People Versus Machines: The Impact of Minimum Wages on Automatable Jobs

45 Pages Posted: 6 Feb 2018

See all articles by Grace Lordan

Grace Lordan

London School of Economics & Political Science (LSE) - London School of Economics

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

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Abstract

We study the effect of minimum wage increases on employment in automatable jobs – jobs in which employers may find it easier to substitute machines for people – focusing on low-skilled workers for whom such substitution may be spurred by minimum wage increases. Based on CPS data from 1980–2015, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become nonemployed or employed in worse jobs. The average effects mask significant heterogeneity by industry and demographic group, including substantive adverse effects for older, low-skilled workers in manufacturing. We also find some evidence that the same changes improve job opportunities for higher-skilled workers. The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase.

Keywords: minimum wage, employment, automation

JEL Classification: J23, J38

Suggested Citation

Lordan, Grace and Neumark, David, People Versus Machines: The Impact of Minimum Wages on Automatable Jobs. IZA Discussion Paper No. 11297, Available at SSRN: https://ssrn.com/abstract=3117301 or http://dx.doi.org/10.2139/ssrn.3117301

Grace Lordan (Contact Author)

London School of Economics & Political Science (LSE) - London School of Economics ( email )

David Neumark

University of California, Irvine - Department of Economics ( email )

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