The Employment Consequences of Robots: Firm-Level Evidence

39 Pages Posted: 19 Jul 2019

See all articles by Jay Dixon

Jay Dixon

Statistics Canada

Bryan Hong

New York University (NYU) - Leonard N. Stern School of Business

Lynn Wu

University of Pennsylvania - The Wharton School

Date Written: July 19, 2019

Abstract

As a new general-purpose technology, robots have the potential to radically transform industries and affect employment. Preliminary empirical studies using industry and geographic region-level data have shown that robots differ from prior general-purpose technologies and predict substantial negative effects on employment. Using novel firm-level data, we show that investments in robotics are associated with increased employee turnover, but also an increase in total employment within the firm. Examining changes in labor composition, we find that manager headcount has decreased but non-managerial employee headcount has increased, suggesting that robots displace managerial work that in prior waves of technology adoption was considered more difficult to replace. However, we also find that firms are more likely to hire managers from outside the firm and invest in additional training, suggesting that firms require different employee skills as the nature of work changes with robot investment. We also provide additional evidence that robot investments are not generally motivated by the desire to reduce labor costs but are instead related to an increased focus on improving product and service quality. With respect to changes in the way work is organized within the firm, we find that robot adoption predicts organizational changes in ways that differ from prior technologies. While information technology has generally been found to decentralize decision-making authority within organizational hierarchies, we find that robots can either centralize or decentralize decision-making, depending on the task. Overall, our results suggest that the impact of robots on employment is more nuanced than prior studies have shown.

Keywords: Robot, AI, Employment, Productivity, Organizational Change

Suggested Citation

Dixon, Jay and Hong, Bryan and Wu, Lynn, The Employment Consequences of Robots: Firm-Level Evidence (July 19, 2019). Available at SSRN: https://ssrn.com/abstract=3422581 or http://dx.doi.org/10.2139/ssrn.3422581

Jay Dixon

Statistics Canada ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada

Bryan Hong

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY 10012
United States

Lynn Wu (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3733 Spruce Street
Philadelphia, PA 19104-6374
United States

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