Unpacking Skill Bias: Automation and New Tasks: Daron Acemoglu and Pascual Restrepo

AEA Papers and Proceedings 2020, 110: 356–361
https://doi.org/10.1257/pandp.20201063
Unpacking Skill Bias: Automation and New Tasks†
By Daron Acemoglu and Pascual Restrepo*
Tinbergen’s (1974) approach to inequality, disappearance of middle-skill occupations

based on the race between technological change such as production and clerical jobs. More
increasing the demand for skills and the rise in importantly, as pointed out in Acemoglu and
the supply of skills due to education, has been Restrepo (2019), the economic mechanism in
a mainstay of labor economics. Its canonical the canonical SBTC model is the substitution
formalization in the skill-biased technological of the tasks and goods produced by skilled
change (SBTC) model of, inter alia, Katz and workers who are becoming more productive
Murphy (1992) and Goldin and Katz (2008) has for those produced by less skilled workers (and
transformed the study of inequality and skills. is thus mediated by the elasticity of substitu-
In this model, technological change takes a tion σ). This implies that the canonical SBTC
factor-augmenting form and increases the pro- model cannot account for major changes in the
ductivity of skilled workers more than that of US labor market without technological regress.
less skilled workers. In its most common ver- First, without technological regress, real wages
sion, changes in the demand for skills can be of unskilled workers should be rising, whereas
expressed as in the United States over the past four decades,
they have declined notably. Second, even if A L
(  AL    ),

σ − 1  d ln _
(1) d ln(_ σ   d ln(  L  ) +   σ   
  wH    )  = −  _
w 1 H
_ _ AH were constant, this model could generate the
L rise in the US college premium between 1963
and 1987 only with a growth of 11.3 percent
where wH / wL is the skill premium, H / L is per annum in A H. But this would translate into
the relative supply of skills, σ is the elasticity at least a 1.9 percent increase in total factor
of substitution between skilled and unskilled productivity (TFP), whereas the US TFP over
workers, and AL and AH are factor-augmenting this time period grew by only 1.2 percent per
technologies for unskilled and skilled work- annum (the same applies for the more recent
ers, respectively. In Katz and Murphy’s sem- 1992–2008 period; see the online Appendix).
inal paper, σis estimated to be around 1.4, Acemoglu and Autor (2011) and Acemoglu
and, combined with a steady growth path and Restrepo (2018, 2019) propose a t ask-based
/ AL , this model accounts for the t ime series
for AH model that redresses some of these problems
of the college premium in the United States fairly and extends the types of technological changes
successfully. that affect the demand for skills (see also
As argued in Acemoglu and Autor (2011), Autor, Levy, and Murnane 2003). At the cen-
however, this framework is restrictive in some ter of the framework are (i) the allocation of
crucial respects. It does not help us under- tasks to different factors of production (skilled
stand the occupational trends in the labor mar- labor, unskilled labor, and capital) and (ii) new
ket of most advanced economies, whereby, technologies that affect the productivity of fac-
rather than general skill upgrading, we see the tors in specific tasks and, as with automation,
change the task content of production. In this
framework, the effect of technology on the
* Acemoglu: Massachusetts Institute of Technology demand for skills and wages is not mediated
(email: daron@mit.edu); Restrepo: Boston University
(email: pascual@bu.edu). We thank Chad Jones and partic- via the elasticity of substitution, the impacts
ipants in the Allied Social Sciences Association 2020 meet- of technology on productivity and wages are
ing for their comments, and Google, the National Science decoupled, and new technologies can easily
Foundation, Schmidt Sciences, the Smith Richardson reduce wages for some workers. In this paper,
Foundation, and the Sloan Foundation for financial support.
†
Go to https://doi.org/10.1257/pandp.20201063 to visit
we develop a flexible version of this conceptual
the article page for additional materials and author disclo- framework, study the impact of different types
sure statement(s). of technologies on productivity and wages, and
356
VOL. 110 UNPACKING SKILL BIAS: AUTOMATION AND NEW TASKS 357
provide evidence on the link between automa- Analogously to equation (1) in the canonical
tion and inequality.1 SBTC model, the effects of various technologies
on the skill premium can be expressed as
(  AL    )

I. A Model of Tasks, Output, and Inequality
σ − 1  d ln _
(2) d ln(_ σ   d ln(  L  )  +   σ   
  wH    )  = −  _
w 1 H
_ _ AH
L
We start with a single-industry model. The
Γ
λ ( ΓL ) _ |
unique final good is produced from a mass M of
tasks x ∈ combined via a constant elasticity of +  _
1  d ln _
  H   ,
A H
substitution aggregator:
H
     AL L
  λ     where the last term—the main difference from

