Robotics technology and firm-level employment adjustment in Japan☆
Introduction
Many industries are currently on the verge of a second digital revolution known as the fourth industrial revolution (Makridakis, 2017). In the face of challenges arising from aging societies and labor shortages, especially in advanced economies, industrial digitalization, robotics technology, and artificial intelligence (AI) will play a significant role in helping countries go through the transition. Fig. 1 shows a clear trend of growing installation of industrial robots, together with a downward trend of the working population ratio in Japan. The greater utilization of robotics technology seems inevitable in Japan and in other highly mature economies.
The adoption of industrial robots, or automation in general, can help Japan’s industries ease the burden due to the labor shortage; however, accelerated automation of the tasks that used to be performed by labor raises concerns that new technologies will make the existing labor redundant (e.g., Brynjolfsson and McAfee, 2014; Akst, 2013; Autor, 2015). The main reason for concern is the replacement of humans by machines and other technologies to perform certain types of jobs. Technology could make the production process more capital-intensive by automating labor-intensive tasks. For example, the loss of comparative advantage conferred by cheap labor might result in concentrated production tasks in advanced economies. Therefore, developing economies that specialize in labor-intensive parts of the global supply chains worry about the possibility that jobs might evaporate in their territories.
If we go a step further and examine within-firm labor structures, the situation is even more complicated. Manufacturing firms usually have different divisions with various functions: sales, marketing, production, research and development (R&D), administration, amongst others. In some divisions, such as R&D, it is common practice for firms to hire the most talented workers, while in production or assembly divisions, firms tend to recruit less skilled workers. In other divisions, workers with different skill levels are mixed. Since routine tasks are more likely to be automated, divisions that focus on routine tasks are more prone to experience job loss. Meanwhile, technological changes associated with automation may yield new job opportunities or new tasks that can be performed by skilled workers.
Most previous studies have tended to look at the net employment growth of firms and have overlooked within-firm labor dynamics driven by automation. Since net employment change is the difference between total job creation and job destruction within a firm, detecting the net or overall impact does not necessarily mean that job creation and job destruction occur in the same directions and magnitudes. Thus, the conventional arguments about complementarity between skilled labor and automation and about substitutability between unskilled labor and automation cannot be simply applied if we look only at overall employment changes. This study addressed this gap by separating job creation from job destruction and investigating whether robotics technology, as a leading example of automation, affects them in different ways.
Unlike previous studies, this study defined job creation as the aggregated number of newly added jobs for all divisions within a firm and job destruction as the aggregated number of newly eliminated jobs for all divisions. One obvious advantage of such definitions is that the individual effects of robotics technology on job creation and destruction can be captured separately, which helps to elucidate a firm’s decision-making from different perspectives.
The next section reviews related studies. Section 3 describes the data used for assessment of firm-level employment composition and industry-level robot installation. The estimation strategy used is described in Section 4. Section 5 presents the estimation results and robustness checks. The final section concludes this paper.
Section snippets
Previous literature and the contribution of this study
This study is broadly related to the literature on the implications of technological change on employment, wages, and productivity (see Acemoglu and Autor, 2011, for the literature review). Although how the introduction of new technology transforms the labor market is not a new question, the ongoing process of automation, such as advances in robotics technology, has triggered renewed concern about massive joblessness. Frey and Osborne (2017), for example, estimated that 47 % of total United
Data
To analyze the effects of robotics technology on job creation and destruction, we combined data from two separate sources: firm-level data for employment composition across divisions from the BSJBSA and industry-level data for industrial robots from the World Robotics database. The following subsections describe each data set.
Empirical methodology
This section begins by explaining our measurements of job creation and destruction using firm-level data on employment composition across divisions. Section 4.2 provides preliminary data observations on job creation and destruction in relation to the diffusion of robotics technology by industry. Section 4.3 presents the baseline estimation strategy.
Baseline results
Columns [1]–[3] in Table 1 show the estimation results of Eq. (1) for job creation (), job destruction (), and net employment change (). The measure of industry-level diffusion of robotics technology, , has a positive and significant impact on both within-firm JC and JD and an overall negative influence on the net employment change of firms.6
Conclusion
We made use of firm-level data obtained from the BSJBSA and industry-level robot shipment data obtained from the IFR and JARA to investigate the causal effect of the industry-wide diffusion of robotics technology on within-firm labor reallocation. In contrast to the literature focusing on net employment changes, we looked at how individual Japanese manufacturing firms respond through job creation and destruction channels to the diffusion and penetration of robotics technology at the industry
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2022, Journal of the Japanese and International EconomiesCitation Excerpt :Several studies have investigated whether labor augmenting technological progress has led to a decline in employment. Ni and Obashi (2021) finds that industry-level adoption of robotics leads to firm-level job creation as well as job destruction, while the job destruction effect dominates. Dekle (2020) further finds that the introduction of robotics raises the productivity level of the entire economy leading to an increase in labor demand, which counteracts the negative displacement effect.
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This research was conducted as a part of the “Technology and Jobs in East Asia” project of the Economic Research Institute for ASEAN and East Asia (ERIA). For useful feedback and suggestions, we thank Fukunari Kimura, Hongyong Zhang, and other project members, as well as the participants of the Japan Economy Workshop held at the University of Hawai’i. For excellent research assistance, we thank Yuchen Lu. The opinions expressed in this paper are solely the responsibility of the authors and do not reflect the views of ERIA.