Showing Up to Work
The Robot Revolution: Managerial and Employment Consequences for Firms
Jay Dixon, Bryan Hong & Lynn Wu
Management Science, forthcoming
Abstract:
As a new general-purpose technology, robots have the potential to radically transform employment and organizations. In contrast to prior studies that predict dramatic employment declines, we find that investments in robotics are associated with increases in total firm employment but decreases in the total number of managers. Similarly, we find that robots are associated with an increase in the span of control for supervisors remaining within the organization. We also provide evidence that robot adoption is not motivated by the desire to reduce labor costs but is instead related to improving product and service quality. Our findings are consistent with the notion that robots reduce variance in production processes, diminishing the need for managers to monitor worker activities to ensure production quality. As additional evidence, we also find that robot investments predict improved performance measurement and increased adoption of incentive pay based on individual employee performance. With respect to changes in skill composition within the organization, robots predict decreases in employment for middle-skilled workers but increases in employment for low- and high-skilled workers. We also find that robots predict not only changes in employment but also corresponding adaptations in organizational structure. Robot investments are associated with both centralization and decentralization of decision-making authority depending on the task, but decision rights in either case are reassigned away from the managerial level of the hierarchy. Overall, our results suggest that robots have distinct and profound effects on employment and organizations that require fundamental changes in firm practices and organizational design.
Partial Automation and the Technology-Enabled Deskilling of Routine Jobs
Mitch Downey
Labour Economics, April 2021
Abstract:
Evidence shows technology automates middle-wage occupations' routine tasks. I argue technology only partially automates these, simplifying them so that they can be performed by less-skilled workers. Thus, post-automation costs include technology and low-wage workers to use it. The minimum wage raises these costs, lowering the profitability of automation and slowing the adoption of routine-replacing technologies. I test this claim using new cross-state variation in the minimum wage (induced by state price differences) and new cross-industry variation in the importance of low-skilled labor for technology (measuring using the Current Population Survey Computer Use Supplement and the Dictionary of Occupational Titles). Because low-skilled workers are needed alongside technology, I show that a low minimum wage increases the automation of routine jobs.
Should Robots Be Taxed?
Joao Guerreiro, Sergio Rebelo & Pedro Teles
Review of Economic Studies, forthcoming
Abstract:
Using a quantitative model that features technical progress in automation and endogenous skill choice, we show that, given the current U.S. tax system, a sustained fall in automation costs can lead to a massive rise in income inequality. We characterize the optimal tax system in this model. We find that it is optimal to tax robots while the current generations of routine workers, who can no longer move to non-routine occupations, are active in the labor force. Once these workers retire, optimal robot taxes are zero.
Labor's Capital and Worker Well-Being: Do US Pension Funds Benefit Labor Interests?
Larry Liu & Adam Goldstein
Social Forces, forthcoming
Abstract:
Since the 1980s, the shareholder value revolution has undermined the position of workers and organized labor within US firms. At the same time, workers have paradoxically become one of the largest classes of shareholders through labor pension funds (LPF), including state public employee funds and private sector union-affiliated funds. Does workers' concentrated ownership of capital in LPF represent a mechanism to advance worker interests against the prevailing wage, benefit, and jobs squeeze in publicly traded firms? This article links data on US state pension funds' investments and shareholder activism to firm-level data on work and employment outcomes from 2001-2016. LPF shareholder proposals targeting large firms have declined over time. However, panel regression models show that intra-firm mobilization by LPF in the form of shareholder proposals is associated with modestly improved worker outcomes. There is no evidence that greater ownership share by public pension funds (PPF) is associated with more labor-friendly outcomes. This null association obtains even when focusing only on ownership by the most socially activist funds, or those from Democrat-controlled states. Nor does PPF ownership buffer workers from the negative impact of extractive hedge funds. Together, the results help reconcile contending accounts of pension fund capitalism's effects on worker well-being. The analysis contributes to the sociological study of financialization, corporate governance, work and employment, and labor movements.
Spillover Effects from Voluntary Employer Minimum Wages
Ellora Derenoncourt, Clemens Noelke & David Weil
University of California Working Paper, March 2021
Abstract:
Low unionization rates, a falling real federal minimum wage, and prevalent non-competes characterize low-wage jobs in the United States and contribute to growing inequality. In recent years, a number of private employers have opted to institute or raise company-wide minimum wages for their employees, sometimes in response to public pressure. To what extent do wage-setting changes at major employers spill over to other employers, and what are the labor market effects of these policies? In this paper, we study recent minimum wages by Amazon, Walmart, Target, and Costco using data from millions of online job ads and employee surveys. We document that these policies induced wage increases at low-wage jobs at other employers. In the case of Amazon, which instituted a $15 minimum wage in October 2018, our estimates imply that a 10% increase in Amazon's advertised hourly wages led to an average increase of 2.6% among other employers in the same commuting zone. Using the CPS, we estimate wage increases in exposed jobs in line with our magnitudes from employee surveys and find that major employer minimum wage policies led to small but precisely estimated declines in employment, with employment elasticities ranging from -.04 to -.13.