∫
_
Y = (_
  1        (My(x))  λ dx)  ,

  λ−1 λ−1
equation (1)—is evaluated at the initial ratio of
_     

M effective skilled to unskilled labor, AH H/AL L,
and captures the effect of changes in the allo-
where λ ≥ 0is the elasticity of substitution cation of tasks to factors on the skill premium.
between tasks. Tasks are performed by unskilled Moreover,
labor ℓ ( x), skilled labor h ( x), or capital k( x):
( ∂ ln(AH H / AL L))

∂ ln(ΓH / ΓL )
y( x)  = ψL (x)ℓ( x)  + ψH(x)h(x)  + ψK(x)k( x), σ = λ / 1 −  _____________
      ≥ λ
  
where ψj(x) ≡ Aj  ⋅ γj(x) for j ∈ {L, H, K} is the derived elasticity of substitution between
denotes the productivity of factor jat task x. skilled and unskilled labor. This elasticity
We assume k(x)is produced using q( x) units reflects two types of substitution: substitution
of the final good, while skilled and unskilled labor between tasks, represented by λ (with more
is supplied inelastically, with m arket-clearing
productive skilled labor, there is greater produc-
conditions L  = ∫     ℓ(x) dxand H = ∫     h(x) dx. tion of skill-intensive tasks), and substitution at
We denote by  L, H , and K the set of tasks per- the extensive margin, whereby some tasks are
formed by each factor. A competitive equilib- reallocated from unskilled labor and capital to
rium is represented by an allocation of tasks skilled labor. It is because of this second type of
to factors and production of capital goods that substitution that σ ≥ λ.
maximizes net output Y  − ∫x    q(x)k( x) dx. The In addition to factor-augmenting changes—
online Appendix shows that net output is given the AL, AH, and AKterms—that increase the pro-
by ductivity of a factor in all tasks, this framework
enables us to analyze the impact of technologies
  λ−1
_     
NY = (Γ  L  (AL L)  ) 
  1     1   λ that affect the productivity of a factor in some
  λ−1   λ−1
_ _
  + Γ  H    (AH
H) 
λ _      λ _     
λ λ , tasks. Particularly relevant is automation—
changes that enable capital to be used in tasks
ΓL and ΓH, are
where the share parameters, that were previously performed by labor (or
endogenously determined and represent the equivalently increase the productivity of capital
range of tasks performed by the two types of in such tasks). For example, robots can become
labor: more productive in welding, a task that was
previously performed by human welders. The

_ 1
  M    ∫   j  γj (x)  λ−1 dx effects of automation and other technological
j  =    
Γ ____________________
   λ−1
  for j ∈ {L, H}. changes affecting the allocation of tasks to fac-
M  K ( q(x) )
1
1 −  _   ∫     _     dx
ψ

K (x) tors work through the last term in equation (2).
Formally, consider an increase in γ K(x) for
a set of tasks currently not in K. This type of
advance in automation technology will lead
to an expansion in the set of tasks allocated to
1
Our companion paper, Acemoglu and Restrepo (2020), capital, K . Automation can displace skilled
develops a multisector model with multiple skill types and or unskilled labor. In the context of industrial
estimates the contribution of factor-augmenting technologi-
cal changes and changes in the task content of production to robotics technology, the evidence presented in
the evolution of US wage structure. It finds that the bulk of Acemoglu and Restrepo (forthcoming) sug-
the changes are due to the task content of production. gests that most of the automated tasks used to be
358 AEA PAPERS AND PROCEEDINGS MAY 2020
p erformed by less skilled workers, and we start precisely when the increase in TFP is small
with this case. We also simplify the analysis by (Acemoglu and Restrepo 2018), but the skilled
assuming that γ K( x)  = 0for all x  ∉ K and that wage always increases because tasks produced
if a task can be automated and produced by cap- by other factors, which are q complements to
ital it will be produced by capital in equilibrium those produced by skilled workers, are becom-
(see the online Appendix for primitive condi- ing cheaper.3
tions that ensure this). This framework also allows us to study the
implications of new labor-intensive tasks. The
PROPOSITION 1: Consider an improve- role of new tasks is emphasized in Acemoglu
ment in automation technologies such that and Restrepo (2018, 2019) in both maintaining
the productivity of capital in a set of tasks in a stable labor share in GDP in the face of steady
 ⊂ L increases to ψK (x) > 0. Then automation and as a source of productivity
growth. For example, design tasks, most man-
∫      γ x   λ−1 dx
 L( )
d ln(_
  wH   ) =  _
w 1 _____________ ufacturing engineering tasks, most b ack-office
σ       
  
