"So far, there is little empirical evidence for the causal relationship between labor supply and the development of labor-saving technologies", says Professor Danzer, Chair of Economics / Microeconomics at the Ingolstadt School of Management, explaining the motivation for the study. For this reason, he and his colleagues looked at the so-called "late repatriation" after 1990 and its effects on automation innovations. This historical event is suitable for scientific studies due to its quasi-experimental nature: "After the collapse of the Soviet Union, there was an influx of around 2.5 million ethnic Germans from the successor states, mainly to West Germany. These new German citizens were allocated fairly evenly to the regions by the authorities." According to Danzer, this led to an expansion of the applicant pool in various parts of Germany for companies "that were looking for employees for low-skilled manual jobs, for example in the manufacturing industry. Since their Soviet qualifications were not recognized, the ethnic German resettlers had to accept such jobs and were willing to do so. This made it advantageous for many companies to hire more workers in exchange for research into labor-saving machines".
Study shows correlation between labor supply and automation
![[Translate to Englisch:] Automatisierung](/fileadmin/_processed_/4/0/csm_AdobeStock_714684776_9175d029c9.webp)
According to the researchers' findings, this increase in the labor supply reduced regional innovation activities for the automation of work processes: fewer corresponding patents were registered with the European Patent Office. "By contrast, the number of non-automation patents remains largely unchanged due to the increase in labor supply. Overall, these results indicate that the direction of technological change is changing significantly in the regions covered", continues Danzer. The effect concentrated on large companies and primarily affected process-related rather than product-related automation innovations. "This indicates that companies that want to improve their own production processes through research and development are adapting to regional changes in labor supply, while this is not the case for companies that develop products."
According to Danzer, previous research suggests that companies react to changes in the labor supply by switching to the most cost-efficient production technologies. "Our study complements these findings by showing that companies not only acquire these technologies, but also develop them themselves, which is reflected in their lower activity in patenting automation innovations."
These findings regarding the interplay between available labor and automation innovations are "relevant as many countries are facing serious demographic challenges such as an aging population and immigration". The study could therefore provide valuable conclusions for politicians and political decision-making. On the one hand, it is clear that immigration can have an impact on technological progress in addition to the frequently discussed competition for jobs. "In this case, immigration has influenced production technologies in such a way that the demand for labor has increased, at least temporarily. This effect could be added to the debate on immigration." At the same time, according to Danzer, the study also shows how innovation is linked to the labor market and that the major demographic trends – such as an aging population and labor shortages – can have an impact on the innovative activity of companies and thus potentially also on the innovative capacity of entire economies.