Study suggests robots in the workforce increase income inequality

This however, depends greatly on the industry and region, but the automobile sectors seems to be affected the most

There have been many predictions about the future of work with artificial intelligence (AI) and automation, ranging from massive unemployment to the creation of many new jobs due to the technology. Now, a new study co-authored by an MIT professor has been released, providing some more insight into the replacement of workers by robots.

The paper is titled “Robots and Jobs: Evidence from U.S. Labor Markets” and was authored by MIT economist Daron Acemoglu and Pascual Restrepo Ph.D., who is an assistant professor of economics at Boston University. It can be found in the Journal of Political Economy. 

One of the findings of the study is that the impact of robots, specifically in the United States, will greatly depend on the industry and region. It also found that income inequality can be dramatically increased due to the technology. 

According to Acemoglu, “We find fairly major negative employment effects.” However, Acemoglu also said that the impact could be overstated. 

The study reveals that between 1990 and 2007, the addition of one robot per 1,000 workers resulted in a reduction of the national employment-to-population ratio by approximately 0.3%. It also found that this number differs depending on the areas of the US, with some areas being greatly more affected than others. 

In other terms, an average of 3.3 workers nationally were replaced for each additional robot that was added in manufacturing. 

Another key finding of the study was that during the same time period, wages were lowered by about 0.4% due to the increased use of robots in the workplace. 

“We find negative wage effects, that workers are losing in terms of real wages in more affected areas, because robots are pretty good at competing against them,” Acemoglu says.

The study was conducted with data from 19 different industries, which was compiled by the International Federation of Robotics (IFR). The IFR is an industry group based in Frankfurt that gathers detailed data on robot deployments around the world. The data was then combined with more from the US, which was based on population, employment, business, and wages. The US data was taken from the national Census Bureau, the Bureau of Economic Analysis, and the Bureau of Labor Statistics. 

One of the other methods used in the study was to compare robot deployment in the US to other countries, and the researchers found that the US is actually behind Europe in this regard. Compared to Europe’s 1.6 new robots introduced per 1,000 workers between 1993 and 2007, US firms only introduced one new robot per 1,000 workers. 

“Even though the US is a technologically very advanced economy, in terms of industrial robots’ production and usage and innovation, it’s behind many other advanced economies,” Acemoglu says.

By analysing 722 different commuting zones in the continental US, as well as the impact of robots on them, the study found that there are dramatic differences in the usage of robots based on geographical location.  One of the areas most affected by this technology is the automobile industry, and some of the major hubs of that industry, including Detroit, Lansing, and Saginaw, are some of the hardest-hit areas. 

“Different industries have different footprints in different places in the US,” Acemoglu says. “The place where the robot issue is most apparent is Detroit. Whatever happens to automobile manufacturing has a much greater impact on the Detroit area [than elsewhere].”

Each robot replaces about 6.6 jobs locally in the commuting zones where robots are put into the workforce. One of the more interesting findings of the study is that whenever robots are added in manufacturing, other industries and areas benefit around the country, due to things like a lower cost of goods. This is why the study concluded with a total of 3.3 jobs replaced per one robot added for the entire US 

The researchers also found that income inequality is directly affected by the introduction of robots. This is largely due to the fact that in the areas where many of these jobs are replaced, there is a lack of other good employment opportunities. 

“There are major distributional implications,” Acemoglu says. “The burden falls on the low-skill and especially middle-skill workers. That’s really an important part of our overall research [on robots], that automation actually is a much bigger part of the technological factors that have contributed to rising inequality over the last 30 years.”

“It certainly won’t give any support to those who think robots are going to take all of our jobs,” Acemoglu continues. “But it does imply that automation is a real force to be grappled with.”

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