Tasks, Automation, and the Rise in U.S. Wage Inequality

Article Source: Econometrica, Vol. 90, No. 5, pp. 1973-2016, 2022
Publication Date:
Time to Read: 2 minute read
Written By:

 Pascual Restrepo

Pascual Restrepo



A new model for measuring the effect of technology on the growth of wage inequality is based on the theory that workers displaced by automation will experience a decline in their wage rates relative to other workers.


Policy Relevance:

Automation explains most changes in the wage structure.


Key Takeaways:
  • Over the last four decades, wage inequality in industrialized nations has risen; the wages of highly educated workers rose, but the wages of men who failed to graduate from high school have fallen 15 percent.
  • A new framework for measuring the link between technology and changes in the wage structure is based on the theory that changes in wages that disfavor less skilled workers are caused by automation.
  • Technologies that make skilled workers more productive do not displace these workers, and tends to raise the wages of unskilled workers; technologies that displace workers from certain tasks will reduce their wages relative to other workers, and may reduce their real wages.
  • Data showing the extent to which different sectors have adopted robots, specialized machinery, and specialized software helps identify declines in labor share related to automation; sectors with the highest automation rates, such as primary metals, also experienced the highest loss of labor share.
  • Displacement due to automation explains 50 to 70 percent of changes to the US wage structure.
    • Displacement leads to higher unemployment rates and lower wages for affected workers.
    • Substitution of offshore labor for domestic labor accounts for only about two percent of changes in wage structure.
  • Declining unionization rates, competition from Chinese imports, and changes to industry concentration have not had a significant effect on the US wage structure.
  • When certain demographic groups are displaced by automation, they compete for tasks with other groups of a similar age and educational background, causing automation in one area to have a ripple effect on related sectors.
  • Displacement has not played a major role in the decline of the importance of manufacturing in the US, but does affect wages within the manufacturing sector.



Daron Acemoglu

About Daron Acemoglu

In 2019, Professor Acemoglu received MIT’s highest faculty honor by being named Institute Professor. Professor Acemoglu is a leading thinker on the labor market implications of artificial intelligence, robotics, automation, and new technologies. His innovative work challenges the way people think about how these technologies intersect with the world of work.