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Wage Shocks and the Technological Substitution of Low-Wage Jobs

Author

Listed:
  • Daniel Aaronson

    (Federal Reserve Bank of Chicago)

  • Brian Phelan

    (DePaul University)

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.

Suggested Citation

  • Daniel Aaronson & Brian Phelan, 2016. "Wage Shocks and the Technological Substitution of Low-Wage Jobs," Upjohn Working Papers 17-266, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:17-266
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    More about this item

    Keywords

    technological substitution; routine tasks; minimum wage;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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