Stagnant wages in the face of rising labor productivity: The potential role of industrial robots

Abstract

Over the past decades, labor productivity and per capita GDP have increased steadily, while real wages for most workers have remained stagnant. This challenges conventional economic wisdom according to which the remuneration of a production factor is determined by its productivity. Considering industrial robots as a substitute for workers allows reconciling the two trends. Industrial robot use reduces the marginal product of labor, whereas it raises output per hour worked. Using data for the United States, we show that a sizable part of the observed wedge between wages and labor productivity can be explained using such a framework.