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Here’s how automation will hollow out the American economy

February 16, 2018

A new study by Bain & Company found that automation could exacerbate inequality in the US.

Why? The study shows that automation will disproportionately hit middle- and low-income jobs. Its benefits—such as productivity gains and new investment—accrue mainly to highly skilled workers and large companies. (This “winner-take-all” effect has been known for a while.)

The more you earn, the more you save: As more income shifts to the top earners, who save more of it, less of money goes back into the economy.

What this means for growth: The savings will be funneled into investment, which will temporarily boost economic growth. But as the report says, “This growth isn’t based on effective demand and actually creates a misleading signal about how sustainable it is.” Eventually demand-led growth stops altogether, or even reverses, leading to “deeply unbalanced economies,” says the report.

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