Previously, technological advances had a direct link to increment in wages. It made workers more efficient; increasing productivity from labor while also engorging job requirements and training. But the promises have recently become hazy since automation in the form of AI technology or robots came into play. There has been a growing fear that jobs would be destroyed by automation, with the current trend of minimum wage increase set to force employers into a shift to automation.
Different reports have offered varied estimations of jobs to be lost and the labor sector set to face the maximum threat. However, some economists have argued that automation would have no negative impact on wages. Technology can only result in employment equilibrium, taking knowledge from how automobiles created mechanics and filling stations after displacing farriers.
Generally, the minimum wage in the US grew by 1.1% year over year (YOY) last December, according to a report from TechRepublic. Some sectors did not experience the same growth, anyway. YOY pay growth in the technology sector was just 0.5% at the same period after scoring 3% earlier. The same report also suggests that automation would rather increase wages for certain jobs: technical support specialists and web developers. They both experienced more pay growth by 3.5% and 2.4% respectively, while Java developers slightly went down to 2.5%. Data scientists and data analysts that are usually ranked among of the best jobs in America did not experience significant pay growth in December 2017.
Which sector could face the worst?
The Institute for Fiscal Studies (IFS) has warned that top routine occupations such as receptionists and checkout operations are the most vulnerable positions likely to be replaced by machines. This was proposed as one of the potential challenges facing UK’s labor market as the government look to increase workers minimum wage by 12% between 2015 and 2020.
A recent study reported by Forbes also suggests that the fight for minimum wage increment in the US could hurt the very workers it intended to help. Fast food industry which is currently responding to wage hikes could force employers into adopting automation. For instance, Wendy’s plans to adopt touchscreen ordering device in its restaurants in response to workers wage hikes, according to Quartz.
Automation is not the only factor shrinking labor’s share
Inappropriate measurements, tame inflation and hidden labor market slack may also contribute to Labor's loss of share in our economy. GDP paid as wages has significantly declined over the past 20 years. Labor income which prides up to 67% of GDP between the 1960s and 1990s struggled to account for 57% in 2000 during the recession, before increasing to 57% today. The method used in measuring productivity has faced large criticism arguing that several new sources are not properly measured, especially in e-commerce and the digital economy.
Will technology affect wages differently today?
In the past, technology brought new opportunities after displacing some professions. But the result is not outright the same since the introduction of robots. Some sectors have experienced job growth, however, to sustain automation encroachment. The US manufacturing sector has measured productivity through the roof as the leading country in automation and steep fall in employment. The trend may not continue like this. Technology can only pave way for a new line of professions which may require more skills to handle, not completely going to leave a big hole of unemployment or a wide wage gap compared to years of no automation. It could only be a call for personnel development.