New technologies can replace a large segment of labour tasks, and with current debates about the potential impacts of AI on the future of work, now is a key time to look at historical data to determine the potential effects of labour-saving technologies.
One strand of this work is looking at modelling the adoption of computers since the middle of the 20th century. Since computers have steadily become cheaper, firms know that they will eventually automate production and replace jobs. Initial findings indicate that firms prefer to undertake such a replacement during a recession, when the opportunity cost of restructuring is lower, and refrain from re-hiring workers, leading to a jobless recovery.
The other strand of this work focuses on the effects of cheaper electricity in the US over the early 20th century, which made labour-saving devices more affordable. Early results from this research, looking at data from the concrete industry between 1929 and 1935, suggest that electricity caused the use of labour-saving devices to increase, which in turn made labour more productive. Employment and the share of income paid to labour fell, and there was no effect on output. The effects were stronger in US counties where the Great Depression was more severe, which is consistent with the view that firms used a recession as an opportunity to replace workers with electrical machinery.
Filip Rozsypal is collaborating on the project as an external researcher from the National Bank of Denmark.