Automation, Bargaining Power, and Labor Market Fluctuations

Sylvain Leduc and Zheng Liu

No 2019-17, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We argue that the threat of automation weakens workers' bargaining power in wage negotiations, dampening wage adjustments and amplifying unemployment fluctuations. We make this argument based on a quantitative business cycle model with labor market search frictions, generalized to incorporate automation decisions and estimated to fit U.S. time series. In the model, procyclical automation threats create real wage rigidity that amplify labor market fluctuations. We find that this automation mechanism is quantitatively important for explaining the large volatilities of unemployment and vacancies relative to that of real wages, a puzzling observation through the lens of standard business cycle models.

Keywords: automation; bargaining power; unemployment; wages; productivity; business cycles (search for similar items in EconPapers)
JEL-codes: E32 J63 J64 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-05-18
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mac and nep-pay
Note: The paper was previously circulated under the title “Robots or Workers? A Macro Analysis of Automation and Labor Markets", published July 18, 2019.
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Automation, Bargaining Power, and Labor Market Fluctuations (2024)
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DOI: 10.24148/wp2019-17

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