Automated workforce, financial precarities and family consumption: The importance of demand-side policies under the background of automation applications

Abstract

The continuous innovation of automation technology is expanding its application in the workplace, with wide-ranging implications for the economy and society. However, it is not yet clear how workplace automation changes people’s consumption behavior. This paper conducts an empirical analysis in this regard based on the Chinese General Social Survey. The main results are shown as follows: (1) One standard deviation increase in automation contributes to an average reduction of 7.073 % in family consumption. This finding is validated by conducting several robustness and endogeneity checks using various measures of automation and consumption, instrumental variable approach, placebo analysis, etc. (2) The mechanism is that automation decreases family income and work-related social capital, resulting in a decline in families’ socioeconomic status and increased financial precarities. In addition, financial uncertainties brought about by automation decrease people’s subjective well-being, expectations for future life and risk appetite, thus prompting them to lower consumption as a precautionary measure to prepare for potential risks caused by the technological change. (3) Automation has greater negative effects on hedonic and developmental consumption, which are about three times the impact on non-hedonic and basic living expenses respectively, thus leading to a downgrade in families’ consumption structure. In addition, its effect is more pronounced for families with lower economic status, having no houses and living in urban areas. This study also highlights the importance of demand-side policies in the application of automation technology by finding that better labor protection is needed to mitigate automation’s adverse consequences for family consumption. In the context of automation’s increasingly profound impact on the society, this research has important policy implications.