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9 Findings Our principal finding on the employment-related ejects of technology states that: Technological change is an essential component of a dynamic, expanding economy. The modern U.S. economic system, in which international trade plays an increasingly important role, must generate and adopt advanced technologies rapidly, in both the manufacturing and nonmanufacturing sectors, if growth in employment and wages is to be maintained. Recent and prospective levels of technological change will not produce significant increases in total unemployment, although individuals willface painful and costly adjustments. Rather than producing mass unemployment, technolog- ical change will make its maximum contribution to higher living standards, wages, and employment levels if appropriate public and private policies are adopted to support the adjustment to new technologies. The panel's other central findings, which cover a number of dimensions of the employment impact of technological change and form the basis for the policy recommendations in Chapter 10, are listed below. This listing is followed by subsidiary findings from each chapter. CENTRAL FINDINGS Employment and Wage Impacts of Technological Change in an Open Economy Historically, technological change and productivity growth have been associated with expanding rather than contracting total employ 168

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FINDINGS 1 69 ment and rising earnings. The~future will see little change in this pattern. As in the past, however, there will be declines in specific industries and growth in others, and some individuals will be displaced. Technological change in the U.S. economy is not the sole or even the most important cause of these dislocations (see Chapters 2 and 3~. The adoption of new technologies generally is gradual rather than sudden. The employment impacts of new technologies are realized through the diffusion and adoption of technology, which typically take a considerable amount of time. The employment impacts of new technologies therefore are likely to be felt more gradually than the employment impacts of other factors, such as changes in exchange rates. The gradual pace of technological change should simplify somewhat the development and implementation of adjust- ment policies to help affected workers (see Chapter 21. Within today's international economic environment, slow adoption by U.S. firms (relative to other industrial nations) of productivity- increasing technologies is likely to cause more job displacement than the rapid adoption of such technologies. Much of the job displacement of the past 7 years does not reflect a sudden increase in the adoption of labor- saving innovations but instead is due in part to increased U.S. imports and sluggish exports, which in turn reflect macroeconomic forces (the large U.S. budget deficit and the high foreign exchange value of the dollar during 198~1985), slow adoption of some technologies in U.S. manufac- turing, and other factors (see Chapters 2 and 31. The rate of technology transfer across national boundaries has grown; for the United States, this transfer increasingly incorporates significant inflows of technology from foreign sources, as well as outflows of U.S. research findings and innovations. In many technolo- gies, the United States no longer commands a significant lead over industrial competitor nations. Moreover, technology "gaps" (the time it takes another country to become competitive with U.S. industry or for U.S. firms to absorb foreign technologies) are likely to be shorter in the future (see Chapter 31. Technology and the Characteristics of Tomorrow's Jobs New technologies by themselves are not likely to change the level of job-related skills required for the labor force as a whole. We do not project a uniform upgrading or downgrading of job skill requirements in the U.S. economy as a result of technological change. This does not deny the need, however, for continued investment and improvement in the job-related skills of the U.S. work force to support the rapid adoption of new technologies that will contribute to U.S. competitiveness (see Chapter 41.

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170 TECHNOLOGY AND EMPLOYMENT Technological change will not limit employment opportunities for individuals entering the labor force with strong basic skills. The most reliable projections of future job growth suggest that the number of jobs in the broad occupational categories accounting for the majority of entrant employment will continue to expand. Combined with a projected lower rate of growth in the entrant pool, this conclusion suggests that labor force entrants with strong basic skills (numerical reasoning, prob- lem solving, literacy, and written communication) will fare well in the job markets of the future (see Chapter 51. Technology and Work Force Adjustment A substantial portion from 20 to 30 percent of displaced workers with job experience lack basic skills. These workers often remain unem- ployed longer and have difficulty finding new jobs without incurring significant wage reductions. In view of the fact that technological and structural change in this economy will place increasing demands on the ability of workers to adjust, experienced workers who lack basic skills will face even greater difficulties in future job markets (see Chapter 31. The evidence suggests that displaced workers who receive substan- tial advance notice of permanent job loss experience shorter periods of unemployment than workers who do not receive such notice. Substantial advance notice (several months) of permanent layoffs or plant shutdowns appears to reduce the severity of worker displacement. Moreover, such a policy can improve the effectiveness of job search assistance, counseling, and retraining programs, thereby reducing the public costs of unemploy- ment (see Chapter 71. The primary federal program for displaced workers, Title III of the Job Training Partnership Act (JTPA>, emphasizes the rapid placement of workers in new jobs. It does not appear to serve the needs of many displaced workers. JTPA provides little training for the substantial number of displaced workers who need better basic skills; it also provides little extended training in job-related skills for other workers (see Chapter 71. Displaced worker adjustment assistance programs reduce the dura- tion of unemployment after displacement and result in higher wages in new jobs obtained immediately after participation in such programs. There is limited evidence on the contribution of retraining in basic and job-related skills (a component of many such programs) to the employ- ment and earnings prospects of displaced workers. Nevertheless, it would be wrong to conclude from this that retraining is ineffective or that it has a negative impact on earnings or reemployment prospects. Too little is known about the components of effective adjustment programs for displaced worker populations with different characteristics because of the

