The Real Impact of Automation: Transforming Jobs, Not Just Replacing Them

Automation is omnipresent today, reshaping industries and challenging conventional perceptions about its impact on employment. Traditionally, economists have framed automation's influence in terms of job creation or destruction, focusing on whether technological progress generates more employment opportunities than it eliminates. However, a less explored but equally critical perspective is how automation transforms jobs, fundamentally altering the skills required and the wages offered.

Technological Advancement Accelerated by the Pandemic

The COVID-19 pandemic catalyzed an unprecedented adoption of automation, pushing industries toward contactless solutions, like cashierless checkouts, welding drones, and robotic chefs. While consumers benefit from faster, cheaper, and more efficient services, these advancements also raise concerns for workers who once occupied those roles.

But can automation be a benefit for workers?

The answer isn't as straightforward as a binary "yes" or "no." While automation can displace workers in certain sectors, it also reshapes job roles, creating new demands for skills and, in many cases, offering new opportunities.

Job Creation vs. Job Destruction

 A popular dichotomy in the automation debate centers around whether technology displaces or reinstates workers. For instance, the World Economic Forum has projected that automation will result in a net creation of 12 million jobs by 2025. Companies like Waymo, developing driverless taxis, argue that the advent of autonomous vehicles will create jobs in emerging sectors, such as self-driving fleet maintenance, rider support, and software engineering.

Yet, even though new jobs are created, the transformed nature of these roles often requires workers to learn new, specialized skills. As job requirements shift, so do wage structures, with automation playing a dual role in both raising and lowering wages.

The Wage Impact of Automation

While some sectors have seen wage growth tied to automation, such as skilled workers who can operate complex machinery, automation has also suppressed wages in other areas. For instance, economists Daron Acemoglu and Pascual Restrepo found that displaced workers from sectors overtaken by automation, like clerical roles, often enter new sectors like retail, where an influx of labor can drive down wages.

A historical example comes from aviation. In the early days, pilots flying risky night routes commanded a premium, but as technology improved and made flying safer, the wage premiums associated with those specialized skills vanished. Similarly, London cab drivers once earned a premium due to their in-depth knowledge of the city’s layout. However, with Uber’s introduction of turn-by-turn navigation apps, this specialized knowledge became redundant, driving down wages.

Balancing the Benefits of Automation

Firms often see automation as a way to cut costs by reducing the need for human labor. Yet, eliminating human labor entirely is risky. The human element remains crucial when technology fails, as demonstrated when "Flippy," a burger-flipping robot, was sidelined after it couldn’t meet demand. In this case, human cooks were called upon to step in.

Flippy, the robot hamburger flipper, by Jefferson Graham

The key lesson here is that automation changes the nature of work rather than eliminating it. While robots take over mundane, dangerous, or repetitive tasks, the demand for workers with specialized skills to manage, maintain, and troubleshoot these technologies remains high.

Moving Forward with Automation

As companies adopt new technologies, they must carefully consider the implications. Automation may streamline processes, but it also changes the demand for specific skills and can impact wages across industries. Executives should ask three critical questions when evaluating automation: What can’t technology do? How do these limits affect operations? And what are the costs of overseeing automation?

As technology continues to evolve, so too will its impact on the workforce. Automation doesn’t simply destroy or create jobs; it transforms them, requiring both workers and employers to adapt to an ever-changing landscape.