What is the impact of robots on the job market?

Responsible researcher: Viviane Pires Ribeiro

Paper Title: Robots and Jobs: Evidence from US Labor Markets

Authors: Daron Acemoglu and Pascual Restrepo

Intervention Location: United States

Sample Size: United States Industrial Workers

Big topic: Job Market

Variable of Main Interest: Employment

Type of Intervention : Adoption of robots in industries

Methodology: Econometric model

The spread of robots, artificial intelligence and other automation technologies has raised concerns about the future of jobs and wages. In this context, Acemoglu and Restrepo (2020) sought to analyze the effect of the increase in the use of industrial robots between 1990 and 2007 on the United States labor markets. Using a model in which robots compete against workers, study results show that advances in robotics technology can reduce employment and wages. According to estimates, one more robot for every thousand workers reduces the employment/population ratio by around 0.2 percentage points and wages by 0.42%.

Assessment Context

Robotic technology advanced significantly in the 1990s and 2000s, leading to an increase in the stock of industrial robots of four times the value of the initial stock in the United States and Western Europe during the period 1993 to 2007. In the United States the increase was one new robot per thousand workers, and in Western Europe it was 1.6 new robots per thousand workers. The automotive industry employs 38% of existing robots, followed by the electronics industry (15%), plastics and chemicals (10%), and metal products (7%).

As robots and automation technologies take over tasks performed by human labor, there is growing concern about the future of jobs and wages. Yet there has been relatively little work on the equilibrium effects of new automation technologies and, in particular, robots.

Intervention Details

Despite concerns about the spread of robots, artificial intelligence and other automation technologies, there is little systematic evidence on the equilibrium impact of automation technologies, and especially robots, on employment and wages. Aiming to corroborate the literature that addresses this topic, Acemoglu and Restrepo (2020) seek to investigate the effects of industrial robots on local labor markets in the United States. According to the authors, robots and automation technologies, in general, displace workers from the tasks they previously performed and, therefore, should have effects on the labor market that are very different from capital deepening (savings used to increase the capital ratio -work) and other types of technological changes.

In the study, the authors consider industrial robots as fully autonomous machines that do not require a human operator and can be programmed to perform various manual tasks such as welding, painting, assembly, material handling and packaging. Textile looms, elevators, cranes or conveyor belts are not robots as they have a single purpose, cannot be reprogrammed to perform other tasks and/or require a human operator. Thus, it excludes other types of equipment and allows an internationally and temporally comparable measurement of a class of technologies – industrial robots – that are capable of replacing human labor in a series of tasks.

To carry out the analysis, data on employment in industry, wage bill, added value, labor participation and capital were used. Employment and wage bill data are from County Business Patterns (CBP) and NBER-CES. While data on value added and labor market participation are from the Bureau of Economic Analysis, and on information technology capital and general capital stock from the Bureau of Labor Statistics (BLS).

Methodology Details

The empirical approach was based on a model in which robots and workers compete in producing different tasks. The model is based on other studies, but allows the share of tasks performed by robots to vary between sectors and for trade between specialized labor markets in different sectors. According to the model specification, the greater adoption of robots negatively affects wages and employment due to a displacement effect (as they directly displace workers from tasks they previously performed), but there is also a positive productivity effect (as other industries and/or tasks increase their demand for labor). Due to the displacement effect, robots can have very different implications for labor demand than capital deepening or factor augmentation technologies. Furthermore, the effects of robots on employment and wages can be estimated by regressing the change in these variables on exposure to robots. Exposure to robots is built on the interaction between baseline industry actions in a local labor market and the technological possibilities for introducing robots across industries.

First, the authors document that there is considerable variation in robot adoption across industries and show that the same industries are rapidly adopting robots in the United States and Europe. Furthermore, they show that, at the industry level, there is a strong positive correlation between robot adoption and other important trends affecting local U.S. labor markets, such as import competition from China, competition from Mexico, investment in information technology capital and capital deepening.

Results

The estimation results indicate a negative relationship between a travel zone's exposure to robots and its labor market outcomes after the year 1990. Between 1990 and 2007, the increase in the stock of robots (approximately one additional robot per thousand workers from 1993 to 2007) reduced the average employment-to-population ratio in a commuting zone by 0.39 percentage points and average wages by 0.77% (relative to a switching zone without exposure to robots). These numbers are considerable, but not implausible. For example, they imply that one more robot in a commuting zone reduces employment by about 6 workers; This estimate includes direct and indirect effects, the latter being caused by the drop in demand for non-tradable goods as a result of the reduction in employment and wages in the local economy.

Increased use of robots in a travel zone generates benefits for the rest of the U.S. economy, reducing the prices of tradable goods produced with robots and creating shared capital gains. The estimates imply that one additional robot for every thousand workers reduces the aggregate employment-to-population ratio by about 0.2 percentage points and wages by about 0.42% (compared to their larger local effects, 0.39 percentage points and 0.77%, respectively). Or, equivalently, a new robot reduces employment by about 3.3 workers.

The authors verified that the measure of exposure to robots is not related to previous trends in employment and wages from 1970 to 1990, the period that preceded the start of rapid advances in robotic technology. Several robustness checks reinforce the results obtained. First, the results are robust to include differential trends by various baseline characteristics, linear switching zone trends, and controls for other changes that affect demand or productivity across sectors. Second, testing shows that the automotive industry, which is the most robot-intensive sector, is not driving results. Third, in line with the theoretical emphasis that robots (and, more generally, automation technologies) have very different effects on the labor market than other types of machinery and capital deepening, we found no similar negative impact of capital, other information technology measures or general productivity increases.

The effects on employment caused by the use of robots are most pronounced in manufacturing and, in particular, in industries most exposed to robots. They are also focused on routine manual activities, assembly and related occupations. Negative effects on construction, retail and personal services were also estimated.

Public Policy Lessons

Acemoglu and restrepo (2020) argue that there are relatively few robots in the US economy, so the number of jobs lost due to robots has thus far been limited (a 0.2 percentage point drop in the employment-to-population ratio or around 400,000 jobs). However, if robotic technology continues as expected by experts over the next two decades, the future aggregate implications of robots could be greater. Thus, it is crucial that any extrapolation about the future effects of robots must recognize not only the usual uncertainty associated with their use, but also the possibility that some of the general equilibrium effects that work through the technology may emerge only slowly and that the Employment and wage response may be different once robots become sufficiently widespread.

In this sense, the authors highlight that the conceptual framework adopted in the study indicates that, in contrast to the presumption prevalent in economic discussions, automation and non-automation technologies have distinct and different impacts and, therefore, technological waves of automation can have impacts different, depending on the balance between displacement and productivity effects. Therefore, the next decade will likely witness major advances in artificial intelligence, machine learning, communications technologies and new manufacturing technologies, including augmented reality and design .

References

ACEMOGLU, Daron; RESTREPO, Pascual. Robots and jobs: Evidence from US labor markets. Journal of Political Economy , vol. 128, no. 6, p. 2188-2244, 2020.