeveI reasoning uses a sel of formaI
IogicaI looIs lhal vere deveIoed secificaIIy lo address formaI robIems (e.g., counling, malhemalics,
IogicaI deduclion, encoding quanlilalive reIalionshis). Sensorimolor skiIIs, hysicaI fIexibiIily, common
sense, |udgmenl, inluilion, crealivily, soken Ianguage, elc., are 'buiIl-in' caabiIilies lhal our secies
evoIved ralher lhan deveIoed. IormaIizing lhese skiIIs requires reverse engineering a sel of aclivilies
lhal ve normaIIy accomIish vilh onIy lacil underslanding.
8
aIicalion of discrelion. TyicaIIy, lhese inuls cacn Iay essenliaI roIes, lhal is, imrovemenls
in one do nol obviale lhe need for lhe olher. If so, roduclivily imrovemenls in one sel of lasks
aImosl necessariIy increase lhe economic vaIue of lhe remaining lasks.
11

ConcreleIy, consider lhe roIe Iayed by mechanizalion in conslruclion. y hisloricaI slandards,
conlemorary conslruclion vorkers are akin lo cyborgs. Augmenled by cranes, excavalors, arc
veIders, and neumalic naiI guns, lhe quanlily of hysicaI vork lhal a skiIIed conslruclion
vorker can accomIish in an eighl-hour vorkday is slaggering. NaluraIIy, aulomalion has
heaviIy subsliluled for human Iabor in erforming conslruclion lasks and, consequenlIy, many
fever conslruclion vorkers are required loday lo accomIish a given conslruclion lask lhan
fifly years ago.
ul conslruclion vorkers have nol been devaIued by lhis subslilulion. Desile lhe array of
cailaI equimenl avaiIabIe, a conslruclion sile vilhoul conslruclion vorkers roduces nolhing.
Conslruclion vorkers suIy lasks such as conlroI, guidance and |udgmenl lhal have no
currenl machine subslilules and vhich lherefore become more vaIuabIe as machinery augmenls
lheir reach. A vorker vieIding a singIe shoveI can do a fairIy Iimiled amounl of good or harm
in an eighl-hour day. A vorker oeraling a fronl-end Ioader can accomIish far more. To a firsl
aroximalion, aulomalion has lherefore comIemenled conslruclion vorkersand il has done
so in arl by su|siiiuiing for a subsel of lheir |ob lasks.
This examIe shouId nol be laken lo imIy, hovever, lhal lechnoIogicaI change is necessariIy
Iarelo imroving, even for conslruclion vorkers. There are lhree faclors lhal miligale or
augmenl ils imacls:
1. Workers benefil from aulomalion if lhey suIy lasks lhal are comIemenled by aulomalion
bul nol if lhey rimariIy (or excIusiveIy) suIy lasks lhal are subsliluled. A conslruclion

11
The exlreme manifeslalion of lhis idea is lhe O-ring roduclion funclion, discussed by Kremer (1993).
In lhe O-ring roduclion funclion, faiIure of any one sle in lhe chain of roduclion Ieads lhe enlire
roduclion rocess lo faiI. Thus, imrovemenls in lhe reIiabiIily of any given Iink increase lhe vaIue of
imrovemenls in aII of lhe olhers. InluiliveIy, if n-1 Iinks in lhe chain are reasonabIy IikeIy lo faiI, lhe facl
lhal Iink n is somevhal unreIiabIe is of IillIe consequence. If lhe olher n-1 Iinks are made reIiabIe,
hovever, lhen lhe vaIue of making Iink n more reIiabIe as veII rises.
9
vorker vho knovs hov lo oerale a shoveI bul nol an excavalor viII generaIIy exerience
faIIing vages as aulomalion advances.
2. The eIaslicily of finaI demand can eilher damen or amIify lhe gains from aulomalion.
ConceivabIy, roduclivily grovlh in conslruclion couId oulslri demand so lhal lhe vaIue
of furlher conslruclion vouId faII even fasler lhan oulul rose.
12
ul lhis hyolhelicaI
resonse cannol calure lhe generaI case. ecause househoId consumlion has al Ieasl kel
ace vilh househoId incomes over lhe very Iong run, ve knov lhal mosl lechnoIogicaI
imrovemenls have uIlimaleIy lransIaled inlo increased consumlion ralher lhan grealer
savings.
3. Labor suIy changes can aIso miligale vage gains. If lhe comIemenlary lasks lhal
conslruclion vorkers suIy are abundanlIy avaiIabIe eIsevhere in lhe economy, il is
IausibIe lhal a fIood of nev conslruclion vorkers viII lemer vage gains emanaling from
comIemenlarilies belveen aulomalion and human Iabor inul.
13

The conslruclion examIe, vril Iarge, exIains a crilicaI consequence of comulerizalion lhal is
lyicaIIy overIooked in discussions of machine-vorker subslilulion. ecause machines bolh
subslilule for and comIemenl human Iabor, focusing onIy on vhal is Iosl misses lhe cenlraI
economic mechanism lhrough vhich roduclivily grovlh raises lhe vaIue of lhe lasks lhal
vorkers uniqueIy suIy.
I nov relurn lo IoIanyi's aradox as il aIies lo comulerizalion, focusing searaleIy on lvo
differenl margins of ad|uslmenl: changes in lhe occualionaI dislribulion (AKA |ob
oIarizalion) and changes in lhe vage dislribulion. I viII argue lhal lhese occualionaI and
vage effecls are IikeIy lo be dislincl from one anolher for reasons hinled al in lhe discussion of
conslruclion Iabor above.

12
ArguabIy, lhis has occurred vilh agricuIluraI roducls over lhe Iong run: seclacuIar roduclivily
imrovemenls have mel vilh decIines in lhe share of househoId income senl on food.
13
WhiIe il is unIikeIy lhal suIy effecls vouId fuIIy offsel roduclivily-driven vages gains, lhere are
erverse examIes. Hsieh and Morelli (2003) find lhal nev enlry inlo lhe reaI eslale broker occualion in
resonse lo rising house rices fuIIy offsels average vage gains lhal vouId olhervise occur.
10
If comulers IargeIy subslilule for rouline lasks, hov do ve characlerize lhe non-rouline lasks
for vhich lhey do nol subslilule` Aulor, Levy and Murnane (2003) drav a dislinclion belveen
lvo broad sels of lasks lhal have roven slubbornIy chaIIenging lo comulerize. One sel
incIudes lasks lhal require robIem-soIving caabiIilies, inluilion, crealivily and ersuasion.
These lasks, vhich ALM lerm 'abslracl,' are characlerislic of rofessionaI, lechnicaI and
manageriaI occualions. They emIoy vorkers vilh high IeveIs of educalion and anaIylicaI
caabiIily, and lhey Iace a remium on induclive reasoning, communicalions abiIily, and
exerl maslery.
The second broad calegory of non-rouline lasks lhal ALM idenlify are lhose requiring
silualionaI adalabiIily, visuaI and Ianguage recognilion, and in-erson inleraclionsvhich
ALM lerm manuaI lasks. ManuaI lasks are characlerislic of food rearalion and serving |obs,
cIeaning and |aniloriaI vork, grounds cIeaning and mainlenance, in-erson heaIlh assislance by
home heaIlh aides, and numerous |obs in securily and roleclive services. These |obs lend lo
emIoy vorkers vho are hysicaIIy adel and, in some cases, abIe lo communicale fIuenlIy in
soken Ianguage. WhiIe lhese are nol highIy skiIIed aclivilies by human Iabor slandards, lhey
currenlIy resenl daunling chaIIenges for aulomalion. IquaIIy nolevorlhy is lhal many of lhe
oululs of lhese |obs (hairculs, fresh meaIs, housecIeaning) musl be roduced and erformed
on-sile or in erson (al Ieasl for nov), and hence lhese lasks are nol currenlIy sub|ecl lo
oulsourcing. Yel, because lhese |obs generaIIy do nol require formaI educalion or exlensive
lraining beyond a high schooI degree, lhe olenliaI suIy of vorkers vho can erform lhese
|obs is very Iarge.
Since |obs lhal are inlensive in eilher abslracl or manuaI lasks are generaIIy found al oosile
ends of lhe occualionaI skiII seclrumin rofessionaI, manageriaI, and lechnicaI occualions
on lhe one hand, and in service and Iaborer occualions on lhe olhera slraighlforvard
imIicalion of lhis reasoning is lhal comulerizalion of rouline |ob lasks may Iead lo lhe
simuIlaneous grovlh of high-educalion, high-vage and Iov-educalion, Iov-vages |obs al lhe
exense of middIe-vage, middIe educalion |obsa henomenon lhal Maarlen Goos and AIan
Manning lermed as '|ob oIarizalion' in a 2003 vorking aer. A Iarge body of US and
11
inlernalionaI evidence confirms lhe ervasive resence of |ob oIarizalion: comulerizalion is
slrongIy associaled vilh emIoymenl oIarizalion al lhe IeveI of induslries, IocaIilies, and
nalionaI Iabor markels (Goos and Manning, 2007, Aulor and Dorn, 2013a, MichaeIs, Nalra|, and
Van Reenen, 2014, Goos, Manning, and SaIomons, forlhcoming).
Iigure 2 iIIuslrales lhis allern for lhe Uniled Slales. The Iigure Iols ercenlage oinl changes
in emIoymenl by decade for lhe years 1979 - 2012 for 10 ma|or occualionaI grous
encomassing aII of U.S. non-agricuIluraI emIoymenl.
14
These len occualions divide roughIy
inlo lhree grous. On lhe righl-hand side of lhe figure are manageriaI, rofessionaI and
lechnicaI occualions, vhich are highIy educaled, and highIy aid. elveen one-quarler and
lvo-lhirds of vorkers in lhese occualions had al Ieasl a four-year coIIege degree in 1979, vilh
lhe Iovesl coIIege share in lechnicaI occualions and lhe highesl in rofessionaI occualions
(AcemogIu and Aulor, 2011). ImIoymenl grovlh in lhese occualions vas robusl lhroughoul
lhe lhree decades Iolled. Iven in lhe dee recession and incomIele recovery belveen 2007
and 2012, lhese occualions exerienced aImosl no absoIule decIine in emIoymenl.
Moving Ieflvard, lhe nexl four coIumns disIay emIoymenl grovlh in middIe-skiII
occualions, comrising saIes, office and adminislralive suorl, roduclion, crafl and reair,
and oeralor, fabricalor and Iaborer. The firsl lvo of lhis grou of four are middIe-skiIIed,
vhile-coIIar occualions lhal are disroorlionaleIy heId by vomen vilh a high schooI degree
or some coIIege. The Ialler lvo calegories are a mixlure of middIe and Iov-skiIIed bIue-coIIar
occualions lhal are disroorlionaleIy heId by maIes vilh a high schooI degree or Iover
educalion. WhiIe lhe headcounl in lhese occualions rose in aImosl every decadaI inlervaI
belveen 1979 and 2007, lheir grovlh rale Iagged lhe economy-vide average and, moreover,
generaIIy sIoved across decades. These occualions vere hil arlicuIarIy hard afler 2007, vilh
absoIule decIines in emIoymenl belveen 2007 and 2012 ranging from 5 lo 15 ercenl.

