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Stagnant Wages in the Face of Rising Labor Productivity: The Potential Role of Industrial Robots

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  • Prettner, Klaus
Abstract
Over the past decades, labor productivity and per capita GDP have increased steadily, while real wages for most workers have remained stagnant. This development challenges conventional economic insights according to which the remuneration of a production factor is determined by its productivity. Augmenting an otherwise standard production function with industrial robots as a substitute for workers allows to reconcile the two trends. If workers are compensated according to their marginal product, wages may decrease when robot use intensifies, whereas output and measured labor productivity both increase. Using data on labor input, physical capital input, and industrial robot use in the United States, I show that a sizable part of the observed wedge between wages and labor productivity can be explained using such a framework.

Suggested Citation

  • Prettner, Klaus, 2023. "Stagnant Wages in the Face of Rising Labor Productivity: The Potential Role of Industrial Robots," Department of Economics Working Paper Series 354, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus005:59342809
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    Cited by:

    1. David E. Bloom & Klaus Prettner & Jamel Saadaoui & Mario Veruete, 2023. "Artificial intelligence and the skill premium," Department of Economics Working Papers wuwp353, Vienna University of Economics and Business, Department of Economics.

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    More about this item

    Keywords

    automation; productivity; wage growth; inequality;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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