Stagnant Wages in the Face of Rising Labor Productivity: The Potential Role of Industrial Robots

Klaus Prettner

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: Over the past decades, labor productivity and per capita GDP have increased steadily, while real wages for most workers have remained stagnant. This development challenges conventional economic insights according to which the remuneration of a production factor is determined by its productivity. Augmenting an otherwise standard production function with industrial robots as a substitute for workers allows to reconcile the two trends. If workers are compensated according to their marginal product, wages may decrease when robot use intensifies, whereas output and measured labor productivity both increase. Using data on labor input, physical capital input, and industrial robot use in the United States, I show that a sizable part of the observed wedge between wages and labor productivity can be explained using such a framework.

Keywords: automation; productivity; wage growth; inequality (search for similar items in EconPapers)
JEL-codes: J31 O11 O33 O40 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-eff and nep-gro
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Citations: View citations in EconPapers (5)

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Journal Article: Stagnant wages in the face of rising labor productivity: The potential role of industrial robots (2023)
Working Paper: Stagnant Wages in the Face of Rising Labor Productivity: The Potential Role of Industrial Robots (2023)
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