Friday, April 5, 2013

Rage against the "Job-Killing" machine

We are feeling the pain of automation

One of the most important and under reported stories of our time has finally hit the big time.  Technology and automation are destroying jobs AND we are feeling it. For the past 100 years, technology has helped developed countries grow and raise their standard of living. It has created a high standard of living where everyone in society has all of life's basic necessities.  Technology has killed jobs but added many more until recently.

Technology did cause people to lose jobs but in a growth else where quickly absorbed the surplus. Most jobs required low-skill levels and hard work, so workers were quickly recycled in to other areas of the economy.

When the industrial revolution first started in Britain, the new machines were feared by the populous who thought they would put people out of work.  Instead, growing wages fueled demand for new material goods, the country grew, and the displaced workers moved on to other, newer industries.  Britain's internal growth and lack of global competition allowed the country to shift workers to more productive jobs.  Britain's financial system was designed to supported industry. Labor captured most of the increase in wealth and funneled it back into the economy as demand. The results was a prosperous cycle of demand and growth.

What has happened during the late 20th century is that the 100 year cycle of growing wages, growing demand and national income growth has been broken.  No one is complete sure why the link between growth and wage is broken.  Many economists suspect globalization / outsourcing (global labor competition, financial engineering, regulatory manipulation by large companies, and technology change).  We are going to look at technological change.

As we mentioned earlier, technology killing jobs has been in the news because of a great, new book called  "Race Against the Machine" by Erik Brynjolfsson and Andrew McAfee. Their basic theory is that smarter machines are reducing the demand for white collar labor, however the change can be absorbed as long as wages are sufficient to generate demand for technology.  In addition, two other factors have conspired to reduce employment: 1) developed countries are net importers of goods and 2) process (versus product) technologies have become incredibly efficient by historical standards.

There is no shortage of new machines and innovation, but the country cannot afford to buy them because wages have stagnated.  In addition, developed countries are net importers further reducing growth and wages.

We want to offer some further background reading on the problem:

Race against the machine
Economist: Has the idea machine broken down ?
60 Minutes

The dilemma  was summarized by Walter Reuther, the leader of the United Auto Workers union, in a famous anecdote he would tell.

'After touring a factory filled with lots of automated car making equipment, a manager asked Reuther how he was going to collect union dues from all the machines making cars."  Reuther replied "How are you going to sell cars to these machines ?" '

Here is some background on the quote.

Finally, just to keep the problem real, here are some video's of Robots in Action

Packaging robots from ABB on Youtube.
ABB dual arm concept robot is here. 


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