Automation and New Tasks : The Implications of the Task Content of Technology for Labor Demand

We present a framework for understanding the effects of automation and other types of technological changes on labor demand, and use it for interpreting changes in US employment over the recent past. Automation enables capital to replace labor in tasks it was previously engaged in. Because of the displacement effect it generates, automation is qualitatively different from factor-augmenting technological changes; it always reduces the labor share in value added (of an industry or economy) and may also reduce employment and wages even as it raises productivity. The effects of automation are counterbalanced by the creation of new tasks in which labor has a comparative advantage, which generates a reinstatement effect raising the labor share and labor demand by expanding the set of tasks allocated to labor. We show how the role of changes in the task content of production—due to automation and new tasks—can be inferred from industrylevel data. Our empirical exercise suggests that the slower growth of employment over the last three decades is accounted for by an acceleration in the displacement effect, especially in manufacturing, a weaker reinstatement effect, and slower growth of productivity than in previous decades.