Breaking the link between labour and output

Yesterday I wrote about when the link between labour market and inflation would become weaker, today I want to talk about more about how to break the link between labour and output. Technology will play a critical role in breaking the link between labour and output. For example, although Elon Musk backed down his idea of complete automatic factory, Tesla’s factory has given us a picture that how human labours will be replaced by robots completely. In addition, on the same day of Amazon announcing its plan to raise minimum wages for its US and UK workers, Amazon opened its store without no humans staff, which was an irony. When AI technology becomes more developed and mature, it will be more common to see that robots replace human labours in a much wider scale. However, technology may not be the only way to break the link between labour and output.

The structure of an economy would also determine the significance of the link between labour and output. Some industries have relatively weaker link between labour and output and in some industries, it is hard to identity the productivity. For example, it is very hard to identify for a government officer’s productivity, a judge does not produce economic outputs, but his or her role is very important to maintain the market order for supporting a healthy economy. Therefore, if an economy has lots of government officers, the link between labour and output is more likely to be weak. In addition, the structure of the labour market will also influence the link between labour and output. If an economy has a group of labours who are highly skilled and produce the majority of the total outputs, and a larger group labours who are not skilled and produce an insignificant amount of outputs, then the unskilled labours will be the ones who are at the risk of losing their jobs and the skilled labours have their jobs completely secured; under such condition, when fewer labours are employed, as long as the highly skilled labours remain employed, the total outputs will not be affected.