Do Robots Reduce Wages?

Significant advancements in technology over the past few decades have made it possible to develop and evolve sophisticated robots and AI systems. Robots with high developed tech are designed to perform tasks faster and more accurately than humans consistently, making them highly efficient and cost-effective. This is evident and can be seen within hazardous or repetitive jobs[1], as well as in industries where labour costs may be reaching an all-time high. Moreover, AI is a sector where innovations are constantly being made, making them a very attractive investment opportunity as the return value may be exponentially higher. Robotics and AI systems can increase productivity and profits in the workplace, but they also have the potential to displace jobs and increase wage inequality, although they may create new employment possibilities and income increases for professionals in certain industries.

One crucial aspect which stands out about robots is the ability to continuously customise and personalise them to do various tasks with machine learning. Robots can analyse and comprehend data, identify trends, and make judgements based on that knowledge due to machine learning algorithms. New circumstances can be adapted to, and their performance continuously enhances because of this process. Robots can now be tailored and personalised to carry out particular duties more effectively, which makes them an incredibly useful asset in sectors like manufacturing, logistics, and healthcare. This is crucial because it enables streamlined processes and higher output in sectors where productivity and efficiency are major factors. This would allow engineers to have improved quality control and product customization as well as faster production cycles. Moreover, data analysis can be utilized by senior executives to ensure informed decision-making and maximum efficiency. Not only this but through task automation and it can assist those working in healthcare to reduce their workload and free up their time to focus on more important tasks such as patient care. As a result, this can lead to higher wages since as productivity increases, it can lead to greater profitability which can then be used to pay higher wages.

The introduction of robots and automation technology, on the other hand, may significantly alter the relationship between employers and employees. Employers can replace humans with machines that can complete activities more inexpensively and effectively as automation technology is used more frequently. Due to the ease with which businesses can replace humans with robots or machines, this might diminish the negotiating power of employees, especially those in regular and low-skilled roles. A report by the Centre for Global Policy Solutions[2] claims that the use of automation technologies may result in lower unionisation rates and collective bargaining ability as well as a loss in employee benefits such as retirement and health care. From an increased control over the production process, paired with the ability to displace humans with machines, if necessary, the introduction of robots and automation technology may result in a shift in the balance of power in favour of employers. This idea is supported by Daron Acemoglu’s major study in the subject of labour economics “Skill-Biased Technological Revolution,” which examines the connection between technological advancement and shifts in the demand for skilled labour. His study makes the case[3], that the rise in wage inequality in industrialised countries has been predominantly and primarily caused by the move towards more skill-intensive technology that has been observed over the last few decades. Acemoglu first contends that technological advancement is not a homogeneous force but rather instead consists of several innovations and breakthroughs that have an impact on the relative productivity of numerous types of workers. He emphasises the significance of “skill-biased” technological change, which boosts skilled employees’ productivity relative to unskilled workers. Due to this, the demand for labour shifts in favour towards the skilled workers, raising their wages and earnings relative to those of unskilled workers. Furthermore, the availability of affordable and more productive robotic labour may result in wage pressure, especially for workers in fields that heavily rely on routine jobs that can be automated. This means that workers may struggle to locate other employment options as a result, particularly those with low levels of education and demanded skills. 

Nevertheless, robots could also be the cause of creating more jobs[4] as they require specialised knowledge and skills to build, operate, and manage them. This means that businesses that employ robots will have to also acquire qualified personnel with training in fields like software development, robotics engineering and data analysis. These new jobs have the potential to provide higher wages as well as more possibilities and prospects for career advancements and progression; this would outweigh the jobs that such automation would have displaced. Moreover, they can assist in automating tedious and ordinary jobs, freeing up businesses to concentrate on more challenging and creative projects. New employment opportunities in fields like research and development, marketing, and sales can emerge from this.

The concept of ‘skill-biased technical change’[5], is a very intriguing viewpoint on this topic, which refers to a situation where technological advancements reduce the demand for workers who perform regular and manual jobs while simultaneously increasing the need for people with higher levels of education and abilities. This leads to an outcome where people with the required expertise and qualifications may be given higher wages, while those without them may earn less. This could exacerbate current disparities by extending the pay gap between highly skilled and unskilled workers. The ILO report also mentions that depending on the industry and profession, the effects of skill-biased technical change on wages can fluctuate. Robotics and automation technology have the potential to increase earnings for some individuals in specific professions, such as engineers, technicians, and IT specialists. However, the use of robots and automation technology may result in reduced earnings and job displacement for employees in other occupations, such as administrative and support staff. 

Robots and automation technology have a variety of ways to affect wages both positively and negatively, the overall impact and effect will vary depending on an array of factors, including the profession, industry, and the degree of expertise required. As technology advances, the demand for skilled workers is consistently increasing while the demand for low-skilled workers is on a downtrend, resulting in a widening wage gap between the two groups. This phenomenon, known as skill-biased technological change, represents how the net change in wages would essentially be minimal, yet the disparity in wages would widen due to higher wages for the more proficient workers and lower wages or perhaps even no employment for the non-skilled. 

[1] Pultyn, M. (2022) Why are robots not equal to humans? Digital Teammates. Available at: (Accessed: April 2, 2023). 

[2] Austin, A. (2017) Stick shift: Autonomous Vehicles, driving jobs and the future of workCenter for Global Policy Solutions. Available at: (Accessed: April 3, 2023). 

[3] Acemoglu, D. (2000) TECHNICAL CHANGE, INEQUALITY, AND THE LABOR MARKETNational Bureau of Economic Research. Available at: (Accessed: April 4, 2023). 

[4] Frey, C.B. and Osborne, M. (2013) The Future of Employment – Oxford Martin SchoolTHE FUTURE OF EMPLOYMENT: HOW SUSCEPTIBLE ARE JOBS TO COMPUTERISATION? Available at: (Accessed: April 3, 2023). 

[5] Bergin, A. et al. (2019) Skills and jobs mismatches in low- and middle-income countriesInternational Labour Organization. Available at:—ed_emp/documents/publication/wcms_726816.pdf (Accessed: April 3, 2023). 

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