The Alpha Beta Gamma of the Labor Market
Victoria Gregory, Guido Menzio & David Wiczer
NBER Working Paper, April 2021
Abstract:
Based on patterns of employment transitions, we identify three different types of workers in the US labor market: α's β's and γ's. Workers of type α make up over half of all workers, are most likely to remain on the same job for more than 2 years and, when they become unemployed, typically find a new job within 1 quarter. Workers of type γ comprise less than one-fifth of workers, have a low probability of staying on the same job for more than 2 years and, when they become unemployed, face a high probability of remaining jobless for more than 1 year. Workers of type β are in between αs and γ's. The earnings losses caused by displacement are relatively small and transitory for α-workers, while they are large and persistent for γ-workers. During the Great Recession, excess unemployment for α-workers rose by little and was reabsorbed quickly; unemployment for γ-workers rose by 20 percentage points and was not reabsorbed 4 years after its peak. We use a search-theoretic model of the labor market to rationalize the different patterns of employment transitions across types. The model naturally explains both the variation in the consequences of job displacement across types, and the variation in the dynamics of unemployment during the Great Recession. Our view is that several puzzling micro and macro phenomena about the labor market are driven by the behavior of the small group of γ-workers.
How Do Workers Perceive the Risks from Automation and the Opportunities to Retrain? Evidence from a Survey of Truck Drivers
Daniel Shoag, Michael Strain & Stan Veuger
American Enterprise Institute Working Paper, April 2021
Abstract:
How do truck drivers perceive the risk they face from automation and their opportunities to retrain for employment in a different occupation? Autonomous vehicle (AV) technology has made rapid progress in recent years, so these questions are likely salient to truckers. Based on surveys of the new RAND American Truck Driver Panel, we find that those drivers who are most concerned about automation are, counterintuitively, also most likely to say they intend to re-invest in driving by seeking additional endorsements or purchasing their own truck. This zero-sum "arms race" for remaining positions is socially inefficient, and it may be driven by incorrect information about outside options. Specifically, the effect disappears among those drivers who are most familiar with the generally low costs of community college. We show that this is consistent with a simple model in which idiosyncratic noise in the perceived cost of retraining can lead to inefficient outcomes. This mechanism suggests that effective information provision can have large positive externalities and welfare consequences. However, a calibration of labor market prospects suggests that information provision about the true costs of retraining may not be adequate to induce occupational switching if truckers believe wages for survivors will continue to grow. This points to another important role for perceptions about the future, and for a policy of information interventions.
The Local Labour Market Effects of Light Rail Transit
Justin Tyndall
Journal of Urban Economics, forthcoming
Abstract:
Many US cities have made large investments in light rail transit in order to improve commuting networks. I analyse the labour market effects of light rail in four US metros. I propose a new instrumental variable to overcome endogeneity in transit station location, enabling causal identification of neighbourhood effects. Light rail stations are found to drastically improve employment outcomes in the surrounding neighbourhood. To incorporate endogenous sorting by workers, I estimate a structural neighbourhood choice model. Light rail systems tend to raise rents in accessible locations, displacing lower skilled workers to isolated neighbourhoods, which reduces aggregate metropolitan employment in equilibrium.
Impact of Broadband Penetration on U.S. Farm Productivity
Katherine LoPiccalo
Consumer Financial Protection Bureau Working Paper, February 2021
Abstract:
This paper uses data on broadband connections and the production and sales of agricultural products to empirically estimate the impact of improved connectivity on U.S. farming outcomes. The Federal Communications Commission has detailed data on broadband subscriptions from its semi-annual Form 477 collection. The USDA's National Agricultural Statistics Service (NASS) releases a complete census of agriculture every five years to measure agricultural activity. By pairing periodic releases of the Form 477 data collection with information on farm production expenses and crop yields from corresponding releases of the Census of Agriculture, the analysis directly evaluates the benefit of rural broadband development on the U.S. farming industry. Overall, I find evidence of crop yield improvements from increased Internet penetration rates at thresholds of 25 Megabits-per-second download and 3 Megabits-per-second upload speeds. Among the findings, doubling the number of 25+/3+ connections per 1,000 households is associated with a 3.6% increase in corn yields, as measured in bushels per acre. I also find some evidence of cost savings at thresholds of 10 Megabits-per-second download and 0.768 Megabits-per-second upload speeds. Doubling the number of 10+/0.768+ connections per 1,000 households is associated with a 2.4% decrease in operating expenses per farm operation. The paper also provides an introductory look at changes in the composition and speed thresholds of connectivity available for selected field crops over time.
