Project Syndicate: Technology and Inequality
... There is no doubt that income inequality is the single biggest threat to social stability around the world, whether it is in the United States, the European periphery, or China. Yet it is easy to forget that market forces, if allowed to play out, might eventually exert a stabilizing role. Simply put, the greater the premium for highly skilled workers, the greater the incentive to find ways to economize on employing their talents. ...
... As skilled labor becomes increasingly expensive relative to unskilled labor, firms and businesses have a greater incentive to find ways to “cheat” by using substitutes for high-price inputs. The shift might take many decades, but it also might come much faster as artificial intelligence fuels the next wave of innovation.
Perhaps skilled workers will try to band together to get governments to pass laws and regulations making it more difficult for firms to make their jobs obsolete. But if the global trading system remains open to competition, skilled workers’ ability to forestall labor-saving technology indefinitely should prove little more successful than such attempts by unskilled workers in the past.
The next generation of technological advances could also promote greater income equality by leveling the playing field in education. Currently, educational resources – particularly tertiary educational resources (university) – in many poorer countries are severely limited relative to wealthy countries, and, so far, the Internet and computers have exacerbated the differences.
But it does not have to be that way. Surely, higher education will eventually be hit by the same kind of sweeping wave of technology that has flattened the automobile and media industries, among others. If the commoditization of education eventually extends to at least lower-level college courses, the impact on income inequality could be profound.
Many commentators seem to believe that the growing gap between rich and poor is an inevitable byproduct of increasing globalization and technology. In their view, governments will need to intervene radically in markets to restore social balance.
I disagree. Yes, we need genuinely progressive tax systems, respect for workers’ rights, and generous aid policies on the part of rich countries. But the past is not necessarily prologue: given the remarkable flexibility of market forces, it would be foolish, if not dangerous, to infer rising inequality in relative incomes in the coming decades by extrapolating from recent trends.