Watch Marshall Van Alstyne Explain Platform Economics

Where to Find More Content




      Take the Poll

      Refresh this widget
      What are the 2 biggest business/technology disruptions you are facing this year?

      Choose 2

      Paula KleinCreated by Paula Klein on Feb 26, 2015 in Public Site: MIT CDB

      Most Recent Blog Posts

      Refresh this widget

      IDE research on Machines and Work wins best paper award


      While most of us realize that the rapid rise of technology is having a profound impact on traditional work, new IDE research measures the actual scope and specific type of change taking place in the  U.S. economy—and offers strategic guidance for employees and employers.


      According to Racing With and Against the Machine: Changes in Occupational Skill Composition in an Era of Rapid Technological Advance, “many middle- and low-skill jobs have disappeared, contributing to increasing inequality, falling labor-force participation and stagnating median incomes.” The report—honored as the Best Conference Paper at the 2014 International Conference on Information Systems-- suggests ways to understand current trends and prepare the imminent disruption.


      GW, FM award (2).jpgIn December, MIT Sloan IDE researchers George Westerman (pictured, left) and Frank MacCrory (right), accepted the award for themselves and on behalf of fellow co-authors, IDE co-director, Erik Brynjolffson and Yousef Alhammadi from the Masdar Institute in Abu Dhabi. The ICIS conference, held in Auckland, New Zealand, December 14-17, was hosted by The University of Auckland Business School.


      Many economic factors are contributing to upheavals in the workforce, yet “technology -- particularly information technology that substitutes for routine work -- is an important driver” cited in the research. Based on comprehensive data in 674 occupations, the study examines how job skills and requirements have changed as a result of automation from 2006 to 2014.  For instance:

      “Recently, technology has moved beyond automation to cognition, with the ability to replace or augment human skills of different types. The differential improvements in technology’s capabilities have changed the types of jobs that are threatened by automation. Formerly, laborers and factory workers were threatened, but now lawyers and journalists are. While much of the prior research on skill-biased technical change has focused on a single dimension of more- or less-skilled work, the actual effects of technology are much more varied, affecting at least five distinct dimensions of skills. Moreover, the effects vary over time, which can explain the notable changes we document between 2006 and 2014.”


      For today’s employees and employers gearing up for this looming transformation means retraining and re-tooling to meet the new needs. Overall, there will be “a significant reduction in skills that compete with machines, an increase in skills that complement machines, and an increase in skills where machines (thus far) have not made great in-roads.” For example, fewer supervisors may be needed in an automated world, while deductive reasoning, problem solving, initiative and interpersonal skills are becoming more vital.

      ICIS Graph.jpg


      The report aims to create opportunities rather than pose threats for the future. “Researchers, managers and policymakers need to understand these changes if they are to diagnose them correctly and ultimately prescribe effective solutions,” the report concludes.



      5 Key Takeaways

      • The importance of “manual” skills within jobs has decreased over time.
      • The importance of “perception” skills within jobs has decreased over time.
      • The importance of “interpersonal” skills within jobs has increased over time.
      • The importance of workers’ facility with technology has increased over time.
      • Technological progress will affect the apparent complementarities among skills. That is, the pattern of correlations among the skills that are important within jobs will change over time. Flexibility is critical.



      January’s jobs report was so good that The Atlantic declared it to be ‘without a blemish.’ Job creation remained strong and wages grew as well. I agree that there was a lot to like about it, but it also strikes me that the enthusiasm it’s generated is a bit unsettling because it shows me how far our expectations have been diminished.


      At first glance, job growth looks quite torrid. The New York Times noted that “Since Nov. 1, employers have hired more than one million new workers, the best performance over a three-month period since 1997.” This sounds a bit better than it is: we need to keep in mind that there are also a lot more Americans of working age now than there were in the 1990s, so we need to generate more jobs just to hold steady.


      To see this, I used FRED to graph monthly job growth as a percentage of the working age US population:


      Screenshot 2015-02-09 16.53.00


      This graph shows a steady and encouraging upward trend since the end of the recession, but it also clearly shows that the rate of job creation has been well below what we experienced during the non-recession years of the 1980s and 1990s.


      And even though the job news is good and getting better, labor force participation remains quite low by historical standards, and has been generally declining even since the end of the great recession:


      Screenshot 2015-02-09 16.57.00


      This decline seems to have leveled off over the past year, but there’s not much evidence yet that it’s reversing itself.

      The more underwhelming trend is that of wage growth. Here’s year-over-year wage growth for the past few years:


      Screenshot 2015-02-09 17.01.13


      Here again, we see an uptick over the past year, but  only a small one.

      Data for front-line workers goes back a bit farther, and shows that wage growth is significantly lower than it’s been in the past. These workers have also seen a pretty sharp wage growth decline over the past few months:


      Screenshot 2015-02-09 17.05.28

      So while the January employment news is unquestionably good, there’s still a lot of room for it to get better. When I look at the participation and wage growth rates, I get the impression there’s still a lot of slack in the labor force.



      This post first appeared in my Business Impact of IT blog on February 10 here.


      The Second Machine Age: Challenges for CXOs

      Erik Brynjolfsson, co-author of the book The Second Machine Age, discussed with I-CIO the profound impact of automation on every industry and how CXOs must play a key role--now.

      Andrew McAfee on Technology and the American Workforce

      On the PBS NewsHour last April, Andy McAfee spoke about how increased use of technology does play a role in the current disappointing job growth statistics.