Does Industry 4.0 Increase Social Imbalance?

2023 Author : Hannah Pearcy | [email protected] . Last modified: 2023-05-24 11:12

Automation brings us many advantages - faster and more individual products, less expensive production, less monotonous work. But it also leads to more economic and social inequality , especially people with low qualifications are left behind. These are the results of economists from the University of Hohenheim and the University of Göttingen in Stuttgart, who have developed a new calculation model.

Automation has so far been lacking in growth models

In order to explain long-term developments and economic growth, the researchers use calculation models into which they feed key data. If you want to know how certain measures or changes impact, change the corresponding parameters in your model - and can thus take a look into the future. So far, however, automation has been lacking in these growth models; the basic models date from the 1990s.

The scientists have now corrected this. This means that, as in the model, there are not only machines and workers that are complementary to a relatively large extent, but that automation is now also included as a substitute for work. Educational decisions are also new in the calculation model: for example, whether you choose a university or not depends on your future income.

More graduates, more unemployed

As a result, the modified model predicts that automation will lead to an increasing proportion of university graduates. "In a way, it forces the smarter minds to invest more in their own education," explains Prof. Prettner. “However, the others are being left behind more and more.” The result: the income gap between the highly qualified and the low-skilled continues to widen, and unemployment among the low-skilled increases.

Prof. Prettner

To test how economic countermeasures work, the researchers have also built a robot tax and a progressive income tax into their model and calculated what happens when different measures are financed with the tax revenue.

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Model calculation shows surprising results

A direct redistribution to low-income people and an educational subsidy were considered. The researchers were surprised by the results. An example: A robot tax lowers the willingness to innovate in companies. This lowers the wages of the highly qualified compared to the baseline scenario, which in turn makes investment in higher education less interesting. There is also more competition for jobs for the low-skilled, which lowers their wages and potentially increases their unemployment. "With a robot tax, you can fight inequality less effectively than previously thought," says Prof. Prettner.

An education subsidy, in turn, can increase the average wage, but it leads to higher inequality: it is paid by everyone's taxes, but only the well-educated benefit. "The model shows that simple solutions do not always lead to the desired effects," warns Prof. Dr. Prettner. His recommendation: "All policy measures should be carefully considered and model-based."