As a result of technological advancement, economic growth and living standards have increased. Also not every technology is equal. However, automation can affect employment and provide salary very differently from technologies that increase human productivity.
So, it is critical to distinguish automation from other types of technologies and capital deepening (meaning an increase in the amount of capital and machinery used in production).
To start with, businesses can invest in machines that complement workers – think about upgrading the machines they already use. Second, firms may purchase more or better machines to perform tasks that are already automated, such as replacing an automated welding machine with an advanced robot. Lastly, this type of (non-automated) capital deepening is generally good for labor because it increases productivity and motivates the firm to require additional workers.
On the other hand, automation differs from capital deepening in that it substitutes machines for workers in the jobs that they previously performed. Automation has a clear negative impact on the labor share, or how much of a company’s, industry’s, or economy’s revenue is spent on labor.
Finally, automation always increases the capital share and decreases the labor share by reducing the work performed by workers and increasing the work produced by capital. Also, automation has obvious distributional repercussions, in addition to its impact on employment and earnings.