How Technology Creates Jobs for Less Educated Workers

Conventional wisdom holds that new technology requires highly educated workers. There is little doubt that new technologies have taken a heavy toll on less educated workers not only in manufacturing industries, but also in routine white-collar jobs. In many cases, these workers had accumulated valuable experience that has now become obsolete.

Yet it is a mistake for managers to assume that they need to hire highly educated workers to handle new technology; employees gain much critical knowledge about new technologies through experience on the job and such learning often does not require a high degree of education. Managers need to understand the role of technological maturity, the value of experience, and how employees’ technical skills develop under different business models. Indeed, economic research shows that new technology increases the need for more educated workers at first, but, as technology matures, less educated workers are hired in general.

Consider, for example, the licensed practical nurse (LPN, also known as licensed vocational nurse in some states). Many hospital managers have stopped hiring LPNs, arguing that they lack the education needed to handle new technology. The American Nurses Association has urged replacing LPNs, who require from 9 to 18 months of training depending on the state, with associate degree nurses who have two years of college training. The Association argues that technology has made the LPN position obsolete.

But a strange thing happened on the way to obsolescence. From the 1970s through the 1990s, the number of LPNs remained flat or fell slightly, depending on which statistics you look at. Since 1999, however, the number of LPNs has risen nearly 50% and wages have grown substantially. The reason: a combination of new technology and a new business model. New technologies, including advances in in electronics, fiber optics and anesthetics, allowed the widespread adoption of techniques for minimally invasive surgery. Using these techniques, surgical patients recover quickly enough to return home the same day, avoiding an expensive hospital stay.

Much of this technology has been around for a long time. For example, endoscopy has been used since the nineteenth century. But recent improvements have made the technology much better and, with that, a new business model emerged, the “ambulatory surgery center.” Centers specializing in just one type of surgery—knee surgery, eye surgery, etc.—grew much more proficient because the surgeons and other healthcare providers learned through experience. This meant that medical outcomes improved while avoiding the extra cost of a hospital stay and the complications that tend to arise from more invasive procedures. Better quality at lower cost opened up a profitable opportunity and, once insurance and government reimbursement was changed, this opportunity generated explosive growth. In 1983 there were 239 freestanding ambulatory surgery centers in the US; by 1996 there were 3,300. In 1983, 380,000 ambulatory surgical procedures were performed at freestanding centers and at hospitals. In 2006 there were 53 million.

But this new business model demanded different sorts of skills. Management experts Clayton Christensen, Jerome Grossman and Jason Hwang label the transition from the hospital to outpatient surgery as an instance of a more general transition from “intuitive medicine” to “precision medicine.”  Hospitals treat all sorts of patients with all sorts of symptoms. Many diseases, however, are difficult to diagnose with certainty, and once a diagnosis is made, not all therapies work for all patients. Medical professionals often have to make a tentative initial diagnosis, start a therapy, and then possibly modify both the therapy and the diagnosis depending on how the patient responds. This is “intuitive” medicine, and it requires highly trained professionals to make complex judgments about the patient’s condition. In this situation, LPNs can assist the medical professionals by performing routine tasks monitoring and caring for patients, but there is little the LPN can learn because the patients differ so much from one to the next.

The ambulatory surgery centers, by contrast, work in specialized areas where diagnoses are well identified, patients are screened for complications, therapies are well known and medical outcomes are predictable, if not always successful. Physicians can reliably diagnose nearsightedness or carpal tunnel syndrome, and treat these ailments with laser eye surgery or endoscopic hand surgery, respectively. The procedures are standardized and the outcomes are predictable.

This is precision medicine and LPNs play a different role. Because the procedures are standardized, an LPN learns valuable skills on the job. Because specialization limits the range of circumstances they encounter, LPNs can learn faster and better, acquiring skills that, though narrow, are more valuable. Through experience, an LPN can better anticipate the needs of the medical professionals, can monitor and care for the patients more effectively, and can identify signs of impending problems and alert the medical professionals.

In this environment, LPNs learn on the job. In the late 1970s, an LPN with 15 years’ experience earned only 11% more than an LPN with less than five years. LPNs apparently learned little that was valuable on the job then. But today, the average LPN with 15 years’ experience earns 37% more than one with less than five years. Experience has become quite valuable, even though these workers have relatively little education. And most of the growth in jobs for LPNs has been at ambulatory care centers.

This pattern is more general within the healthcare sector as the trend to precision medicine has grown, aided by new diagnostic and preventive technologies. Increasingly, doctors and dentists are performing a smaller share of the work and a variety of mid-skill providers, from LPNs and dental hygienists to nurse practitioners and physician’s assistants, are performing more. Over the last two decades this shift has created two million new jobs for mid-skill healthcare providers, beyond the growth arising from overall expansion of the healthcare sector. Moreover, the value of experience has risen for these occupations, just as it has for LPNs.

In other words, the trend in healthcare is to shift work away from the most educated workers toward less educated workers, contrary to the conventional wisdom. Mid-skill healthcare providers have important education, to be sure. Nevertheless, managers need to understand that the benefits of new technology are often realized through new business models that depend on learning on the job.

Indeed, many of the hospitals that attempted to eliminate LPNs in recent years have since backtracked, complaining of a shortage of highly educated nurses. As Peter Cappelli has found,  managers across a wide range of industries face similar skill shortages. The healthcare example suggests that rather than complaining about a “skills gap,” managers either need to step up to providing training or they need to re-examine their business models.

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