What’s going on? Why have the stats that workers care about – job volumes and wages – become decoupled from the rest of the train of economic progress? There are several explanations for this, including tax and policy changes and the effects of globalization and offshoring. We agree that these matter, but we want to stress another driver of the “Great Decoupling”: the changing nature of technological progress.
As digital devices like computers and robots get more powerful and capable over time thanks to "Moore’s law," they can do more of the work that people used to do. Digital labor, in short, substitutes for human labor. This happens first with more routine tasks (both physical and cognitive), which is a big part of the reason why less educated workers have seen their wages fall the most in recent decades as we moved ever deeper into the computer age.
As we move ahead, the Great Decoupling will only accelerate, for two reasons. First, Moore’s law will continue to operate, and computers will keep getting drastically cheaper over time. Digital labor will become cheaper than human labor not only in the United States and other rich countries, but also in places like China and India. Offshoring, in short, is only a way station on the road to automation.