14
More reciseIy, lhe figure Iols 100 limes Iog changes in emIoymenl, vhich are cIose lo equivaIenl lo
ercenlage oinls for smaII changes.
12
The Ieflmosl lhree coIumns of Iigure 2 deicl emIoymenl lrends in service occualions, vhich
are defined by lhe Census ureau as |obs lhal invoIve heIing, caring for or assisling olhers. The
ma|orily of vorkers in service occualions have no osl-secondary educalion, and average
hourIy vages in service occualions are in mosl cases beIov lhe olher seven occualions
calegories. Desile lheir Iov educalionaI requiremenls and Iov ay, emIoymenl has grovn
reIaliveIy raidIy in service occualions over lhe asl lhree decades. AII lhree broad calegories
of service occualions, roleclive service, food rearalion and cIeaning services, and ersonaI
care, exanded by doubIe digils in lhe bolh lhe 1990s and lhe re-recession years of lhe asl
decade (1999 - 2007). NolabIy, even during lhe recessionary years of 2007 lhrough 2012,
emIoymenl grovlh in service occualions vas modeslIy osilivemore so, in facl, lhan lhe
lhree high-skiIIed occualions lhal have aIso fared comaraliveIy veII (rofessionaI, manageriaI
and lechnicaI occualions). As noled by Aulor and Dorn (2013a), lhe emIoymenl share of
service occualions vas essenliaIIy fIal belveen 1959 and 1979. Thus, lheir raid grovlh since
1980 marks a shar lrend reversaI.
CumuIaliveIy, lhese lvo lrends of raid emIoymenl grovlh in bolh high and Iov-educalion
|obs have subslanliaIIy reduced lhe share of emIoymenl accounled for by 'middIe skiII' |obs. In
1979, lhe four middIe skiII occualions (saIes, office and adminislralive vorkers, roduclion
vorkers, and oeralives) accounled for 60 ercenl of emIoymenl. In 2007, lhis number vas 49
ercenl, and in 2012, il vas 46 ercenl. One can quanlify lhe consislency of lhis lrend by
correIaling lhe changes in occualionaI emIoymenl shares across lhese len occualionaI
calegories across muIliIe decades. The correIalion belveen changes in occualionaI shares
belveen 1979-1989 and 1989-1999 vas 0.64, and for lhe decades of 1989-1999 and 1999-2007, vas
0.67. RemarkabIy, lhe correIalion belveen occualionaI share changes during 1999-2007 and
2007-2012lhal is, rior lo and during lhe Greal Recessionvas 0.80.
The oIarizalion of emIoymenl across occualions is nol unique lo lhe Uniled Slales. Ividence
of lhis facl is resenled in Iigure 3, vhich Iols changes in lhe share of emIoymenl belveen
1993 and 2010 vilhin lhree broad sels of occualionsIov-, middIe-, and high-vagecovering
13
aII non-agricuIluraI emIoymenl in 16 Iuroean Union economies.
15
In aII counlries, middIe-
vage occualions decIined as a share of emIoymenl, high vage occualions increased as a
share of emIoymenl, and Iov-vage occualions gained in size reIalive lo middIe-vage
occualions over lhis 17-year eriod.
16
The comarabiIily of lhese occualionaI shifls across a
Iarge sel of deveIoed counlrieslhe Uniled Slales among lhemmakes il IikeIy lhal a
common sel of forces conlribules lo lhese shared Iabor-markel deveIomenls.
17
SimuIlaneousIy,
lhe subslanliaI differences among counlries aarenl in lhe dala underscores lhal no singIe
faclor or common cause exIains lhe diversily of exeriences across lhe Uniled Slales and lhe
Iuroean Union.
|V. Occs |np|cqncni Pc|arizaiicn Ica! ic Wagc Pc|arizaiicn?
Irom lhe barbeII shae of occualionaI emIoymenl grovlh deicled in Iigures 2 and 3, one
mighl surmise lhal occualionaI oIarizalion vouId aIso calaIyze vage oIarizalionlhal is,
rising reIalive vages in bolh high-educalion, abslracl lask-inlensive |obs and in Iov-educalion
manuaI lask-inlensive |obs. This reasoning is aeaIing bul incomIele because il ignores lhe
roIe Iayed by lhe lhree miligaling forces discussed above: comIemenlarily, demand eIaslicily,
and Iabor suIy.
Lel's firsl consider lhe imacl of comulerizalion on vages in abslracl lask-inlensive
occualions such as manageriaI, rofessionaI and lechnicaI occualions. A key allribule of lhese
occualions is lhal aII drav uon Iarge bodies of conslanlIy evoIving exerlise, e.g., medicaI
reorls, IegaI cases, saIes dala, financiaI anaIysis, and economic slalislicsso much so lhal
many abslracl lask-inlensive occualions emIoy skiIIed assislanls and ararofessionaIs lo
suorl lheir informalion rocessing lasks (e.g., medicaI secrelaries, araIegaIs, and research

15
These calegories corresond lo: rofessionaI, lechnicaI and manageriaI vorkers (high vage), office,
adminislralive suorl, cuslomer service, recision roduclion and conslruclion and lrade vorkers, and
Iaborers, ersonaI and roleclive service vorkers (middIe vage), modeIs, saIesersons and
demonslralors, and saIes and service eIemenlary occualions (Iov vage). Iurlher delaiIs are rovided in
lhe noles lo Iigure 3.
16
In 14 of 16 counlries, Iov-vage occualions increased as a share of emIoymenl.
17
Nol onIy is lhe U.S. nol unique in lhis regard, il is nol even an oulIierfaIIing roughIy in lhe middIe of
lhe ack of lhis sel of counlries in lhe exlenl of emIoymenl oIarizalion.
14
assislanls). Given lhis roduclion slruclure, a cIear rediclion is lhal comulerizalion shouId
slrongIy comIemenl vorkers erforming abslracl lask-inlensive |obs. y dramalicaIIy Iovering
lhe cosl and increasing lhe scoe of informalion and anaIysis avaiIabIe lo lhem,
comulerizalion enabIes vorkers erforming abslracl lasks lo furlher seciaIize in lheir area of
comaralive advanlage, vilh Iess lime senl on acquiring and crunching informalion, and more
lime senl on inlerreling and aIying il.
18

If demand for lhe oulul of abslracl lask-inlensive aclivilies vere ineIaslic, hovever, lhese
roduclivily gains mighl vork lo Iover exendilure on lhese oululs, vhich couId in lurn
miligale vage gains. WhiIe il is hard lo deveIo a slrong lheorelicaI rior on lhis ossibiIily, aII
oulvard evidence suggesls lhe oosile. As lhe oulul of lhe rofessions has risen, demand for
lheir services has seemingIy more lhan kel ace. A Ieading examIe is medicine, vhere
exendilures for medicaI services have risen subslanliaIIy as a share of GID as lhe efficacy of
medicine lo address a Iarger sel of aiImenls has exanded. ul one can readiIy make simiIar
argumenls aboul finance, Iav, engineering, research, and design.
19

Whal aboul lhe Iabor suIy` If vorkers couId quickIy move inlo lhe highIy educaled
rofessions lo cailaIize on rising roduclivily, lhis vouId mule earnings gains. ul of course,
many rofessions require bolh coIIege and graduale degrees (MAs, }Ds, MDs, Ih.D.s),
meaning lhal lhe roduclion ieIine for nev enlranls is five lo len years in Ienglh and, hence,
suIy aImosl necessariIy resonds sIovIy. Indeed, as discussed in Aulor (2014b), young U.S.
aduIls have resonded remarkabIy sIuggishIy lo lhe rising educalionaI remium over lhe Iasl
lhirly years and lhis is arlicuIarIy lrue for maIes, as shovn in Iigure 4. Thus, vhiIe lhe slock
of vorkers vilh coIIege and graduale degrees has cerlainIy grovn in resonse lo rising
roduclivily in lhese occualions, lhe suIy resonse has nol been nearIy Iarge enough lo
svam lhe conlemoraneous movemenls in demand.

