Workforce Transition and Income Inequality in the Age of Automation

Master thesis (2019)

Authors

A. Kocaoğlu Technology, Policy and Management

Contributors

S.T.H. Storm Economics of Technology and Innovation - TPM (supervisor 1)
B. Enserink Policy Analysis - TPM (supervisor 2)
Cees van Beers Economics of Technology and Innovation - TPM (coach)
Faculty
Technology, Policy and Management
Copyright: © 2019 Alper Kocaoğlu
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Published Date

20-02-2019

Language

English

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Faculty

Technology, Policy and Management

Abstract

It is expected that automation and income inequality will have a major impact on the world economy in the 2020’s and beyond. A research conducted by Bain (K. Harris, Kimson, & Schwedel, 2018) claimed that the impact of the economic disruption, which could be triggered by the collision of income inequality and automation, might be more dramatic than what was experienced in the past sixty years. On one hand, the adoption of new automation and production technologies, such as recent developments in artificial intelligence (AI) and machine learning, is expected to raise new businesses and investment opportunities. It is also expected that automation will boost productivity which has been declining due to several reasons, including aging population (Bughin et al., 2017).On the other hand, only a fraction of society (around 25%) will enjoy the benefits of the coming wave of automation (K. Harris et al., 2018) because automation is expected to increase the demand for high-skilled labour while decreasing the demand for the low-skilled labour. Furthermore, the scarcity of the high skill labour may increase the skill premium. Putting it differently, the demand for high-skilled labour will boost their income while depressing the wage of the low-skilled labour. Moreover, the benefits of automation will flow to the owners of capital due to increasing investment along with automation. As a result, automation has the potential to further deepen income inequality, aggravating the existing inequality in the United States (Alvaredo, Chancel, Piketty, Saez, & Zucman, 2018).This research, therefore, focuses three research gaps to study the impact of automation and digitalization. These gaps are:1) The impact of automation on gross output, the productivity growth, wage, labour share, employment and the structure of the economy in the short run2) The impact of income inequality on aggregate demand and investment of automation and capital3) The role of Main macroeconomic actors and their possible policy actions