Robots at work: The economic effects of workplace automation

 
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From the first stone ax to the latest assembly-line robots, technology has long played an essential role in work. As technology has advanced, machines are increasingly working alongside employees, as they do at Amazon’s new warehouse in Trenton, N.J., and robots have even been developed to help provide therapy for children during long hospital stays.

As we’ve moved from devices that reduce physical effort to those that can replace humans, however, the benefits of technology for individual workers have become less clear, according to a 2011 study in the Journal of Occupational and Organizational Psychology. In 2014 the Pew Research Center canvassed nearly 2,000 industry experts and found them to be deeply divided on how robotics and artificial intelligence will affect jobs and the economy over the next decade. Scholars also disagree on how such technology will affect the economics of employment.

New research is bringing fresh perspectives to these and related questions. A 2014 paper from the National Bureau of Economic Research found that since the 1970s productivity has risen as information technology has advanced, yet real wages have stagnated. A 2015 NBER paper models potential future outcomes, and finds that the most likely scenario is not altogether positive for workers: The scholars conclude that smart machines will produce mixed results and that “can mean long-term misery for all.”

In a March 2015 paper, “Robots at Work,” Georg Graetz of Uppsala University and Guy Michaels of the London School of Economics concentrate on the economic effects of industrial robots. They base their research on data collected from 1993 to 2007 in the United States and 16 other countries.

The study’s findings include:

  • In the 17 countries examined, the average density of industrial robots increased by more than 150%. This was accompanied by a substantial fall in their prices, including an average drop of approximately 50% from 1990 to 2005, and a drop of more than 80% in six countries.
  • At the start of the period studied, robots were most often used in transportation equipment and metal industries, with approximately 5.4 and 2.4 robots per million hours worked. After 1992, “the fastest increase in the number of robots per million hours worked took place in the transportation equipment (about 8.1), chemical (about 3.3) and metal (about 1.7) industries.”
  • Over the period studied, the use of robots led to an increase in both total factory productivity and wages. The use of robots also increased labor productivity and value added from labor — in other words, each human worker was more productive and added more value to the economy than before the implementation of industrial robots.
  • On average across the 17 countries, the increasing use of robots from 1993 to 2007 raised the annual growth of GDP and labor productivity by 0.37 and 0.36 percentage points, respectively. The authors compare it to the increased labor productivity that steam technology brought to Britain from 1850 to 1910.
  • Robots had no effect on the hours worked by high-skilled workers. While the authors found that industrial robots had no significant effect on overall employment, there was some evidence that they crowded out low-skilled and, to a lesser extent, middle-skilled workers.
  • As robot density increases, there is evidence of economic returns beginning to decline. “We find that larger increases in robot density translated into increasingly small gains in productivity, suggesting that there are some congestion effects (or diminishing marginal gains) from increased use of robots.”

The authors note that the number of sectors in which robots are being used is increasing: “During the period we analyze, industrial robots were used in just under a third of the economy (as averaged across the countries in our dataset) and service robots were still in their infancy,” the authors state. “If the quality-adjusted prices of robots keep falling at a rate similar to that observed over the past decades, and as new applications are developed, there is every reason to believe that they will continue to increase both labor productivity and value added,” even as the marginal returns may decline.

Related research: A 1988 study in the Journal of Occupational and Organizational Psychology, “A History of Social Psychological Reactions to New Technology,” examines workers’ reactions to technological change and its potential consequences, including unsatisfactory working conditions and job displacement.

Keywords: technology, robots, robotics, technological change, assembly lines, artificial intelligence, AI

 

Editor’s Note: A previous version of this post offered the wrong publication year for the study titled, “A History of Social Psychological Reactions to New Technology.” It has been corrected.

 

    Writer: | Last updated: September 22, 2015

    Citation: Graetz, Georg; Michaels, Guy. Working paper for the London School of Economics and Political Science’s Centre for Economic Performance, March 2015.
     

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