David Autor on the Labor Market

When economic news, especially that revolving around working, gets reported, it tends to get reported in aggregate – the total number of jobs affected or created, the average wage paid, the impact on a defined geographic area. This is an approach labor economist David Autor knows well. But he also knows that the aggregate often masks the effect on the individual.

In this Social Science Bites podcast, Autor, the Daniel (1972) and Gail Rubinfeld Professor, Margaret MacVicar Faculty Fellow, Google Technology and Society Visiting Fellow at the Massachusetts Institute of Technology, examines two momentous changes to global economics and how they play out for individuals. He explains to interviewer David Edmonds how the rise of China's manufacturing dominance and the widespread adoption of artificial intelligence likely are and will affect individual people accustomed to do specific tasks for pay.

What he finds is not as straightforward as the headlines alluded to above. Take China and its remarkable ascent and how that impacted the United States.

"[The rise] benefited a lot of people. It lowered prices. It allowed American companies to kind of produce a lot of products more cheaply. You know, it's hard to imagine Apple's growth without China, for example, to do all that assembly, which would have been extremely expensive to do in the United States. At the same time, it displaced a lot of people, more than a million, and in a very geographically and temporarily concentrated way, extremely scarring the labor market. Now those people also got lower prices, but that's not even remote compensation for what they lost. And now there are new jobs -- even in those places where those trade shock occurs -- but it's not really the same people doing them. It's not the people who lost manufacturing work."

Concerns about these shocks have been widespread in the 2020s, but the tough if erratic talk about tariffs coming from the U.S. president centers on the idea of restoring something (while ignoring question of that thing ever existed or if it makes sense to go back). Autor argues that the administration actually is asking the right question – but they are arriving at the wrong answers, He notes that the U.S. currently has a half a million unfilled manufacturing jobs open already, a sizeable figure relative to the nation's 13 million manufacturing workers. But that number itself is roughly a tenth of China's 120 million.

"We cannot compete with them across every front. .. What we should be very deeply worried about is losing the frontier sectors that we currently maintain. Those are threatened. So aircraft, telecommunications, robotics, power generation, fusion, quantum computing, batteries and storage, electric vehicles, shipping. These are sectors that we still have (except for shipping, actually) but China is making incredibly fast progress, and instead of trying to get commodity furniture back, we need to think about the current war we're in, not the last war."

At MIT, Autor is co-director of the School Effectiveness and Inequality Initiative, while off campus he is a research associate and co-director of the Labor Studies Program at the National Bureau of Economic Research.