Has labor-saving technology accelerated? Evidence from industry-level data

Abstract

What role has labor-saving technological change played in the recent past in charting out the trajectory of employment? Have we already transitioned into a new technological regime where production technologies are more invasive upon labor’s terrain? In this study, I provide empirical evidence to answer these questions. Using industry-level data from 12 advanced economies for 1970–2007, I show that capital goods did not become more effective in labor-saving after 1980 or 1990. Similarly, the strength of the relationship between employment and output did not decline after 1980 or 1990. While many recent econometric studies have estimated the number of workers displaced due to industrial robots with which the media and public are highly preoccupied, there is nothing new in the fact that production technologies are labor-saving and displace workers. The importance of demand side factors and structural change (mainly deindustrialization) in determining employment patterns is often neglected, leading to a misleading assessment of the impact of labor-saving technologies on employment.