Growing wages linked to an increase in innovation of automation technologies

Does the increase in wage pressure encourage automation? Economic theory suggests that this is the case. The increase in wages stimulates innovation in automation technology, companies to seek economic innovations to replace costly workforce. But what is the reality? Do companies develop and really put the implementation of automation innovation in response to external pressures, such as higher wages?

A new study by UZH economists who will be published in the Journal of Political Economy Provides the first solid empirical evidence to support this idea.

Patent data and wage analysis

To conduct their study, the authors implemented an innovative approach that combined two separate data sets. The first was a new classification of automation patents, using European patent data. This new set of data has enabled researchers to measure business innovation activity by following patents linked to automation at business level. The researchers focused on patents for machine tools, textile machines and paper machines.

This patent data set was then combined with a set of macroeconomic data covering 41 countries, focusing on innovative companies exposed to global market forces. Consequently, UZH researchers were able to calculate salary levels and analyze how wages fluctuations stimulate automation innovation.

“This new approach allowed us to isolate the causal impact of work costs technological advances And to acquire a more precise understanding of companies’ responses to salary changes, “explains the first author David Hémous, associate professor of innovation and entrepreneurship at UZH.

Higher minimum wages stimulate innovation

The authors analyzed the past reforms of the labor market and their impact on innovation trends. Their study shows that a higher minimum wage has led companies to develop more automation technologies. “Our data provide strong empirical support for the idea that higher wages to low -skilled workers encourage companies to invest in automation innovation to reduce their production costs,” explains Hémous.

According to the study, an increase in wages by 1% leads to an increase of 2% to 5% of innovation in the relevant field. In turn, the increase in wages for highly skilled workforce reduces automation innovation, as automation and installation automation machines often require highly skilled workers. Higher salary costs make automation more expensive, reducing its advantages and thus discouraging innovation.

Impact of labor market policies

Hartz reforms in Germany, which the authors have studied, showed a similar effect. These labor market reforms, implemented between 2003 and 2005, would have an increase in the offer of labor and reduced wages, in particular for low-skilled workers. This was confirmed by the study of UZH researchers.

“We found that the reforms led to a drop in automation innovation Among the companies exposed to the German market, “explains Hémous.” Political shocks such as minimum wage increases and German Hartz reforms also emphasize how labor market policies directly shape companies to invest in automation – or not – and how they affect the long term economic such as economic growth. “”

The authors also found that non -self -employed innovations, such as improving energy efficiency, do not respond to salary shocks. They therefore call for more in -depth research on the influence of the increase in high wages automation Technologies, such as AI.