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Research Examines Automation and Low-Wage Jobs

Scholarly Pursuits: Business Insights from Driehaus Faculty Research

Barista and cashier stock image
Associate Professor of Economics Brian Phelan's research, which was published by the Federal Reserve Banks of Chicago, examined the impact of automation on low-wage workers.

Brian Phelan, associate professor of economics and Driehaus Fellow at DePaul University’s Driehaus College of Business, is an award-winning teacher whose research focuses on labor economics and related topics. Phelan recently partnered with Daniel Aaronson, vice president and director of microeconomic research at the Federal Reserve Bank of Chicago, to publish a paper titled Does Automation Always Lead to a Decline in Low-Wage Jobs? (Chicago Fed Letter, No. 413, 2019)

Brian Phelan
Associate Professor of Economics and Driehaus Fellow Brian Phelan | Photo by Kathy Hillegonds

“We examine whether low-wage jobs are being automated in the United States,” Phelan says. “We find that low-wage automation, while changing the composition of jobs, has not led to a net decline in the total number of jobs. Thus, the impact of automation on individual low-wage workers has been surprisingly small.”

Here are three takeaways from their research findings:

  • While low-wage automation began taking place in the early 2000’s, the pace of automation has accelerated since the Great Recession of 2008 and a greater proportion of low-wage jobs are now susceptible to automation. 

  • The automation of low-wage jobs has been associated with the destruction of jobs that involve intensive routine cognitive tasks. However, it also has been associated with the creation in other types of jobs, namely those intensive in interactive tasks.

  • How can the introduction of technology intended to replace some jobs end up creating other types of jobs? One explanation is that automation technology may ease a fixed factor of production. For example, replacing cashiers at your favorite coffee shop with kiosks or an ordering app could free up precious space behind the counter and allow the café to hire more baristas and churn out more drinks per hour.

“The fear of automation technology and its potential to displace a large portion of the global labor force is nearly ubiquitous,” Phelan says. “However, there is no credible evidence that technological change – at any point in time – has led to a net decline in overall employment. Still, it’s only natural to wonder whether this time could be different. This is an important question that warrants further study.”

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