Automation of traditional jobs could potentially hurt older workers’ retirement chances

The growth of globalization and automation on the job market is stimulating the spread of “alternative employment arrangements” that often lack such former job essentials as benefits and stability in wages and hours.

And in areas more exposed to the increasing competition presented by globalization and automation, concerns have arisen that older workers might be the ones who end up working under those alternative arrangements, and thus losing out on the formerly traditional benefits of conventional jobs—which in turn puts their retirement at risk.

According to a working paper from the Center for Retirement Research at Boston College, older workers need the longevity and benefits offered by traditional jobs in order to prepare adequately for retirement—a longer career that gives them more time to prepare, and benefits that allow them to be able to save money and to have access to affordable health care.

But with competition for jobs fierce and increasing, researchers sought to discover whether “nontraditional” jobs are more prevalent in areas more exposed to the competitive pressures of globalization and automation, and whether older workers are more likely to hold them.

Using data from the 1996–2008 panels of the “Survey of Income and Program Participation” to track the share of workers in nontraditional work arrangements, researchers found that while workers in areas with greater exposure to trade and automation do not suffer major effects from globalization, the same cannot be said for automation.

In fact, not only is there “suggestive evidence” that workers in traditional jobs end up shifting to nontraditional ones when their industries are hit with increased automation, the report says that “a 1-standard deviation increase in the use of industrial robots is associated with an 11-percent increase in nontraditional employment.”

And the effect of automation is even more pronounced on older workers, it adds, with “a 1-standard-deviation increase in automation [being] associated with a 17-percent increase in nontraditional work at ages 50–62.”

Researchers wrote, “As automation continues to increase, jobs that offer retirement savings, health insurance, and stable income may continue to decline, and the impact is likely to be particularly felt by older workers who may need these benefits the most.”

The paper concludes that increasing frequency of automation could cut down on what bargaining power workers do have at present. It could also cause employers to be less likely to develop relationships with workers in the long term. And it could hurt older workers who might be forced out of traditional jobs and have to take jobs with few or reduced benefits.

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