Robots Are Slashing U.S. Wages and Worsening Pay Inequality: Robots have a real impact on jobs and wages, new research shows


Robots have long been maligned for job-snatching. Now you can add depressing wages and promoting inequality to your list of automation-related grievances.

Industrial robots cut into employment and pay for workers, based on an new analysis of local data stretching from 1990 and 2007. The change had the biggest impact on the lower half of the wage distribution, so it probably worsened America’s wage gap.

Today’s economic research wrap also looks at labor market slack, student loan defaults in times of crisis, and where rates might be headed in coming years. Check this column every week for new and interesting studies from around the world.

The pessimists’s guide to the robot invasion

Industrial robots have had a “large” and negative effect on U.S. employment and wages in local labor markets, according to new research by Massachusetts Institute of Technology’s Daron Acemoglu and Boston University’s Pascual Restrepo.


One additional robot per thousand workers reduces the employment-to-population ratio by 0.18 percentage points to 0.34 percentage points and slashes wages by 0.25 percent to 0.5 percent, based on their analysis. To put that in context, the U.S. saw an increase of about one new industrial robot for every thousand workers between 1993 and 2007, based on the study.

“The employment effects of robots are most pronounced in manufacturing, and in particular, in industries most exposed to robots; in routine manual, blue collar, assembly and related occupations; and for workers with less than college education,” the authors write. “Interestingly, and perhaps surprisingly, we do not find positive and offsetting employment gains in any occupation or education groups.”

Worth noting: the authors estimate that robots may have increased the wage gap between the top 90th and bottom 10 percent by as much as 1 percentage point between 1990 and 2007. There’s also room for much broader robot adoption, which would make all of these effects much bigger.

Robots and Jobs: Evidence from U.S. Labor Markets
Published March 2017
Available on the NBER website

Tallying up the slack

The unemployment rate has more than halved since its 2009 peak, yet it fails to account for some potential workers: it doesn’t capture all of the people who are underemployed or who aren’t actively applying to jobs. To examine what’s happening in the broader population, Federal Reserve Bank of San Francisco Senior Economist Marianna Kudlyak revisits an index of non-employment in a new analysis.

The alternative measure takes all non-employed people into account, splitting them into different groups that are weighted by their historical likelihood of transitioning into a job. For example, retirees have less than a 2 percent chance of jumping back in, while non-retirees who want a job have a higher likelihood.

The alternative index is close to its 2005-6 levels, so it “tells a story similar to the unemployment rate — that the U.S. labor market has returned to full health,” according to the report.


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