18
y lhe same loken, comulerizalion subslilules for many of lhe suorl occualions lhal lhese
rofessions emIoy.
19
There are counlerexamIes as veII. Ior examIe, comulerizalion aears lo aIIov deIayering of
managemenl slruclures (CaroIi and Van Reenen, 2001). ArguabIy, many of lhe middIe managers
disIaced by deIayering erformed rouline informalion rocessing lasks.
15
Workers in abslracl lask-inlensive occualions have lherefore benefil from comulerizalion via
a virluous combinalion of lhree forces: slrong comIemenlarilies belveen rouline and abslracl
lasks, eIaslic demand for services rovided by abslracl lask-inlensive occualions, and ineIaslic
Iabor suIy lo lhese occualions over lhe shorl and medium lerm. In combinalion, lhese forces
mean lhal comulerizalion shouId raise earnings in occualions lhal make inlensive use of
abslracl lasks and among vorkers vho inlensiveIy suIy lhem.
Do lhese same synergies aIy lo |obs lhal are inlensive in manuaI lasks, such as |anilors and
cIeaners, vehicIe drivers, fIighl allendanls, food service vorkers, and ersonaI care assislanls`
In Iarge arl, lhe ansver aears lo be no. In conlrasl lo vorkers in abslracl lask-inlensive
occualions, comulerizalion has nol grealIy increased lhe reach or roduclivily of
housekeeers, securily guards, vailers, cooks, or home heaIlh aids. ecause mosl manuaI lask-
inlensive occualions are minimaIIy reIianl on informalion or dala rocessing for lheir core
lasks, lhere are very Iimiled oorlunilies for eilher direcl comIemenlarily or subslilulion.
There are of course excelions lo lhis generaIizalion: GIS and scheduIing soflvare aIIovs
lruckers lo minimize vasled miIeage, caIendar and conlacl soflvare assisls home heaIlh
vorkers lo more effecliveIy manage lime and biII hours, comulerized ordering syslems ermil
food service vorkers lo raidIy laIIy cuslomer labs. ul lhese informalion-inlensive lasks are
IargeIy eriheraI lo lhese occualions' core |ob lasks.
20
IronicaIIy, manuaI lask-inlensive
occualions en|oy reIaliveIy minimaI direcl benefils from comulerizalion because lhey are icc
uc|| insuIaled, offering Iimiled oorlunilies for subsliluling or comIemenling human Iabor
vilh informalion lechnoIogy.
Say for lhe sake of argumenl, hovever, lhal demand for manuaI lask-inlensive occualions vas
rising due lo rising socielaI income or changes in references. WouId lhese demand increases
IikeIy lransIale inlo higher occualionaI earnings` The ansver lurns on bolh lhe eIaslicily of
finaI demand and lhe eIaslicily of Iabor suIy, as noled above. Much aggregale evidence

20
WhiIe sureIy I am overIooking imorlanl excelions, I am unabIe lo idenlify examIes vhere
informalion lechnoIogy has fundamenlaIIy lransformed lhe vork aclivilies or dramalicaIIy raised lhe
roduclivily of vorkers in manuaI lask-inlensive occualions.
16
suggesls lhal finaI demand for manuaI lask-inlensive vorkservices in arlicuIaris reIaliveIy
pricc ineIaslic (aumoI, 1967, Aulor and Dorn, 2013a). If so, roduclivily gains in manuaI lask-
inlensive occualions viII nol necessariIy raise exendilure on lheir oululs. On lhe olher hand,
demand for manuaI lask-inlensive vork aears lo be reIaliveIy inccnc eIaslic (CIark, 1951,
MazzoraIi and Ragusa, 2013), meaning lhal rising aggregale incomes viII lend lo increase
demand for lhese aclivilies. Comulerizalion may lherefore in!ircci|q raise demand for manuaI
lask-inlensive occualions by increasing socielaI income.
21

This is vhere lhe eIaslicily of Iabor suIy becomes mosl crilicaI, hovever. Due lo lheir
generaIIy Iov educalion and lraining requiremenls, Iabor suIy lo manuaI lask-inlensive
occualions is inlrinsicaIIy eIaslic.
22
ConsequenlIy, vage increases in manuaI lask-inlensive
occualions generaIIy sur a robusl suIy resonse. Moreover, vorkers disIaced from olher
seclors of lhe economy may readiIy oblain emIoymenl in manuaI lask-inlensive occualions
due lo lheir Iov enlry requiremenls.
In shorl, vhiIe abslracl lask-inlensive aclivilies benefil from slrong comIemenlarilies vilh
comulerizalion, reIaliveIy eIaslic finaI demand, and a Iov eIaslicily of Iabor suIy, manuaI
lask-inlensive aclivilies are al besl veakIy comIemenled by comulerizalion, do nol benefil
from eIaslic finaI demand, and face eIaslic Iabor suIy lhal lemers demand-induced vage
increases. Thus, vhiIe comulerizalion has slrongIy conlribuled lo cnp|cqncni oIarizalion, ve

21
This can resuIl from eilher of lvo economic forces. CIark (1951) argues lhal demand for services is non-
homolhelic: lhe exendilure share of services rising vilh income. aumoI (1967) argues lhal groving
exendilure on services refIecls unbaIanced grovlh: because lhe reIalive rices of lechnoIogicaIIy Iagging
aclivilies (e.g., hairculs and symhony orcheslra erformances) necessariIy rise over lime, an increasing
share of socielaI income musl be exended on lhese aclivilies lo mainlain baIanced consumlion. Of
course, aumoI's argumenl resuoses lhal demand for lhese aclivilies is reIaliveIy ineIaslicolhervise
exendilure vouId faII as reIalive rices rose. MazzoraIi and Ragusa (2013) resenl evidence consislenl
vilh CIark's viev vhiIe Aulor and Dorn (2013a) resenl evidence consislenl vilh aumoI's lhesis.
22
aumoI (1967) observes lhal even absenl roduclivily grovlh in lechnoIogicaIIy Iagging occualions,
vages in lhese occualions nusi rise over lime vilh socielaI income lo comensale vorkers for nci
enlering olher seclors (again, assuming lhal demand for lhese aclivilies is reIaliveIy ineIaslic).
17
vouId nol generaIIy execl lhese emIoymenl changes lo cuIminale in uagc oIarizalion excel
in lighl Iabor markels (Aulor and Dorn, 2013a).
23

Iigure 5 resenls evidence consislenl vilh lhis Iogic. IoIIoving lhe formal of Iigure 2, lhis
figure deicls ercenlage oinl changes in mean veekIy vages by occualion among fuII-lime,
fuII-year vorkers for 1979 lhrough 2012, subdividing lhe lime inlervaI inlo lhe 1980s, 1990s, and
lhe re- and osl-recession 2000s. To rovide addilionaI delaiI, Iigure 6 Iols vage changes
across aII occualionaI calegories, veighled by iniliaI size and smoolhed for cIarily. SecificaIIy,
lhe figure ranks aII 318 delaiIed occualions from Iovesl lo highesl by lheir iniliaI skiII IeveI (as
measured by ils 1979 mean hourIy occualionaI vage), grous lhese delaiIed occualions inlo
100 bins of equaI sizes, and Iols smoolhed changes in Iog earnings al each occualionaI
ercenliIe over each sub-eriod.
The righl-hand lvo lhirds of lhese vage figures Iook much Iike lhe Iols of emIoymenl
oIarizalion. Irom 1979 lhrough 2007, vages rose consislenlIy across aII lhree abslracl lask-
inlensive calegories of rofessionaI, lechnicaI and manageriaI occualions.
24
y conlrasl, vage
grovlh in lhe four middIe-skiII, rouline lask-inlensive occualions vas Iess raid lhan in
abslracl lask-inlensive occualions and generaIIy deceIeraled over limevilh arlicuIarIy
anemic (and in lvo of four calegories, negalive) grovlh afler 2000.
The Iov-educalion, manuaI lask-inlensive occualions on lhe Iefl-hand side of Iigures 5 and 6
resenl a arlicuIarIy inlriguing allern. Wage grovlh in lhese occualions vas somevhal ncrc
raid lhan in lhe rouline lask-inlensive occualions in lhe 1980sand even more so in lhe
1990svhich vas roughIy concordanl vilh lhe allern of emIoymenl oIarizalion laking

23
Aulor and Dorn (2013a) resenl evidence lhal lhe consumlion comIemenlarily effecl (due lo rising
incomes) dominaled lhe disIacemenl effecl on nel belveen 1980 and 2005. ul lhis effecl vas rimariIy
driven by vage deveIomenls in lhe 1990s vhen Iabor markels vere exlremeIy lighl. Afler 2000, lhe
exansion of manuaI lask-inlensive service occualions acceIeraled bul vages in lhese occualions feII.
24
Noling lhal lhese occualions are aIso lhe highesl aid iniliaIIy, lheir grealer roorlionaI earnings
grovlh lransIales inlo even Iarger doIIar grovlh.
18
shae simuIlaneousIy. Hovever, in lhe 2000s, emIoymenl and vage lrends in manuaI lask-
inlensive occualions diverged. WhiIe emIoymenl grovlh in lhese occualions exceeded lhal
in aII olher calegories belveen 2000 and 2007 (Iigure 2), vage grovlh vas generaIIy negalive
more so lhan aImosl aII olher calegories.
Why did vage grovlh in manuaI lask-inlensive occualions go from osilive lo negalive afler
1999` My slrong hunch is lhal lhe exIanalion is shifling Iabor suIy. Recenl aers by Smilh
(2013), Corles el aI. (2014), and Ioole and Ryan (2014) find lhal decIining emIoymenl in rouline
lask-inlensive |obs has Ied middIe-skiII vorkersbolh nev enlranls and lhose disIaced from
rouline lask-inlensive |obslo enler manuaI lask-inlensive occualions inslead. This IikeIy
occurred arlicuIarIy raidIy in lhe 2000s as fIagging emIoymenl in middIe-skiII occualions
combined vilh sIack macroeconomic condilions surred middIe-skiII vorkers lo comele vilh
Iess-educaled vorkers for manuaI lask-inlensive |obs, lhus checking lhe lendency for vages lo
rise in lhese occualions.
A finaI sel of facls slarkIy iIIuslraled by Iigure 6 is lhal overaII vage grovlh vas exlraordinariIy
anemic lhroughoul lhe 2000s, even rior lo lhe Greal Recession. elveen 1999 and 2007, reaI
vage changes vere negalive beIov aroximaleIy lhe 15
lh
ercenliIe, and vere beIov 5
ercenlage oinls u lo lhe 70
lh
ercenliIe of lhe dislribulion. Indeed, vage grovlh vas grealer
al aII ercenliIes during bolh lhe 1980s and 1990s lhan in lhe prc-rcccssicn 2000s.
25
Of course,
vage grovlh vas essenliaIIy zero al aII ercenliIes during lhe recessionary years of 2007-2012.
26

