Digital Technologies and the Labor Market
Evidence from South Korea
The impact of new technologies on the labor market is as yet unknown
An empirical study of the effects of robotics, artificial intelligence, and other new technologies on manufacturing at the plant level in South Korea charts a research agenda for assessing what new technologies augur for the future of work in East Asia and other Asia-Pacific regions.
New technologies such as artificial intelligence, machine learning, robotics, and digital platform economies can increase workers’ productivity and make certain job sectors flourish, but they might also replace workers, disrupt firms, and eliminate entire occupations. Indeed, there is increasing empirical evidence that automation and robotics do replace workers. East Asia is at the forefront of adopting some of these new technologies. Their net effect on labor, however, is yet to be understood.
The Digital Technologies and the Labor Market project examines the impact of new technologies on various sectors of the economy. By focusing on particular technologies and their applications in different sectors, it aims to improve our understanding of how new technologies affect people and how society reacts to new technologies. Based on the findings, the study will propose policies that can help alleviate the negative impact of technology on labor and prepare the labor force for the new digital economy.
A particular portion of this research focuses on evidence from South Korea, which, in 2015, had the highest number of industrial robots per worker in the world (OECD 2017). This study first identifies the scope and rate of change of key technologies—including robotics, big data analytics, and artificial intelligence—and then evaluates how specific technologies or their aspects are augmenting or replacing various tasks and workers, as measured in terms of the types of jobs, skill requirement, and wages. It will serve as a platform for developing a research agenda in Asia that could be expanded to China, Japan, and other Asia-Pacific regions.
Extant studies of the impact of digital technologies on labor markets have focused on relatively large aggregate local market effects, using primarily indirect measures of technological penetration, such as share of jobs susceptible to automation based on job tasks, or industry-level robot purchase across countries. The effects of today’s technologies on occupations and tasks, however, would likely differ across technologies and industries. There is therefore need for research that examines how firms are responding to specific technologies in terms of labor and skill.
One main challenge has been the difficulty to identify and measure the scope and rate of technological change at the firm level. Studying plant-level adoption of particular new technologies would provide better insight into their net effect on labor than a cross-country or industry-level analysis.
This study examines the firm-level responses to new technologies in South Korea’s manufacturing industry. It uses a unique “smart factory” policy in South Korea, launched by the government in 2014 to reinvigorate South Korea’s manufacturing sector. The policy supports small and medium sized manufacturing firms in adopting and utilizing robotics, data collection, and big data analytics. The government aims to establish 10,000 smart factories by the year 2020.
The project will examine manufacturing establishments that have received government support under the “smart factory” initiative and compare them with establishments that have not yet received support. The primary data will come from a survey to be designed in collaboration with the Korea Development Institute. In addition to the survey, the study will link the establishments to the annual manufacturing survey, which provides detailed information on production input and labor usage.
With the unique quasi-experimental setting, along with detailed administrative data and survey data, we will be able to better identify how new technologies affect the productivity of establishments, labor skill, and job tasks, and ultimately labor input. This will be one of the first empirical studies of the impact of robotics and big data analytics on manufacturing at the plant level. Our focus on a unique policy experiment and micro-level plant data will help provide deeper and more nuanced insights into the impact of technology on labor.
The Digital Technology and Labor Project is made possible by research grants and awards from the Stanford Cyber Initiative, the Freeman Spogli Institute for International Studies, and the Shorenstein Asia-Pacific Research Center.
Lead Researchers and Collaborators
Yong Suk Lee
Deputy Director of the Korea Program, Shorenstein Asia-Pacific Research Center
SK Center Fellow, Freeman Spogli Institute for International Studies
Charles (Chuck) Eesley
Associate Professor and W. M. Keck Foundation Faculty Scholar, Department of Management Science and Engineering
Executive Director, Center for Automotive Research at Stanford
Robotics and Local Employment Dynamics (with Jong-Hyun Chung and Chuck Eesley)
Digital Technologies and the Skill Gap Across Regions (with Chuck Eesley and Christos Makridis)
Smart Factories, Productivity, and Changing Labor (with Chang-Keun Lee)
Aging, Productivity, and Technology (with Takeo Hoshi)
Modern Management and the Demand for Technical Skill
Labor Economics, December 2018
Information Technology in the Property Market (with Yuya Sasaki)
Working paper, in progress