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Question of the Day
While consumers and workers have enthusiastically embraced the changes that came with smartphones, laptops and other devices, less visible to the naked eye have been the wide-ranging changes in the backrooms and inner plants of corporations big and small.
“Process innovation, such as developing new manufacturing methods or innovative delivery or distribution methods” have been “powerful drivers of economic trends,” Mr. Carson said, including the “just-in-time” inventory system that has slashed the cost of carrying supplies for most businesses.
To address the competitive challenges from China and other emerging markets in the past decade, businesses “created global supply chains, increased outsourcing and shifted investments offshore,” he said, taking advantage of the increasingly automated and globalized workforce.
Following standard economic advice, Congress regularly enacts tax incentives for businesses to invest in the latest technologies as part of legislation to stimulate the economy in the face of downturns.
But there’s a darker side to such policies for workers that is not much discussed in Washington. As the technologies are adopted more widely each year, the efficiency gains have come at the rising cost of displacing workers who are no longer needed to carry out tasks that can be more profitably automated, or performed by lower-paid workers overseas. The shedding of workers has occurred steadily since the 1990s, but it increased dramatically during the Great Recession, when millions of workers lost their jobs.
Congressional investment tax credits helped to turn the recession into a watershed event that accelerated the technological change in many industries. Tech firms and most other American businesses including manufacturers and law offices used the sudden drop in demand across the economy caused by the October 2008 financial crisis as a pretext to lay off staff and switch to an online-business model or adopt other automated approaches that would help them cut costs and streamline their businesses.
This technological restructuring was not the cause of the recession, but it played an important role in accelerating the layoffs and holding back growth in jobs even when the economy started to recover in mid-2009.
Awareness of the role of this technological change in the economy is growing in Washington. President Obama himself singled out the phenomenon as one reason he said was behind the sluggish pace of job growth since the recession ended.
“A lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you use an ATM — you don’t go to a bank teller,” he said in an interview with MSNBC this month. “Or you go to an airport and use a kiosk instead of checking in at the gate.”
The president, like most others in Washington, suggested that this “structural” change is something Washington should continue to promote rather than hinder, despite the hardship it may cause workers in older industries. The bipartisan belief is that more investment will open up new jobs in advanced technologies and offshoot industries, even if it destroys some old jobs along the way.
With the boost from Congress and drive by recession-plagued businesses to find cost savings, the tech industry fared better than most other sectors during the recession. Tech jobs grew by 6.8 percent while the overall workforce shrank by 4.5 percent between 2007 and 2011 as a result of the downturn, according to the Information Technology and Innovation Foundation.
Companies continue to frenetically update their business models. For a firm like IBM, modernizing business is its stock in trade, making it little wonder that it found opportunities during the downturn and applied the same housecleaning techniques to its own operations.
Empowering a global workforce
The offshoring of manufacturing jobs was the story of the 1990s and 2000s, as U.S. businesses shifted production overseas to take advantage of lower wage rates and looser environmental standards in emerging countries such as China. Some analysts and entrepreneurs think the trend toward offshoring service-sector jobs like tax preparation, accounting and paralegal paperwork is only in its infancy as people around the world get increasingly wired with access to computers and mobile devices.
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