<p>Let's assume that we could find a very cheap source of energy that the cost of energy drops to say 1% of its current value. And let's also assume that automation and robots advanced to a level at which they are able to handle 50% of the economy, mainly in the industrial and agricultural sectors which would also make food, shelter, clothing and consumed products cost 1% of their current value.</p>
<p>The last assumption would be that the service sector (50% of the economy) is still fully dependent on humans work. This would include services like hospitality, healthcare, nursing, teaching, tourism, media and entertainment .. etc</p>
<p>My question is: how would that scenario affect the salaries of the employed workers ?</p>
<p>To make my question clearer, let me give an a example with numbers. Let's say at the current market, a worker is making 100,000 USD a year. He spends 80,000 USD of his income proportionally: 40,000 USD for food, shelter, and consumable products and 40,000 USD for other services.</p>
<p>Now, with the cheap energy and automation the spending changes. Now the same person is spending 400 USD (1% of the current value of 40,000) for food, shelter, and consumable products and spends 40,000 USD for services, which is unchanged.</p>
<p>How will this change reflect on the original 100,000 USD income then when it comes to the market and competition? Will the competition between the employed work force drive the salaries down to just meet the basic needs and so the salaries become 1000 USD instead? Or will salaries stay the same which would mean that you still earn 100,000 USD a year but spend only 40,400 USD (40,000 + 400)?</p>

CC BY-SA 4.0
2022-12-05T08:20:38.873Z
what sort of production function you assume for the economy in your scenario?
1muflon1
CC BY-SA 4.0
2022-12-05T10:54:20.990Z
@1muflon1 I am sorry I am not very familiar with economic terms. Could you please explain how this would make a difference?
Abanob Ebrahim
CC BY-SA 4.0
2022-12-05T11:23:10.077Z
it makes a lot of difference. If you assume that on average labor and capital (which includes robots) are complements you get diametrically different results from the situation when they are substitutes on average. Also, now thinking about it there are more parameters that the question should have if you want to get precise numeric answer. For example, how prices change as a result to technological change depends on whether you assume markets are perfect or if there is some markup due to imperfect competition. Also, are labor markets perfect as well?
1muflon1
<macroeconomics><wages><energy-economics><automation>
How can high automation dependence and abundance in energy affect salaries?
Abanob Ebrahim
# How can high automation dependence and abundance in energy affect salaries?

(Asked by: username_0 on 2022-12-05)

Let's assume that we could find a very cheap source of energy that the cost of energy drops to say 1% of its current value. And let's also assume that automation and robots advanced to a level at which they are able to handle 50% of the economy, mainly in the industrial and agricultural sectors which would also make food, shelter, clothing and consumed products cost 1% of their current value.

The last assumption would be that the service sector (50% of the economy) is still fully dependent on humans work. This would include services like hospitality, healthcare, nursing, teaching, tourism, media and entertainment .. etc

My question is: how would that scenario affect the salaries of the employed workers ?

To make my question clearer, let me give an a example with numbers. Let's say at the current market, a worker is making 100,000 USD a year. He spends 80,000 USD of his income proportionally: 40,000 USD for food, shelter, and consumable products and 40,000 USD for other services.

Now, with the cheap energy and automation the spending changes. Now the same person is spending 400 USD (1% of the current value of 40,000) for food, shelter, and consumable products and spends 40,000 USD for services, which is unchanged.

How will this change reflect on the original 100,000 USD income then when it comes to the market and competition? Will the competition between the employed work force drive the salaries down to just meet the basic needs and so the salaries become 1000 USD instead? Or will salaries stay the same which would mean that you still earn 100,000 USD a year but spend only 40,400 USD (40,000 + 400)?

**Tags:** macroeconomics, wages, energy-economics, automation

> **Comments:**
> **username_1**: what sort of production function you assume for the economy in your scenario?  
> **username_0**: @username_1 I am sorry I am not very familiar with economic terms. Could you please explain how this would make a difference?  
> **username_1**: it makes a lot of difference. If you assume that on average labor and capital (which includes robots) are complements you get diametrically different results from the situation when they are substitutes on average. Also, now thinking about it there are more parameters that the question should have if you want to get precise numeric answer. For example, how prices change as a result to technological change depends on whether you assume markets are perfect or if there is some markup due to imperfect competition. Also, are labor markets perfect as well?  

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## 0 answers

