I want to talk about two very, very different reasons why firms attempt to minimize labor costs. They are too often conflated, and yet have very different implications. An AI robot (L) by CloudMinds is seen during the Mobile World Conference in Shanghai on June 27, 2018. (Photo by – / AFP) / China OUT (Photo credit should read -/AFP/Getty Images) The first is: strong labor demand -> high wages -> labor saving technology. I will call this, simply enough, the labor demand mechanism. This occurs across the economy at full employment, causing labor demand overall to be high. […]
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