Robots and wage polarisation

Industrial robots can have a transformative effect on employment and wages. This column studies how the rise of robot capital has influenced wage polarisation across different occupations in the US. It finds that the substitutability between robots and labour is heterogeneous across occupations, and particularly strong in production and material-moving jobs. Robotisation has led to slower wage growth for these occupations, and thus contributed to increasing wage polarisation. Potential policies to address these distributional effects include retraining programmes and tax policies to manage the pace of robot adoption without stifling innovation.

In recent years, the rapid integration of industrial robots into manufacturing processes has spurred significant debate among policymakers and economists. The discussion centres around the transformative effects of automation on employment and the distribution of wages, especially in economies with substantial industrial sectors like the US. This column examines how the rise of robot capital has influenced wage polarisation across different occupations from 1990 to 2007, shedding light on the mechanisms driving these changes.

The growing role of robots in industry

Industrial robots have revolutionised factory production over the past three decades, with the global robot market expanding at an annual rate of 12% (IFR 2021). These advancements, however, have not affected all workers uniformly. Concerns about the uneven distributional impacts of robotics have prompted policymakers to consider measures like taxing robot adoption to mitigate potential harms. Previous studies have examined the broader employment effects of robot penetration (e.g. Acemoglu and Restrepo 2020) and explored the implications of robot taxes (e.g. Humlum 2021). However, understanding the substitutability between robots and workers within specific occupations remains crucial for assessing the full impact of automation.

To read the full text:
https://www.rieti.go.jp/en/columns/v01_0216.html

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[List of discussion papers]
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