Routine Biased Technological Change in a Middle-income Country: the Case of South Africa

This new paper investigates the effects of routine-biased technological change in South Africa and the unequal effects within the labor market.

After several decades of decreasing wage inequality in labor markets, the late 1970s saw a reversal of this trend as wage gaps between workers of different skill and occupation classes started widening in several countries.

RBTC postulates that technological progress allows the automation of a growing share of routine tasks, which incentiveses firms to replace the middle-skilled workers who perform such “codifiable” tasks with computer-based systems. In contrast, low-skilled and high-skilled workers perform a larger share of non-routine manual or cognitive tasks, both of which are harder to automate, making these workers less dispensable and raising the relative demand for their services.

Several studies have confirmed that the shrinking share of middle-skilled occupations corresponds with a reduced demand for occupations with high routine task intensity (RTI) in developed economies.

What is the case of developing countries? This new document investigates the effects of routine-biased technological change in developing country South Africa and the unequal effects within the labor market contribuing in four main points:

  • The first contribution is to analyse trends in wages and the occupational distribution in the South African labour market between 1997 to 2015, to see whether there is any evidence that RBTC affected South African labour market outcomes.
  • Secondly, it investigates whether a declining share of middle-skilled workers offset by the relative growth of low- or high-wage jobs, the informal sector, or unemployment, and whether this experience differs between workers of different population groups or genders.
  • The third contribution is to gauge the robustness of the results to using different measures of routine task intensity.
  • Finally, it explores whether wage and employment trends that are consistent with RBTC may have been driven by other causes: specifically international trade or changes in labour supply.