Automation increases income inequality, say Baker Institute experts

Automation does not kill jobs, but it does increase income inequality, according to new research from Dagobert Brito, Rice Faculty Scholar in international economics at the Baker Institute, and Robert Curl, the Kenneth S. Pitzer-Schlumberger Professor Emeritus of Chemistry.

Some jobs can’t be completely automated, but automation can make the workers doing those jobs more productive. However, when workers perform tasks that can be entirely automated, their wages essentially compete with “the marginal cost of automation,” the authors write.

“The wages of highly skilled workers grow because they are a complementary factor to automation,” they write. “Creating high-paying jobs for the rest of workers requires that the tasks necessary for these new jobs cannot be performed by automation.”

Inevitably, this wage inequality accelerates wealth inequality, the authors say.

“For the wealthy, additional income does not usually lead to a commensurate increase in consumption,” they wrote. “Our expectation is that automation will cause inequality in terms of wealth to grow enormously because middle-income and lower-income workers will consume almost all their income while the fraction of the income saved at the top will continue to increase.”

Automating any job affects the wage structure of every job, the authors conclude, raising some wages at the top but lowering the rest.

About Avery Ruxer Franklin

Avery is a media relations specialist in the Office of Public Affairs.