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FINDINGS 17 1 paucity of rigorous evaluations of such programs. Additional policy experiments and evaluations are badly needed to improve these programs (see Chapters 7 and 84. CHAPTER FINDINGS Chapter 2: The Sources and Rate of Technological Change in the U.S. Economy Nontechnological, managerial, and organizational factors power- fully influence the adoption of new technologies and the impact of their adoption on product quality, labor productivity, and the skill require- ments of labor. Indeed, the recent experience of some U.S. adopters of advanced manufacturing technologies suggests that changes in the struc- ture of management and production organization are as important as the technologies themselves in improving productivity and product quality. A work force that is well trained in job-related skills, and therefore capable of adopting new technologies more rapidly, can improve the ability of U.S. firms to remain at the technological frontier and to compete more electively in international markets. The evidence on job-specific training and the adoption of new technologies in other nations, such as Japan, Sweden, and West Germany, is qualitative rather than quantitative, but it suggests that investments in improving the job-related skills of the blue-collar work force can contribute to more rapid adoption and effective utilization of new technologies. The rate of technological change in the United States does not appear to have increased in recent years. Acceleration in the rate at which new technologies are developed and adopted within this economy should be revealed in increases in labor productivity growth within the overall economy. Such growth during the past decade has been well below its postwar average. Within the manufacturing sector, labor productivity growth recently has increased, although it does not significantly exceed levels of the 1950s or early 1960s. In the nonmanufacturing sector, labor productivity growth remains low, well below the postwar average (although this may reflect measurement problems). Chapter 3: Labor Supply and Demand Within the U.S. Economy An average of more than 1 million experienced workers (those with at least 3 years' tenure in their jobsJ were displaced each year during 1979-1983. The annual flow of displaced workers accounted for 10-13 percent of the unemployed population during 1979-1983, although the

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172 TECHNOLOG Y AND EMPLO YMENT - share of total unemployment during this period for all displaced workers ranged between 20 and 31 percent. Data covering 1983 and 1984 suggest that the rate of displacement of experienced workers has not declined significantly. Workers with higher levels of training in job-related skills experience shorter spells of unemployment after lay odds than workers without such training. These workers are also more likely to find better-paying jobs than their less skilled colleagues. Blue-collar workers' adjustment to new technologies and structural change may be impaired as a result of the tendency for these workers to receive less employer-financed training than white-collar employees, as Chapter 7 discusses in greater detail. The rate of growth in the U.S. Iabor force is projected to be considerably lower during the next decade than it was during 1975-1985. This slower rate of growth should reduce somewhat the supply of labor relative to demand and should ease worker adjustment to technological change. Projected low rates of labor force growth during 1987-1995 also mean that the gender composition and ethnic makeup of the 1995 labor force will closely resemble those of the 1987 labor force. The economic returns from higher educational attainment within the U.S. Iabor force have increased substantially since the 1970s. Measured as the difference in median annual income, the economic returns to completing high school have increased significantly since 1973. Such increases reflect the importance of basic skills for quality jobs and career advancement within the modern economy. Serious gaps persist in the level of secondary educational attainment of whites, blacks, and Hispanics within the U.S. work force, although these gaps have narrowed in recent years. As the data on the economic returns from educational attainment suggest, workers with lower levels of educational attainment have more trouble obtaining quality jobs as entrants or displaced workers. The persistence of these educational gaps therefore will contribute to racial and ethnic economic inequality. The dynamic character of U.S. Iabor markets, combined with the gradual pace of technological change, should ease worker adjustment to such change. Although the U.S. labor market is characterized by high rates of job creation and loss, this fluidity is not caused by technological change; rather, it resects changes in the structure of the economy and the growth of individual firms. For many U.S. workers, the costs of displace- ment are high, but the duration of unemployment after displacement is shorter than for displaced workers in Western Europe. The level of demandfor U.S. Iabor, especially in manufacturing, has been Affected by declines in the international competitiveness of many U.S. industries. The recent realignment of foreign exchange rates will aid U.S. exports and reduce import penetration of many U.S. markets. Yet

