The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies

by Erik Brynjolfsson

And indeed manufacturing employment in the United States has fallen over the past twenty years; economists David Autor, David Dorn, and Gordon Hanson estimate that competition from China can explain about a quarter of the decline in U.S. manufacturing employment.28 However, when one looks more closely at the data, the globalization story becomes much less compelling. Since 1996, manufacturing employment in China itself has actually fallen as well, coincidentally by an estimated 25 percent.29 That’s over thirty million fewer Chinese workers in that sector, even while output soared by 70 percent. It’s not that American workers are being replaced by Chinese workers. It’s that both American and Chinese workers are being made more efficient by automation. As a result, both countries are producing more output with fewer workers. In the long run, the biggest effect of automation is likely to be on workers not in America and other developed nations, but rather in developing nations that currently rely on low-cost labor for their competitive advantage. If you take most of the costs of labor out of the equation by installing robots and other types of automation, then the competitive advantage of low wages largely disappears.