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The Evolution of Technological Substitution in Low-Wage Labor Markets

Daniel Aaronson and Brian J. Phelan

No WP-2020-16, Working Paper Series from Federal Reserve Bank of Chicago

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 in the decade since the 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 previous to the Financial Crisis – to fully offset the negative effects of automation on low-wage routine jobs. Employment losses are most evident among minority workers who experience outsized losses at routine-intensive jobs and smaller gains at interpersonal jobs.

Keywords: Low-wage automation; routine-biased technical change; minimum wages (search for similar items in EconPapers)
JEL-codes: J15 J21 J24 J38 O33 (search for similar items in EconPapers)
Pages: 72
Date: 2020-07-14, Revised 2022-03-01
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DOI: 10.21033/wp-2020-16

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