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FINDINGS 1 73 this realignment has not solved and will not solve the nation's competi- tiveness problem without improved U.S. performance in technological and other areas (e.g., rates of capital formation). The rate of decline in the manufacturing sector's share of total employment has accelerated during the past 7 years. In addition, the wage losses incurred by the small stream of workers moving involuntarily from manufacturing to nonmanufacturing industry have increased. Tech- nological change is but one of a number of influences affecting this decline and by no means the most important one. The foreign exchange rate of the U.S. dollar and slow rates of economic growth in nations buying a large share of U.S. exports appear to be even more significant factors. Chapter 4: Studies of the Impact of Technological Change on Employment, Skills, and Earnings: A Critical Review Forecasting the sectoral or occupational impacts of technological change is extremely difficult. Numerous factors, such as the length of time required for the widespread diffusion of an innovation, affect the employ- ment impacts of technological change. These factors operate with varying lags and exert offsetting influences on the demand for labor. In addition, the data available to measure these factors often are deficient in quantity and quality. The results of most forecasts in this area therefore should be viewed with considerable skepticism. Technological change does not appear to be responsible for growth in the inequality of the distribution of household incomes during the past two decades. Increasing inequality in the before-tax household income distribution reflects changes in the composition of the U.S. work force and the structure of the family, rather than the impact of technological change. Changes in the structure of federal entitlement programs and tax policies since 1981 appear to have contributed to increased inequality in the after-tax household income distribution. Assessing the elect of technological change on occupational struc- ture and entry-level job skill requirements beyond basic skills is fraught with uncertainty. Such uncertainty derives from the dynamic character of the U.S. economy, the unpredictable direction and impacts of future technological change, and the fact that the effects of new technologies on skill requirements often are affected heavily by managerial decisions concerning the organization of work. This uncertainty reinforces the arguments favoring a "generalist" approach to the education of entrants to the labor force, emphasizing basic skills, rather than a large investment of resources in training for a specific set of vocations.

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174 TECHNOLOGY AND EMPLO YMENT Chapter 5: Diflerential Technology Impacts: Black Workers, Female Workers, and Labor Force Entrants The negative employment impact of technological change within specific occupations will have little if any elect on the future employment prospects of black workers. Nevertheless, reductions in barriers to minority employment in all occupations would improve the ability of blacks to adjust to technological change. As in the case of blacks, the employment-reducing impacts of techno- logical change within specific occupations, which are small in the aggre- gate, will have little elect on the employment prospects of women. Reducing barriers that impede the entry of women into other occupations would expand their employment options and thus improve their ability to adjust to such change. Labor force entrants from minority groups often have low levels of educational attainment that imply weak basic skills and that impair the adjustment of these groups to technological change. Continued efforts to raise the quality of entrants' basic skills preparation, narrowing the gap in educational attainment between black and white as well as Hispanic and white youth, will aid such adjustment. Chapter 6: Technological Change and the Work Environment A "two-tiered" work force, which might develop as a result of de- creases in career mobility within the workplace and reductions in the skill requirements for some jobs, does not appear to be an inevitable result of technological change. The evidence is limited on the effects of technological change on career mobility within the workplace. These effects are not determined solely by technological factors but are also influenced by managerial decisions on the design and implementation of new technologies. Case studies, which provide some indication of these impacts, do not suggest a uniform reduction in such mobility. Although future developments may change this judgment, our review of the evidence suggests that new tech- nologies will not reduce upward mobility within the workplace. Management policies (including retraining for other jobs within the firm, advance notification of the introduction of new technologies, or labor-management consultation on the introduction of technology) that help workers adjust to technological change often benefit both management and labor by allowing more rapid introduction of new technologies without significant production losses or other disruptions. Worker involvement and responsibility in planning the adoption of technology often can improve the performance of new process technologies. Greater cooperation between

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FINDINGS 1 75 management and labor (both union and nonunion) can improve U.S. productivity and competitiveness, thereby enhancing job security and sup- porting growth in real wages. The direct and indirect impacts of technological change may pose significant challenges to the structure of health and safety regulation, while also contributing to the reduction of workplace hazards. For example, information and computer-aided manufacturing technologies could reduce workplace hazards by contributing to safer production processes. Increases in the share of employment accounted for by small firms, however, may create problems for the enforcement of federal and state workplace safety and health regulations. Chapter 7: Current Policies for Worker Adjustment Some federal policies for dealing with displaced workers, such as Trade Adjustment Assistance (TAAJ, have differentiated among these workers by the cause of their displacement. This program design has resulted in the inequitable treatment of different groups of displaced workers andirequently has introduced long delays in the delivery of assistance. Because of the need to certify the causes of worker displacement under the provisions of TAA, assistance was delayed in some cases as long as 14 months, which hampered the use of program funds for retraining displaced workers. Existing unemployment compensation policies provide income sup- port during temporary layoffs, but they do not deal electively with the problems of long-term displacement. Moreover, in many states, workers undertaking retraining are ineligible for unemployment compensation. The training system as a whole appears to be highly responsive to the changing demands of employers for new job-related skills. There are serious questions, however, about the ability of displaced workers to finance their access to this system. Forecasts of detailed skill requirements for the U.S. economy historically have been inaccurate and of marginal value. In view of this fact, as well as the evidence on the high degree of flexibility and responsiveness of the training system to changing employer and worker demands, we see little need for additional investments in forecasting detailed skill or training requirements. Chapter 8: The Quality of Data on Technological Change, Its Employment Effects, and Adjustment Mechanisms The quality of data on many detailed aspects of technological change and its economic consequences is poor. In areas ranging from productiv

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176 TECHNOLOG Y AND EMPLO YMENT ity growth in nonmanufacturing industries to the rates of diffusion of technologies in both manufacturing and nonmanufacturing industry to the effectiveness of worker adjustment programs, knowledge and understand- ing are impaired by a dearth of reliable quantitative measures. Deficien- cies in the available data hinder detailed analyses of the impact of technology on employment and the design of policies to address the problems created by technological and structural change.