Study finds stronger links between automation and inequality !!!

This is part 3 of a three-part series examining the effects of robots and automation on employment, based on new research from economist and Institute Professor Daron  Acemoglu.

Modern technology affects different workers in different ways. In some white-collar jobs — designer, engineer — people become more productive with sophisticated software at their side. In other cases, forms of automation, from robots to phone-answering systems, have simply replaced factory workers, receptionists, and many other kinds of employees.

Now a new study co-authored by an MIT economist suggests automation has a bigger impact on the labor market and income inequality than previous research would indicate — and identifies the year 1987 as a key inflection point in this process, the moment when jobs lost to automation stopped being replaced by an equal number of similar workplace opportunities.

“Automation is critical for understanding inequality dynamics,” says MIT economist Daron Acemoglu, co-author of a newly published paper detailing the findings.

Within industries adopting automation, the study shows, the average “displacement” (or job loss) from 1947-1987 was 17% of jobs, while the average “reinstatement” (new opportunities) was 19% . But from 1987-2016, displacement was 16%, while reinstatement was just 10% . In short, those factory positions or phone-answering jobs are not coming back.

“A lot of the new job opportunities that technology brought from the 1960s to the 1980s benefitted low-skill workers,” Acemoglu adds. “But from the 1980s, and especially in the 1990s and 2000s, there’s a double whammy for low-skill workers: They’re hurt by displacement, and the new tasks that are coming, are coming slower and benefitting high-skill workers.”

The new paper, “Unpacking Skill Bias: Automation and New Tasks,” will appear in the May issue of the American Economic Association: Papers and Proceedings. The authors are Acemoglu, who is an Institute Professor at MIT, and Pascual Restrepo PhD ’16, an assistant professor of economics at Boston University.

Low-skill workers: Moving backward 

The new paper is one of several studies Acemoglu and Restrepo have conducted recently examining the effects of robots and automation in the workplace. In a just-published paper, they concluded that across the U.S. from 1993 to 2007, each new robot replaced 3.3 jobs.

In still another new paper, Acemoglu and Restrepo examined French industry from 2010 to 2015. They found that firms that quickly adopted robots became more productive and hired more workers, while their competitors fell behind and shed workers — with jobs again being reduced overall.

In the current study, Acemoglu and Restrepo construct a model of technology’s effects on the labor market, while testing the model’s strength by using empirical data from 44 relevant industries. (The study uses U.S. Census statistics on employment and wages, as well as economic data from the Bureau of Economic Analysis and the Bureau of Labor Studies, among other sources.)

More specifically, the standard model implies an estimate of about 2 % annual growth in productivity since 1963, whereas annual productivity gains have been about 1.2 %; it also estimates wage growth for low-skill workers of about 1 percent per year, whereas real wages for low-skill workers have actually dropped since the 1970s.

“Productivity growth has been lackluster, and real wages have fallen,” Acemoglu says. “Automation accounts for both of those.” Moreover, he adds, “Demand for skills has gone down almost exclusely in industries that have seen a lot of automation.”

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