The Evolution of Technological Substitution in Low-Wage Labor Markets

Daniel Aaronson and Brian J. Phelan
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Daniel Aaronson: Federal Reserve Bank of Chicago
Brian J. Phelan: DePaul University

The Review of Economics and Statistics, 2024, vol. 106, issue 4, 1045-1063

Abstract: This paper uses minimum wage hikes to evaluate the susceptibility of low-wage employment to technological substitution. We find that automation is accelerating and supplanting a broader set of low-wage routine jobs since the 2008–2009 financial crisis. Simultaneously, low-wage interpersonal jobs are increasing and offsetting routine job loss. However, interpersonal job growth does not appear to be enough, as it was prior to the financial crisis, to fully offset the negative effects of automation on low-wage routine jobs. Employment losses are most evident among non-Asian people of color who experience outsized losses at routine jobs and smaller gains at interpersonal jobs.

Date: 2024
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