...it's definitely the case that automation is raising the demand for skilled labor. And the work that I've done ... has been about what set of activities are complemented by automation and which set of activities is displaced, pointing out that on the one hand, there were tasks that were creative and analytical, and on the other, tasks that required dexterity and flexibility, which were very difficult to automate. So the middle of the skill distribution, where there are well understood rules and procedures, is actually much more susceptible to automation...That polarization of jobs definitely reduced the set of opportunities for people who don't have a college degree. People who have a high school or lower degree, it used to be they were in manufacturing, in clerical and administrative support. Now, increasingly, they're in cleaning, home health, security, etc.
The greater concern is not about the number of jobs but whether those jobs will pay decent wages and people will have sufficient skills to do them. That's the great challenge. It's never been a better time to be a highly educated worker in the western world. But there hasn't been a worse time to be a high school dropout or high school graduate.
...a lot of what we see—a lot of the political dissatisfaction, as well—comes from the fact that as average wealth and income in the U.S. have risen, it's a very, very geographically concentrated phenomenon. Most of that is basically New York, San Francisco, Los Angeles, San Jose, Houston, Boston, and a couple other places. It's not broadly shared prosperity. A lot of the country is actually kind of downwardly mobile.
You could have imagined a world where we all have Skype and mobile phones and broadband, and no one commutes anywhere, and we all live in our remote hilltop houses overlooking the water, and we'd have no reason to travel. But that doesn't appear to be the case at all.
It appears that remote and in-person communications are complements, not substitutes. Somehow the force of people wanting to clump together has actually, seemingly, if anything gotten stronger. And when we talk about these geographic inequalities, that's what we're seeing.
There are two schools of thought that you hear often. One is, ‘the sky is falling, the robots are coming for our jobs, we're all screwed because we've made ourselves obsolete.’ The other version you also hear a lot is, ‘We've been through things like this in the past, it's all worked out fine, it took care of itself, don't worry.’ And I think both of these are really wrong.
I've indicated I think the first view is wrong. The reason I think the second view is wrong is because I don't think it took care of itself. Countries have very different levels of quality of life, institutional quality, of democracy, of liberty and opportunity, and those are not because they have different markets or different technologies. It's because they've made different institutional arrangements. Look at the example of Norway and Saudi Arabia, two oil-rich countries. Norway is a very happy place. It's economically mobile with high rates of labor force participation, high rates of education, good civil society. And Saudi Arabia is an absolute monarchy that has high standards of living, but it's not a very happy place because they've stifled innovation and individual freedom. Those are two examples of taking the same technology, which is oil wealth, and either squandering it or investing it successfully.
I think the right lesson from history is that this is an opportunity. Things that raise GDP and make us more productive, they definitely create aggregate wealth. The question is, how do we use that wealth well to have a society that's mobile, that's prosperous, that's open? Or do we use it to basically make some people very wealthy and keep everyone else quiet? So, I think we are at an important juncture, and I don't think the U.S. is dealing with it especially well. Our institutions are very much under threat at a time when they're arguably most needed.