Technology has enabled work to be much more efficient and productivity to increase. But these gains have not resulted in higher wages for workers, which have stagnated in the developed world since the 1970s.
Pew Research from 2018 outlines that today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago, and what wage gains there have been have mostly flowed to the highest-paid tier of workers.
Researchers Daron Acemoglu & Pascual Restrepo have a new paper for the National Bureau of Economic Research entitled Tasks, Automation, and the Rise in US Wage Inequality that examines the situation in the American context.
Their work employs a task displacement variable to capture the effects of automation technologies. This quantitative analysis shows that a significant portion of the rise in U.S. wage inequality over the last four decades has been driven by automation (and to a lesser extent offshoring) displacing certain workgroups from employment opportunities for which they had comparative advantage.
In fact, between 50 percent and 70 percent of changes in the U.S. wage structure over the last four decades are accounted for by the relative wage declines of worker groups specialized in routine tasks in industries experiencing rapid automation, they find.
Importantly, their research highlights that overall, this task displacement leads to sizable increases in wage inequality, but only small productivity gains.
