THE BEST IS YET TO COME:

Ryan Avent: [...] [I]n my view, what's going on is that we are in fact experiencing this really dramatic technological change - that the digital revolution is really powerful. And one of the main things that it's doing actually is adding hugely to the amount of effective labor that's available to firms. And part of that is in the way that it's opened up global supply chains and allowed billions of low-wage workers to join the global labor market. Part of it is in automation - that there are a lot of routine tasks in factories and in offices that can now be automated. And part of it is that people in a lot of high-skilled jobs in finance, in media, in technology, are able to use these new technologies to do work that used to require a lot more people to do and in the process are displacing workers.

Ironically, the more powerful the digital revolution becomes, the more people we have out there looking for low-wage work and the less of an interest firms have in using machines to replace them.

And so the net effect is that we just have this enormous, abundant labor. And as the economy struggles to find places to put all these workers who want jobs, what happens is we see downward pressure on wages. That's kind of the adjustment mechanism.

But if you're an employer and you suddenly find yourself with a huge reservoir of willing workers at very low wages, you suddenly say, well, you know what? I don't need to invest in this labor-saving technology. I don't need to replace my cashiers with automated checkout. I don't need to replace the people moving boxes in the warehouse with robots.

And so you get this sort of self-limiting technological change. Ironically, the more powerful the digital revolution becomes, the more people we have out there looking for low-wage work and the less of an interest firms have in using machines to replace them.

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