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The Evolution of Production Process and Its Impact on the Labor Markets

Author Kim, Youngmin and Kim, Jaeduck Date 2018.12.06 Page
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It is a necessary to the evolution of the production process using automation and global production networks to maintain the competitiveness of industries and individual firms. However, these efforts to improve the competitiveness of firms have a variety of effects on wages, job status, safety and working conditions. There is ongoing research into how changes to the production process affects labor markets using task-based approach. This suggests that new production processes enabled by automation and global production networks have not entirely substituted low-skilled and low-educated workers, but could influence certain tasks that workers performed. These changes are called Routine-Biased Technological Changes.

 

This paper analyzes the effects of the evolution production process by automation and global production networks on labor markets. To this end, we use the robot data from International Robot Federation, Foreign Direct Investment by the Export-Import Bank of Korea and the Local Area Labour Force Survey from Statistics Korea.

 

The results of this study show that automation and global production networks have a demonstrably negative effect on employment, while the employment structure is improving. This phenomenon was more pronounced in the manufacturing industry than in non-manufacturing industries. This results suggest that the evolution of production processes enabled by automation and global production networks have negative effects on employment, but job losses were particularly high for positions in which employees conduct routine tasks.

 

In addition, we analyze the effects of the evolution of production processes by automation and global production networks on the wage gap between routine and non-routine tasks. Our analysis finds that when all other factors are held constant, the wages of workers engaged in routine tasks are lower than those of workers who conduct non-routine tasks because automation and global production networks have more seriously influenced routine tasks.

 

The implications carried by the results of this research are as follows. First, as the possibility of job losses due to the evolution of production processes brought about by automation and global production networks is much greater for routine tasks, it is necessary to create support systems that address this. Second, given that the evolution of production processes has the effect of improving the employment structure, it is important to study how to leverage this fact for the purpose of creating good jobs. Third, the evolution of production processes has exerted differing effects on routine and non-routine tasks, with a possible consequence of this being the exacerbation of wage differentials and income inequality. Policies that mitigate this

should be duly considered. Fourth, and finally, this research makes clear the need for an index that tracks changes in labor demand due to automation and global production networks among other factors.?