Automation threat and wage bargaining

Grant description:

This study proposes a novel mechanism through which automation in the labor market might have an impact on wages through the threat, rather than the actuality, of automation, which threatens to significantly change the structure of the labor market. Despite widespread popular accounts of a future where few work, the literature is more circumspect. How automation will affect both the demand for labor and wages is an important area of study. The project will build a model of bargaining over wages and the automation threat, and empirically test the impact of this threat using employer-employee matched data in the United Kingdom. Using heterogeneity of firms, Arnoud will identify occupations that are vulnerable to automation and look at firms that have yet to automate, implying the existence of the threat of automation. Arnoud will further investigate the extent to which this threat channel is mediated by the bargaining power of workers due to other institutional features.