Rising stakes: how higher wages and unions shape technology adoption

What the paper says

Purpose This study examines the effects of rising wages, organisational power, and task nature on automation adoption and firm performance in the US fast-food industry. It tests the concept of “bounded automation” by investigating whether wage increases incentivise firms to automate, how unions and regulations influence automation decisions and whether certain tasks are resistant to automation due to their human component. The research also explores the mediating role of automation in the relationship between organisational factors and firm performance. Design/methodology/approach The study employs a survey-based approach, collecting data from 415 fast-food chains in the United States. The survey instrument, developed from previous studies and validated through expert review and a pilot study, uses a 7-point Likert scale. Partial Least Squares-Structural Equation Modelling (PLS-SEM) is utilised to test the hypotheses, with bootstrapping performed to assess the significance of relationships within the model. Findings The results reveal that rising wages do not lead to increased automation, but organisational power (unions and regulations) does. Automation positively impacts firm performance and mediates the relationship between organisational power and performance. Rising wages directly benefit firm performance. Contrary to expectations, the nature of tasks does not significantly affect automation decisions. The study finds no evidence supporting the notion that certain jobs require human workers even when automation is viable. Research limitations/implications The study is limited to the US fast-food industry, potentially affecting generalisability to other sectors or regions. The cross-sectional nature of the data restricts causal inferences. Future research could benefit from longitudinal studies to examine these dynamics over time. Additionally, investigating specific mechanisms through which higher wages positively impact firm performance, independent of automation, could provide deeper insights. Practical implications For fast-food industry managers, the findings suggest that investing in automation can improve firm performance, especially when facing union pressures or stringent labour regulations. However, raising wages may also positively impact performance without necessarily leading to more automation. Policymakers should consider that labour laws and union activities might inadvertently accelerate automation adoption by firms seeking to mitigate associated costs. Social implications The study's findings have significant implications for labour market dynamics and workforce planning. As automation adoption increases in response to organisational pressures rather than wage increases, it may lead to job displacement in certain areas. However, the positive relationship between wages and firm performance suggests potential benefits for workers. Policymakers and labour organisations need to balance protecting workers' rights with the realities of technological advancement. Originality/value This research provides novel empirical evidence on the concept of bounded automation in the fast-food industry. It challenges prevailing notions about the relationship between wages and automation, while offering new insights into how organisational power influences technology adoption. The study's findings contribute to the ongoing debate on automation's impact on employment and provide valuable insights for policymakers, industry leaders and labour organisations in navigating the evolving landscape of work.