Automation puts a premium on decision-making jobs

A new paper shows that as automation has reduced the number of rote jobs, it has led to an increase in the proportion and value of occupations that involve decision-making.

Why it matters: Automation and AI will shape the labor market, putting a premium — at least for now — on workers who can make decisions on the fly, while eroding the value of routine jobs.

By the numbers: David Deming, a political economist at the Harvard Kennedy School, analyzed labor data over the past half-century and found that the share of all U.S. jobs requiring decision-making rose from 6% in 1960 to 34% in 2018, with nearly half the increase occurring since 2007.

• Partially as a result, a greater share of wages is going to management and management-related occupations, more than doubling since 1960 to 32% — a trend that is more pronounced in high-growth industries.

Details: This shift has also reinforced generational disparity in the labor market.

• Getting better at making decisions requires experience, and experience requires time on the job.
• Largely as a result, career earnings growth in the U.S. more than doubled between 1960 and 2017, and the age of peak earnings increased from the late 30s to the mid-50s.

Between the lines: As automation and AI take up more of the decision-making in jobs like trucking and warehouse logistics, workers in those occupations won't get the chance to build up the cognitive skills employers increasingly value.

What they're saying: "One implication is that AI leads to lots of angry, frustrated, left-wing young people, and a cementing in of the gerontocracy," economist Tyler Cowen commented in a blog post.

The bottom line: In the current economy, what you know matters less than how adept you are at learning — at least until AI learns how to do that, too.