How Many Jobs Do Robots Really Replace?

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How Many Jobs Do Robots Really Replace?

MIT economist Daron Acemoglu's new research puts a number on the job costs of automation. In many parts of the US, robots have been replacing workers over the last few decades. But to what extent, really? Some technologists have forecast that automation will lead to a future without work, while other observers have been more skeptical about such scenarios. Now a study co-authored by an MIT professor puts firm numbers on the trend, finding a very real impact - although one that falls well short of a robot takeover. The study also finds that in the US, the impact of robots varies widely by industry and region, and may play a notable role in exacerbating income inequality. "We find fairly major negative employment effects," MIT economist Daron Acemoglu says, although he notes that the impact of the trend can be overstated. From 1990 to 2007, the study shows, adding one additional robot per 1,000 workers reduced the national employment-to-population ratio by about 0.2%, with some areas of the US affected far more than others. This means each additional robot added in manufacturing replaced about 3.3 workers nationally, on average. That increased use of robots in the workplace also lowered wages by roughly 0.4% during the same time period. "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. Displaced in Detroit To conduct the study, the economists used data on 19 industries, compiled by the International Federation of Robotics (IFR), a Frankfurt-based industry group that keeps detailed statistics on robot deployments worldwide. The researchers also compared robot deployment in the US to that of other countries, finding it lags behind that of Europe. From 1993 to 2007, US firms actually did introduce almost exactly one new robot per 1,000 workers; in Europe, firms introduced 1.6 new robots per 1,000 workers. "Even though the US is a technologically very advanced economy, in terms of industrial robots' production & usage & innovation, it's behind many other advanced economies," Acemoglu says. In the US, four manufacturing industries account for 70% of robots: automakers (38% of robots in use), electronics (15%), the plastics and chemical industry (10%), & metals manufacturers (7%). Michigan has the highest concentration of robots in the workplace, with employment in Detroit, Lansing, and Saginaw affected more than anywhere else in the country. However, in a subtle twist, adding robots in manufacturing benefits people in other industries & other areas of the country-by lowering the cost of goods, among other things. These national economic benefits are the reason the researchers calculated that adding one robot replaces 3.3 jobs for the country as a whole. The inequality issue The study suggests that robots have a direct influence on income inequality. The manufacturing jobs they replace come from parts of the workforce without many other good employment options; as a result, there is a direct connection between automation in robot-using industries & sagging incomes among blue-collar workers. "There are major distributional implications," Acemoglu says. When robots are added to manufacturing plants, "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." So while claims about machines wiping out human work entirely may be overstated, the research by Acemoglu and Restrepo shows that the robot effect is a very real one in manufacturing, with significant social implications. Robots help some firms, even while workers across industries struggle The study further reveals that firms that move quickly to use robots tend to add workers to their payroll, while industry job losses are more concentrated in firms that make this change more slowly. The study, by MIT economist Daron Acemoglu, examines the introduction of robots to French manufacturing in recent decades, illuminating the business dynamics and labour implications in granular detail. "When you look at use of robots at the firm level, it is really interesting because there is an additional dimension," says Acemoglu. "We know firms are adopting robots in order to reduce their costs, so it is quite plausible that firms adopting robots early are going to expand at the expense of their competitors whose costs are not going down. And that's exactly what we find." Indeed, as the study shows, a 20 percentage point increase in robot use in manufacturing from 2010 to 2015 led to a 3.2% decline in industry-wide employment. And yet, for firms adopting robots during that timespan, employee hours worked rose by 10.9%, and wages rose modestly as well. A French robot census To conduct the study, the scholars examined 55,390 French manufacturing firms, of which 598 purchased robots during the period from 2010 to 2015. The 598 firms that did purchase robots, while comprising just 1% of manufacturing firms, accounted for about 20% of manufacturing production during that five-year period. The manufacturing industries most heavily adding robots to their production lines in France were pharmaceutical companies, chemicals & plastic manufacturers, food & beverage producers, metal and machinery manufacturers, and automakers. The industries investing least in robots from 2010 to 2015 included paper and printing, textiles and apparel manufacturing, appliance manufacturers, furniture makers, and minerals companies. The firms that did add robots to their manufacturing processes became more productive and profitable, and the use of automation