Demographics and Automation

Innovation and Economic Growth and Artificial Intelligence

Article Snapshot

Author(s)

Daron Acemoglu and Pascual Restrepo

Source

NBER Working Paper No. 24421, March 2018

Summary

Some predict that economic growth will slow in countries with rapidly aging populations. But data shows that firms respond to scarcity of middle-aged workers by automating. These firms become more productive.

Policy Relevance

The populations of different countries are aging at different rates. These differences partly explain why some countries lag behind in automation.

Main Points

  • The rate at which automation is proceeding varies widely from country to country; in 2014, in manufacturing firms based in the United States, there were 9.14 industrial robots for every thousand workers, compared to 14.20 in Japan, 16.95 in Germany, and 20.14 in South Korea.
     
  • About 40 percent of the cross-country differences in automation in the manufacturing sector are due to differences in demographics.
     
    • The populations of the United States and the United Kingdom are not aging as rapidly as the populations of Germany, Japan, and the South Korea.
       
    • The United States and the United Kingdom are lagging behind in robotics compared with Germany, Japan, and South Korea.
       
  • As populations age, middle-aged workers become scarce, high demand for their services increases wages, and firms respond by increasing automation.
     
  • Workers aged 31 to 55 are more likely to work in blue-collar jobs than in white-collar or service jobs; robots can more easily be substituted for middle-aged workers than for older workers, who often work in service-related occupations.
     
  • As jobs done by middle-aged workers are automated, some workers are displaced from some jobs, the displacement effect; however, as firms automate, they become more productive, and can hire more workers to perform tasks that cannot be automated, the productivity effect.
     
  • Countries with greater unionization rates also tend to adopt more robots, because unions raise labor costs; however, unionization rates have less effect than the aging of the population.
     
  • Countries undergoing rapid aging also export more automation-related technologies; a 20 percent increase in aging (the difference between Germany and the United States) leads to an 88 percent increase in robotics exports, but no increase in the exports of other technologies.
     
  • Within the United States, robotics-using firms tend to locate in areas that are aging more rapidly; this does not affect communities that lack significant manufacturing employment.
     
  • Industries that rely more on middle-aged workers, such as electronics, are adopting robotics at a greater rate than industries that rely less on middle-aged workers, such as a basic metal production.
     

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