Does Minimum Wage Spur Automation?: Evidence from South Korea

Abstract

We empirically investigate the impact of minimum wage on automation by exploiting the recent minimum wage hike in South Korea. We utilize South Korean establishment-level panel data, which contains information regarding the newly adopted automation process. We find that the increase in the minimum wage significantly spurred the adoption of automation. The establishments that were more severely affected by the minimum wage increase were more likely to adopt new automation technology after the minimum wage increase. We also discover the impacts are heterogeneous across industries: establishments in the manufacturing sector more actively responded to the minimum wage increase by adopting automation compared to the firms in the non-manufacturing sector.

Keywords: Automation, Technology Adoption, Establishment-level Data, Minimum wage

JEL Classification: J31, J38, L23, O14