Full Citation

Title: Rise of the Machines: The Effects of Labor-Saving Innovations on Jobs and Wages

Citation Type: Conference Paper

Publication Year: 2013

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Abstract: We study the labor market effects of increased automation. We build a model in which firms optimally design machines, train workers, and assign these factors to tasks. Consistent with findings from computer science and robotics, the model features tasks which are difficult from an engineering perspective but easy for humans to carry out due to innate capacities for complex functions like vision, movement, and communication. In equilibrium, firms assign low-skill workers to such tasks. High skill workers have a comparative advantage in tasks which require much training and are difficult to automate. Workers in the middle of the skill distribution perform tasks of intermediate difficulty on both dimensions. When the cost of designing machines falls, firms adopt machines predominantly in tasks that were previously performed by middle-skill workers. Occupations at both the bottom and the top of the wage distribution experience employment gains. Wage inequality increases at the top but decreases at the bottom. As design costs fall much further, only the most skilled workers enjoy rising skill premiums, and an increasing fraction of the labor force is employed in jobs that require little or no training. The models implications are consistent with recent evidence of job polarization and a hollowing-out of the wage distribution. In addition, we provide novel evidence on trends in occupational training requirements that is in line with the models predictions.

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Authors: Feng, Andy; Graetz, Georg

Conference Name: Institute for the Study of Labor

Publisher Location: Buch, Ammersee, Germany

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

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