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The Hidden Cost of Tech Booms: What History Teaches Us About Worker Skills
- Tech companies attract skilled workers with high salaries during tech booms but research by Harvard University warns of the permanent damage to worker's skills and careers. Adrien Matray and Johan Hombert examined France during the 1990s tech bubble and found workers who joined the ICT sector suffered significant long-term earnings losses. These booms create 'skill obsolescence', leaving workers with outdated skill sets when the tech bubble deflates. Financial speculation exacerbates the issue. The very technical expertise that made workers valuable during the boom becomes a liability after. When large numbers of workers are channelled into obsolete skills, this represents a misallocation of human capital, weighing on long-term economic growth despite any infrastructure legacy.
- This has implications for today’s AI boom which may create workers with specialized skills in AI approaches that may prove to be dead ends. The researchers propose strategies for workers, employers and policymakers. Skilled workers should focus on developing flexible, transferable skills rather than highly specialized technical knowledge which carries risks for long-term career potential. Companies should invest in helping employees continually update their skills rather than letting them become too narrowly specialized. Policymakers must balance the benefits of fostering innovation with the potential long-term costs to human capital.
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