Publications | 08 Feb, 2021

Working Paper 4: Technological change and labour substitution: can firm characteristics shield workers against automation?

Manuel Souto-Otero
Deputy Programme Director

Simon Freebody

Phillip Brown
Programme Director

A burgeoning literature that has emerged examining the potential of technology to automate labour. Much of this work, however, has relied on expert opinions and is ‘de-contextualised’, with little use of data on firms’ actual behaviour. We employ a rich dataset of over 3,800 companies to explore whether certain firm characteristics (firms’ stock of skills, organizational structure, competitive strategies and management’s perception of their workforce) can have a ‘sheltering effect’ on jobs when technology is introduced in the workplace. The results suggest, first, that technology-related changes in work processes are leading to the destruction of jobs at the firm level – to a greater extent than non-technology related changes in work processes. Second, our results challenge skills biased technological change and skills biased organizational change theories, which argue that firms with a large proportion of high-skilled workers and flexible work organization are less prone to technology related labour substitution. By contrast, the results point to the importance of the competitive strategies of firms and management perceptions of workforce competence and commitment, as organisational characteristics that shelter workers against technological replacement. The role of management perceptions, in particular, points us to the relevance of social relations, and not only economic calculations or the limits of technological possibilities, in the analysis of the future of work.


Working Paper 4 by Manuel Souto-Otero, Simon Freebody and Phillip Brown. Download full working paper here.

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