 .
∫   γ
λ−1 activities, and all programming occupations are
L  L (x)  dx
L
new relative to the first half of the twentieth cen-
increases, while wL may increase
Moreover, wH tury and have been major drivers of the growth
or decrease. of labor demand.
Several points are worth noting. First, the PROPOSITION 2: Suppose a small set of new
effect of automation technologies on the skill tasks (expanding M) is introduced. If skilled
premium is completely driven by the set of tasks workers have comparative advantage in these
(weighted by their effective productivity) that tasks—that is, wH / ψH
( x)  < wL / ψL ( x) at cur-
unskilled labor loses relative to the entire set rent wages—then the skill premium increases by
of tasks previously performed by these workers
(and it is not mediated by the elasticity of sub- ∫      γ x   λ−1 dx
 H( )
d ln(_
  wH    ) =  _
w 1 _____________
stitution, and σdoes not need to be greater than
σ       
  

∫   γ
λ−1
 .
  H (x)  dx
L
H
one). This close connection between the set of
tasks reallocated and factor price changes is the If, on the other hand, unskilled workers have
main conceptual insight of this class of models. comparative advantage in these tasks—that
Second, advances in automation technologies is, wL / ψL ( x) < wH
/ ψH(x) at current wages—
increase TFP, but these effects, coming from then the skill premium will decline by
cost savings due to automation, may be small
(see the online Appendix). Third, the magnitude ∫       γ x   λ−1 dx
 L( )
d ln(_
  wH    ) = −  _
w 1 _____________
σ       
  

∫   γ
λ−1
 .
  L (x) 
of the change in the skill premium is decou- L dx
pled from productivity increases.2 Fourth, the L
unskilled wage may decline, and this happens The interpretation of this proposition is sim-
ilar to that of Proposition 1. In particular, the
2 effect on the skill premium is again a function
Specifically, in the canonical SBTC model, we
of the set of tasks reallocated across factors.
have _  d ln TFP   

/ wH
d ln(wH )|
= sH
 ⋅ σ / ( σ − 1),where
A
L
share of skilled labor in value added. Thus, to get the
sHis the Analogously, these changes always increase
TFP, but small changes in TFP can go hand in
hand with sizable changes in the skill premium.
demand for skilled labor to increase by 1 percent, one needs
a 0.83 percent increase in productivity. Instead, in our
model, in response to automation, _ d ln TFP
 d ln    
(w / w )
= σ ⋅ sL ⋅ π,
H L
premium between 1963 and 1987 can be explained with as
where π > 0 is the average proportional cost reduction in little as 0.54 percent per annum growth in TFP.
automated tasks. This expression shows that, when π  → 0, 3
Some of the automated tasks in  may have previously
our model generates large swings in the skill premium from been performed by skilled workers: artificial intelligence
very small changes in TFP. Because of this difference, our may replace tasks currently employing skilled workers, and
framework generates sizable changes in the skill premium many of the iconic innovations of the industrial revolution
for reasonable changes in TFP. For example, if automation automated spinning, weaving, and knitting tasks previously
reduces the cost of producing a task by π  = 30 percent, as in performed by skilled artisans. If so, automation may have
the case of industrial robots, then the increase in the college the opposite effect on the skill premium.
Also notable is that new tasks may increase or (respectively, reinstatement) effects correspond
reduce the skill premium, depending on whether to declines (respectively, increases) in the labor
they are allocated to skilled or unskilled labor.4 share of value added in an industry not explained
Two other types of technological changes can by changes in factor prices over a five-year
be studied in this framework. The first is “stan- period. In the online Appendix, we provide
dardization,” which involves the simplification details on data sources and the construction of
of previously complex and skilled tasks so that these variables and present descriptive statis-
they can now be more cheaply performed by tics. Both measures are expressed in percent
unskilled workers. The second is “skill upgrad- changes, so that a 0.1 displacement corresponds
ing,” which involves the transformation of to a 10 percent decline in the labor share.
unskilled tasks so that they can be more produc- Using these measures, we estimate the fol-
tively performed by skilled workers. We derive lowing model separately for the two periods:
the implications of these two types of technolog-
ical changes in the online Appendix. (3) Δ Skill Demi = βd displacementi
II. Empirical Evidence from US Industries +  βr reinstatementi  + εi,

