Fear the Machine?

Abstract

Advanced automation and artificial intelligence, or ‘robot’ technology use, continues to expand across many industries. Recent decreasing labor market movements fuels the question: How do these technologies affect workers’ wages and jobs? Authors Dennis W. Jansen and Michael D. Bradley study the effects of automation and artificial intelligence on employment and labor income over multiple generations. This paper studies the potential impact of automation using two versions of an overlapping generations model, one with a single production technology where the share of output shifts from labor to capital, and one with two separated technologies where traditional technology and automation compete for labor and capital. Findings show that during the transition period, shifting to technology that uses limited labor can potentially lower wages and labor income. However, a policy of subsidizing labor can mitigate the decline in capital stock and negative economic impacts.