Technological Change can Raise Relative Wages and Productivity of Low-Skill Workers

August 5, 2019

The usual story about technological change says that technology substitutes for low-skill work–replacing clerical tasks, jobs on the factory floor, and other rote information processing tasks. On the other hand, technological change augments creative design work, abstract reasoning, and other skills deemed high-skill (Brynjolfsson and Mcafee 2016). They call this phenomenon skill-biased technical change.

However, the interviews I did with tech company CEO’s in manufacturing and warehouse fulfillment, revealed that they were trying to make workers more productive–make more stuff and pick more orders in the warehouse without getting as tired. This story is about how technology can complement low-skill work–making workers on the factory floor more productive and seeing low-skill workers earn greater returns in wages.

I focus on the Electronic Shopping industry and, first, simply plot the hourly earnings of non-supervisory and production workers as a percentage of the hourly earnings of all employees. Chart 1, below, shows that the trend line between March 2006 and March 2019 increases about 8 percentage points. In other words, relatively low-skilled workers are earning a greater proportion of wages, and are outstripping the wage growth of managerial workers. (Source: https://beta.bls.gov/dataQuery/find?st=0&r=20&s=popularity%3AD&q=electronic+shopping&fq=survey:[ce]&more=0)

The next chart, Chart 2 below, gives us some intuition as to why this is happening. I overlay the ratio of aggregate hours for non-supervisory and production workers on top of the ratio of earnings and something interesting appears. Up until January 2014, non-supervisory and production workers were working a greater proportion of hours (red line), but earned a smaller proportion of wages (blue line). After January 2014, however, the red and blue lines flip. Non-supervisory and production workers began earning a greater share of wages, but were working a smaller share of hours. My interpretation for why this is happening is technological change. Low-skill workers are now more productive because of low-skill biased technological change–warehouse automation and manufacturing automation, for example.

The final chart shows that between March 2006 and March 2019, the ratio of employment of non-supervisory and production workers over the employment figures for all employees stays relatively flat. If anything, the trend line is slightly positive demonstrating that over the designated time period, non-supervisory and production workers are being employed in a constant proportion to managerial workers.

The Electronic Shopping industry shows that low-skill workers are not losing out to technology. In fact, technology is making them more productive and they are seeing wage gains relative to managerial workers.


Here are the definitions of non-supervisory and production workers from the CES ( https://www.bls.gov/web/empsit/cestn.htm):

Production and related employees

This category includes working supervisors and all nonsupervisory employees (including group leaders and trainees) engaged in fabricating, processing, assembling, inspecting, receiving, storing, handling, packing, warehousing, shipping, trucking, hauling, maintenance, repair, janitorial, guard services, product development, auxiliary production for plant’s own use (for example, power plant), recordkeeping, and other services closely associated with the described production operations.

Nonsupervisory employees

These are employees (not above the working-supervisor level) such as office and clerical employees, repairers, salespersons, operators, drivers, physicians, lawyers, accountants, nurses, social employees, research aides, teachers, drafters, photographers, beauticians, musicians, restaurant employees, custodial employees, attendants, line installers and repairers, laborers, janitors, guards, and other employees at similar occupational levels whose services are closely associated with those of the employees listed.

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