Firm-Level Robot Adoption and Labor Cost Behavior

This study examines the effect of firm-level adoption of industrial robots on labor cost adjustments using a unique data set of Spanish manufacturing firms. Our results suggest that robot-adopting firms exhibit greater labor cost stickiness than non-adopters. Robot adoption leads to a greater demand for high-skilled workers to perform complementary and complex tasks (i.e., upskilling). As skilled labor is associated with higher labor adjustment costs, managers seem less willing to adjust labor resources during downturns. A difference-in-differences analysis using the Spanish labor reform of 2010 as a quasi-natural experiment reveals even more amplified labor cost stickiness of robot-adopting firms in the post-reform period. While the overall labor market was greatly deregulated, the “war for talent” for high-skilled workers seems even more pronounced for robot-adopting firms. Our findings go contrary to the widespread notion that robots are "stealing" human jobs