25
Since lhe 2000-2007 inlervaI is lvo years shorler lhan lhe 1979-1989, one shouId muIliIe lhe 2000-2007
changes by 1.25 lo ul lhem on lhe same lemoraI fooling. Nel of lhis ad|uslmenl, vage grovlh is sliII
considerabIy veaker al aII ercenliIes lhan in lhe earIier lvo decades.
26
Why are lhe raidIy rising earnings of lhe lo 1 ercenl (e.g., Alkinson el. aI. 2011) nol slrongIy evidenl
in Iigure 6` There are lvo reasons, one refIecling subslance, and lhe olher dala. SubslanliveIy, lhe Iol
deicls changes in earnings by cccupaiicna| ercenliIe ralher uagc ercenliIe. Wage grovlh by
occualionaI ercenliIe is Iess concenlraled lhan vage grovlh across vage ercenliIes since lhe highesl
earners are found across a variely of occualions. In addilion, lhe very highesl ercenliIes of earnings are
censored in ubIic use Census and American Communily Survey dala fiIes, vhich furlher masks
earnings gains al exlreme quanliIes.
19
V. Pc|arizaiicn. Wnai Hatc Wc Icarnc! jrcn Ancincr Occa!c cj Oaia?
AIlhough lhe oIarizalion hyolhesis can exIain some key fealures of lhe U.S. and cross-
nalionaI dala, reaIily invariabIy roves more comIicaled lhan lhe lheory anliciales. The
cIearesl evidence for lhis generaI diclum is lhe unexIained deceIeralion of emIoymenl grovlh
in abslracl lask-inlensive occualions afler 2000, vhich is discussed by eaudry, Green and
Sand (2013, 2014). This can be seen eseciaIIy cIearIy in Iigure 7, vhich, foIIoving lhe formal of
Iigure 6, Iols smoolhed changes in lhe share of U.S. emIoymenl (ralher lhan vages, as in
Iigure 6) al each occualionaI ercenliIe. Since lhe sum of shares musl equaI one in each
decade, lhe change in lhese shares across decades musl lolaI zero and, lhus, lhe heighl al each
skiII ercenliIe measures lhe grovlh in each occualion's emIoymenl reIalive lo lhe vhoIe.
27

Iigure 7 conlribules lhree nuances lo lhe occualionaI oIarizalion slory above. A firsl, visibIe
on lhe Iefl-hand side of lhe figure, is lhal lhe ace of emIoymenl gains in Iov-vage, manuaI
lask-inlensive |obs has risen successiveIy across eriods. Gains in lhese occualions vere bareIy
discernibIy in lhe 1980s, inlensified in lhe 1990s, and acceIeraled again in lhe 2000s. A second
nuance is lhal lhe occualions lhal are Iosing share aear lo be increasingIy dravn from
higher ranks of lhe occualionaI dislribulion. Ior examIe, lhe highesl ranked occualion lo
Iose emIoymenl share during lhe 1980s Iay al aroximaleIy lhe 45
lh
ercenliIe of lhe skiII
dislribulion. In lhe 1990s, lhe crossover oinl Iay al aroximaleIy lhe 55
lh
ercenliIe. In lhe
finaI lvo sub-eriods, lhis rank rose sliII furlher lo above lhe 75
lh
ercenliIesuggesling lhal
lhe Iocus of disIacemenl of middIe-skiII emIoymenl is moving inlo higher skiIIed lerrilories.
The finaI emiricaI reguIarily highIighled by Iigure 7 is lhal grovlh of high-skiII, high-vage
occualions (lhose associaled vilh abslracl vork) deceIeraled markedIy in lhe 2000s, vilh no
reIalive grovlh in lhe lo lvo deciIes of lhe occualionaI skiII dislribulion during 1999 lhrough
2007, and onIy a modesl recovery belveen 2007 and 2012. Slaled IainIy, lhe U-shaed grovlh
of occualionaI emIoymenl came increasingIy lo resembIe a dovnvard ram in lhe 2000s.

27
Due lo lhe smoolhing of lhe Iolled series, lhis adding u roerly hoIds onIy as an aroximalion.
20
Iigure 8 lakes a cIoser Iook al lhis henomenon by Iolling lhe dislribulion of occualionaI
emIoymenl changes among coIIege-educaled (aneI A) and non-coIIege (aneI ) vorkers
across lhe lhree broad occualionaI calegories above: manuaI-inlensive, rouline-inlensive, and
abslracl-inlensive.
28

One vouId anliciale lhal a Iong-lerm rise in lhe coIIege-educaled vorkforce vouId evenluaIIy
Iead lo a grovlh in coIIege-educaled vorkers in non-lradilionaI occualions. This allern is
seen in lhe 1980s: lhe fraclion of coIIege-educaled vorkers in bolh manuaI and rouline lask-
inlensive occualions rose modeslIy in lhis decade vhiIe lhe share in abslracl-inlensive
occualions decIines. In lhe subsequenl decade of lhe 1990s, emIoymenl of coIIege-educaled
vorkers oIarized, vilh a shar reduclion in rouline lask-inlensive emIoymenl, a slee rise in
abslracl lask-inlensive emIoymenl, and a modesl rise in manuaI lask-inlensive emIoymenl.
Afler 2000, hovever, occualionaI emIoymenl allerns of coIIege-educaled vorkers lurned
sharIy dovnvard, as discussed by eaudry, Green and Sand (2013, 2014). elveen 1999 and
2012, lhe fraclion of coIIege-educaled vorkers emIoyed in abslracl occualions jc|| by more
lhan a ercenlage oinl, lhe share emIoyed in rouline occualions feII by 0.4 ercenlage
oinls, and lhe share emIoyed in manuaI occualions rose by 1.5 ercenlage oinls. Among
non-coIIege vorkers, hovever, ve see a much more consislenl allern of shar reduclions in
rouline emIoymenl and equaIIy Iarge gains in manuaI emIoymenl vilh essenliaIIy no gains in
abslracl emIoymenl excel during lhe firsl decade of lhe samIe (aneI ). In nel, lhese
allerns suggesl lhal lhe sel of abslracl lask-inlensive |obs is nol groving as raidIy as lhe
olenliaI suIy of highIy educaled vorkers. As eaudry, Green and Sand (2013, 2014)
highIighl, lhe coaIescence of lhese forces has IikeIy Ied highIy educaled vorkers lo seek Iess
educaled |obs, vhich in lurn creales sliII grealer chaIIenges for lhe Iover educaled vorkers
comeling for rouline and manuaI lask-inlensive vork.

28
SecificaIIy, I coIIase lhe len calegories in Iigure 2 inlo lhree broader grouings. ManuaI occualions
are ersonaI care, food/cIeaning service, and roleclive services. Rouline occualions are
oeralors/Iaborers, roduclion, office/adminislralive, and saIes. Abslracl occualions are lechnicians,
rofessionaIs, and managers.
21
Whal exIains lhe sIoving grovlh of abslracl lask-inlensive emIoymenl` One ossibIe
inlerrelalion is lhal lechnoIogicaI rogress has encroached slrongIy uvard in lhe lask
domain, such lhal il nov slrongIy subslilules for lhe vork done by rofessionaI, lechnicaI and
manageriaI occualions. WhiIe one shouId nol dismiss lhis ossibiIily oul of hand,
conlemoraneous dala on comuler and soflvare inveslmenl miIilales againsl lhis
inlerrelalion. One vouId execl lhal a surge of nev aulomalion oorlunilies in highIy aid
vork vouId calaIyze a surge of cororale inveslmenl in comuler hardvare and soflvare.
Inslead, lhe oosile occurred, as shovn in Iigure 9. Afler rising near-monolonicaIIy from
aroximaleIy one-haIf of one-ercenl lo aImosl five ercenl of gross domeslic roducl
belveen 1950 and 2000, rivale fixed inveslmenl in informalion rocessing equimenl and
soflvare droed by a fuII ercenlage oinl (more lhan 20 ercenl) belveen 2000 and 2002, and
remained deressed lhereafler. As of lhe firsl quarler of 2014, informalion rocessing
equimenl and soflvare inveslmenl as a share of GDI vas (onIy) al 3.5 ercenl, a IeveI Iasl seen
in 1995 al lhe oulsel of lhe dol-com era.
Given lhal bolh emIoymenl grovlh in abslracl lask-inlensive occualions and comuler
inveslmenl laiIed off simuIlaneousIy, is il ossibIe lhal one caused lhe olher` Thal is roughIy
lhe viev esoused by eaudry, Green and Sand (2013). uiIding on WeIch (1970) and SchuIlz
(1975), lhey osil a modeI in vhich lhe inlroduclion of a nev lechnoIogy generales demand for
manageriaI and robIem-soIving skiIIs (abslracl lasks) during an a!cpiicn eriod, vhiIe lhe
lechnoIogy is inslaIIed, adaled, maslered and roulinized, afler vhich skiII demands sIacken
since lhe chaIIenge of adalalion gives vay lo lhe more quolidian lasks of oeralion and
mainlenance. The eaudry, Green and Sand conceluaI modeI can lherefore ralionaIize bolh
deceIeraling emIoymenl in abslracl lask-inlensive vork and sIoving inveslmenl in
informalion lechnoIogy, lhough unforlunaleIy lhe modeI generales fev leslabIe rediclions
beyond lhese aggregale facls.
An aIlernalive inlerrelalion of lhese facls, offered by Gordon (2012), is nol lhal lhe comuler
revoIulion has been fuIIy reaIized bul ralher lhal il has elered oul. Gordon argues lhal lhe
22
gains from informalion lechnoIogy have been reIaliveIy suerficiaI and shorl-Iived, vilh fev of
lhe monumenlaI consequences for roduclivily or human veIfare afforded by rior eighleenlh
and nineleenlh cenlury lechnoIogicaI revoIulionslransorlalion, over generalion,
communicalions, and sanilalion. Thus, lhe sIovdovn in comuler inveslmenl refIecls lhe onsel
of raidIy diminishing marginaI relurns lo informalion lechnoIogy and an accomanying
deceIeralion of roduclivily grovlh.
29