We next suppose that the model outlined in where Δ

Skill Demi—our measure of
the previous section describes production at the industry-level increase in the relative demand
industry level and then use industry-level data for skills—is the change in the log of the college
from the United States to investigate whether wage bill relative to the high school wage bill
automation and new tasks are associated with in each industry during the relevant period. All
changes in the relative demand for skills. We regressions are weighted by the average share of
follow Acemoglu and Restrepo (2019), which the wage bill accounted by the industry during
shows how changes in the task content of pro- the period. These regression results are pre-
duction across industries can be estimated. We sented in the online Appendix. Here we depict
use data from the Bureau of Economic Analysis, them visually.
the Bureau of Labor Statistics, and National Figure 1 shows a strong association between
Income and Product Accounts on factor shares, industry-level demand for skills and our mea-
factor prices, and capital stocks for 1947–1987 sures of displacement (due to automation) and
and 1987–2016 at the three-digit industry level reinstatement (due to new tasks). During both
and exclude industries heavily dependent on subperiods, displacement is associated with
commodity prices—in particular, oil and gas, increases in the relative demand for skills of
mining, and agriculture, which exhibit large tem- the industry, though displacement changes are
porary fluctuations in factor shares. This leaves larger and the relationship becomes steeper in
us with 44 industries. We combine these with 1987–2016, as shown in panel B. A 10 percent
data on wage bills and hours of work by college increase in displacement during 1987–2016
and high school workers from the US Censuses is associated with an 8 percent increase in the
and the American Community Survey.5 relative demand for college workers (standard
We follow Acemoglu and Restrepo (2019) error = 0.015). This estimate implies that dis-
in constructing estimates of displacement and placement alone explains about 30 percent of
reinstatement effects (corresponding to automa- the variation in the demand for skills across
tion and the creation of new tasks) at the indus- industries during this period.6 Panels C and D
try level for our two subperiods. Displacement
6
The 0.55 percent increase in displacement per annum
4
This is in contrast to the extension considered in at the aggregate level during this period could account for
Acemoglu and Restrepo (2018), where we assume that new as much as a 0.44 percent increase in the demand for col-
tasks are always performed by skilled workers. lege skills (out of an estimated shift in the relative demand
5
We follow Acemoglu and Autor (2011) and define col- of 2.4 percent per annum (see Acemoglu and Autor 2011)).
lege workers as those with a college degree and half of those Assuming that π = 30 percent, this substantial increase in
with some college. High school workers are therefore those the relative demand for college skills is consistent with auto-
with a high school degree or less and half of those with some mation technologies increasing TFP by as little as 0.11 per-
college. cent per annum between 1987 and 2016.
360 AEA PAPERS AND PROCEEDINGS MAY 2020
Panel A. Displacement, 1947–1987 Panel B. Displacement, 1987–2016
Change in log college wage

2.5 1.2
bill relative to high school

Computers and electronics Appliances
Transportation by water
1
Restaurants Apparel and leather
Communications
2 Miscellaneous manufacturing Chemical products
Other transportation equipment Computers and electronics Motor vehicles
Textiles
Communications 0.8 Textiles
1.5 Retail Primary metals

Motor vehicles
Utilities
Plastic and rubber products

0.6 Primary metals
Retail
1 0.4
Ambulatory health care

Administrative services Real estate
Social assistance
Transportation services and support
0.5 Educational services

0.2 Construction
Warehousing and storage
−0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 −0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
Panel C. Reinstatement 1947–1987 Panel D. Reinstatement 1987–2016


1.2
2.5

Computers and electronics Appliances
1
Restaurants Apparel and leather
Communications
2 Real estate
Computers and electronics
0.8
Motor vehicles
Textiles
Textiles
Transportation by air
1.5 Primary metals

Retail
Other transportation equipment

Legal services
0.6 Primary metals
Retail
Ambulatory health care
1 Hospitals
0.4
Plastic and rubber products Recreation
Administrative services
Social assistance
Transportation services and support
0.5 Educational services

