Adjusting to Robots: Worker-Level Evidence

Abstract

We estimate the effect of industrial robots on employment, wages, and the composition of jobs in German labor markets between 1994 and 2014. We find that the adoption of industrial robots had no effect on total employment in local labor markets specializing in industries with high robot usage. Robot adoption led to job losses in manufacturing that were offset by gains in the business service sector. We analyze the impact on individual workers and find that robot adoption has not increased the risk of displacement for incumbent manufacturing workers. They stay with their original employer, and many workers adjust by switching occupations at their original workplace. The loss of manufacturing jobs is solely driven by fewer new jobs for young labor market entrants. Moreover, we find that, in regions with higher exposure to automation, labor productivity increases while the labor share in total income declines.JEL-Classification: J24, O33, F16, R11

Local Labor Market Size and Qualification Mismatch

“…A major explanation for this is the paucity of data allowing to measure match quality in a comprehensive way. Previous studies have attempted to measure it indirectly through the share of occupational and industry changes (Bleakley and Lin, 2012) or through assortative matching in terms of worker and firm quality (Andersson et al, 2007;Dauth et al, 2016) and found evidence of better matches in more urbanized areas. The focus in this paper is on a direct measure of job match quality, namely the match between the formal qualifications earned by workers and the job requirements.…”

Will This Time Be Different? A Review of the Literature on the Impact of Artificial Intelligence on Employment, Incomes and Growth

“…Another EU study on the impact of robots showed no effect at all on employment at firm level (Fraunhofer Institute, 2015). Dauth et al (2018) find no evidence that robot use in German manufacturing causes overall job losses. Every robot destroys two manufacturing jobs but this is offset by additional jobs in services.…”

“…Yet, new evidence from the impact of robots on the manufacturing sector in Germany suggests that transitional unemployment effects may not be that strong as a large part of the workers manage the transition within their firms and across occupations. Nevertheless, this job security comes at the cost of reduced wage growth for adjusting workers (Dauth et al, 2018).…”

What is happening to middle skill workers?

“…The analysis also shows whether and to what extent middle-skill workers are exiting employment, as well as how this transition is taking place. The analysis in this section is most similar to Cortes, Jaimovich and Siu (2017 [10]) who perform a similar analysis for the United States. Researchers have performed similar analyses for Germany (Bachmann, Cim and Green, 2018[11]), Finland (Maczulskij and Kauhanen, 2017 [12]), and the United Kingdom (Salvatori, 2015[13]).…”

“…To answer the question of whether or not shifts in the demographic composition of the working-age population are causing the shares of middle-skill employment to shrink, the analysis turns to a shift-share analysis. 10 The shift-share analysis decomposes the change in the share of middle-skill employment into shifts induced by changes in the composition of the workforce and changes in propensity to be employed in middle-skill employment within groups. The analysis also includes an interaction term.…”