Does worker scarcity push firms to invest more in automation?
Core argument: A one-unit increase in a firm's labor issues, as measured by earnings calls, is estimated to raise its investment by 28 basis points.
A one-unit increase in a firm’s labor issues [as measured by earnings calls] leads to a 28 basis point increase in its investment. To put this investment effect into perspective, our estimate implies that since 2021, the increase in labor issues (due to, for example, tighter labor markets) has spurred approximately an additional $55 billion in investment in the U.S. economy. This is a significant amount and one that’s similar in size to funding appropriated through the 2022 CHIPS and Science Act for boosting domestic semiconductor research and manufacturing. We also found that the increase in investment has been driven by firms in industries that heavily employ routine manual tasks, such as assembly line work in the manufacturing industry or packaging and labeling in the warehousing sector. Industries that don’t heavily employ routine manual tasks tend not to experience a significant increase in investment resulting from labor issues.
Allysia Finley commented, “…We could spend all night fact-checking both candidates, but a brief note on a tendentious question on the national debt posed by CNN moderator Jake Tapper. He referred to a study by the Committee for a Responsible Federal Budget, which purportedly found that Donald Trump approved $8.4 trillion of new 10-year borrowing, while Joe Biden added only $4.3 trillion. The study inflates the cost of Mr. Trump’s tax cuts—including bipartisan efforts that repealed the Affordable Care Act’s medical device and Cadillac insurance taxes—while low-balling the costs of Mr. Biden’s spending increases and regulations. For example, the study dings Mr. Trump for adding to the debt by ending certain Affordable Care Act cost subsidies, which it says caused insurers to raise premiums and thereby increased other insurance subsidies. The outfit says Mr. Trump added to the deficit with a 2020 rule that restricted drug-maker rebates in Medicare, though that rule never took effect. Then the study claims that Mr. Biden’s Inflation Reduction Act reduced the national debt by delaying the same rebate rule and increasing IRS funding. All of which is to say that the figures cited by Mr. Tapper include subjective judgments that are biased in favor of Mr. Biden. But for the record, the national debt increased by $2.6 trillion during Mr. Trump’s first three years before Covid and $5.2 trillion during Mr. Biden’s first three….”
Marc Goldwein commented, Re: “But for record, the national debt increased by $2.6T during Mr. Trump’s first three years before Covid and $5.2T during Mr. Biden’s first three.” That’s true, but says nothing about how much debt each approved over a ten year period. “…1) Their response over-estimates Biden executive orders by $800 billion — mainly because it counts proposals that haven’t been finalized ($150b) or even introduced ($350b), but also because they overestimate some provisions (~$200b) and don’t count deficit reducing executive orders (~$100b) 2) There is no “Extra $1.1 trillion” from the infrastructure bill. What they are referring to is a weird baseline budget rule quirk that required CBO to assume $1.1 trillion of extra costs in their 2022 baseline and then remove $1 trillion of that in their 2023 baseline 3) IRA does indeed save less/cost more, which we discuss in our paper. But our paper is based off of prospective estimates. And House budget overstates the difference — its probably about $250 billion worse than we say 4) TCJA also costs more, even though house budget says it costs less. Heck, estimates of extending TCJA have gone up 50%!. The extra $1 trillion they point to has nothing to do with TCJA, and was a one-time revenue surge from the big surprise inflation and capital gains during and after the pandemic.”