The Equilibrium of Robots

“When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.”

George Westerman, Research Scientist with the MIT Sloan Initiative —

Exponential advancements in the world of technology has led to the inseparable union of man and robot. This collaboration has become a necessity in the production of goods and services. The interdependence of hardware and flesh adds a layer of complexity to our traditional employment models while simultaneously reconstructing the design of organizations. Anecdotal evidence projects a bleak future of jobless communities subject to extreme income inequality in the wake of robot adoption. As general-purpose technology becomes more accessible, it is important ask whether these fears will hold true or if the economic implications are more nuanced and (possibly) optimistic.

Market exposure to modern machines and AI began in the 1990’s. Access to these tools has recently become more affordable and some industries are seeing significant changes to their structure. Trends in the job market show that integrated technology causes an employment substitution away from certain roles while simultaneously complimenting others. Mid-level jobs appear to be on the decrease while occupations that require a high- or low-level of education are increasing. Although these shifts are apparent, scientists do not agree on the productivity gains or welfare implications of such patterns. It is unclear whether certain conclusions represent a true, new equilibrium or if the technological shocks are still undulating.

In their groundbreaking works, Autor et al. (2006) and Acemoglu and Restrepo (2017) focused on aggregate effects of robots on employment. Their findings suggest that positions that require professional work and management skills are not subject to easy replacement. They show that computers compliment nonroutine cognitive tasks, substitute routine tasks, and remain agnostic to nonroutine manual tasks. The papers predict that an investment in robots acts as a catalyst to decreased employment shares while increasing a firm’s overall productivity.

 Dixon et al. (2020) are poised to provide a new narrative to the labor story in their article “The Robot Revolution.” Looking at data from 1996 to 2017, they argue that earlier research around technological change failed to capture the true effects of modern machines. Robots have become increasingly sophisticated with dexterous limbs and tremendous computing power. The authors show that these new advancements have caused managerial positions (categorized as nonroutine cognitive tasks) to experience a substitution rather than compliment effect. They hypothesize that advanced robot processing makes quality-control jobs such as management positions obsolete and therefore causes a reduction in these occupations. They also provide evidence that robots increase (rather than decrease) total firm employment, although these new jobs are not on the managerial level. Their research adds a new hue to the dynamic world of robots.

Our understandings around the implications of technological advancements increase at a rate similar to technology’s own growth. As research is developed and employed, it is important to question the short-run and long-run possibilities of robots, AI, and modern machines. It might be too soon to conclude long run results but it’s not too late to account for this in our policies.

Works Cited

  • Acemoglu, D., & Restrepo, P. (2017). Robots and Jobs: Evidence from US Labor Markets. Journal of Political Economy. https://doi.org/10.3386/w23285
  • Autor, D., Katz, L., & Kearney, M. (2006). The Polarization of the U.S. Labor Market. American Economic Review. https://doi.org/10.3386/w11986
  • Dixon, J., Hong, B., & Wu, L. (2021). The Robot Revolution: Managerial and Employment Consequences for Firms. Management Science. https://doi.org/10.1287/mnsc.2020.3812