To the surprise of many observers, the computer revolution of the past twenty years has failed to accelerate productivity growth. Examination of historical data from the past two centuries reveals that similar patterns in equipment prices, productivity growth, and wage inequality characterized several different eras of profound technological innovation, such as the introduction of steam power and the beginning of the use of electricity. This pattern is now repeating itself in the United States as a consequence of the revolution in information technology. The current computer revolution will likely follow the pattern of previous industrial revolutions. In the long run, everybody will gain.
Technological change implies that eventually more output can be produced by a unit of labor.
Hence, a unit of labor will become more valuable. Given time, this process translates into higher wages and standards of living for everyone. Everybody today is better off due to the British industrial revolution. That was not true, however, in 1760. Data from a cotton mill in Lowell, Massachusetts, in the period between 1836 and 1856 illustrate the point.