lowered their labour share - the part of their income going to workers - between roughly 4 and 6 percentage points. However, because their investments in technology fueled more growth and more market share, they added more workers overall. By contrast, the firms that did not add robots saw no change in the labour share, and for every 10 percentage point increase in robot adoption by their competitors, these firms saw their own employment drop 2.5%. Essentially, the firms not investing in technology were losing ground to their competitors. Stronger links between automation & inequality The study further suggests that automation has a bigger impact on the labour market and income inequality than previous research would indicate - and identifies the year 1987 as a key inflection point in this process, the moment when jobs lost to automation stopped being replaced by an equal number of similar workplace opportunities. Within industries adopting automation, the study shows, the average "displacement" (or job loss) from 1947-1987 was 17% of jobs, while the average "reinstatement" (new opportunities) was 19%. But from 1987-2016, displacement was 16%, while reinstatement was just 10%. In short, those factory positions or phone-answering jobs are not coming back. "A lot of the new job opportunities that technology brought from the 1960s to the 1980s benefitted low-skill workers," Acemoglu adds. "But from the 1980s, and especially in the 1990s and 2000s, there's a double whammy for low-skill workers: They're hurt by displacement, and the new tasks that are coming, are coming slower and benefitting high-skill workers." Low-skill workers: Moving backward Acemoglu and Restrepo constructed a model of technology's effects on the labour market, while testing the model's strength by using empirical data from 44 relevant industries. The result is an alternative to the standard economic modeling in the field, which has emphasised the idea of "skill-biased" technological change - meaning that technology tends to benefit select high-skilled workers more than low-skill workers, helping the wages of high-skilled workers more, while the value of other workers stagnates. However, Acemoglu and Restrepo think even this scenario, with the prosperity gap it implies, is still too benign. Where automation occurs, lower-skill workers are not just failing to make gains; they are actively pushed backward financially. Moreover, Acemoglu and Restrepo note, the standard model of skill-biased change does not fully account for this dynamic; it estimates that productivity gains & real (inflation-adjusted) wages of workers should be higher than they actually are. More specifically, the standard model implies an estimate of about 2% annual growth in productivity since 1963, whereas annual productivity gains have been about 1.2%; it also estimates wage growth for low-skill workers of about 1% per year, whereas real wages for low-skill workers have actually dropped since the 1970s. "Productivity growth has been lackluster, and real wages have fallen," Acemoglu says. "Automation accounts for both of those." Moreover, he adds, "Demand for skills has gone down almost exclusively in industries that have seen a lot of automation." Why "so-so technologies" are so, so bad Indeed, Acemoglu says, automation is a special case within the larger set of technological changes in the workplace. As he puts it, automation "is different than garden-variety skill-biased technological change," because it can replace jobs without adding much productivity to the economy. Think of a self-checkout system in your supermarket or pharmacy: It reduces labour costs without making the task more efficient. The difference is the work is done by you, not paid employees. These kinds of systems are what Acemoglu and Restrepo have termed "so-so technologies," because of the minimal value they offer. "So-so technologies are not really doing a fantastic job, nobody's enthusiastic about going one-by-one through their items at checkout, and nobody likes it when the airline they're calling puts them through automated menus," Acemoglu says. "So-so technologies are cost-saving devices for firms that just reduce their costs a little bit but don't increase productivity by much. They create the usual displacement effect but don't benefit other workers that much, and firms have no reason to hire more workers or pay other workers more." To be sure, not all automation resembles self-checkout systems, which were not around in 1987. Automation at that time consisted more of printed office records being converted into databases, or machinery being added to sectors like textiles and furniture-making. Robots became more commonly added to heavy industrial manufacturing in the 1990s. Automation is a suite of technologies, continuing today with software and AI, which are inherently worker-displacing. "Displacement is really the centre of our theory," Acemoglu says. "And it has grimmer implications, because wage inequality is associated with disruptive changes for workers. It's a much more Luddite explanation." After all, the Luddites - British textile mill workers who destroyed machinery in the 1810s - may be synonymous with technophobia, but their actions were motivated by economic concerns; they knew machines were replacing their jobs. That same displacement continues today, although, Acemoglu contends, the net negative consequences of technology on jobs is not inevitable. We could, perhaps, find more ways to produce job-enhancing technologies, rather than job-replacing innovations.