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as well as any sales message she delivers.
A little of this interaction is within a computer’s
reach. Her employer is experimenting
with a computerized conversational interface
that may be able to provide answers to routine
questions. But Mary’s job requires conversation
over such a broad range of topics that her
job will require the fl exibility of human information-
processing for the foreseeable future.
It is likely, however, that the human will not
be sitting in the United States.
Other countries – notably India – are
making big strides in developing call-center
jobs like Mary’s. Operators are given typical
American names and are trained to speak
with regional American accents. Modern telecommunications
technology gives the conversation
the clarity of a local call. Drop-down
menus on an operator’s terminal contain
glossaries of everyday speech so that an operator
selling professional basketball tickets will
not have to ask the caller to explain what he
means by “Shaquille.” Since an operator in
Bangalore makes less than a quarter of Mary’s
salary, it is easy to imagine Mary’s job moving
overseas before very long.
Where Jobs Will Be Lost and Gained
Computer substitution had its greatest initial
impact on blue-collar and clerical jobs
Our Simonesque prediction is that the major
consequence of computerization will not be mass
unemployment, but a continued decline in the demand
for moderately skilled and less-skilled labor.
Fourth Quarter 2004 79
– rules-based jobs. The story of Mary Simmons’s
job illustrates our prediction that this
impact will expand upward in the wage distribution
into jobs that involve some pattern
recognition but still have a large rules-based
component. Think about income tax preparation.
The tax system is based on rules –
rules that are built into software like TaxCut
and TurboTax. While preparation of
complex tax returns requires expert
human judgment, many other tax
returns do not, and so it is not surprising
that the preparation of routine
income tax returns is beginning
to move offshore.
In some instances, this expanded
substitution will reach into highwage
jobs. A highly publicized case
has been the shift of programming
jobs to India and China.
We can think of this shift as stemming
from the combination of three
factors. One, at least for the moment,
is the low wages of Indian and Chinese
programmers. A second is the way that
software code written abroad can be transported
instantaneously to U.S. customers.
The third factor is the nature of the knowledge
required for programming. Creating an
advertising campaign for Fritos requires
extensive tacit knowledge of the U.S. market.
By contrast, debugging software modules for
an Oracle database requires knowing a selfcontained
set of programming rules that is
available to students everywhere.
While the movement of programming
jobs offshore illustrates that even some quite
skilled jobs are susceptible to outsourcing, we
see these as exceptions. The greatest impacts
of computer substitution (including outsourcing)
will be on jobs like call-center customer
service reps and blue-collar manufacturing
jobs – jobs in the lower middle of
the wage distribution now paying $20,000 to
$35,000 a year.
Thus, our Simonesque prediction is that
the major consequence of computerization
will not be mass unemployment, but a continued
decline in the demand for moderately
skilled and less-skilled labor. Job opportunities
will grow, but job growth will be greatest
in higher skilled occupations in which computers
complement expert thinking and complex
communication to produce new products
and services. At the same time, more
moderate expansion will occur in low-end,
low-wage service-sector jobs.
This declining demand for less-skilled
labor was implicit in Simon’s 1960 predictions,
and was given a modern face by Brookings
Institution economist Gary Burtless
some years later. In 1990, Burtless assessed
the fear that the U.S. job market would
become dominated by low-skilled, low-wage
work. His conclusion turned that fear on its
head: “Ironically, [less-skilled workers’] labor
market position could be improved if the
U.S. economy produced more, not fewer, jobs
requiring limited skill.”
What seemed like ivory-tower logic was
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80 The Milken Institute Review
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