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[                    ]
Finance & economicsJan 22nd 2022 edition

Free exchange
Economists are revising their views on robots and jobs

There is little evidence of a pandemic-induced surge in automation

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Jan 22nd 2022

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WHEN THE pandemic first struck, unemployment soared. Not since the
Depression had American joblessness surpassed 14%, as it did in April
2020. But fears of a prolonged period of high unemployment did not
come to pass. According to the latest available data, for November,
the unemployment rate for the OECD club of mostly rich countries was
only marginally higher than it was before the pandemic. By now it may
even have drawn level. The rich world's labour-market bounceback is
the latest phenomenon provoking economists to look again at a
foundational question in the discipline: whether robots help or harm
workers.

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The gloomy narrative, which says that an invasion of job-killing
robots is just around the corner, has for decades had an
extraordinary hold on the popular imagination. Warning people of a
jobless future has, ironically enough, created plenty of employment
for ambitious public intellectuals looking for a book deal or a
speaking opportunity. Shortly before the pandemic, though, other
researchers were starting to question the received wisdom. The world
was supposedly in the middle of an artificial-intelligence and
machine-learning revolution, but by 2019 employment rates across
advanced economies had risen to all-time highs. Japan and South
Korea, where robot use was among the highest of all, happened to have
the lowest rates of unemployment.

Many thought that the pandemic would at last prove the doom-mongers
right. In mid-2020 a highly cited paper published by America's
National Bureau of Economic Research argued that covid-19 "may
accelerate the automation of jobs", and another asserted that it was
"reinforcing both the trend towards automation and its effects". A
paper published by the IMF wondered whether the jobs lost during the
pandemic would "come back". Part of the logic was that since robots
don't fall ill, bosses would turn to them instead of to people--as
seemed to have happened in some previous pandemics. Others noted that
bursts of automation tend to occur during recessions.

Two years on, though, the evidence for automation-induced
unemployment is scant, even as global investment spending is surging.
The rich world faces a shortage of workers--by our reckoning there are
a record 30m unfilled vacancies across the OECD--which is hard to
reconcile with the idea that people are no longer necessary. Wage
growth for low-skilled workers, whose occupations are generally
thought to be more vulnerable to replacement by robots, is unusually
fast. There is still little evidence from America that "routine"
jobs, thought to be easier to automate, are shrinking relative to
other sorts of jobs.

Considering that so many doubts about the "robots kill jobs"
narrative have arisen, it is not surprising that a different thesis
is emerging. In a recent paper Philippe Aghion, Celine Antonin, Simon
Bunel and Xavier Jaravel, economists at a range of French and British
institutions, put forward a "new view" of robots, saying that "the
direct effect of automation may be to increase employment at the firm
level, not to reduce it." This opinion, heretical as it may sound,
does have a solid microeconomic foundation. Automation might help a
firm become more profitable and thus expand, leading to a hiring
spree. Technology might also allow firms to move into new areas, or
to focus on products and services that are more labour-intensive.

A growing body of research backs up the argument. Daisuke Adachi of
Yale University and colleagues look at Japanese manufacturing between
1978 and 2017. They find that an increase of one robot unit per 1,000
workers boosts firms' employment by 2.2%. Another study, by Joonas
Tuhkuri of the Massachusetts Institute of Technology (MIT) and
colleagues, looks at Finnish firms and concludes that their adoption
of advanced technologies led to increases in hiring. Unpublished work
by Michael Webb of Stanford University and Daniel Chandler of the
London School of Economics examines machine tools in British industry
and finds that automation had "a strong positive association with
firm survival, and that greater initial automation was associated
with increases in employment".

Non-economists can be forgiven for rolling their eyes at the
profession's apparent about-face. But things are not as simple as
saying that economists had got it wrong before. For a start,
statistical methods have improved since the publication of the
foundational papers in robonomics, such as one by Carl Benedikt Frey
and Michael Osborne of Oxford University in 2013, which was widely
interpreted as saying that 47% of American employment was at risk of
automation. The methodology used by Mr Adachi and his co-authors is
particularly clever. One problem is untangling causality: firms on a
hiring spree may also happen to buy robots, rather than the other way
round. But the paper shows that firms buy robots when their prices
fall. This helps establish a causal chain from cheaper robots, to
more automation, to more jobs.

The onrushing wave...of research

A second qualification is that the "new view" does not establish that
automation is "good". So far, it has had little to say about job
quality and wages. But a forthcoming book by David Autor, David
Mindell and Elisabeth Reynolds of MIT finds that even if robots do
not create widespread joblessness, they may have helped create an
environment where the rewards are "skewed towards the top". Others
argue that automation reduces job quality.

Mr Aghion and his colleagues add that even if automation boosts
employment at the level of the firm or industry, the effect across
the economy as a whole is less clear. In theory robot-adopting
companies could be so successful that they drive competitors out of
business, reducing the total number of available jobs. Such questions
leave researchers with plenty more to investigate. But what seems
clear at this stage is that the era of sweeping, gloomy narratives
about automation is well and truly over. #

Read more from Free Exchange, our column on economics:
Will remote work stick after the pandemic? (Jan 15th)
The IMF bashes the IMF over Argentina (Jan 8th)
New research counts the costs of the Sino-American trade war (Jan
1st)

For more expert analysis of the biggest stories in economics,
business and markets, sign up to Money Talks, our weekly newsletter.

This article appeared in the Finance & economics section of the print
edition under the headline "Update in progress"

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