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The impact on employment and wages of Robots in US – No overall positive impact on any group

As robots and other computer-assisted technologies take over tasks previously performed by labour, there is increasing concern about the future of jobs and wages. This column discusses evidence that industrial robots reduced employment and wages between 1990 and 2007. Estimates suggest that an extra robot per 1,000 workers reduces the employment to population ratio by 0.18-0.34 percentage points and wages by 0.25-0.5%. This effect is distinct from the impacts of imports, the decline of routine jobs, offshoring, other types of IT capital, or the total capital stock.

The impact on employment and wages

Our results show a strong relationship between a commuting zone’s exposure to robots and employment. In the areas most exposed to robots, between 1990 and 2007 both employment and wages declined in a robust and significant way. During this period, we estimate that, relative to other areas, the introduction of a new robot per 1,000 workers in a commuting zone reduced the local employment-to-population ratio by 0.37 percentage points and local wages by 0.73%. This is equivalent to 6.2 workers losing their jobs for every robot.

Although these numbers suggest that exposed commuting zones are doing worse than the rest in terms of employment and wages, they do not necessarily reflect the US-wide effects of robots. The adoption of robots in one commuting zone could lower production costs, and via trade, enable other industries to create employment in the rest of the economy. Such indirect benefits would be missed in our cross-sectional comparisons. To account for these gains, we use our model to recompute the impact of robots allowing for trade between commuting zones, and found that the employment and wage effects were smaller – but not by much. The exact impact depends on how easy it was to substitute between goods produced in different places, the cost savings from robots and the elasticity of the local labour supply. Using reasonable estimates for these elasticities and our estimates to discipline the calibration of the remaining parameters in our model, we found that allowing for trade still implies each new robot per thousand workers reduced employment to population ratio by 0.34 percentage points and cut wages by about 0.5% (as opposed to 0.73%). If we further take account of the potential spillovers from reduced employment and wages in industries adopting the robots onto other local non-tradable industries, these numbers might be even smaller: about 0.18 percentage points lower employment to population ratio and 0.25% slower wage growth for every one robot per thousand workers (corresponding to about three workers losing their jobs because of one more robot).

Clearly industrial robots are not the only innovations being implemented at any time, and we might have erroneously attributed to robots the effects of many other technologies that could also displace labour. This is not the case: our results are the same when we control for the increase in overall capital intensity and IT capital by industry. Note also that exposure to robots is only weakly correlated with various other trends. Nor is our measure of exposure to robots related to past trends in employment and wages in the pre-robot era from 1970 to 1990. Indeed, controlling for broad industry composition (shares of manufacturing, durables, construction and so on), for detailed demographics, for exposure to Chinese and Mexican imports, for the decline in routine jobs, and for offshoring opportunities does not change our results.

In the commuting zones most exposed to robots, the employment effect is strongest for routine manual, blue collar, assembly and related occupations, and for workers with less than college education. But no one, it seems, has escaped entirely. Slicing the data by type of employment or education (Figure 2), we find no overall positive impact on any group.

Chosen excerpts by Job Market Monitor. Read the whole story at Robots and jobs: Evidence from the US | VOX, CEPR’s Policy Portal

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