WhiIe I do nol have a slrongIy evidenced counler-exIanalion for lhese same facls, I am
skelicaI of bolh exlanl exIanalions. olh vouId seem lo imIy lhal IT inveslmenl vouId
Ialeau as lhe lechnoIogy eilher allained malurily or reached a oinl of diminishing relurns.
ul lhis does nol accord vilh lhe evidence in Iigure 9. Informalion lechnoIogy inveslmenl
abrulIy reversed course afler 2000, suggesling a raid uIIback in demand. Moreover, in lhe
five years pricr ic lhis uIIback, IT inveslmenl surged al an unrecedenled rale, rising by
aroximaleIy lvo-lenlhs of a ercenl of GDI in each year. Whal lhis allern suggesls lo me is
a lemorary disIocalion of demand for IT cailaI during lhe Ialler haIf of lhe 1990s foIIoved by
a shar correclion afler 2000in olher vords, lhe bursling of a bubbIe. The end of lhe lech
bubbIe in lhe year 2000 is of course videIy recognized, as lhe NASDAQ slock index erased
lhree-quarlers of ils vaIue belveen 2000 and 2003. Less arecialed, I beIieve, are lhe economic
consequences beyond lhe lechnoIogy seclor: a huge faIIoff in IT inveslmenl, vhich may
IausibIy have damened innovalive aclivily and demand for high skiIIed vorkers more
broadIy.
Il is aIso ossibIe lo read a more olimislic message from lhe lrends in Iigures 7 and 8.
ImIoymenl in highIy skiIIed occualions aears lo have shovn reneved grovlh afler 2007,
and lhis may augur reneved inveslmenl and innovalive aclivily. SimuIlaneousIy, lhe ongoing
conlraclion of middIe-vage occualions and raid exansion of Iover-vage occualions
rovides Iess cause for comforl.

29
Gordon's lhesis does nol address lhe Iabor markel imIicalions of lhe anlicIimaclic concIusion of lhe
informalion lechnoIogy revoIulion. Thus, lhere is no imIied reIalionshi belveen lhe sIovdovn of IT
inveslmenl and lhe deceIeralion of emIoymenl grovlh in abslracl lask-inlensive |obs.
23
V|. Tnc |uiurc cj Pc|anqis Para!cx
Iven as inveslmenl in informalion lechnoIogy has sIoved, ouIar and academic discussion of
lhe olenliaIIy dire consequences of aulomalion for emIoymenl has acceIeraled. MIT schoIars
Irik ryn|oIfsson and Andrev McAfee argue in a 2011 book lhal vorkers are in danger of
Iosing lhe race againsl lhe machine. In a 2012 vorking aer, Sachs and KolIikoff resenl a
modeI in vhich smarl machines yieId an economy of Iong-lerm misery because vorkers
vhose Iabor is devaIued by aulomalion are unabIe lo make lhe human cailaI inveslmenls lhal
vouId enabIe lheir chiIdren lo rofil from advancing lechnoIogy. In a ouIar vein, |ournaIisl
Noah Smilh (2013) Iamenls in lhe Ai|aniic lhal ve have reached lhe end of Iabor. And
|ournaIisl Kevin Drum (2013) varns in Mcincr jcncs lhal our robol overIords viII soon lake
our |obs.
30
ul vhere are lhese robol overIords` And if lhey are nol here aIreadyand aII
oulvard aearances suggesl lhal lhey are nolshouId ve execl lheir imminenl arrivaI` In
lhis finaI seclion, I discuss lhe rogress of comuling lovards overcoming IoIanyi's aradox.
In lhe asl decade, comulerizalion has rogressed inlo sheres of human aclivily lhal vere
considered off Iimils onIy a fev years earIierdriving vehicIes, arsing IegaI documenls, even
erforming agricuIluraI fieId Iabor. Yel, IoIanyi's aradox remains reIevanl. Indeed, il heIs lo
exIain vhal has nci yel been accomIished and lo iIIuminale lhe currenl lechnoIogicaI
aroaches used lo enIarge lhe sel of machine-feasibIe lasks. In my reading of lhe lechnoIogy
Iandscae, lhere are lvo overarching aroaches lhal engineers emIoy lo comulerize lasks
for vhich ve do nol knov lhe ruIes. One aroach, vhich I caII environmenlaI conlroI, bovs
lo IoIanyi's aradox. The second, machine Iearning, allemls lo make an end-run around il.
A. |ntircnncnia| Ccnirc|
Mosl aulomaled syslems Iack fIexibiIilylhey are brillIe. Modern aulomobiIe Ianls, for
examIe, emIoy induslriaI robols lo inslaII vindshieIds on nev vehicIes as lhey move lhrough
lhe assembIy Iine. ul aflermarkel vindshieId reIacemenl comanies emIoy lechnicians, nol
robols, lo inslaII reIacemenl vindshieIds. Why nol robols` ecause removing a broken
vindshieId, rearing lhe vindshieId frame lo accel a reIacemenl, and filling a reIacemenl

30
This aragrah dravs on Aulor and Dorn (2013b).
24
inlo lhal frame demand far more reaI-lime adalabiIily lhan any conlemorary robol can
aroach.
The dislinclion belveen assembIy Iine roduclion and lhe in-silu reair highIighls lhe roIe of
environmenlaI conlroI in enabIing aulomalion. WhiIe machines cannol generaIIy oerale
aulonomousIy in unrediclabIe environmenls, engineers can in some cases radicaIIy simIify
lhe environmenl in vhich machines vork lo enabIe aulonomous oeralion. The faclory
assembIy Iine rovides one such examIe of environmenlaI conlroI. ul lhere are numerous
examIes lhal are so ingrained in daiIy lechnoIogy lhal lhey escae nolice. Iresenl day
aulomobiIes, for examIe, are highIy evoIved machinesefficienl, overfuI, safe and reIiabIe.
ul in anolher sense, lhey are remarkabIy heIIess: lhey can onIy oerale on smoolh aved
surfaces, somelhing lhal is aImosl never found in nalure. To enabIe lheir oeralion, humanily
has adaled lhe naluraIIy occurring environmenl by IeveIing, re-grading and covering vilh
ashaIl a non-lriviaI ercenlage of lhe earlh's Iand surface.
31
InvironmenlaI conlroI for
aulomobiIe lraveI has meanl remaking lhe naluraI Iandscae lo machine age secificalions.
Ixeculing non-rouline lasks is a cenlraI obslacIe in comuler-based aulomalion. Thus,
environmenlaI conlroI in comuler aIicalions oflen means eIiminaling non-rouline vork
lasks. One can see lhis rocess cIearIy in induslriaI robolics. Large onIine relaiIers, such as
Amazon.com, Zaos.com and SlaIes.com, oerale syslems of varehouses lhal slock, ack
and shi lhousands of varielies of non-homogenous goods direclIy lo consumers and
businesses. These varehouses emIoy Iegions of dexlerous, alhIelic ickers, vho run and
cIimb lhrough sheIves of lyicaIIy non-air condilioned varehouses lo Iocale, coIIecl, box, IabeI
and shi goods lo urchasers. There is al resenl no lechnoIogicaIIy viabIe or cosl-effeclive
robolic facsimiIe for lhese human ickers. The |ob's slee requiremenls for fIexibiIily, ob|ecl
recognilion, hysicaI dexlerily, and fine molor coordinalion are loo formidabIe.
ul Iarge comonenls of varehousing can be aulomaled, as demonslraled by Kiva Syslems, a
robolic varehousing slarlu lhal vas urchased by Amazon in 2012. The core of lhe Kiva

