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technological substitution
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The evolution of technological substitution in low-wage labor markets

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Editor's Note:

This paper was prepared for the December 12, 2019, conference on “Automation, Labor Market Institutions, and the Middle Class” for the Brookings Institution, Future of the Middle Class Initiative.

Abstract:

This paper documents how the susceptibility of low-wage occupational employment to technological substitution has changed over the first two decades of the century.  We find that low-wage automation has accelerated and spread to a broader set of jobs since the Financial Crisis – decreasing employment at both cognitively routine and manually routine jobs.  However, we also find that low-wage automation is associated with increases in the demand for jobs requiring interpersonal tasks.  That said, the growth in jobs requiring interpersonal tasks does not appear to be enough – as it was prior to the Financial Crisis – to fully offset the negative effects of automation on low-wage routine jobs. We also show that low-wage automation is occurring at a much higher rate outside of the largest U.S. cities and disproportionately impacts less-educated workers who are young, male, and especially minority.

Brian Phelan

Associate Professor and Driehaus Fellow, Department of Economics - DePaul University

Daniel Aaronson

Vice President and Director of Microeconomic Research - Federal Reserve Bank of Chicago

The goal of the Future of the Middle Class Initiative is to improve the quality of life of America’s middle class and to increase the number of people rising to join its ranks. Through independent, non-partisan analysis and policy development, we seek to advance public understanding of challenges facing the middle class and barriers to upward mobility.

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