This article continues our series exploring the impact of AI automation on employment, featuring groundbreaking research from MIT economist and Institute Professor Daron Acemoglu.
The widespread implementation of AI-powered robots in manufacturing sectors typically leads to job reductions across industries. However, a groundbreaking study co-authored by an MIT professor reveals a fascinating pattern: companies that rapidly embrace AI automation tend to expand their workforce, while industry-wide job losses primarily affect slower-adopting competitors.
This comprehensive research, led by MIT economist Daron Acemoglu, analyzes how robot adoption effects on employment have played out in French manufacturing over recent decades, providing unprecedented insights into business dynamics and labor market implications.
"Examining robot adoption at the firm level reveals an additional dimension that's truly fascinating," explains Acemoglu. "We understand that companies implement AI automation to reduce operational costs, making it logical that early adopters would expand at the expense of competitors with higher cost structures. Our research confirms this competitive dynamic."
The study demonstrates that a 20 percentage point increase in robot implementation in manufacturing from 2010 to 2015 resulted in a 3.2 percent decline in industry-wide employment. However, companies that adopted robots during this period experienced a 10.9 percent increase in employee hours worked, alongside modest wage growth.
A detailed paper titled "Competing with Robots: Firm-Level Evidence from France" will appear in the May issue of the American Economic Association: Papers and Proceedings. The research team includes Acemoglu, an Institute Professor at MIT; Clair Lelarge, a senior research economist at the Banque de France and the Center for Economic Policy Research; and Pascual Restrepo Phd '16, an assistant professor of economics at Boston University.
Comprehensive Analysis of French Robot Implementation
To conduct this study on industrial automation job market trends, researchers analyzed 55,390 French manufacturing firms, of which 598 purchased robots between 2010 and 2015. The research utilized data from France's Ministry of Industry, client information from French robot suppliers, customs data on imported robots, and detailed firm-level financial data including sales, employment, and wages.
Though representing merely 1 percent of manufacturing firms, the 598 companies that invested in robots accounted for approximately 20 percent of manufacturing production during the five-year study period.
"Our research provides an almost comprehensive view of robot adoption across the manufacturing sector," notes Acemoglu.
The manufacturing industries most aggressively implementing AI automation included pharmaceutical companies, chemical and plastic manufacturers, food and beverage producers, metal and machinery manufacturers, and automotive companies.
Industries with minimal robot investment from 2010 to 2015 included paper and printing, textiles and apparel manufacturing, appliance manufacturers, furniture makers, and mineral extraction companies.
Firms that integrated robots into their manufacturing processes experienced enhanced productivity and profitability. The implementation of automation reduced their labor share—the portion of income allocated to workers—by approximately 4 to 6 percentage points. Nevertheless, their technological investments fueled growth and market share expansion, leading to overall workforce increases.
Conversely, companies that didn't adopt robots maintained stable labor shares, but for every 10 percentage point increase in robot adoption by competitors, these firms experienced their own employment decline by 2.5 percent. Essentially, technology-resistant companies lost competitive ground to their more innovative counterparts.
This dynamic—job growth at robot-adopting firms alongside overall industry job losses—aligns with another finding from Acemoglu and Restrepo's separate research on how robots affect firm-level employment in the U.S. Their previous study revealed that each robot added to the workforce effectively eliminated 3.3 jobs nationally.
"At first glance, these results might appear contradictory to our U.S. findings, where robot adoption correlated with job destruction, whereas in France, robot-adopting firms expanded their employment," Acemoglu explains. "However, this apparent contradiction disappears when we consider that these firms are growing at their competitors' expense. When we account for the indirect effects on competitors, the overall impact remains negative and comparable to our U.S. findings."
Market Leaders and Labor Distribution Challenges
The competitive dynamics observed in French manufacturing resemble those highlighted in recent high-profile economics research by MIT professors. In a recent paper, MIT economists David Autor and John Van Reenen, alongside three co-authors, presented evidence suggesting the declining labor share in the U.S. was primarily driven by the success of "superstar firms" that reduce their labor share while gaining market dominance.
Although these leading firms may hire more workers and offer competitive compensation as they grow, the overall labor share in their industries continues to decline.
"Our findings complement the work of Autor and Van Reenen," observes Acemoglu. "However, a key distinction is that superstar firms in their U.S. research could emerge from various sources. With our detailed firm-level technology data, we can demonstrate that automation plays a significant role in this phenomenon."
While economists have proposed numerous explanations for the general decline in labor share—including technology, tax policies, evolving labor market institutions, and other factors—Acemoglu believes technology, particularly automation, represents the primary driver, especially in the French context.
"A significant portion of current economic literature on technology, globalization, and labor market institutions focuses on explaining the declining labor share," Acemoglu concludes. "While many hypotheses offer reasonable explanations, our research shows that in France, only firms adopting robots—which are predominantly large corporations—are reducing their labor share. This trend accounts for the entire decline in labor share within French manufacturing. Our findings emphasize that automation, particularly robotics, represents a crucial element in understanding these economic shifts."
