Difficulties in Finding Middle-Skilled Jobs under Increased Automation

This study investigates the labor market under increased automation of middle-skilled jobs wherein worker suitability for these jobs is considered. We examine two effects of increased automation on workers. The first effect is the possibility of replacement of middle-skilled workers by machines. The second effect is the diversity in job mismatch probabilities of workers. If machines perform a worker’s suitable jobs more (or less) than the worker’s unsuitable jobs, then the worker’s job mismatch probability rises (or declines). Because workers who have larger job mismatch probabilities remain job seekers, it is more difficult for a firm to find a suitable worker. Due to these two effects, underemployment rises.