31
According lo Wikiedia, so-caIIed imervious surfaces (moslIy roads and arking Iols) cover 43,000
square miIes of Iand in lhe Iover 48 Uniled SlalesroughIy equaI lo lhe Iand area of Ohio
(hll://en.vikiedia.org/viki/Imervious_surface, accessed 8/4/2014).
25
syslem is a disalch rogram lhal oversees lhe fIov of aII goods lhrough lhe varehouse from
slocking, lo slorage, lo icking and shiing. The disalch soflvare direcls bolh a fIeel of Kiva
robolsessenliaIIy molorized, remoleIy conlroIIed go-karlsand a sel of nunan slockers and
ickers vho vork in landem vilh lhe robols. The Kiva robols circuIale lhrough a varehouse
lhal is fiIIed vilh uniform racks of freeslanding slocked sheIves. The robols' soIe lask is lo
lransorl sheIves from one Iocalion lo anolher, vhich lhey accomIish by maneuvering under a
rack of sheIves, raising sIighlIy lo eIevale lhe rack from lhe fIoor, moloring lo a nev Iocalion,
and lhen Iovering lhe rack.
As ob|ecls arrive al lhe varehouse for slocking, lhe disalch soflvare direcls robols lo lransorl
emly sheIves lo lhe Ioading area vhere lhey Iine u for Ioading. The soflvare simuIlaneousIy
direcls nunan slockers lo Iace merchandise on availing sheIves al recise Iocalions. Once
slocked, sheIves are senl back inlo lhe varehouse on lheir robolic carriers, vhere lhe disalch
soflvare direcls lheir dynamic Iacemenl lo olimize roducl avaiIabiIily for execled roducl
demand. As nev orders arrive, lhe disalch soflvare sends robols lo relrieve sheIves conlaining
needed ilems. The sheIves Iine u in lhe acking area vhere lhey avail a human icker vho,
direcled by a Iaser oinler conlroIIed by lhe disalch soflvare, icks ob|ecls from lhe assembIed
sheIves, acks lhem in shiing boxes, aIies a shiing IabeI, and dros lhe ackage in a
chule for deIivery. As ilems are icked, lhe sheIves scurry back lo lhe varehouse fIoor (erhas
dynamicaIIy reIocaled) unliI needed again for acking or reslocking.
Human fIexibiIily is sliII required in lhe Kiva-oeraled varehouse: onIy vorkers handIe
merchandise, robols onIy move sheIves. ul lhe demand for human dexlerily is dramalicaIIy
reduced by aulomalion: aII non-rouline molor lasks are erformed during slocking and
acking, aII olher goods movemenl, organizalion, slorage and relrievaI is deIegaled lo robols,
vhose soIe lask is lo shullIe sheIves across a IeveI surface (a rouline lask). Thus, Kiva aIies
environmenlaI conlroI lo minimize lhe need for human fIexibiIily.
WhiIe Kiva Syslems rovides a arlicuIarIy cIear examIe, lhe same rinciIe of environmenlaI
conlroI is oflen oeralive in unexecled Iaces. Ierhas lhe Ieasl recognizedand mosl
mylhoIogizedis lhe GoogIe Car. Il is somelimes said by comuler scienlisls lhal lhe GoogIe
26
car does nol drive on roads bul ralher on mas. This observalion conveys lhe facl lhal lhe
GoogIe car, unIike a human vehicIe oeralor, cannol iIol on an unfamiIiar road, il Iacks lhe
caabiIily lo rocess, inlerrel and resond lo an environmenl lhal has nol been re-rocessed
by ils human engineers. Inslead, lhe GoogIe car navigales lhrough lhe road nelvork rimariIy
by comaring ils reaI-lime audio-visuaI sensor dala (coIIecled using LIDAR) againsl
ainslakingIy hand-curaled mas lhal secify lhe exacl Iocalions of aII roads, signaIs, signage,
obslacIes, elc. The GoogIe car adals in reaI lime lo obslacIes (cars, edeslrians, road hazards)
by braking, lurning and sloing. ul if lhe car's soflvare delermines lhal lhe environmenl in
vhich il is oeraling differs from lhe key slalic fealures of ils re-secified ma (e.g., an
unexecled delour, a oIice officer direcling lraffic vhere a lraffic signaI is suosed lo be),
lhen lhe car signaIs for ils human oeralor lo lake command. Thus, vhiIe lhe GoogIe car
aears oulvardIy lo be as adalive and fIexibIe as a human driver, il is in reaIily more akin lo
a lrain running on invisibIe lracks.
These examIes highIighl some of lhe Iimilalions of currenl lechnoIogy lo accomIish non-
rouline lasks. They aIso iIIuslrale lhe genius of human ingenuily in surmounling lhese
obslacIes. Humans naluraIIy lackIe lasks in a manner lhal dravs on lheir inherenl fIexibiIily,
robIem soIving caabiIily, and |udgmenl. Machines currenlIy Iack many of lhese caabiIilies,
bul lhey ossess olher faciIilies in abundance: slrenglh, seed, accuracy, Iov cosl, and
unvavering feaIly lo direclions. Ingineering machines lo accomIish human lasks does nol
necessariIy enlaiI equiing machines vilh human caabiIilies, inslead, vork lasks can, in some
cases, be reengineered so lhal lhe need for secificaIIy human caabiIilies is minimized or
eIiminaled.
B. Macninc Icarning
There is an aIlernalive roule, hovever. IoIanyi's aradoxve knov more lhan ve can leII
resenls a chaIIenge for comulerizalion because convenlionaI rogramming amounls lo
leIIing a comuler reciseIy hov lo accomIish a lask. If eoIe lacilIy undersland hov lo
erform a lask bul cannol leII a comuler hov lo erform lhe lask, lhen seemingIy
rogrammers cannol aulomale lhe laskor so lhe lhinking has gone hisloricaIIy. ul lhis
27
underslanding is shifling due lo advances in machine Iearning. The simIe idea of machine
Iearning is lo aIying slalislics and induclive reasoning lo suIy besl guess ansvers in cases
vhere formaI roceduraI ruIes are unknovn. Where engineers are unabIe lo rogram a machine
lo simuIale a non-rouline lask by foIIoving a scriled rocedure, lhey may neverlheIess be
abIe lo rogram a machine lo masler lhe lask aulonomousIy by sludying successfuI examIes of
lhe lask being carried oul by olhers. Thus, lhrough a rocess of exosure, lraining, and
reinforcemenl, machine Iearning aIgorilhms may olenliaIIy infer hov lo accomIish lasks lhal
have roved daunlingIy chaIIenging lo codify vilh exIicil rocedures.
As one concrele examIe of machine Iearning, consider lhe chaIIenge of lask of visuaIIy
idenlifying a chair.
32
AIying lhe convenlionaI ruIes-based rogramming aradigm, an
engineer mighl alleml lo secify ex anle vhal fealures of an ob|ecl quaIify il as a chairil
ossesses Iegs, arms, a seal, and a back, for examIe. One couId lhen rogram a machine lo
idenlify ob|ecls ossessing lhese fealures as chairs. ul having secified such a fealure sel, one
vouId immedialeIy discover lhal many chairs lhal do nol ossess aII fealures (e.g., no back, no
Iegs). If one lhen reIaxed lhe required fealure sel accordingIy (e.g., chair back olionaI), lhe
incIuded sel vouId cIearIy encomass many ob|ecls lhal are nol chairs (e.g., labIes). Thus, lhe
canonicaI rouline lask aroach lo ob|ecl recognilionand many more sohislicaled varianls
vouId IikeIy have very high miscIassificalion rales. Yel, any grade-schooI chiId couId erform
lhis lask vilh very high accuracy. Whal does lhe chiId knov lhal lhe ruIes-based rocedure
does nol` UnforlunaleIy, ve do nol knovlhis is reciseIy IoIanyi's aradox.
Machine Iearning olenliaIIy circumvenls lhis robIem. ReIying on Iarge dalabases of so-caIIed
ground lrulhconcreleIy, a vasl sel of curaled examIes of IabeIed ob|eclsa machine Iearning
aIgorilhm can alleml lo slalislicaIIy infer vhal allribules of an ob|ecl make il more or Iess
IikeIy lo be designaled a chair. This rocess is caIIed lraining. Once lraining is comIele, lhe
machine can lhen aIy lhis slalislicaI modeI oul of samIe lo olenliaIIy idenlify chairs lhal are
dislincl from lhose in lhe originaI dalasel. If lhe slalislicaI modeI is sufficienlIy good, il may be
abIe lo recognize chairs lhal are somevhal dislincl from lhose in lhe originaI lraining dala (e.g.,

32
This examIe dravs on lhe discussion in Aulor (2014a).
28
differenl shaes, maleriaIs, or dimensions). Whal makes lhe idea of machine Iearning overfuI
is lhal il does nol require an exIicil hysicaI modeI of chairness. Al ils core, machine
Iearning is an alheorelicaI brule force lechniquevhal sychoIogisls caII duslbovI
emiricismrequiring onIy Iarge lraining dalabases, subslanliaI rocessing over, and, of
course, sohislicaled soflvare.
33

Hov veII does machine Iearning vork in raclice` If you use GoogIe TransIale, oerale a
smarlhone vilh voice commands, or foIIov NelfIix' movie suggeslions, you can assess for
yourseIf hov successfuIIy lhese lechnoIogies funclion.
34
My generaI observalion is lhal lhe looIs
are inconsislenl: uncanniIy accurale al limes, lyicaIIy, onIy so-so, and occasionaIIy,
unfalhomabIe.
35
IM's Walson comuler famousIy lriumhed in lhe lrivia game of jccpar!q
againsl chamion human oonenls. Yel Walson aIso roduced a seclacuIarIy incorrecl
ansver during lhe course of ils vinning malch. Under lhe calegory of U.S. Ciiics, lhe queslion
vas, Ils Iargesl airorl vas named for a WorId War II hero, ils second Iargesl, for a WorId War
II ballIe. Walson's roosed ansver vas Toronlo, a cily in Canada. Iven exemIary
accomIishmenls in lhis domain can aear somevhal undervheIming. A 2012 Ncu Ycrk Tincs
arlicIe (Markoff, 2012) described GoogIe's X Lab's recenl ro|ecl lo aIy a neuraI nelvork of
16,000 rocessors lo idenlify images of cals on YouTube (see Iigure 10 for examIes). The
arlicIe's headIine ruefuIIy oses lhe queslion, Hov Many Comulers lo Idenlify a Cal`
16,000.

33
Levy and Murnane (2004) rovide numerous iIIuslralive examIes of lhe aulomalion of |ob lasks. Ior
inlroduclory maleriaI on machine Iearning vrillen by and for economisls, see Varian (2014).
34
y Iogging and anaIyzing lhe cIicks of users in resonse lo earIier queries, search engines aIso use
machine Iearning lo dynamicaIIy refine search resuIls offered for subsequenl queries. Ior examIe, if lhe
ma|orily of users vho recenlIy searched for lhe lerms degrees bacon cIicked on Iinks for Kevin acon
ralher lhan Iinks for besl bacon cooking lemeralures, lhe search engine vouId lend lo Iace lhe Kevin
acon Iinks higher in lhe Iisl of resuIls.
35
A IoveIy irony of machine Iearning aIgorilhms is lhal lhey aIso cannol leII rogrammers vhy lhey do
vhal lhey do. The decisions lhal a machine Iearning rogram makes foIIoving lraining are somelhing
of a bIack box.
29
Since lhe underIying lechnoIogieslhe soflvare, hardvare, and lraining dalaare aII
imroving raidIy (Andreoouos and Tsolsos, 2013), one shouId viev lhese examIes as
rololyes ralher lhan as malure roducls. SliII, lhe Iong-lerm olenliaI of machine Iearning for
circumvenling IoIanyi's aradox is a sub|ecl of aclive debale among comuler scienlisls. Some
researchers execl lhal as comuling over rises and lraining dalabases grov, lhe brule force
machine Iearning aroach viII aroach or exceed human caabiIilies. Olhers susecl lhal
machine Iearning viII onIy ever gel il righl on average vhiIe missing many of lhe mosl
imorlanl and informalive excelions.
To give lhis skelicism hefl, relurn lo lhe chaIIenge of lraining a machine lo recognize a chair.
UIlimaleIy, vhal makes an ob|ecl a chair is lhal il is a device urose-buiIl for a human being lo
sil uon. This urosiveness may be difficuIl for a machine Iearning aIgorilhm lo infer, even
given an arbilrariIy Iarge lraining dalabase of images. As Grabner el aI. (2011) argue, il is IikeIy
lhal humans recognize chairs nol simIy by comaring candidale ob|ecls lo slalislicaIIy
robabIe fealure sels bul aIso by reasoning aboul lhe allribules of lhe ob|ecl lo assess vhelher il
is IikeIy inlended lo serve as a chair. Ior examIe, bolh a loiIel and a lraffic cone Iook somevhal
Iike a chair, bul a bil of reasoning aboul lheir shaes vis-a-vis lhe human analomy suggesls lhal
a lraffic cone is unIikeIy lo make a comforlabIe seal. Draving lhis inference, hovever, requires
reasoning aboul vhal an ob|ecl is for nol simIy vhal il Iooks Iike. Conlemorary ob|ecl
recognilion rograms do nci, for lhe mosl arl, lake lhis reasoning-based aroach lo
idenlifying ob|ecls, IikeIy because lhe lask of deveIoing and generaIizing lhe aroach lo a
Iarge sel of ob|ecls vouId be exlremeIy chaIIenging.
36
One is reminded of CarI Sagan's remark
lhal, If you vish lo make an aIe ie from scralch, you musl firsl invenl lhe universe.
V||. Ccnc|usicns
A rinciIe concIusion from lhe discussion above is lhal lhe chaIIenges lo comulerizing
numerous everyday lasksfrom lhe subIime lo lhe mundaneremain subslanliaI. Lel us

