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Minimum wages in an automating economy
Author(s) -
Eckardt Marcel Steffen
Publication year - 2022
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12528
Subject(s) - economics , minimum wage , inequality , labour economics , margin (machine learning) , income distribution , wage inequality , distribution (mathematics) , wage , economic inequality , technological change , macroeconomics , computer science , mathematical analysis , mathematics , machine learning
We explore the suitability of the minimum wage as a policy instrument for reducing emerging income inequality created by new technologies. For this, we implement a binding minimum wage in a task‐based framework, in which tasks are conducted by machines, low‐skill, and high‐skill workers. In this framework, an increasing minimum wage reduces the inequality between the low‐skill wage and the other factor prices, whereas the share of income of low‐skill workers in the national income is nonincreasing. Then, we analyze the impact of an automating economy along the extensive and intensive margins. In a setting with a minimum wage, it can be shown that automation at the extensive margin and the creation of new, labor‐intensive tasks do not increase the aggregate output in general, as the displacement of low‐skill workers counteracts the positive effects of cost‐savings. Finally, we highlight a potential trade‐off between less inequality of the factor prices and greater inequality of the income distribution when a minimum wage is introduced into an automating economy.