For productivity to increase, labor costs must shrink. That’s fine provided new industries emerge to accommodate workers, but that really isn’t what we’ve seen so far in the Technological Revolution, the next great bend in the curve, as production and wages haven’t boomed. It’s been the trade of a taxi medallion for a large pink mustache. More convenient, if not cheaper (yet), for the consumer, but bad for the drivers.

Perhaps that’s because we’re at the outset of a slow-starting boom, the Second Machine Age, or perhaps what we’re going through refuses to follow the form of the Industrial Revolution. Maybe it’s the New Abnormal. The opening of the Economist feature, “Technology Isn’t Working“: 

“IF THERE IS a technological revolution in progress, rich economies could be forgiven for wishing it would go away. Workers in America, Europe and Japan have been through a difficult few decades. In the 1970s the blistering growth after the second world war vanished in both Europe and America. In the early 1990s Japan joined the slump, entering a prolonged period of economic stagnation. Brief spells of faster growth in intervening years quickly petered out. The rich world is still trying to shake off the effects of the 2008 financial crisis. And now the digital economy, far from pushing up wages across the board in response to higher productivity, is keeping them flat for the mass of workers while extravagantly rewarding the most talented ones.

Between 1991 and 2012 the average annual increase in real wages in Britain was 1.5% and in America 1%, according to the Organisation for Economic Co-operation and Development, a club of mostly rich countries. That was less than the rate of economic growth over the period and far less than in earlier decades. Other countries fared even worse. Real wage growth in Germany from 1992 to 2012 was just 0.6%; Italy and Japan saw hardly any increase at all. And, critically, those averages conceal plenty of variation. Real pay for most workers remained flat or even fell, whereas for the highest earners it soared.

It seems difficult to square this unhappy experience with the extraordinary technological progress during that period, but the same thing has happened before. Most economic historians reckon there was very little improvement in living standards in Britain in the century after the first Industrial Revolution. And in the early 20th century, as Victorian inventions such as electric lighting came into their own, productivity growth was every bit as slow as it has been in recent decades.

In July 1987 Robert Solow, an economist who went on to win the Nobel prize for economics just a few months later, wrote a book review for the New York Times. The book in question, The Myth of the Post-Industrial Economy by Stephen Cohen and John Zysman, lamented the shift of the American workforce into the service sector and explored the reasons why American manufacturing seemed to be losing out to competition from abroad. One problem, the authors reckoned, was that America was failing to take full advantage of the magnificent new technologies of the computing age, such as increasingly sophisticated automation and much-improved robots. Mr Solow commented that the authors, ‘like everyone else, are somewhat embarrassed by the fact that what everyone feels to have been a technological revolution…has been accompanied everywhere…by a slowdown in productivity growth.'”

Sure, we have phones that are way nicer now, but the Technological Revolution has largely been injurious to anyone in the Labor market, and things are going to get worse, at least in the near and mid term. A free-market society that is highly automated isn’t really very free. Drive for Uber until autonomous cars can take over the wheel, you’re told, or rent a spare room on Airbnb–make space for yourself on the margins through the Sharing Economy. But there’s less to share for most people. From an Economist report:

“Before the horseless carriage, drivers presided over horse-drawn vehicles. When cars became cheap enough, the horses and carriages had to go, which eliminated jobs such as breeding and tending horses and making carriages. But cars raised the productivity of the drivers, for whom the shift in technology was what economists call ‘labour-augmenting.’ They were able to serve more customers, faster and over greater distances. The economic gains from the car were broadly shared by workers, consumers and owners of capital. Yet the economy no longer seems to work that way. The big losers have been workers without highly specialised skills.

The squeeze on workers has come from several directions, as the car industry clearly shows. Its territory is increasingly encroached upon by machines, including computers, which are getting cheaper and more versatile all the time. If cars and lorries do not need drivers, then both personal transport and shipping are likely to become more efficient. Motor vehicles can spend more time in use, with less human error, but there will be no human operator to share in the gains.

At the same time labour markets are hollowing out, polarising into high- and low-skill occupations, with very little employment in the middle. The engineers who design and test new vehicles are benefiting from technological change, but they are highly skilled and it takes remarkably few of them to do the job. At Volvo much of the development work is done virtually, from the design of the cars to the layout of the production line. Other workers, like the large numbers of modestly skilled labourers that might once have worked on the factory floor, are being squeezed out of such work and are now having to compete for low-skill and low-wage jobs.

Labour has been on the losing end of technological change for several decades.”