Mechanization, task assignment, and inequality

Mechanization− the replacement by machines of humans engaged in production tasks− is a continuing process since the Industrial Revolution. As a result, humans have shifted to tasks machines cannot perform efficiently. The general trend until about the 1960s is the shift from manual tasks to analytical (cognitive) tasks, while, since the 1970s, because of the advancement of IT technologies, humans have shifted away from routine analytical tasks (such as simple information processing tasks) as well as routine manual tasks toward non-routine manual tasks in services as well as non-routine analytical tasks. Mechanization also has affected relative demands for workers of different skill levels and thus earnings levels and earnings inequality. The rising inequality has been the norm in economies with light labor market regulations, although the inequality fell in periods when the relative supply of skilled workers grew rapidly. This paper develops a task assignment model and examines how improvements of productivities of machines and an increase in the relative supply of skilled workers affect task assignment (which factors perform which tasks), earnings, earnings inequality, and aggregate output in order to understand the aforementioned long-run trend.