The Washington Post's article "Cloud Centers Bring High-tech Flash, but Not Many Jobs to Beaten-down Towns" is simply sophomoric silliness masquerading as sophisticated news. The article weaves together a series of anecdotes to paint a picture that conveniently supports its premise: technology and the resulting productivity growth is a source of unemployment -- particularly in the manufacturing sector. The inconvenient truth is that the facts contradict this story. Those who have spent time studying the issue, including a definitive report from the National Bureau of Economic Research (NBER), conclude that "more rapid productivity growth leads to higher rather than lower employment in manufacturing."
The NBER study has been supported by economists at the Federal Reserve who write that, "a positive technology shock leads to a reduction in the unemployment rate that persists for several years, and likewise by the OECD in a definitive review of the studies on productivity and employment, Jobs Study: Facts, Analysis, Strategy. That report concluded that, technology "generally destroys lower wage, lower productivity jobs, while it creates jobs that are more productive, high-skill and better paid. Historically, the income-generating effects of new technologies have proved more powerful than the labor-displacing effects: technological progress has been accompanied not only by higher output and productivity, but also by higher overall employment."
It is true that for individual companies or industries, technology and higher productivity growth may lead to a loss of jobs. For example, there was a significant decline in employment in the typewriter manufacturing industry following the advent of the personal computer, but the spin-off benefits -- employment and otherwise -- from the PC industry are beyond dispute.
We are saddened by the slow job creation in the U.S. but it is against our best interest to scapegoat the technology sector. The cause of lower employment over the last decade, including in the manufacturing sector, is not technology and higher productivity growth in the United States. Rather, the source is likely to be higher productivity growth, and more pronounced price declines, among foreign manufacturers that compete with U.S. companies. In China in particular, productivity has been rising and costs have been declining more rapidly than in the United States -- particularly in industries such as consumer electronics and apparel, where China did not compete with the United States two decades ago. It is this loss of U.S. global competitiveness that is principal cause of anemic job growth.
What the U.S. economy needs to restore job growth is a commitment to a national action plan focused on driving growth and creating jobs through making investments in basic research, science education, and R&D; enforcing our trade agreements and boosting our exports; lowering effective corporate tax rates; improving physical and digital infrastructure; and embracing the power of technology (particularly IT) to transform and to make more efficient entire sectors of the economy. The evidence is clear: technology is part of the job creation solution, not part of the problem.
For more on this, look for the Information Technology Industry Foundation's upcoming report on"America's Competitiveness Crisis and the Anemic Job Recovery."
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