36
CouId, for examIe, a machine lhal recognizes chairs by reasoning aboul lheir olenliaI comalibiIily
vilh human analomy aIso be readiIy rerogrammed lo recognize bicycIesor vouId il require anolher
sel of reasoning caabiIilies lo delermine vhelher lhe ob|ecl couId suorl a human being in lhe acl of
baIancing vhiIe in molion`
30
assume, hovever, lhal a sel of near-lerm breaklhroughs enabIes raid lechnoIogicaI rogress in
non-rouline manuaI and abslracl domains. Whal does lhis augur for Iabor demand`
As chronicIed in seclion II, lhere is a Iong hislory of Ieading lhinkers overeslimaling lhe
olenliaI of nev lechnoIogies lo subslilule for human Iabor and undereslimaling lheir olenliaI
lo comIemenl il. The green revoIulion disIaced Iabor from farming. The induslriaI revoIulion
reIaced skiIIed arlisanaI Iabor vilh unskiIIed faclory Iabor. The mass-roduced aulomobiIe
draslicaIIy reduced demand for bIacksmilhs, slabIe hands, and many olher equeslrian
occualions. Successive vaves of earlh moving equimenl and overed looIs disIaced
manuaI Iabor from conslruclion. In each case, grous of vorkers Iosl emIoymenl and earnings
as secific |obs and accomanying skiII sels vere rendered obsoIele.
Yel, shorl-lerm emIoymenl Iosses sarked by rising roduclivily vere evenluaIIy more lhan
offsel by subsequenl emIoymenl gainsin some cases in lhe innovaling seclors, in many cases
eIsevhere. In 1900, for examIe, 41 ercenl of lhe Uniled Slales vork force vas emIoyed in
agricuIlure. y 2000, lhal share had faIIen lo 2 ercenl, in Iarge arl due lo roduclivily gains
emanaling from lhe Green RevoIulion (Aulor, 2014b). Il is unIikeIy, hovever, lhal farmers al
lhe lurn of lhe lvenlielh cenlury couId foresee lhal one hundred years Ialer, heaIlh care,
finance, informalion lechnoIogy, consumer eIeclronics, hosilaIily, Ieisure and enlerlainmenl
vouId emIoy far more vorkers lhan agricuIlure.
ArguabIy, ve sland al a simiIar momenl loday. One can find fresh examIes daiIy in vhich
lechnoIogy subslilules for human Iabor in an exandinglhough sliII circumscribedsel of
lasks. The comIemenlarilies are aIvays harder lo idenlify. Desile lhese uncerlainlies, lhere
are lhree inferences in vhich ve can be fairIy confidenl:
A firsl is lhal lhe lechnoIogicaI advances lhal have secuIarIy ushed oulvard lhe demand for
skiIIed Iabor over many decades viII conlinue lo do so. As hysicaI Iabor has given vay lo
cognilive Iabor, lhe Iabor markel's demand for formaI anaIylicaI skiIIs, vrillen communicalions,
and secific lechnicaI knovIedge has risen seclacuIarIy. If lhe nineleenlh U.S. Iabor force vere
suddenIy reslored in lhe lvenlielh cenlury, a Iarge fraclion of vorkers vouId be sureIy
unemIoyabIe due lo lheir exceedingIy Iov IeveIs of educalionaveraging aroximaleIy nine
31
years of comIeled schooIing (Kalz and GoIdin, 2008). WhiIe some have secuIaled lhal lhe
advenl of Iabor markel oIarizalionarlicuIarIy lhe grovlh of Iov-educalion, manuaI lask-
inlensive |obsindicales lhal lhe comIemenlarily belveen higher educalion and lechnoIogicaI
change has come lo an end, lhis reasoning is incorrecl. Though comulerizalion may increase
lhe fraclion of |obs found in manuaI lask-inlensive vork, il is generaIIy unIikeIy lo raidIy boosl
earnings in lhese occualions for lhe reasons discussed above: an absence of slrong
comIemenlarilies and an abundance of olenliaI Iabor suIy. Thus, human cailaI inveslmenl
musl be al lhe hearl of any Iong-lerm slralegy for roducing skiIIs lhal are comIemenled
ralher lhan subsliluled by lechnoIogy.
A second observalion is lhal emIoymenl oIarizalion viII nci conlinue indefinileIy.
37
WhiIe
many middIe skiII iasks are suscelibIe lo aulomalion, many middIe skiII jc|s demand a mixlure
of lasks from across lhe skiII seclrum. To lake one rominenl examIe, medicaI suorl
occualionsradioIogy lechnicians, hIebolomisls, nurse lechnicians, elc.are a numericaIIy
significanl and raidIy groving calegory of reIaliveIy veII-remuneraled, middIe skiII
emIoymenl. WhiIe nol aII of lhese occualions require a coIIege degree, lhey do al Ieasl
demand lvo years of osl-secondary vocalionaI lraining. SignificanlIy, maslery of middIe
skiII malhemalics, Iife sciences, and anaIylicaI reasoning is indisensabIe for success in lhis
lraining.
Why are lhese middIe skiII |obs IikeIy lo ersisl and, olenliaIIy, lo grov` My con|eclure is lhal
many of lhe lasks currenlIy bundIed inlo lhese |obs cannol readiIy be unbundIed---vilh
machines erforming lhe middIe skiII lasks and vorkers erforming lhe residuaI---vilhoul a
subslanliaI dro in quaIily. Consider, for examIe, lhe commonIace fruslralion of caIIing a
soflvare firm for lechnicaI suorl onIy lo discover lhal lhe suorl lechnician knovs nolhing
more lhan vhal is on his or her comuler screenlhal is, lhe lechnician is a moulhiece, nol a
robIem soIver. This examIe calures one feasibIe division of Iabor: machines erforming
rouline lechnicaI lasks, such as Iooking u knovn issues in a suorl dalabase, and vorkers
erforming lhe manuaI lask of making oIile conversalion vhiIe reading aIoud from a scril.

37
This discussion dravs on Aulor (2013), vilh some assages quoled direclIy.
32
ul lhis is nol generaIIy a roduclive form of vork organizalion because il faiIs lo harness lhe
comIemenlarilies belveen lechnicaI and inlerersonaI skiIIs. Slaled in osilive lerms, rouline
and non-rouline lasks viII generaIIy coexisl vilhin an occualion lo lhe degree lhal lhey are
comIemenls---lhal is, lhe quaIily of lhe service imroves vhen lhe vorker combines lechnicaI
exerlise and human fIexibiIily.
38

This reasoning suggesls lhal many of lhe middIe skiII |obs lhal ersisl in lhe fulure viII combine
rouline lechnicaI lasks vilh lhe sel of non-rouline lasks in vhich vorkers hoId comaralive
advanlage---inlerersonaI inleraclion, fIexibiIily, adalabiIily and robIem-soIving.
39
MedicaI
suorl occualions are one Ieading examIe of lhis virluous combinalion, bul lhis examIe is
nol a singuIarily. This broad descrilion aIso fils numerous skiIIed lrade and reair
occualionsIumbers, buiIders, eIeclricians, HVAC inslaIIers, aulomolive lechnicians
markeling occualions, and even modern cIericaI occualions lhal rovide coordinalion and
decision-making funclions ralher lhan simIy lying and fiIing. Indeed, even as some formerIy
middIe skiII occualions are slried of lheir rouline lechnicaI lasks and arguabIy deskiIIed
for examIe lhe slockbroking occualionolher formerIy high-end lechnicaI occualions are
made accessibIe lo vorkers vilh Iess esoleric lechnicaI maslery, for examIe, lhe nurse
raclilioner occualion lhal increasingIy erforms diagnosing and rescribing lasks in Iieu of
hysicians. I execl lhal a significanl slralum of middIe skiII, non-coIIege |obs combining
secific vocalionaI skiIIs vilh foundalionaI middIe skiIIsIileracy, numeracy, adalabiIily,
robIem-soIving and common senseviII ersisl in coming decades.
A finaI observalion is lhal vhiIe much conlemorary economic essimism allribules lhe Iabor
markel voes of lhe asl decade lo lhe adverse imacls of comulerizalion, I remain skelicaI of
lhis inference. CIearIy, comulerizalion has shaed lhe slruclure of occualionaI change and
lhe evoIulion of skiII demands. ul il is harder lo see lhe channeI lhrough vhich
comulerizalion couId have dramalicaIIy reduced Iabor demand afler 1999. As documenled in

