Occupational Choice in the Face of Technological Disruption
When a new technology threatens to take away jobs in an established industry, employment in that industry declines and wages rise. Workers demand extra pay — an “obsolescence rent” — to enter a soon-to-be-outdated profession. Young workers are less likely to enter such an industry but older workers may be more likely, so its workforce gets older and grayer as it shrinks. This pattern was observed among teamsters at the dawn of the twentieth century when motorized trucks began replacing horse-drawn carriages, and it may happen again in the next few decades if self-driving trucks make human drivers obsolete.
In Obsolescence Rents: Teamsters, Truckers, and Impending Innovations (NBER Working Paper 31743), Costas Cavounidis, Qingyuan Chai, Kevin Lang, and Raghav Malhotra find evidence of labor market anticipation of technological shocks in two case studies from the early 1900s: the transition from horse-drawn carriages to motorized trucks and the move from clothes and hats handmade by skilled workers in independent shops to ready-made clothing sold in department stores.
During an ‘anticipatory-dread period’ before a profession becomes obsolete, the number of workers declines, especially among the young, and wages rise.
Although the first commercial truck was purchased in 1897, trucks diffused more slowly than cars. By 1910, Americans had registered nearly 460,000 cars but only about 10,000 trucks and there was still debate about whether trucks would be electric or gasoline powered. World War I proved trucks’ utility, and by 1920 there were over 1 million. The 1910 census counted 421,983 teamsters, individuals who drove horse-drawn trucks, and the 1920 census showed 350,657. By 1930, however, trucking competition had reduced the number of teamsters to 177,815. The teamster workforce aged before the rapid diffusion of truck technology in the 1920s.
During the 1910s — in what the researchers call the “anticipatory-dread period” — few young workers became teamsters. Entry of 30-year-olds fell by about a third compared with the previous decade, and the exit rate of this age group rose. In contrast, more older workers entered the profession than in the previous decade, perhaps anticipating they would retire before motor vehicles took over. Rising pay encouraged entry by those with short horizons. Compared with wages for similarly paid workers, such as laborers and painters in the building trades, teamster wages measured in five cities rose between 1917 and 1919. They fell sharply during the 1920s.
The researchers find similar labor trends for dressmaking and millinery, two skilled trades. Although innovations such as dress patterns threatened these trades by allowing women to make their clothes at home, they grew until the rise of ready-to-wear clothing sold by department stores early in the twentieth century. From 1900–1910, the proportion of young women in these two trades declined. During the 1910s, the age of the workforce in both trades rose, and employment fell by half. By 1930, it had fallen by another third.
There is active discussion today of potential technological change in the over-the-road trucking industry. It is not certain whether or when a switch to driverless trucks will occur, but today’s truckers may already be responding to the fear of technological disruption and may be in the period of anticipatory dread. In 2021, the American Trucking Associations reported a historic driver shortage, significant increases in driver pay, and a high average age of current drivers. But, Current Population Survey data show a decline followed by a rise in trucker employment during and after the pandemic. In mid-2022, driver wages relative to those of similar professions were near their peak. It is too soon to know whether these trends represent the onset of anticipatory dread or the effect of pandemic-related disruptions.
— Laurent Belsie
This research was funded in part under NSF grant SES-1851636.