Friday, January 5, 2018

Technological Unemployment in America

An interesting and very thorough study by Daron Acemoglu and Pascual Restrepo at MIT and Boston University respectively looks at how industrial robots are taking over jobs that were previously performed by humans and how this impacts the future of both wages and job creation.  For the study, the authors examined the effect of industrial robot usage over the period between 1990 and 2007 (with the year 2007 selected as the last year of the study to eliminate the impact of the Great Recession) on local labor markets in the United States with the data broken down into commuting zones.  Let's look at some of their conclusions, keeping in mind that a 2013 paper by Frey and Osborne concluded that 47 percent of U.S. workers' jobs are at risk of automation over the next two decades and that some of the impacts are felt by adding only one additional robot per thousand workers:

1.) Impact on Employment: Using the employment to population ratio between 1990 and 2007 and the increase in robots adoption of one more robot per thousand workers between 1993 and 2007, a commuting zone with a value of exposure to robots equals to the average for the entire United States experienced 0.37 percentage points lower employment to population ratio than commuting zones with no robot workers.  In other words, adding one more robot per thousand workers reduced employment by 6.2 workers.

2.) Impact on Wages: Since robots affect employment levels, they also impact the composition of the workforce which has an impact on wages.  Again, a commuting zone with a value of exposure to robots equal to the average for the United States experienced 0.73 percent lower wage growth than commuting zones with no robot workers.  In other words, adding one more robot per thousand workers reduced average yearly wages by about $200 in the affected commuting zones.

3.) Impact on Men vs. Women: The authors concluded that employment and wages fall for both men and women, however, the effects of adopting industrial robots on declining employment for men are about 1.5 to 2.0 times higher than they are for women.

4.) Impact on Different Industries:  Here is a graphic which shows the negative effects of robots on the employment to population ratio in different industries over the period between 1993 and 2007:


Here is a graphic which shows the negative effects of robots on the employment to population ratio for specific occupations over the period between 1993 and 2007:


As you can see, the greatest impact on the employment to population ratio is felt in the manufacturing industries followed by services and retail.  Just think about that the next time that you use a self-scanning and checkout system at your local retailer.

5.) Impact on Educational Levels:  Here is a graphic which shows the negative effects of robots on the employment levels for various educational levels over the period between 1993 and 2007:


The greatest negative impact of increased use of robot workers on employment is felt by male workers with a high school or some college education.
  
Here is a graphic which shows the negative effects of robots on wages for various educational levels over the period between 1993 and 2007:


The greatest negative impact of increased use of robot workers on wages is felt by males and female with less that a high school education.

To close this posting, let's look at how the employment to population ratio for American workers has dropped significantly over the past decade and a half:


Given that this study looks at the period only up to 2007 and the fact that U.S. industries and businesses have increasingly adopting the use of robots over the decade since 2007, one has to wonder how much of an impact technology has had on the rather stubborn "real" unemployment rate and dropping employment to population ratio since the Great Recession.  With the industrial robot workforce expected to quadruple by 2025, perhaps the Trump Administration's mantra that America's foreign trade partners are to blame for the country's loss of jobs is disingenuous and ignores the reality of technological advances that have made human workers redundant.  This situation is only likely to worsen given the advances in artificial intelligence.

3 comments:

  1. I only go to the bank to get a roll of coins for the washing machine in my apartment building, everything else I do on-line or at the ATM. I purchase and print my movie tickets at home. I can order my coffee in a cellphone app. When I recognised this a while back, I asked myself what impact has this had on employment. You’ve presented the facts. As per usual, Mr. Trump, like his supporters, has an uninformed view of the world. He can’t solve the problem if he doesn’t know the cause.

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  2. Great article, the cost of labor will be a key driver in replacing workers. Polls show a majority of Americans support a higher minimum wage, however, raising the minimum wage will make America less competitive and slow job growth. The solution of mandating a higher minimum wage to address growing inequality sidesteps the core issues we face.

    It is my feeling the many people that believe this will put more money into the consumers pocket and thus create economic growth fail to recognize it will also spark inflation and reduce opportunity. The article below delves deeper into this complex issue.

    http://brucewilds.blogspot.com/2016/04/raising-minimum-wage-addresses-wrong.html

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