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Can Human Capital Save Labor? Automation, Education, and the Global Decline in the Labor Share

Author

Listed:
  • Subhrasil Chingri

    (Indian Institute of Technology Delhi)

  • Debasis Mondal

    (Indian Institute of Technology Delhi)

  • Klaus Prettner

    (Department of Economics, Vienna University of Economics and Business)

Abstract

Can human capital accumulation mitigate the adverse effects of automation on the global labor share? To answer this question, we build two theoretical models-first an automation augmented growth model with exogenous human capital to illustrate the general effects of education in the context of automation; and then an automation augmented endogenous human capital accumulation framework in which individuals decide how much of their time they devote to education. We show that while automation puts downward pressure on the labor share, this downward pressure is reduced by human capital investment. Quantitatively, however, the effect of human capital accumulation in limiting the decrease in the labor share is rather small given actual data on the change in the use of industrial robots and in the years of schooling between 1990 and 2024. Achieving a full stabilization of the labor share requires unrealistically high and sustained investments in education. Our findings underscore the importance of education as a policy lever in the age of automation but they also clarify that education policies alone are insufficient given the challenges ahead.

Suggested Citation

  • Subhrasil Chingri & Debasis Mondal & Klaus Prettner, 2025. "Can Human Capital Save Labor? Automation, Education, and the Global Decline in the Labor Share," Department of Economics Working Papers wuwp392, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp392
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    Keywords

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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