Robot adoption and ICT investment show context-dependent employment effects
A new Bank for International Settlements working paper finds that robot adoption and ICT investment jointly shape sectoral employment across 20 EU countries from 1995 to 2020. The study highlights that employment effects are highly context-dependent, influenced by initial conditions and complementary technology investment.
Initial conditions flip technology's employment effects
The study reveals that the relationship between employment and robot adoption critically depends on a sector's initial level of robotisation and its ICT investment.
For sectors starting without robots but with high ICT investment (top decile), a one-standard-deviation increase in robotisation is linked to an annual employment growth increase of about 0.4 percentage points.
This effect is double that seen in comparable sectors with low ICT investment.
Conversely, in sectors that already had robots and high ICT investment, further robotisation leads to a 0.4 percentage point decline in employment growth.
However, if ICT investment is low, these sectors still see a 0.8 percentage point gain.
This suggests that as sectors advance technologically, further increases in technology intensity can depress employment growth.
Unpacking the technology-employment paradox
The paper addresses the complex question of when technology complements or substitutes labor, a long-standing debate intensified by the spread of generative AI.
It investigates how robotics and ICT investment affect employment across advanced and emerging EU countries, exploiting cross-sectoral variation in initial technology endowments.
The research uses sectoral employment data from Eurostat, industrial robot data from the International Federation of Robotics (IFR), and ICT investment measures from the EU KLEMS Growth and Productivity Accounts, covering 20 EU countries over 1995-2020.
Beyond simple automation narratives
This research offers a crucial, nuanced perspective on automation's impact, moving beyond simplistic job creation or destruction narratives.
By emphasizing initial technological conditions and complementary ICT investment, it provides a valuable framework for understanding diverse labor market outcomes.
Policymakers should consider these context-dependent dynamics when designing strategies for technological transitions.