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Wage Shocks and the Technological Substitution of Low-Wage Jobs

Daniel Aaronson and Brian Phelan
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Brian Phelan: DePaul University

No 17-266, Upjohn Working Papers and Journal Articles from W.E. Upjohn Institute for Employment Research

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: technological substitution; routine tasks; minimum wage (search for similar items in EconPapers)
JEL-codes: J24 J38 (search for similar items in EconPapers)
Date: 2016-12
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