Research Findings

How computerization has opened up new opportunities for enhancing the earnings of the already privileged

February 18, 2021

Most of the research on rising economic inequality focuses on technological skill, productivity, and market forces. But of course, that is only part of the story. Just as important is workers’ bargaining power. The weakening of labor unions, which has left workers with less collective power to fight for their own interests, is a major story behind rising economic inequality in recent decades.

In a recent article, I find that rising wages for highly rewarded occupations has very little to do with technological advances, in and of itself, and a lot to do with the politics of production (broadly define) and power.

Computerization and Power over information

In a nutshell, the article’s argument is that computerization has provided a structural basis for rising wages for occupations with greater access to and control of information, independent of their range of skills related to computerization.

Computerization has dramatically expanded opportunities to digitize information. The opportunity to digitize information, in turn, gave the notion of information value as an economic good. Like other economic goods with some scarcity and value, information therefore became more controlled and asymmetric, an asymmetry that plays out between occupations. This asymmetry, catalyzed by the implementation of computerized technology and advanced information systems, creates structural holes in the production process between clusters of occupations. Workers on either side of the hole are exposed to different flows of information.   

The big question is, who benefits the most from it? In the article, I argue that it is mainly workers who have the technology to reorganize, aggregate, and transfer the information (e.g., computer programmer, information systems specialist), and those who know how to translate, interpret, and manipulate the data (e.g., managers, engineers). 

Thus, workers who manage and utilize data have the opportunity to broker the flow of information. This structural opportunity, which is embedded in workers’ location in the labor process’s information flow, makes them indispensable, with greater consequences for the choices made by the workers who do these jobs. These factors combine to produce considerable resources with greater bargaining power to extract higher wages.

What occupational trends tell us?

To evaluate this theoretical argument, I utilized decades-long data on occupational activities and tasks in 330 U.S. occupations. When I compared the trends in wage returns to locations in the information flow across U.S. occupations, I found a substantial and increasing wage premium for occupations doing data management (about 5%–13%), and even a higher premium for those doing data utilization (about 7%–24%). These premiums exist in addition to the wage returns from technological skills. There is, however, no wage premium for occupations doing only data entry, such as data entry keyers, records clerks, or typists.

The earnings premiums from information-based work disproportionately benefit those already advantaged in the labor market as occupations involved in data management and data utilization already experience higher wages as early as the early 1980s. 

Occupational and individual panel data

I also examined occupations that switch from low-information jobs to high-information. Examining over-time changes within occupations, I found that the switch of occupations to data utilization and data management is also related to a wage increase. Specifically, the results indicate that the switch of occupations to data utilization, and even more to data management, is related to a wage increase, even for occupations with similar technological skills.

Perhaps the strongest support for the argument on a wage premium for occupations located at critical junctions of information flow comes from utilizing individual-level rather than occupation-level data. This enabled me to examine whether workers that switch from a noncritical information job to a critical information job receive a wage premium. Accordingly, I found that workers who change their employment by starting new occupations classified as doing data utilization or data management receive a wage premium.

Is computerization skill-biased or class-biased?

Probably both. Previous studies advocating the Skill-Biased Technological Change (SBTC) thesis—that computers increase the productivity of, and demand for, high-skilled workers and occupations, thereby raising their wages above those of the less skilled—attributed inequality to the use of computers at work.  However, these accounts neglect an important feature of computerization: Computer-based technologies are information-centric and are critical to the operation and allocation of information in the labor process. Accordingly, I add to the SBCT view by finding that the wage benefits associated with using computers on the job are somewhat lower than those associated with the greater structural power accruing to some occupations due to their access to and control of information.

But even more importantly, this article emphasizes the notion that the effect of computerization on wages is influenced by positions of power among jobs and not only by workers’ skills and productivity.

This research was funded by the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation program.

Read more

Tali Kristal. “Why Has Computerization Increased Wage Inequality? Information, Occupational Structural Power and Wage Inequality.” Work and Occupations 2000.

Image: Mike Lawrence via flickr (CC BY 2.0)

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