Automation helped kill up to 70% of the US’s middle-class jobs since 1980, study says – Business Insider

Wage growth has been stagnant for the better part of five decades. What's been powering the stagnation is still debated.

Over time, the supposed culprits have included the greed-is-good capitalism of the 1980s, deunionization, rising market power, and weak productivity.

Yet a new study suggests automation has had, by far, the largest negative impact. Such innovations gutted the US's middle class, curbed real wage growth, and left the country with only meager gains in return, MIT professor Daron Acemoglu and Boston University professor Pascual Restrepo said in a working paper published by the National Bureau of Economic Research.

Between 50% and 70% of changes in US wage structure since the 1980s are linked to pay declines in industries experiencing rapid automation, according to the paper, and so-called task displacement has been "particularly high" for middle-income Americans. Groups facing the highest levels of task displacement also saw their real wages fall the most.

Taken together, they write that automation was the most significant force wiping out middle-class jobs and widening the wage gap from the 1980s onward. Rising market power, markups, and deunionization "do not appear to play a major role in US wage inequality," they added.

Sectors hit hardest by automation since the 1980s include vehicle manufacturing, printing and publishing, and the manufacturing of rubber and plastic products, according to the team's model.

The trade-off between task displacement and productivity also seems uneven, the researchers said. While displacing workers from their jobs powered "sizeable increases in wage inequality," it only made for relatively small gains in productivity.

To be sure, other dynamics weighed on wage growth starting in the 1970s. Women's participation in the workforce ramped up through the '70s and '80s, although systemic pay inequities have left women's earnings broadly lagging men's.

Offshoring of US jobs to cheaper labor markets likely dampened wage growth and widened the pay gap as well, the researchers said. Still, the effects pale in comparison to the impact of automation, they added.

Changes seen throughout the pandemic suggest automation could be having a more positive impact as the US labor market recovers. Productivity soared 5.4% in the first quarter of 2021, marking the fastest rate of growth since the 1990s. The leap suggests that forms of automation made popular during the pandemic think QR-code menus and virtual real estate tours could provide a permanent boost to productivity as the country reopens.

Such a pick-up in productivity can kickstart a "virtuous cycle" for American workers, economics writer Noah Smith said in a June 13 blog post. Increased productivity gives workers a stronger case for demanding higher pay. And as businesses reap the benefits of automation and other innovations, other sectors tend to tap into such productivity-boosting measures. This can spark a cycle of stronger wage growth and rising productivity, Smith wrote.

History suggests such a cycle can exist without automation wiping out jobs, Smith added. The employment rate just before the pandemic sat at the same highs as those seen in 2000 and near the record-high of the 1990s. Labor-saving innovations since the 1990s have boosted productivity, yet adequate job openings remained in the years since.

If the last four decades are precedent, automation is likely to further displace workers as the US reopens. It's unclear where those workers will find new jobs, but past waves of technological development signal there will be "plenty of work for people to do," Smith said.

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Automation helped kill up to 70% of the US's middle-class jobs since 1980, study says - Business Insider