Automation and the Underemployment of Educated Workers

Abstract

This study investigates how the automation of high- and low-skilled labor tasks affects educational investment and the job seeking of workers for either high- or low-skilled labor tasks. We consider the probabilities of worker job mismatch where workers obtain their own set of suitable and unsuitable high-skilled labor tasks by receiving education. Under a rational expectation, they receive education. We show that as a consequence of the increased automation of high-skilled tasks, the distribution of job mismatch probabilities of educated workers is diverse, even among the same ability group, while preserving the mean of their job mismatch probabilities. We also show that some educated workers seek low-skilled tasks because of their low probabilities of obtaining high-skilled tasks; such underemployment can keep the unemployment rate low.