Wage Shocks and Technological Substitution

Publication Date


Grant Type

Early Career Research Award


We propose to extend the task-based empirical framework from the job polarization literature to analyze the susceptibility of low-wage jobs to technological substitution. Using the minimum wage as a natural experiment that exogenously increases the cost of low-wage workers, we will examine the employment response to minimum wage changes by the degree to which an occupation is associated with routine tasks - where routine tasks are generally believed to be substitutable by technology. We will examine both the overall effect of technological substitution on employment using the Occupation Employment Statistics as well as effects of this process on individual workers using the Merged Outgoing Rotation Group of the Current Population Survey. This combination of analyses will allow us better understand the extent to which technological substitution of low-wage employment is taking place and how it a effects individual low-wage workers. The analysis will also offer additional insight into our understanding of the employment effects of minimum wages. To the extent that minimum wages are expediting the technological substitution of low-wage labor, future increases in the minimum wage may be associated with larger employment declines than those observed in the past.

Grant Product

Wage Shocks and the Technological Substitution of Low-Wage Jobs
Upjohn Institute Working Paper No. 17-266, 2017

Wage Shocks and the Technological Substitution of Low-Wage Jobs
Federal Reserve Bank of Chicago, Working Paper Series 2017-3, 2017

Aaronson, Daniel and Brian J Phelan. 2019. "Wage Shocks and the Technological Substitution of Low-wage Jobs." The Economic Journal 129(617): 1-34. https://doi.org/10.1111/ecoj.12529