Fact of the Week: One Dollar of Automation Spending Increases Sales by 37 Cents and Raises Profits by 78 Cents While Driving Down Consumer Prices by 5 Cents

Kevin Gawora December 14, 2020
December 14, 2020

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Source: Phillippe Aghion, Celine Antonin, Simon Bunel and Xavier Jaravel, “What Are the Labor and Product Market Effects of Automation? New Evidence from France,” Harvard University Department of Economics, January 2020.

Commentary: A new Harvard economics paper has examined the economic impact of increasing factory automation by looking at French manufacturing data since 1994. The authors found that the impacts of automation on sales and profits were positive, and that consumer prices fell. Specifically, 1 dollar of automation spending increased sales by 37 cents and raised profits by 78 cents while consumer prices fell by 5 cents. Somewhat surprisingly, the authors found that the effect of automation on employment was positive for both skilled and unskilled workers, as the benefit of increased productivity more than outweighed the negative effect of machines displacing what was once manual work. If automation proves to have a more positive impact on employment than once previously thought, then it could greatly alter the national conversation surrounding workforce development and technological innovation.