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Automation Isn’t Killing Jobs, Study Says, But May Be Keeping Income in Check

Posted by hkarner - 11. März 2018

Date: 10-03-2018
Source: The Wall Street Journal

New research finds workers are getting a smaller slice of an expanding economy

Robotic arms weld car frames in a Japanese auto factory in December.
Employment in transportation equipment manufacturing was nearly unchanged between 1970 and 2007, but the sector became far more productive.

A new study rebuts the notion that automation is eliminating jobs broadly in the economy, but does find technological advancement doesn’t reward workers much with added income.

Over the previous five decades, automation hasn’t reduced the number of jobs available in 18 advanced economies, including the U.S.–in fact, it helped increase total employment, finds a new paper by the Massachusetts Institute of Technology’s David Autor and Utrecht University’s Anna Salomons and released Thursday by the Brookings Institution.

But the economists’ paper also found that automation, and the productivity enhancements that it drives, has resulted in laborers taking home a smaller slice of an expanding economic pie.
The study found that in industries where automation stoked large productivity improvements, the number of jobs in those sectors fell, or at best held steady over a nearly 50-year period.
Those fields included textile production, chemical processing and auto manufacturing.

But the economy’s ability to produce products more efficiently helped drive down prices, improving buying power, generating more demand and ultimately creating jobs in other industries.

The paper dubbed that the “Walmart effect,” which helped contribute to a very slight decrease in unemployment from 1970 to 2007. But those new jobs weren’t always good, well-paying jobs.

“A lot of employment growth in the U.S. has been in low-wage, service-sector jobs, such as restaurant employment, cleaning services, security guards and home-health workers,” Mr. Autor said in an interview with The Wall Street Journal. “You need those jobs in an expanding economy, but they don’t command high wages.”

Workers see a smaller share of the the spoils from a growing economy, the economists’ work showed.

Total income across the 28 industries in 18 countries the authors studied increased about 20% in 2007 from 1970. But labor income advanced a smaller 13.5%. Nonlabor income, including corporate profits, dividends and pass-through income to business owners, rose 32%.

And that shift became more pronounced over time.

In the 1970s, when productivity improved–typically through technological improvements–the share of total income produced in the economy moved slightly more toward workers. That’s consistent with the theory that when workers’ productivity improves, so should their wages.

But the relationship has been broken since the 1980s. Over a 37-year span, each unit of improved productivity resulted in a smaller share of income growth flowing to labor. The most substantial shift toward capital holders, including business owners, occurred in the 2000s.

That’s consistent with the idea that automation isn’t helping workers perform more efficiently, but is instead increasingly displacing them into different industries. For example, production of cars, trucks and planes has increased since the 1970s because productivity in the sector grew strongly, while employment held essentially flat. But there are many more workers employed overall today than during the Nixon administration.

The findings help explain why wage growth has been modest relative to productivity gains during the past four decades, and why inequality between the world’s wealthiest and everyday workers has increased, Mr. Autor said.

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