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TECHNOLOGY AND EMPLOYMENT Innovation and Growth in the U.S. Economy Richard M. C yert and David C. Mowery, Editors Pane} on Technology and Employment Committee on Science, Engineering, and Public Policy National Academy of Sciences National Academy of Engineering Institute of Medicine NATIONAL ACADEMY PRESS Washington, D.C. 1987

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NATIONAL ACADEMY PRESS 2101 Constitution Avenue, NVV Washington, DC 20418 The National Academy of Sciences (NAS) is a private, self-perpetuating society of distinguished scholars in scientific and engineering research, dedicated to the furtherance of science and technology and their use for the general welfare. Under the authority of its congressional charter of 1863, the Academy has a working mandate that calls upon it to advise the federal government on scientific and technical matters. The Academy carries out this mandate primarily through the National Research Council, which it jointly administers with the National Academy of Engineering and the Institute of Medicine. Dr. Frank Press is President of the NAS. The National Academy of Engineering (NAE) was established in 1964, under the charter of the NAS, as a parallel organization of distinguished engineers, autonomous in its administration and in the selection of members, sharing with the NAS its responsibilities for advising the federal government. Dr. Robert M. White is President of the NAE. The Institute of Medicine (IOM) was chartered in 1970 by the NAS to enlist distinguished members of appropriate professions in the examination of policy matters pertaining to the health of the public. In this, the Institute acts under both the Academy 1863 congressional charter responsibility to be an adviser to the federal government and its own initiative in identifying issues of medical care, research, and education. Dr. Samuel O. Thier is President of the IOM. The Committee on Science, Engineering, and Public Policy is a joint committee of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. It includes members of the councils of all three bodies. ISBN 0-309-03782-4, hard cover ISBN 0-309-03744-1, soft cover Library of Congress Catalog Card Number 87-42807 Copyright (3 1987 by the National Academy of Sciences No part of this book may be reproduced by any mechanical, photographic, or electronic process, or in the form of a phonographic recording, nor may it be stored in a retrieval system, transmitted, or otherwise copied for public or private use, without written permission from the publisher, except for the purposes of official use by the United States Government. This publication was prepared by the Panel on Technology and Employment of the Committee on Science, Engineering, and Public Policy. The statements, findings, conclu- sions, and recommendations are those of the authors and do not necessarily reflect the views of the Economic Development Administration or other sponsors. Cover photographs: (top) chip for echo-free conversations (Photomacrograph, fiber optic illumination) @) AT&T MicroScapes; (left) UNIPHOTO; (right) FourByFive. Printed in the United States of America

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Panel on Technology and Employment RICHARD M. CYERT (Chairman), President, Carnegie-Mellon University MORTON BAHR, President, Communications Workers of America DAVID CASS, Director, Center for Analytic Research in Economics and Social Science, University of Pennsylvania ALONZO A. CRIM, Superintendent, Atlanta Public Schools DOUGLAS A. FRASER, Past President, United Auto Workers; Professor of Labor Studies, Wayne State University RICHARD B. FREEMAN, Professor of Economics, Harvard University SAMUEL H. FULLER, Vice President, Research and Architecture, Digital Equipment Corporation JUDITH M. GUERON, President, Manpower Demonstration Research Corporation ANNE O. KRUEGER, Professor of Economics, Duke University LAWRENCE LEWIN, President, Lewin and Associates, Inc. JAMES N. MORGAN, Professor of Economics and Research Scientist, Institute for Social Research, University of Michigan THOMAS J. MURRIN, President, Energy and Advanced Technology Group, Westinghouse Electric Corporation ELEANOR HOLMES NORTON, Professor of Law, Georgetown University Law Center D. RAJ REDDY, Director, Robotics Institute, and Professor of Computer Science, Carnegie-Mellon University NATHAN ROSENBERG, Professor of Economics, Stanford University WILLIAM W. SCRANTON, III, Lieutenant Governor, Commonwealth of Pennsylvania, 1979-1987 G. RUSSELL SUTHERLAND, Vice President, Engineering, Deere Company MARTA TIENDA, Professor of Rural Sociology, University of Wisconsin LOUISE TILLY, Chair, Committee on Historical Studies, Graduate Faculty, New School for Social Research AMY D. WOHL, President, Wohl Associates Staff DAVID C. MOWERY, Study Director DENNIS HOULIHAN, Assistant to the Director NINA HALM, Administrative Assistant SARA COLLINS, Research Assistant . . .

