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Automation and the Demand for Labour (Chain of Analysis)

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 4 Jun 2018

Here is a short video looking at building a chain of reasoning to this question "Assess the likely micro and macroeconomic impact of technological change in a developed country of your choice."

Automatic and Demand for Labour (Chain of Analysis)

One possible micro effect of technological change in the UK is a fall in jobs for people working in logistics businesses such as Amazon and DHL. 

This is because mobile robots are able to do the work of people who previously might have been employed in collection and packing. 

Installing robots is an example of capital labour substitution designed to increase productivity & lower the unit of costs of supplying products. 

If capital replaces labour, then the demand curve for labour shifts inwards leading to a contraction of employment

And it might also lead to a fall in real wages in the industry. This is shown in my analysis diagram. 

If people lose their jobs because of automation, this might also cause an increase in structural unemployment due to occupational immobility

From good chains of reasoning, evaluation can flow 

Although in theory, automation reduces demand for labour to perform routine tasks, in practice it also increases employment in and wages for workers in other jobs such as software engineering, training and robot maintenance. Indeed these jobs might offer median pay levels higher than in manual occupations. Much depends on the occupational mobility of labour force and also the extent to which automation, artificial intelligence and machine learning improves the competitiveness and trend rate of economic growth of a country.  Rising prosperity creates new jobs that may not have existed a decade or more ago.

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