Is Job Automation Keeping Down Wages?

In a strong labor market, you’d expect workers to be able to negotiate higher
wages. But that’s not really happening today. San Francisco Fed economists
looked into the story behind the sharp drop in the share of U.S. national
income going to workers as compared to 20 years ago.

Why haven’t workers’ wages kept up with productivity? Job automation could be
partly to blame. Our video explains.

Has job automation impeded workers’ ability to negotiate higher wages in a
strong labor market? Our video sums up
research findings
from San Francisco Fed economists Sylvain Leduc and Zheng Liu (video, 0:57


Job openings are hard for businesses to fill in a strong labor market
with low unemployment.

Normally this gives workers the power to ask for higher pay.

But in recent years, workers have not seen their wages rise, even though
the labor market has been very strong.

Instead, the share of U.S. national income that goes to workers has
dropped sharply compared with 20 years ago.

Why hasn’t workers’ pay kept up with productivity?

One reason could be that it’s easier to automate certain jobs.

When businesses can replace workers with robots, they gain an advantage
in deciding how much to pay workers.

This means workers could lose the power to negotiate higher wages.

Research shows that automation has contributed significantly to the drop
in labor’s share of income.

The threat of automation has also kept wage growth stagnant in the
current strong labor market.

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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.