Description:
It is often argued that robots will lead to the reshoring of activity from low wage countries to rich countries - the revival of manufacturing in rich countries. But smart robots are a capital biased technology which could potentially replace smart people. As a result the skill premium - the relative wage between a university graduate and a high school graduate - is declining in Europe. The expansion of higher education has been too aggressive in face of the capital bias of digital technology.
This essay examines whether robots will lead to the reshoring of activity from low-wage countries to rich countries, leading to a revival of manufacturing in rich countries. I argue that reshoring will not lead to an employment boom in rich countries, because the brilliant robots are a capital-biased technology, and as such, they potentially replace smart people. As a result, the skill premium - the wage discrepancy between a university graduate and a high school graduate - is declining in Europe. I argue further that the expansion of higher education has been too aggressive in light of the capital bias of digital technology.