38
Lavrence Kalz memorabIy lilIes vorkers vho virluousIy combine lechnicaI and inlerersonaI lasks as
lhe nev arlisans (see Iriedman, 2010).
39
In generaI, lhese same demands for inleraclion frequenlIy riviIege face-lo-face inleraclions over
remole erformance, meaning lhal lhese same middIe skiII occualions may have reIaliveIy Iov
suscelibiIily lo offshoring.
33
Iigure 9, lhe onsel of lhe veak U.S. Iabor markel of lhe 2000s coincided vilh a shar !ccc|craiicn
in comuler inveslmenla facl lhal aears firsl-order inconsislenl vilh lhe onsel of a nev era
of cailaI-Iabor subslilulion. Moreover, lhe U.S. Iabor markel voes of lhe Iasl decade occurred
aIongside exlremeIy raid economic grovlh in much of lhe deveIoing vorId. Indeed,
frequenlIy overIooked in U.S.-cenlric discussions of vorId economic lrends is lhal lhe 2000s vas
a decade of rising vorId roserily and faIIing vorId inequaIily. Il seems imIausibIe lo me
lhal lechnoIogicaI change couId be enriching mosl of lhe vorId vhiIe simuIlaneousIy
immiseraling lhe vorId's lechnoIogicaIIy Ieading nalion.
My susicion is lhal lhe deceIeralion of lhe U.S. Iabor markel afler 2000, and furlher afler 2007,
is more cIoseIy associaled vilh lvo olher macroeconomic evenls. A firsl is lhe bursling of lhe
dol-com bubbIe, foIIoved by lhe coIIase of lhe housing markel and lhe ensuing financiaI
crisis, bolh of vhich curlaiIed inveslmenl and innovalive aclivily. A second is lhe emIoymenl
disIocalions in lhe U.S. Iabor markel broughl aboul by raid gIobaIizalion, arlicuIarIy lhe
shar rise of imorl enelralion from China foIIoving ils accession lo lhe WorId Trade
Organizalion in 2001. As documenled by Aulor, Dorn and Hanson (2013), Iierce and Scholl
(2013) and AcemogIu el aI. (2014), China's raid rise lo a remier manufacluring exorler had
far-reaching imacls on U.S. vorkers, reducing emIoymenl in direclIy imorl-comeling U.S.
manufacluring induslries and deressing Iabor demand in bolh manufacluring and non-
manufacluring seclors lhal lhal served as uslream suIiers lo lhese induslries. GIobaIizalion,
Iike lechnoIogicaI change, is nol lyicaIIy Iarelo imroving, arlicuIarIy in lhe shorl run. WhiIe
lhe Iong-run effecls of lhese deveIomenls shouId in lheory be osilive, lhe ad|uslmenl rocess,
as vilh lechnoIogicaI adalalion, is frequenlIy sIov, coslIy, and disrulive.

34
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1492.
CIark, CoIin. 1951. Tnc Ccn!iiicns cj |ccncnic Prcgrcss. London: MacmiIIan.
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Micro and Macro of Disaearing Rouline }obs. NIR Working Iaer -20307, }uIy.
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Pcrsuasicn: 358373.
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25.
MazzoIari, Irancesco and Giusee Ragusa. 2013. SiIIovers from High-SkiII Consumlion lo
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28(2), 328.
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37
Figure 1.
Chicago Booth IGM Expert Poll: Impact of Automation on Employment and Wages

Notes. Survey date February 25, 2014. Details available at
http://www.igmchicago.org/igm-economic-experts-panel/poll-
results?SurveyID=SV_eKbRnXZWx3jSRBb

0%
4%
8%
63%
25%
0%
10%
20%
30%
40%
50%
60%
70%
Strongly Disagree Disagree Uncertain Agree Strongly Agree
A. Advancing Automation has Not Historically Reduced Employment in the
United States...
4%
24%
30%
43%
0%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Disagree Strongly Disagree Uncertain Agree Strongly Agree
B. Information Technology and Automation Are a Central Reason Why
Median Wages Have Been Stagnant in the US Over the Past Decade,
Despite Rising Productivity.
38
Figure 2.
Percentage Changes in Employment by Major Occupational Category, 1979 2012

Source: 1980, 1990 and 2000 Census IIUMS fiIes, American Communily Survey
combined fiIe 2006 2008, and American Communily Survey 2012. SamIe incIudes
lhe vorking-age (16-64) civiIian non-inslilulionaIized ouIalion. ImIoymenl is
measured as fuII-lime equivaIenl vorkers.

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Changes in Employment by Occupation, 1979!2012
1979!1989 1989!1999 1999!2007 2007!2012
39
Figure 3.
Change in Occupational Employment Shares in Low, Middle and High Wage
Occupations in 16 EU Countries, 1993 - 2010

Source: Goos, Manning and SaIomons (forlhcoming, TabIe 1). High-aying occualions
are cororale managers, hysicaI, malhemalicaI and engineering rofessionaIs, Iife
science and heaIlh rofessionaIs, olher rofessionaIs, managers of smaII enlerrises,
hysicaI, malhemalicaI and engineering associale rofessionaIs, olher associale
rofessionaIs, Iife science and heaIlh associale rofessionaIs. MiddIe-aying occualions
are slalionary Ianl and reIaled oeralors, melaI, machinery and reIaled lrade vork,
drivers and mobiIe Ianl oeralors, office cIerks, recision, handicrafl, crafl rinling and
reIaled lrade vorkers, exlraclion and buiIding lrades vorkers, cuslomer service cIerks,
machine oeralors and assembIers, and olher crafl and reIaled lrade vorkers. Lov
aying occualions are Iaborers in mining, conslruclion, manufacluring and lransorl,
ersonaI and roleclive service vorkers, modeIs, saIesersons and demonslralors, and
saIes and service eIemenlary occualions.

-14.9%
-12.1% -12.0%
-10.9%
-10.8% -10.7% -10.6% -10.6%
-10.4%
-10.3%
-9.6%
-8.6%
-8.5%
-7.6%
-6.7%
-4.9%
-18%
-15%
-12%
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-6%
-3%
0%
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6%
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12%
15%
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Figure 4.
College Share of Hours Worked in the U.S. 1963-2012:
Workers with Less than 10 Years of Potential Experience

Source: Aulor (2014b, Iigure S2) based uon March Currenl IouIalion Survey dala
for earnings years 1963 2012.

1
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(
%
)
1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Males: 0-9 Yrs Experience Females: 0-9 Yrs Experience
41
Figure 5.
Changes in Mean Wages by Major Occupational Category among Full-Time, Full-Year
Workers, 1979 2012

Aulhor's caIcuIalions: 1980, 1990 and 2000 Census IIUMS fiIes, American
Communily Survey combined fiIe 2006 2008, American Communily Survey 2012.
SamIe incIudes lhe vorking-age (16-64) civiIian non-inslilulionaIized ouIalion
vilh 48+ annuaI veeks vorked and 35+ usuaI veekIy hours. WeekIy vages are
caIcuIaled as annuaI earnings divided by veeks vorked.

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Full!Time Full!Year Workers
Changes in Mean Weekly Wages by Occupation, 1979!2012
1979!1989 1989!1999 1999!2007 2007!2012
42
Figure 6.
Changes in Mean Wages by Occupational Skill Percentile among Full-Time, Full-Year
Workers, 1979 2012

combined fiIe 2006 2008, American Communily Survey 2012. The figure Iols
changes in mean Iog vages by 1980 occualionaI skiII ercenliIe rank using a IocaIIy
veighled smoolhing regression (bandvidlh 0.8 vilh 100 observalions), vhere skiII
ercenliIes are measured as lhe emIoymenl-veighled ercenliIe rank of an
occualion's mean Iog vage in lhe Census IIUMS 1980 5 ercenl exlracl. SamIe
incIudes lhe vorking-age (16-64) civiIian non-inslilulionaIized ouIalion vilh 48+
annuaI veeks vorked and 35+ usuaI veekIy hours. WeekIy vages are caIcuIaled as
annuaI earnings divided by veeks vorked.

!
5
0
5
1
0
1
5
2
0
1
0
0

x

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F
T
F
Y

W
a
g
e
0 20 40 60 80 100
Skill Percentile (Ranked by Occupations 1979 Mean Log Wage)
1979!1989 1989!1999 1999!2007 2007!2012
Smoothed Wage Changes by Skill Percentile
Among All Workers
43
Figure 7.
Smoothed Employment Changes by Occupational Skill Percentile, 1979 2012

combined fiIe 2006 2008, American Communily Survey 2012. The figure Iols
changes in emIoymenl shares by 1980 occualionaI skiII ercenliIe rank using a
IocaIIy veighled smoolhing regression (bandvidlh 0.8 vilh 100 observalions), vhere
skiII ercenliIes are measured as lhe emIoymenl-veighled ercenliIe rank of an
occualion's mean Iog vage in lhe Census IIUMS 1980 5 ercenl exlracl.
ImIoymenl in each occualion is caIcuIaled using vorkers' hours of annuaI Iabor
suIy limes lhe Census samIing veighls. Consislenl occualion codes for Census
years 1980, 1990, and 2000, and 2008 are from Aulor and Dorn (2013).

!
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0

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0 20 40 60 80 100
Skill Percentile (Ranked by Occupations 1979 Mean Log Wage)
1979!1989 1989!1999 1999!2007 2007!2012
Smoothed Employment Changes by Skill Percentile
Among All Workers
44
Figure 8.
Changes in Employment Shares in Broad Occupational Categories, 1979 2012:
Workers with and Without a Four-Year College Degree

combined fiIe 2006 2008, American Communily Survey 2012. ManuaI occualions
are ersonaI care, food/cIeaning service, and roleclive services. Rouline occualions
are oeralors/Iaborers, roduclion, office/adminislralive, and saIes. Abslracl
occualions are lechnicians, rofessionaIs, and managers.

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Manual Routine Abstract
A. Workers with At Least 4 Years of College
-
4
-
3
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x

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Manual Routine Abstract
B. Workers with Less Than 4 Years of College
1979-1989 1989-1999 1999-2007 2007-2012
45
Figure 9.
Private Fixed Investment in Information Processing Equipment and Software as a
Percentage of Gross Domestic Product, 1949-2014

Source: IRID, IederaI ank of Sl. Louis.
hll://research.slIouisfed.org/fred2/grah/`gGXc (accessed 8/3/2014)

0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
46
Figure 10. Images of Cats Successfully Recognized by Google X Labs Team
Using a Neural Network of 16,000 Processors

Source: rilish roadcasling Comany (}une 26, 2012,
hll://vvv.bbc.com/nevs/lechnoIogy-18595351, accessed 8/4/2014).


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