Economic Applications - Inequality, Automation and Trade

Why is robotics currently a big topic?
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Earnings inequality is rising, middle and low incomes are coming closer together, typical middle class incomes fall - relative to high ones. There's polarisation of the labour market, middle class jobs disappear in favour of either good or bad jobs, i.e more janitors and waiters on low end and more professionals etc on high end, loss of typical skilled worker.
Wage inequality has increased, there was a sharp rise in the 1980's. There's been polarisation of middle class jobs. This fact suggests that the ultimate driver is not political changes, but something more fundamental.
These increases in inequality have been more pronounced and quicker in economies with unregulated labour markets. It is later and weaker in countries like Germany.
This fact suggests that policy can have a moderating role.
Trying to understand increases in inequality and the role of technology started with the idea that technological progress is good for high-qualified workers and bad for low-qualified workers. This was an okay first shot but it falls short as jobs such as truck drivers, barbers and cleaners hasn't changed a huge amount since the 1950s. The work of factory workers, craftsmen and accountants has.
At the core of this approach is the distinction between tasks and jobs:
Tasks are the things that need to be done to produce a good or service, e.g fixing mirrors to cars.
Tasks can be done by domestic workers, machines, or foreign workers.
Task machines may be complements for some or substitutes for others.

Jobs are a combinations of tasks, i.e firms combine several tasks (usually related) into a job and then try and hire someone to do this job.
Routine tasks like record filing are easier to change, e.g computers are good at routine tasks, everything can be pre-coded.
Non-routine tasks such as cleaning, driving etc are comparatively hard to replace by computers.
For tasks such as research, machinery will help productivity. They complement the task.
Job descriptions can be put into 5 different categories, what are these?Routine manual: assembly Routine analytical: calculation Non-routine manual: driving Non-routine analytical: analysing data Non-routine interactive: sellingWhat two things will impact the labour market impact of technological change?*What tasks computers and machines can do better than humans*. (depending on technological capabilities and prices). E.g what might be technologically possible to build a fully automated supermarket, but not cost effective. *The way firms combine jobs into tasks* E.g upgrading within jobs to car mechanic to car mechatronic. A job might depend on the availability of workers with various skills.What are the implications for wage inequality?Many routine tasks were combined in middle-income jobs, e.g manufacturing workers, accountants etc. Wages in these jobs are put under pressure as work can be automated. Many non-routine tasks involving cognitive work, map into typical high routine jobs such as medical doctor so wages in these jobs increased even further as computers increase productivity (complement). Non-routine task involving manual or interactive work are typical low income jobs, such as bus drivers etc. Wages should't change here because they aren't affected by technology. This reflects the polarisation pattern we've seen.What jobs were hit the most by this?manufacturing, agriculture, construction, clerical work. Jobs that dont require much skill beyond willingness to work have become scarce.What jobs were not hit by this?Jobs that are high skilled, that need "thinking" skills. These jobs are actually aided by technology. Also jobs that are non-routine manual like drivers have not been hit. There's evidence that tasks within occupations have changed and become more skill intensive and complex.How is globalisation effected by technology?Trade is highly beneficial. Countries and regions can specialise in the type of products that can produced relatively cheaply and at good quality. This means more variety and lower prices. Benefits of trade tend to be diffused across society, i.e everyone benefits. This makes these benefits huge in total even though they might be small for every individual.What is an example technology on globalisation?The clothing industry. Before the industrial revolution clothing was produced locally by craftsmen. People owned one or two sets of clothing. The spinning wheel and other advances made England the world's dominant producer of clothing and textiles. Increasing capital increased productivity and drove prices down. Later these jobs were moved to different countries would made clothes cheaper.How did globalisation and trade create winners and losers?Specialism in certain activities means that certain skills/workers become more valuable. E.g one country might specialise in high-skilled services, this drives up demand for workers able to do these jobs. But other jobs might become obsolete. Manufacturing might now be done in a different country, this drives down the demand for workers who did these jobs. This creates adjustment costs for workers who have done these jobs. This pattern is more likely to effect jobs and industries that are easy to move abroad, e.g. those involved in tasks not requiring personal contactHow big are the costs of job loss?We can understand this by looking at people who lost their job unrelated to their performance e.g plant closures. Results typically suggest big and lasting earning losses in both the short and long term. Studies also found negative effects on mortality and health. There is also the possibility that mass layoffs affect local labour markets more widely. It effects local supply chains and local services affected by less money around.Why are the effects of job loss so large?This is to do with skill portability. When jobs move into different industries/occupations this leads to a loss of acquired knowledge. So, skills are principally portable, but highly dependent on a worker doing similar things. E.g It is comparatively easy to move from mining to steel working. But it os more tricky to move from mining to steel working. This is a problem in this case as technology and globalisation affect similar tasks (routine tasks). Remaining or newly created jobs that are very different from those who lost their jobs. The only option that remains are low-skilled service jobs without many barriers to entry (low wages).What labour markets were susceptible to decline?Labour markets susceptible to computerisation due to specialisation in routine task intensive activities experience occupational polarisation within manufacturing and non-manufacturing but no net employment decline. Trade impacts rise in the 2000s as imports accelerate, while the effect of technology appears to shift from automation of production in manufacturing towards computerisation of information-processing tasks in non-manufacturing.How does AI differ to technology?AI is different in the sense that it can affect non-routine tasks. E.g self driving cars, improved pattern recognition (medical diagnosis). AI is not different in terms of the basic mechanisms how technology affects labour markets. Tasks become possible to automate. It affects value of human skills in the labour market.What industries are likely to be influenced by AI?Transportation, production, installation and repair. Lots of classical good working jobs are at risk. Holders of these jobs will have likely suffered over the years. It is unclear what these jobs are going to be now, but then the concept of an app designer was alien in 2000.What is the O-ring theory of production?Making any stage of a multi-stage production process more reliable increases value of all stages. Automating production steps that robots/computers are good at increases value of human labour at other stages of the production process.