By Paul Walker 22/09/2016

A common argument you see with regard to computers and employment is that computer automation leads to major job losses.

James Bessen deals with this issue in a new column at A modern version of the Luddite story. Bessen argues that this line of argument, however, ignores the dynamic economic responses that involve both changing demand and inter-occupation substitution.

Using US data, he explores the effect of automation on employment growth for detailed occupational categories. Computer-using occupations have had greater job growth to date, while those using few computers suffer greater computer-related losses. The major policy challenge posed by automation is developing a workforce with the skills to use new technologies.

Bessen looks at estimates of employment demand growth.

Taking these considerations into account, I estimate a simple model of occupational demand across industries that allows for changing demand and inter-occupation substitution within industries. As my key independent variable, I measure the extent of computer use by workers in each occupation and industry. These data come from supplements to the Current Population Survey. I assume that occupations that use more computers will have a higher degree of task automation, all else equal. The dependent variable is the relative growth of employment in occupation-industry cells.

The estimates contradict popular assumptions about the impact of computer automation. First, computer-using occupations tend to grow faster, not slower. At the sample mean, computer use is associated with a 1.7% increase in occupational employment per year. In other words, the bank teller example may be typical rather than exceptional.

Second, there is a strong substitution effect between occupations. Occupations tend to have declining growth to the extent that other occupations in the same industry use computers. That is, the story is not about machines replacing humans; rather it is one of humans using machines to replace other humans, as graphic designers with computers replaced typesetters.

The substitution effect largely offsets the growth effect. Counting both, at the sample mean, computer use is associated with positive employment growth but the effect is small, 0.45% per year. This association is not necessarily causal—perhaps some other factor caused computer-using occupations to grow. But this finding does show that computer automation is not associated with major job losses.

The last sentence is the takeaway result. Computer automation is not associated with major job losses meaning our modern day Luddites have less to worry about than they first thought.

A downside to increasing computer use is that while the evidence suggests that computers are not causing net job losses, low wage occupations are losing jobs, likely contributing to economic inequality. The policy problem is how to get the workers effected the new skills they need in order to transition to new, well-paying jobs. Developing a workforce with the skills to use new technologies is the real challenge posed by computer automation.

0 Responses to “How computer automation affects occupations: technology, jobs, and skills”

  • >I assume that occupations that use more computers will have a higher degree of task automation, all else equal

    That’s a pretty massive assumption to make, and renders Bessens analysis more of jobs using computers vs jobs not using computers. I don’t think it would be surprising to anyone that we’ve seen a growth in the number of jobs using computers. Bensens analysis would include app developers, data-analysts, etc; modern jobs that only use computers. We’ve seen growth in these modern jobs? Big surprise! There’s a big difference between jobs that are enabled by computers and jobs that are being reduced by them.

    An increase in “jobs that use computers” can’t be generalised to suggest that introducing automation into a job typically increases the associated occupational employment. Nor does it point to any flexibility of the market when computers move from an assistive role to negating the need for humans at all. Take cashiers for example (I understand this is a cherry picked example like bank tellers and may not generalise), cashiers have used computers for a long time to scan items (assistive role) but just recently the role of computers has grown to the point where it replaces them. The outlook for cashiers is grim, with little to no growth estimated from 2008-2018.

    The “modern Luddite” is more worried about intelligent automation. Computers that are able to perform tasks that up until now seemed uniquely human. Driving is a good example of this, self-driving cars are being developed and would prove a real threat to taxi-drivers, bus-drivers, truck-drivers etc. I think it’s a bit of a stretch to say that automated truck-drivers would make truck-driving companies cheaper, resulting in more truck-driving companies, facilitating the move of 3.5million (in the US at least) truck-drivers into management positions. Elastic demand doesn’t seem to be an all-present saviour for all jobs facing automation.

    I would be interested to see an analysis where jobs such as cashiers and bank tellers are examined before and after introduction of job replacing automation.