Robotization could reverse progress made to close gender pay gap

March 23, 2021

Robotization hasn't affected the labor market in a huge way in Germany. (AP Photo/Carlos Osorio)

Industrial robotization in the workforce is projected to worsen the gender pay gap, according to new research using data from across Europe, signaling that any progress toward closing the gap may be quickly eroded without intervention.

The study, available online March 2 from European Economic Review, is the first to provide large-scale evidence on the impact industrial robots could have on the gender pay gap, using data from 28 million individuals living across 20 European countries between 2006 and 2014. The study examined how changes in the number of robots per worker affected the monthly earnings of workers in manufacturing and other sectors that employ robots. 

Similar to recent research into how trade liberalization with China reduced U.S. gender pay gap by destroying jobs, this study adds to a growing library of research that is examining how transformative shifts in the economy and the workforce are affecting the gender pay gap. 

The findings also come as the European Union considers a new law that would require companies to disclose their gender pay gap and give job candidates access to salary information during employment interviews. Women in the EU earned, on average, 14.1% less than men as of 2018, according to the European Commission.

Extensive literature has been dedicated to explaining gender pay differences by looking at the "supply-side" of the equation — for example, that fewer women are in the workforce due to the disparate impact of child care and parental leave policies. 

In contrast, little research exists on how technological advancements in the workforce impact the gender wage gap, despite the fact that the impact of automation has been well-studied on overall employment and labor force participation. 

"Reducing the gender pay gap is one of the policy goals agreed to by the countries in the European Union," Berkay Özcan, a co-author of the paper and professor at the London School of Economics, told The Academic Times. "We should not only look at the supply-side factor considerations. We should also look at the labor-demand side factors — technological change — and examine how these factors exacerbate or worsen the existing gender wage gap in those countries." 

Özcan told The Academic Times that recent efforts to investigate the technological impact on the pay gap have mostly focused on projecting future changes, examining technology expected to arrive at a later date and projecting how that technology might affect the pay gap. But Özcan said researchers do not have to speculate on future changes in order to begin their research. 

"One technological change that we know of — robotization — had already happened in the last 20 years," he said. "We don't need to look at future projections. We need to analyze more carefully a specific type of automation, industrial robots and robotization, and then examine whether they had any effects on women's pay gap. From there, we can infer what will happen maybe in the future."

Europe is a particularly good case study, the researchers wrote, because "Europe has seen tremendous growth in robotization over the sample period, both in absolute terms and as a percentage of the number of workers employed." The researchers used the World Economic Forum's Gender Gap Index to gauge levels of gender inequality.

According to the study, the number of robots per 10,000 workers increased, on average, by 47% between 2006 and 2014 in the 20 countries examined. Moreover, the researchers pointed to a separate 2018 study showing that European workers' exposure to industrial robots was 19% higher than U.S. workers.

While at first it seemed that, as an intuitive hypothesis, robotization would actually help close the pay gap because robots would replace physical jobs and "brawn" skills characteristically dominated by men in the industrial sector, while women, mostly dominating the services industry, would be immune from this change, "Our hypothesis was wrong," Özcan said. 

"We were really surprised about it because we thought that when you just replace the muscle with the machine, women would be benefiting," he added.

Instead, the study found that robotization increased the gender pay gap. Specifically, the study found that a 10% increase in robotization leads to a 1.8% increase in the "conditional" gender pay gap, which is the pay gap after adjusting for other factors that may account for differences between men's and women's earnings, such as occupation, industry, age and geography.

The study noted that the introduction of a national minimum wage in the U.K. and Germany only decreased the gender pay gap by about 2%. The U.K. first introduced a minimum wage in 1998 and updated it in 2016; Germany introduced a minimum wage in 2015.

The researchers explained that, while both men and women profited from robotization, men in medium and high-skill occupations in specific industries — particularly the automotive industry — disproportionately reaped the benefits of the profits gained by automating jobs. 

"The firms become more productive and profitable [because of robotization]," Özcan said. "Men were, on average, in occupations where they were earning more than women, and the proportional gains that they received from more profitable firms were also more than women."

"Although everybody benefited from robotization in terms of profit gains," he added, "Men benefited disproportionately higher, so that just widened the pay gap between men and women."

Researchers also noted that in countries with already high levels of gender inequality, robotization exacerbated the problem. 

"Our results were driven by a specific set of countries where initial labor market inequalities were large before robotization happened," Özcan said. "Once robotization came to these industries and these countries, the existing gender inequalities got much worse." 

The researchers also ruled out the possibility that a change in the gender composition of the workforce over the sample period caused these results, concluding that "overall, within-industry gender composition changes have been minimal (2 percentage points or less) between 2006 and 2014."

The culmination of these drivers led the researchers to conclude that, "The underrepresentation of women in medium and high-skill occupations in specific industries, accompanied by robotization, exacerbates the gender pay gap, especially in countries where gender inequality was already severe."

"The size of the effect could wipe out all the policy work that has been done to bring women into the workforce," Özcan said. 

The researchers said governments should not only "ensure that education and vocational training systems provide people with the right skills demanded in the future, but also ... pay attention to distributional issues and increase efforts to make sure that women and men are equally equipped with the skills most relevant for future employability."

The study "Robots and the Gender Pay Gap in Europe," set to be published in the May edition of European Economic Review, was co-authored by Cevat Giray Aksoy, European Bank for Reconstruction and Development, King's College London, IZA Institute of Labor Economics; and Berkay Özcan and  Julia Philipp, London School of Economics.

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