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Committee on Science, Engineering, and Public Policy GILBERT S. OMENN (Chairman), Dean, School of Public Health and Community Medicine, University of Washington, Seattle H. NORMAN ABRAMSON, Executive Vice President, Southwest Research Institute FLOYD E. BLOOM,* Director and Member, Division of Pre-Clinical Neuroscience and Endocrinology, Scripps Clinic and Research Foundation W. DALE COMPTON, Senior Fellow, National Academy of Engineering EMILIO Q. DADDARIO, Esq., Wilkes, Artis, Hendrick, and Lane GERALD P. DINNEEN, Vice President, Science and Technology, Honeywell, Inc. ALFRED P. FISHMAN, William Maul Measey Professor of Medicine and Director, Cardiovascular-Pulmonary Division, University of Pennsylvania School of Medicine RALPH E. GOMORY, Senior Vice President and Chief Scientist, IBM Corporation ZVI GRILICHES, Nathaniel Ropes Professor of Political Economy, Harvard University ARTHUR KELMAN, Wisconsin Alumni Research Foundation Senior Research Professor of Plant Pathology and Bacteriology, Department of Plant Pathology, University of Wisconsin FRANCIS E. LOW, Institute Professor, Department of Physics, Massachusetts Institute of Technology EDWARD A. MASON, Vice President for Research, Amoco Corporation JOHN D. ROBERTS, Institute Professor of Chemistry, Division of Chemistry and Chemical Engineering, California Institute of Technology KENNETH J. RYAN, M.D., Kate Macy Ladd Professor of Obstetrics and Gynecology, Harvard Medical School; Chairman, Department of Obstetrics and Gynecology, Brigham and Women's Hospital LEON T. SILVER, William M. Keck Foundation Professor of Geology, Division of Geological and Planetary Sciences, California Institute of Technology HERBERT A. SIMON, Richard King Mellon University Professor of Computer Science and Psychology, Department of Psychology, Carnegie-Mellon University Ex Officio FRANK PRESS, President, National Academy of Sciences ROBERT M. WHITE, President, National Academy of Engineering SAMUEL O. THIER, President, Institute of Medicine Staff ALLAN R. HOFFMAN, Executive Director BARBARA A. CANDLAND, Administrative Coordinator CATHY DYSON, Senior Secretary *Term expired February 1987. 1V

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Sponsors This project was undertaken with both public and private support. Within the federal government, support was provided by the U.S. Department of Labor (the Assistant Secretary for Policy), the U.S. Depart- ment of Commerce (the Economic Development Administration), and the Army Recruiting Command. The following private organizations provided support for the study: the AT&T Foundation, the American Federation of Labor and Congress of Industrial Organizations, Citicorp, the Computer and Business Equipment Manufacturers Association, the General Motors Foun- dation, IBM Corporation, and the Xerox Foundation. The project also received support from the Thomas L. Casey Fund of the National Academy of Sciences and the National Research Council (NRC) Fund. The NRC Fund, a pool of private, discretionary, nonfederal funds, is used to support a program of Academy-initiated studies of national issues in which science and technology figure significantly. The fund consists of contributions from a consortium of private foundations including the Carnegie Corporation of New York, the Charles E. Culpeper Foundation, the William and Flora Hewlett Foundation, the John D. and Catherine T. MacArthur Foundation, the Andrew W. Mellon Foundation, the Rockefeller Foundation, and the Alfred P. Sloan Foun- dation; the Academy Industry Program, which seeks annual contributions from companies that are concerned with the health of U.S. science and technology and with public policy issues that have technology content; and the National Academy of Sciences and the National Academy of Engineering endowments.

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Preface In recent years, concern over the effects of technological change has led many Americans to ask whether the development and application of new technologies within the U.S. economy will create new employment or contribute to higher unemployment. Many Americans appear to be pessimistic about the answer to this question, an attitude that, if anything, has become more widespread, despite the nation's recovery from the 1981-1982 recession. The relationship of technology to employment and the ejects of technological change on the workplace and on U.S. productivity have become topics of national debate in the face of slow economic growth, high unemployment, and stagnation or decline in the real (inDation-adjusted) earnings of workers since 1970. The importance of these issues to the economic welfare of all Americans, coupled with the impetus of a 1983 National Academy of Engineering symposium that revealed a range of convicting opinions on the long-term implications of technological change for employment and a request from the Council of the National Academy of Engineering, prompted the Committee on Science, Engineering, and Public Policy (COSEPUP)~ to initiate the current study following consultation with scholars, government officials, and business, labor, and civic leaders familiar with the employment- related ejects of technology. Thus, in 1985 COSEPUP created the Panel 'COSEPUP is a joint committee of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. . . V11

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viii PREFACE on Technology and Employment to carry out a new inquiry into the impact of technological change on employment opportunities, productiv- ity, and the quality of work life (COSEPUP's charge to the panel is Appendix A). The Panel on Technology and Employment first met in September 1985 and continued to meet at regular intervals during the next 18 months. This report incorporates the results of our discussions in panel meetings, the expertise of individual panel members, staff research and analysis, briefings from experts in industry, academia, and labor (Appendix B is a list of individuals who presented briefings to the panel or served as consultants), and the findings of the research papers commissioned by the panel (see Appendix C). A selection of these papers will be published separately in Studies in Technological Change, Employment, and Policy in late 1987. To disseminate our analysis and findings as widely as possible, we will also publish a summary of our report, entitled Technology and Work in America: A Critical Challenge. This report addresses a number of issues that have surfaced in the debates over the employment impacts of technological change. These issues include the effects of technological change on levels of employment and unemployment within the economy; on the displacement of workers in specific industries or sectors of the economy; on skill requirements; on the welfare of women, minorities, and labor force entrants in a techno- logically transformed economy; and on the organization of the firm and the workplace. We have concluded that technological change will con- tribute significantly to growth in employment opportunities and wages, although workers in specific occupations and industries may have to move among jobs and careers. Included among our policy recommenda- tions, therefore, are initiatives and options that can assist workers in preparing for and making such transitions. In part because of the increased importance of international trade and competition within this economy, technological change has become essential to the preservation and expansion of U.S. employment and wages. The employment losses that result from a decline in U.S. international competitiveness are likely to outweigh any that might result from rapid technological change. Accordingly, we have developed policy recommendations to aid firms in the development and adoption of new technologies, so as to enhance their international competitiveness. Technological and structural change pervade the U.S. economy, as they do any dynamic economic system. To ensure growth in economic opportunities for U.S. workers, technology should be viewed not as the problem but rather as a key component of the solution. With the development of policies that support investment in the human resources of this nation, as well as policies that deal with the consequences of

