Automation in a New Age: The Effects of Technological Advancement on Labor Market Outcomes for Low-and High-Skill Labor

Abstract

The notion that technology replaces and lowers the wage of low-skill labor, while increasing employment and wages for high-skill labor, may be an outdated outlook on the effects of automation. Over the past couple of years, technological advancements have enabled more advanced tasks to be automated, posing a greater threat to high-skill labor. To measure whether occupational automobility has had similar or different effects on workers, I use the O*Net automation index, which calculates the percent at which an occupation's tasks can be automated, as well as American Community Survey data to estimate the effect of changing vulnerability of automation on wages and employment. I estimate that individuals earn higher wages as their occupation utilizes more technology for tasks. More specifically, low-skill workers see larger improvements in their wages as automation increases, in comparison to high-skill workers. From the O*Net score, I also derive a county level automation score, which specifies an average score representing the degree of occupational automation in each county. Using county level data, I estimate that wages tend to increase for both high- and low- skilled workers as automation increases, but the percent change in wages across years might decrease when a county has an average automation score, but the fraction of high-skill workers rises. Additionally, I find that overall, automation leads to a decrease in county unemployment, but with county fixed effects automation results in an increase in county unemployment.