U.S. Demographics Predict Increased Rate of Automation

America’s getting older. Apparently, this means that automation’s coming quicker.

Here’s the short of it:

In a recent paper, Daron Acemoglu (MIT) and Pascual Restrepo (Boston University) document how changing demographics impact automation. After crunching the data, the pair concluded that aging populations are associated with faster automation. Specifically, the authors make the following findings:

[D]emographic change — measured by an increase in the ratio of older to middle-aged workers — is associated with greater adoption of robots and other automation technologies across countries and with more robotics-related activities across US commuting zones. [The authors] also provide evidence of more rapid development of automation technologies in countries undergoing greater demographic change.

This makes intuitive sense. The rate of diffusion for automation is driven by the answers to two questions: (1) how expensive is it to automate, and (2) how expensive is it not to automate? Compare the two, and you have a basic formula to evaluate the business case for automation.

Demographics affect the second question. An aging workforce means fewer available workers. A shrinking worker supply puts upward pressure on wages. Higher wages makes the business case for automation better.

This got me curious about the US’ demographics; as it turns out, we’re aging fast. The New York Times recently published a piece detailing a shrinking work force. It included this nifty visualization:

Woah, that’s a lot of purple. Purple means fewer people of prime working age.

Of course, I’m not sure if this accounts for urbanization trends. Maybe America’s not getting older in most places, but young people are picking up and moving to a few cities because, well… that’s where the jobs are, and young people need those. The authors didn’t let on as much in their original writing. They paint it as a legitimate demographic trend — fewer babies than moms and dads. Because I’m trusting (read: lazy), I’ll take them at their word.

The data can be repurposed to give legs to Acemoglu and Restrepo’s paper. Notice how the NYT measured age range is eerily close to the ages Acemoglu and Restrepo identify as predictive of automation! Weird. Also, enlightening. Acemoglu and Restrepo would predict that this will spur higher rates of automation in the coming years.

There are probably lots of implications, but they’re outside the scope of this article. I just thought it was interesting — food for thought. Make of it what you will.

OK fine, I’ll give one. I can’t resist. If our aging problem isn’t offset by increased immigration, one might think that higher rates of automation would rejuvenate local industry and the economy by increasing its productivity — a balancing effect of sorts. But one’s thoughts would run headlong into the data. A quirky trend labelled the productivity paradox shows that automation hasn’t done much to improve productivity. At least not yet.

Still, I think the productivity paradox is probably more a people problem than a technology problem. In other words, it’s not that our technology’s unproductive; we’re just bad at deploying it — at least for now. We’ve got the technology for things like driverless cars, but enter nearly any big legacy company right now and you’ll probably find them struggling with the basics. Lots of companies are like the Flintstones living in the time of the Jetsens right now. Fewer available workers will make the case for automation a bit more urgent. This’ll be a boon for B2B companies looking to sell automation technologies, especially those in traditionally human-capital heavy businesses.

Berkeley Law. Interested in all things law, tech & finance. All opinions are mine, all typos are someone else's.

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