Innovators generally speak proudly of being disruptive, of creating new and better products and services by disrupting traditional industries and traditional ways of doing things.
Uber has disrupted the traditional taxi industry by applying digital communications to the ride-hailing business. It has grown because a sufficient number of people have found its service preferable to that of traditional taxis and Uber has been able to attract more financing and expand its coverage area. The possibility of similar disruption is threatening the traditional automobile industry, the traditional energy industries and, indeed, all industries.
I was led to think about disruption by continuing my investigation of the interplay between wage growth and education in Maine over the recent past: 2010-11 (the third quarter of 2010 through the second quarter of 2011) and 2014-15 (the third quarter of 2014 through the second quarter of 2015).
Consider, for example, the growth of average monthly earnings. Over the past four years, the major sector in Maine with the highest growth in average earnings was finance and insurance, with an increase of 5.1 percent. The major sector with the lowest rate of increase was information, where average earnings dropped by 2.6 percent over the same period.
How much of this difference, I wondered, was the result of labor shortages, and how much was related to company wage policies or plain old industrial disruption?
In the finance and insurance sector, employment and average earnings rose across all worker education levels (high school or less, some college and bachelor’s degree or higher) between 2010-11 and 2014-15.
Interestingly, however, employment growth was significantly higher for those with some college or no more than a high school education (2.6 percent for both) than for the most educated workers (0.9 percent). And four-year growth in average earnings was greater for the least-educated workers (6.3 percent) than for workers with some college and college graduates (6.3 percent versus 5 and 5.2 percent, respectively).
The information sector is comprised of a disparate group of businesses, including publishing, motion picture and video production, radio and TV broadcasting, telecommunications and data processing. Workers at all education levels lost jobs in this sector between 2010-11 and 2014-15, but job security declined the most for workers with more education.
The number of jobs fell by 7 percent for workers with a high school education, while job loss was 8.1 percent for employees with some college and 12.3 percent for the college-educated.
In terms of average earnings, the skew toward less-educated workers was equally marked. Average pay rose by 3 percent for high school graduates but fell by 0.9 percent for workers in the mid-education category and by 5.1 percent for the most-educated employees.
What led me to think about disruption is this pattern of earnings rising faster for less-educated workers than for more-educated workers in both the finance and the information sectors. That the same pattern occurs in both the sector with the highest growth in average pay and in the sector with the lowest increase in average pay suggests that something more than labor supply and wage rates is at work here.
It suggests that Maine industries, even those with modest rates of growth, may be going the way of the traditional taxi industry. They may be in the process of being Uberized: of being disrupted, if not out of business, then at least limited to the slower growth of businesses that aren’t on the cutting edge of innovation.
This pattern also suggests that true revitalization of the Maine economy depends not just on increasing the educational preparation of our labor force and the wages our companies are willing to pay, but also, and most importantly, on encouraging the growth of innovative companies that are intent on disrupting the traditional ways of doing business – and, thus, of daring to create the sort of change required to provide more jobs and higher wages across the board.
Charles Lawton is chief economist for Planning Decisions Inc. He can be contacted at:
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