Page - (000064) - in Disrupted Development and the Future of Inequality in the Age of Automation

5 AUTOMATION AND STRUCTURAL TRANSFORMATION … 57 lifting, drilling, and so forth and the latter would, for instance, include creative work involving face-to-face interaction. With a view to the Lewis model of economic development, one could say that automation creates “unlimited supplies of artificial labor” in the APS. The increasing use of robots is thus equivalent to labor force growth in the APS. Arguably, the sheer capacity alone to build and deploy robots creates a new kind of “robot reserve army” in the APS, limiting the bargaining power and wages of labor in that sector. If auto- mation is (technologically, legally, politically, and socially) feasible, the labor force will thus gradually be pushed from the APS into the ARS. There would be automation-driven structural change taking place. In other words, automation itself constitutes a supply shock which shifts the labor supply curve in the APS to the right, and thus reduces the equilibrium wage in that sector (as well as in the ARS to the extent that labor can be absorbed in that sector). If the unit cost of automated production falls below the reservation wage of workers, a labor surplus is created. Automation thus frees up resources for the completion of non-automatable work.4 The surplus can either be absorbed by the ARS or, in case that is not possible, can lead to technological unemployment. Like in the Lewis model, the functional distribution of income changes in favor of capital owners. Is there a “turning point”? In Lewis’ standard model, a turning point is reached when surplus labor has fully migrated from the traditional or subsistence sector to the modern industrial sector, and wages start rising in the traditional sector due to an emerging labor shortage. In the model outlined here, there is, arguably, no such turning point. The supply of “artificial labor,” i.e. automation, is genuinely unlimited, as it does not depend on demographic growth. In that case, human labor in the APS is fully displaced by machines and only an ARS remains. The ARS is itself, of course, not static but is defined by the technological frontier of the time. Technological innovation then gives rise to the shift of the frontier and thus reemergence of a new APS. The question then becomes: What industries and tasks comprise the ARS and the APS, respectively? And is demand for the ARS large enough to allow full employment at decent wages? Regarding the first question, it would arguably be a mistake to suspect the location of the ARS pri- marily in newly emerging post-industrial sectors such as telecommuni- cation or finance. Rather, the little amount of human work performed in modern agriculture is equally as automation-resistant by today’s