The returns to computer-based productivity: an anecdote

November 1, 2011

Do wages in the banking sector reflect “conspicuous consumption?” Yes, bankers like showing off their wealth. But perhaps that’s not the problem. I see the opposite end of this in my volunteering. I help out at an employment center, and was helping a woman write up her resume. She had cleaned and done inventory for a living, and was still searching for a job in similar low-wage occupations at the age of 50. Her human capital accumulation over her life seemed tiny. She knew nothing of computers, and did not have an email address, internet at home, or any ability to job-hunt online. She is precisely the kind of person who should worry by robots which vacuum and self-checkout lines. In comparison, I spend yesterday creating two programs to perform a specific kind of analysis. It will save me tons of time, and in fact, I can distribute it to anyone else to use. This will save them time, and help them do more work. Boom - instant scalability, time saving, effectiveness. That took me two hours, but it took years of skill accumulation to get to the point where it takes two hours. Sometimes it feels like this allows me to accelerate - my intellectual capital allows me to learn more faster, cheaper. Perhaps I’ve reached escape velocity. Much empirical evidence points to the fact that the recent gains in productivity from capital, education, and computers have increased inequality. As out ability to create robots and computers who do things humans general don’t want to do (sewage, hard manual labor, repetitive tasks), we might hope that we can re-train those who the automatons replace (or simply drive wages lower). But in my experience, as opposed to children who learn IT quickly and easily, older works without familiarity with computers are stymied. They don’t think they can learn to use them. Maybe they can’t, or can’t compete with younger workers. The thing which concerned me the most was that she didn’t want help learning how to use computers. I offered encouragement and advice. She had already decided she couldn’t. It’s very hard to invest in someone else’s development when they don’t believe in investing in themselves. It will be very hard for her to find (better?) employment without using the internet and a word processor. I agree that sometimes it can seem ridiculous to people like me, and Felix, that we and others get paid so much for doing so little. But that’s because we run in a crowd where everyone is like us - so we don’t see how different we are from Joe six-pack. The top 1% of america is made up of over 3 million people, most of who have tons of accumulated human capital and earn their wage doing things it would be hard for others to understand. We don’t see that we kind-of compete with the cleaning lady, because to call it a competition would be a joke. But often our jobs involve directly or indirectly figuring out ways to do their jobs more efficiently - which often means putting them out of a job. I agree that the wage gap is incredible, but I’m not sure that it doesn’t accurately reflect social productivity. For a very good read on this, try Race against the Machines.