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PREFACE 1X technological change in an equitable and humane fashion, we believe that this latest in a series of transitions to new structures of work and employment can be accomplished efficiently and fairly. In the modern world economy, there is little choice the United States must remain at the leading edge of technology in order to preserve and improve the economic welfare of all Americans. On behalf of the panel, I would like to thank the numerous individuals who met with us in the course of our deliberations to provide briefings and other assistance and information. We also wish to express our apprecia- tion for the work of the panel's professional staff: Dr. David Mowery, the study director; Dennis Houlihan; Nina Halm; Sara Collins; Leah Mazade, who worked with the staff in editing the report for publication; and Dr. Leonard Rapping, the panel's study director from June 1985 through March 1986. In addition, the panel is indebted to Dr. Allan Hoffman, executive director of COSEPUP, for his unflagging support of this study since its inception and to the reviewers of our report, including the members of COSEPUP. Finally, I extend my personal thanks to the members of the panel, who served with dedication and good humor throughout this study of a difficult and extensive set of problems and issues. Richard M. Cyert Chairman

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Contents EXECUTIVE SUMMARY . . Technology and American Economic Welfare, 1 Central Findings, 4 Policy Options and Recommendations, 7 1 INTRODUCTION Technology and American Economic Welfare, 16 Whose Jobs are Affected by Technological Change?, 19 Technological Change and Employment in an "Open" Economy, 20 Organization of the Report, 22 2 THE SOURCES AND RATE OF TECHNOLOGICAL CHANGE IN THE U.S. ECONOMY............ Defining Technological Change, 24 Sources of Technological Change, 32 The Diffusion of Technology, 40 Key Technology "Clusters", 47 Summary, 49 3 LABOR SUPPLY AND DEMAND WITHIN THE U.S. ECONOMY............... The U.S. Economy: Changes in Structure and Performance Since the 1960s, 51 X1 . 24 .. 51

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xii CONTENTS Trends in U.S. Unemployment, 55 Trends in Labor Supply, 61 Labor Demand, 71 International Trade, Technological Change, and U.S. Employment, 77 Summary, 85 4 STUDIES OF THE IMPACT OF TECHNOLOGICAL CHANGE ON EMPLOYMENT, SKILLS, AND EARNINGS: A CRITICAL REVIEW....................... The Employment Effects of Technological Change, 86 Skill Requirements and Technological Change, 99 The Effects of Technological Change on the Level of Earnings, 103 Technological Change and the Distribution of Earnings and Income, 106 DIFFERENTIAL TECHNOLOGY IMPACTS: BLACK WORKERS, FEMALE WORKERS, AND LABOR FORCE ENTRANTS ................ Black Workers, 113 Female Workers, 117 Labor Force Entrants, 119 6 TECHNOLOGICAL CHANGE AND THE WORK ENVIRONMENT ..... ...... .. ... . . The Impact of Technological Change on Organizational Structure, 122 Labor-Management Relations and the Implementation of Technological Change, 129 Technological Change and Workplace Health and Safety, 134 7 CURRENT POLICIES FOR WORKER ADJUSTMENT Job-Related Training, 138 Training in Basic Skills for Labor Force Entrants, 143 Displaced Workers, 143 8 THE QUALITY OF DATA ON TECHNOLOGICAL CHANGE, ITS EMPLOYMENT EFFECTS, AND ADJUSTMENT MECHANISMS ........... Data on Technology and Economic Performance, 161 .. 86 . 113 . 122 .. 137 . 160

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CONTENTS Xiii A Strategy for Surveys of the Impact of Technology on the Workplace, 164 Information on the Effectiveness of Worker Adjustment Programs, 166 9 FINDINGS........ Central Findings, 168 Chapter Findings, 171 10 POLICY OPTIONS AND RECOMMENDATIONS Recommendations for the Public Sector, 178 Recommendations for the Private Sector, 190 REFERENCES ..... APPENDIXES A. COSEPUP Charge to the Panel ...... B. Consultants to and Briefers of the Panel C. Papers Commissioned by the Panel..... D. Statement of Anne O. Krueger......... INDEX . 168 177 194 209 211 213 216 217

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