Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share

Abstract

Is automation a labor-displacing force? This possibility is both an age-old concern and at the heart of a new theoretical literature considering how labor immiseration may result from a wave of 'brilliant machines,' which is in part motivated by declining labor shares in many developed countries. Comprehensive evidence on this labor-displacing channel is at present limited. Using the recent model of Acemoglu and Restrepo (2018b) as an analytical frame, we first outline the various channels through which automation impacts labor´s share of output. We then turn to empirically estimating the employment and labor share impacts of productivity growth-an omnibus measure of technological change-using data on 28 industries for 18 OECD countries since 1970. Our main findings are that although automation-whether measured by Total Factor Productivity growth or instrumented by foreign patent flows or robot adoption-has not been employment-displacing, it has reduced labor's share in value-added. We disentangle the channels through which these impacts occur, including: own-industry effects, cross-industry input-output linkages, and final demand effects accruing through the contribution of each industry's productivity growth to aggregate incomes. Our estimates indicate that the labor share-displacing effects of productivity growth, which were essentially absent in the 1970s, have become more pronounced over time, and are most substantial in the 2000s. This finding is consistent with automation having become in recent decades less labor-augmenting and more labor-displacing.

Accounting for Factorless Income

“…Our results here with multiple types of capital are broadly consistent with Eden and Gaggl (2018) who estimate a production function with IT and non-IT capital and argue that the decline in the relative price of IT accounts for roughly half of the decline in the U.S. labor share. Recent work by Autor and Salomons (2018) presents evidence across countries and industries that relates productivity-enhancing technological advances (potentially caused by the adoption of industrial robots and patenting flows) to declines in the labor share after the 1980s.…”

Polarization in the South African labour market: Economy-wide scenarios

“…This is captured pithily in the title of Acemoglu and Restrepo's 2019 paper: 'Automation and New Tasks: How Technology Displaces and Reinstates Labor' (Acemoglu and Restrepo 2019). Autor and Salomons (2018) write: 'Many technological innovations replace workers with machines, but this capital-labor substitution need not reduce aggregate labor demand because it simultaneously induces four countervailing responses: own-industry output effects; cross-industry input-output effects; between-industry shifts; and final demand effects.' Similarly, Caselli and Manning (2019) argue that 'new technology is unlikely to cause wages for all workers to fall and will cause average wages to rise if the prices of investment goods fall relative to consumer goods (a condition supported by the data)'.…”

“…Several studies have assessed the size of the potential impact of automation (Arntz et al 2016(Arntz et al , 2017Autor and Salomons 2018;Frey and Osborne 2013). The OECD has published a series of working papers (see, inter alia, Breemersch et al 2017;Nedelkoska and Quintini 2018;Parolin 2019).…”

A 2016 social accounting matrix for South Africa with an occupationally disaggregated labour market representation

“…Acemoglu and Autor (2011) provide a survey. Further, more recent contributions have been made by Acemoglu, Autor, and their various co-authors Restrepo 2018a, 2018b;Autor 2013;Autor and Salomons 2018). Important contributions have been made by Goos et al (2014) and Das and Hilgenstock (2018).…”