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Wage Shocks and the Technological Substitution of Low-Wage Job

Daniel Aaronson and Brian J. Phelan

No WP-2017-3, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: We extend the task-based empirical framework used in the job polarization literature to analyze the susceptibility of low-wage employment to technological substitution. We find that increases in the cost of low-wage labor, via minimum wage hikes, lead to relative employment declines at cognitively routine occupations but not manually-routine or non-routine low-wage occupations. This suggests that low-wage routine cognitive tasks are susceptible to technological substitution. While the short-run employment consequence of this reshuffling on individual workers is economically small, due to concurrent employment growth in other low-wage jobs, workers previously employed in cognitively routine jobs experience relative wage losses.

Keywords: Minimum wage; Routine tasks; Technological substitution (search for similar items in EconPapers)
JEL-codes: J24 J38 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2017-01-15, Revised 2017-01-15
New Economics Papers: this item is included in nep-lma
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Working Paper: Wage Shocks and the Technological Substitution of Low-Wage Jobs (2016) Downloads
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