2025 Reports

Factory Automation, Labor Demand, and Market Dynamics

Kawaguchi, Daiji; Okazaki, Tetsuji; Zhu, Xuanli

This study provides micro-level evidence on the labor market effects of historical automation technology by studying early 20th century powerloom adoption in Japan’s silk-weaving industry. Relative to non-adopting factories in the same area, adopting factories employed more male mechanics but did not reduce female weaver employment. Meanwhile, wages rose only modestly despite large productivity gains. At the industry level, however, the exit of low-wage, low-productivity plants led to substantial net job losses—“technological unemployment”—and stronger overall wage growth. Nature of the technology, monopsony power, and market competition were all important in shaping these outcomes.