How Do Cities Change When We Work from Home?
Matthew Delventhal, Eunjee Kwon & Andrii Parkhomenko
Journal of Urban Economics, forthcoming
Abstract:
How would the shape of our cities change if there were a permanent increase in working from home? We study this question using a quantitative model of the Los Angeles metropolitan area featuring local agglomeration externalities and endogenous traffic congestion. We find three important effects: (1) Jobs move to the core of the city, while residents move to the periphery. (2) Traffic congestion eases and travel times drop. (3) Average real estate prices fall, with declines in core locations and increases in the periphery. Workers who are able to switch to telecommuting enjoy large welfare gains by saving commute time and moving to more affordable neighborhoods. Workers who continue to work on-site enjoy modest welfare gains due to lower commute times, improved access to jobs, and the fall in average real estate prices.
The Impact of the Federal Pandemic Unemployment Compensation on Job Search and Vacancy Creation
Ioana Marinescu, Daphne Skandalis & Daniel Zhao
NBER Working Paper, March 2021
Abstract:
During the COVID-19 pandemic, the Federal Pandemic Unemployment Compensation (FPUC) increased US unemployment benefits by $600 a week. Theory predicts that FPUC will decrease job applications, and could decrease vacancy creation. We estimate the effect of FPUC on job applications and vacancy creation week by week, from March to July 2020, using granular data from the online jobs platform Glassdoor. We exploit variation in the proportional increase in benefits across local labor markets. To isolate the effect of FPUC, we flexibly allow for different trends in local labor markets differentially exposed to the COVID-19 crisis. We verify that trends in outcomes prior to the FPUC do not correlate with future increases in benefits, which supports our identification assumption. First, we find that a 10% increase in unemployment benefits caused a 3.6% decline in applications, but did not decrease vacancy creation; hence, FPUC increased tightness (vacancies/applications). Second, we document that tightness was unusually depressed during the FPUC period. Altogether, our results imply that the positive effect of FPUC on tightness was welfare improving: FPUC decreased competition among applicants at a time when jobs were unusually scarce. Our results also help explain prior findings that FPUC did not decrease employment.
Going Places: Effects of Early U.S. Compulsory Schooling Laws on Internal Migration
Emily Rauscher & Byeongdon Oh
Population Research and Policy Review, April 2021, Pages 255-283
Abstract:
Both the industrialization thesis and institutional theories of education hypothesize that early educational expansion increased internal migration. We take advantage of state variation in early U.S. compulsory schooling laws and use a regression discontinuity approach to test this hypothesis in 1860-1950 Census data. Results indicate that those required to attend school were more likely to leave their state of birth than others. Effects were stronger among men in states with low occupational status scores, suggesting education encouraged migration out of states with fewer occupational opportunities. Potential contemporary implications for the U.S. and developing countries are discussed.
Combining Rules and Discretion in Economic Development Policy: Evidence on the Impacts of the California Competes Tax Credit
Matthew Freedman, David Neumark & Shantanu Khanna
NBER Working Paper, March 2021
Abstract:
We evaluate the effects of one of a new generation of economic development programs, the California Competes Tax Credit (CCTC), on local job creation. Incorporating perceived best practices from previous initiatives, the CCTC combines explicit eligibility thresholds with some discretion on the part of program officials to select tax credit recipients. The structure and implementation of the program facilitates rigorous evaluation. We exploit detailed data on accepted and rejected applicants to the CCTC, including information on scoring of applicants with regard to program goals and funding decisions, together with restricted access American Community Survey (ACS) data on local economic conditions. Using a difference-in-differences approach, we find that each CCTC-incentivized job in a census tract increases the number of individuals working in that tract by over two - a significant local multiplier. We also explore the program's distributional implications and impacts by industry. We find that CCTC awards increase employment among workers residing in both high income and low income communities, and that the local multipliers are larger for non-manufacturing awards than for manufacturing awards.
Ready for a Close-Up: The Effect of Tax Incentives on Film Production in California
Alec Workman
Economic Development Quarterly, May 2021, Pages 125-140
Abstract:
Do motion picture incentives nudge productions to film in an adopting state, increase budgets, or hire more cast and filmmakers? Or do they simply subsidize productions that would have occurred regardless? Using California's Film and Television Tax Credit Program, the author exploits incentives given out by lottery to answer these questions. The author finds that 19% of films would have filmed in California even without a tax incentive, but that the offering of an incentive increased the probability of a film being made in California by 16 percentage points. Both production budgets and the number of cast and filmmakers increased in response to the offering of a tax incentive, and, in California specifically, they increased budget spent by 267% and the number of cast and filmmakers hired by 123%. The program also had differential impacts based on film type, with only nonindependents increasing budgets and the number of cast and filmmakers in California.