Examine two effects of increased ‘automation’ on the demand for labour

Edexcel A-Level Economics Paper 1 June 2025 Extract

With reference to Extract C, examine two effects of increased ‘automation’ on the demand for labour. (8 marks)

Firstly, increased automation is initially likely to lead to a decrease in the demand for workers in many job markets. For example, the successful implementation of self-checkout machines has led to a decrease in the demand for retail staff, as  their tasks can be completed by machinery. Similarly, the extract mentions the growth of automation in banking, leading to high street banks closing. As demand for these workers decreases, this causes a contraction along the supply curve leading to a decrease in the equilibrium quantity of workers and a decrease in their wage. 

Secondly, increased automation might also lead to an increase in the demand for specialists like software engineers and machine learning engineers who are able to help implement AI within companies. They would also see an increase in their pay assuming there isn’t a massive increase in the supply of them. 

Overall, the impact will depend hugely on which job market we are referring to, and the level of occupational mobility of labour, which is the ability of workers to re-train themselves and quickly get another job.

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