0.2 Construction
Warehousing and storage
−0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 −0.1 −0.05 0 0.05 0.1 0.15 0.2 0.25 0.3
Figure 1. Change in Relative Demand for Skills 1947–1987 and 1987–2016 versus Displacement and Reinstatement
Notes: Relative demand for skills is measured as the log of the college wage bill relative to the high school wage bill. See the
online Appendix for details and derivation of the estimates for displacement and reinstatement.
depict the relationship between reinstatement III. Conclusion

and the demand for skills. Greater reinstatement
is associated with lower relative demand for Automation and new tasks can have sizable
skills during 1947–1987, presumably because effects on the demand for skills and factor prices
unskilled labor had a comparative advantage in (including declines in the wages for some or
many of the new tasks introduced during this all types of labor), while leading to only small
period. In contrast, reinstatement goes hand in changes in TFP. These effects are not mediated
hand with greater demand for skills in 1987– by the elasticity of substitution between factors
2016, which we interpret as new tasks being and instead operate via the changes in the allo-
allocated to skilled workers during the past three cation of factors to tasks (the task content of pro-
decades. Our estimates suggest that during this duction). This contrasts with factor-augmenting
latter period, a 10 percent increase in reinstate- technological changes, which are assumed to
ment is associated with a 7 percent increase in raise the productivity of factors in all tasks and
the relative demand for college workers (stan- therefore always cause large TFP increases.
dard error = 0.035).7 We have argued that the canonical SBTC
model can be significantly enriched by incor-
porating this task-level perspective and tech-
nologies that change the allocation of tasks
7
The online Appendix provides several robustness to factors. We also document that proxies for
checks, using different measures of the demand for skills automation and the introduction of new tasks
and different constructions of the displacement and rein-
statement effects, and also presents estimates from several are robustly associated with changes in the rel-
regression models. These results confirm the patterns sum- ative demand for skills at the industry level.
marized in the text. This perspective further suggests that a p rimary
reason for the increase in the skill premium Acemoglu, Daron, and Pascual Restrepo. 2020.
(and the decline in the real wages of less skilled “Automation and Inequality.” Massachusetts
workers) has been rapid automation that has Institute of Technology.
replaced tasks previously performed by less Acemoglu, Daron, and Pascual Restrepo. Forth-
skilled workers. coming. “Robots and Jobs: Evidence from
US Labor Markets.” Journal of Political
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Employment and Earnings.” In Handbook tion.” Quarterly Journal of Economics 118 (4):
of Labor Economics, Vol. 4, Pt. B, edited by 1279–333.
David Card and Orley Ashenfelter, 1043–71. Goldin, Claudia, and Lawrence F. Katz. 2008.
Amsterdam: North Holland. The Race between Education and Technol-
Acemoglu, Daron, and Pascual Restrepo. 2018. ogy. Cambridge, MA: President and Fellows
“The Race between Man and Machine: Impli- of Harvard College.
cations of Technology for Growth, Factor Katz, Lawrence F., and Kevin M. Murphy. 1992.
Shares, and Employment.” American Eco- “Changes in Relative Wages, 1963–1987: Sup-
nomic Review 108 (6): 1488–542. ply and Demand Factors.” Quarterly Journal
Acemoglu, Daron, and Pascual Restrepo. 2019. of Economics 107 (1): 35–78.
“Automation and New Tasks: How Technol- Tinbergen, Jan. 1974. “Substitution of Graduate
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AEA Papers and Proceedings 2020, 110: 356–361

Unpacking Skill Bias: Automation and New Tasks†

By Daron Acemoglu and Pascual Restrepo*

Tinbergen’s (1974) approach to inequality, d­isappearance of ­ middle-skill occupations

(​ ​AL​ ​​​ )​​,

(​ ​AL​ ​​​ )​​

​ λ ​ where the last term—the main difference from

( ∂ ln​(​AH​ ​​ H / ​AL​ ​​L)​)

II. Empirical Evidence from US Industries + ​βr​​​ ​reinstatement​i​​ + ​ε​i​​,​

We next suppose that the model outlined in where Δ

Panel A. Displacement, 1947–1987 Panel B. Displacement, 1987–2016

Change in log college wage

bill relative to high school

2 Miscellaneous manufacturing Chemical products

Other transportation equipment Computers and electronics Motor vehicles

1.5 Retail Primary metals

Plastic and rubber products

Ambulatory health care

0.5 Educational services

Panel C. Reinstatement 1947–1987 Panel D. Reinstatement 1987–2016

Change in log college wage

bill relative to high school

Computers and electronics

1.5 Primary metals

Plastic and rubber products

0.5 Educational services

depict the relationship between reinstatement III. Conclusion

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Tinbergen’s (1974) approach to inequality, disappearance of middle-skill occupations

(  AL    ),

(  AL    )

  λ     where the last term—the main difference from

( ∂ ln(AH H / AL L))

II. Empirical Evidence from US Industries +  βr reinstatementi  + εi,