Effects of Technology - 2020

[Watchcat]

Here is what I mean. Take a look at the video at about 10 seconds in and you will see why these jobs are low-wage. They have a guy mopping a floor instead of using a machine that would allow him to do 4 or 5 times as much work for less physical effort....
...I would recommend that the employer buy the machine (less than $10K), double the worker's pay, and still save $30K a year... by not using a worker's time to push a mop when he could be running a machine.

Wages are determined by supply and demand. These jobs are low wage because the supply of those who can and will do them greatly exceeds the demand to have them done.

If the employer buys the machine, the wage will be increased only if an increase is needed to attract the necessary number of people who can and will operate the machine. If most of the people who can and will operate a mop can and will operate the machine, supply will remain unchanged. However, since now one person can do the work of 4-5, the demand for workers will decrease substantially. This will drive wages down, not up. If it is harder to operate the machine than the mop, this would decrease supply, because less workers will be able to operate the machine than the mop. If the machine is very sophisticated, wages will increase significantly, but most of the people who used to operate the mop will be out of a job.

You can advise businesses all day long to pay workers more than they need to pay them in order to get the work done, but they aren't going to do it.

Henry Ford was working an industry that was in the early growth phase. If the automation of the assembly line made it possible for fewer workers to manufacture the same number of cars in a shorter period of time, or the same number of workers to manufacture more cars in less time, the workers or time that was made available by this limited automation could be used to manufacture more cars, and still they could not manufacture them fast enough to meet demand. In addition, Ford automated the assembly line, not the assembly tasks, which were still done manually, so the number of workers and amount of time that became available as a result of this limited automation were relatively modest.

In mature or declining industries, where demand is steady or dropping, the workers would either be laid off or reduced to part-time employment. We see the trend toward low wages and part-time employment today in part because corporate pursuit of "lean" has outstripped corporate capacity to develop products for which there is a big enough demand to support higher prices, higher wages, and full-time employment.

 

[Ronen E]

The relentless drive for more and more efficiency makes business sense, but from a social standpoint it is destructive. Technological societies have evolved to a point where we can quite easily make everything everyone needs, utilising less and less working people (all professions). We can invent new needs or make things we don't need and try to convince people to consume them, but it can only delay the inevitable. And the more relentless and efficient we are in becoming more efficient, the quicker we arrive at the end point.

Fast forward to a day where 1 person (with the right equipment) can manufacture everything that person and another 999 need. That person is employed and is getting compensated so all good for her/him. What about the other 999? Where will they go? How will they support themselves?

There used to be a time the wellbeing of society depended on everybody (or the majority) getting, keeping and doing a job even if it was hard, unpleasant and unrewarding, so it made sense to tie putting in that work with getting basic needs fulfilled. That time is over, so it's time to consider a paradigm shift. Placing our trust in the invisible forces of the "free" labour market will eventually push masses of people to the edge and that can only lead to large scale violence.

 

[Marc]

The relentless drive for more and more efficiency makes business sense, but from a social standpoint it is destructive.

In any event, this illustrates what lean can do for your company. Assuming that the video tells the whole story, I would recommend that the employer buy the machine (less than $10K), double the worker's pay, and still save $30K a year (I am assuming these workers get minimum wage--if they are paid more, the savings are even higher) by not using a worker's time to push a mop when he could be running a machine. The job looks like it makes as much sense as using shovels to dig a hole when a backhoe is available. (Not formal engineering advice

It really depends on the company and it's size. A small company may not even have enough floor space for such a machine.

I remember a documentary I saw some years ago. It had to do with large building projects. I don't remember the country, but there were probably 500+ workers excavating building foundations with very few machines that we normally see in big cities (or example). The discussion centered around the use of people/labor. The upshot was it would be faster and potentially lower costs of the builder. The country had some laws that forced the builder to use people rather than machines for as much of a project as possible. The reasoning for the laws was that too many people depended on these types of jobs or their living, as menial as they lived. Since it's 2020, I'm guessing I saw that documentary 20 to 25 years ago. I don't remember where I saw the documentary or the name but I do remember I thought it was very interesting back then.

Food for thought...

EDIT ADD: One of the things that happens in a discussion forum such as this is often times posters immediately think in terms of big manufacturing companies and neglect thoughts related to small companies and, for example, small companies in (example: yard maintenance and seasonal companies such as snow removal) unusual fields.

Just another thought.

 

[Bill Levinson]

Re: "I remember a documentary I saw some years ago. It had to do with large building projects. I don't remember the country, but there were probably 500+ workers excavating building foundations with very few machines that we normally see in big cities (or example). The discussion centered around the use of people/labor. The upshot was it would be faster and potentially lower costs of the builder. The country had some laws that forced the builder to use people rather than machines for as much of a project as possible. "

This sounds like the restrictive work rules demanded by unions to keep their people employed. The consequence is that they cannot pay 500 people with shovels decent wages, and the cost to the builder and customer will far exceed what can be done by a few high-wage people with backhoes and other construction equipment. The basic principle coincides, in fact, with the abolition of slavery. Aristotle predicted 2300 years ago that "mechanical servants" would make slavery uneconomical. A slave gets no compensation other than food, and a minimum wage worker once got only enough money to buy food, so there was not much difference (except the worker could quit if he found better work). In any event, the Industrial Revolution, which resulted in Luddism because British workers were afraid machines would take their jobs from them, resulted in the abolition of slavery in the UK, and soon afterward in the industrialized northern United States. Scientific management, motion efficiency, and lean manufacturing (all from the late 19th to early 20th century) then created the American middle class by making jobs sufficiently productive to pay much higher wages.

Henry Ford and Charles Sorensen described the issue as follows. We cannot pay four people decent wages to do one person's job. Sorensen wrote that it is better to pay one person $8 a day (this was in the 1930s when this was a lot of money) to do a job than pay four people $2 each for the same job because the high-wage worker has disposable income whose expenditure (or investment) will create more high-wage jobs.

Ronen E: wrote, "Fast forward to a day where 1 person (with the right equipment) can manufacture everything that person and another 999 need. That person is employed and is getting compensated so all good for her/him. What about the other 999? Where will they go? How will they support themselves? " We have already reached the point where 1 person with the right equipment can do the same job that required 100 people two centuries ago. A book written in 1915 describes hundred-fold efficiency gains at the Ford Motor Company. The result was not loss of jobs, but the creation of more jobs not just at Ford but also in other industries that were needed to feed Dearborn's new appetite for iron, coal, rubber, fabrics, and countless other materials. There was a time when half our economy was devoted to raising enough food on which to live (with some exports); now one farmer feeds 100 or more people.

As matters stand, we now have something like 3.5% unemployment, and I saw online a McDonalds billboard that said they were hiring people at $13 rather than $7.25 an hour. Target starts entry-level people at $13 an hour. As automation makes jobs more productive, the jobs can pay more.

 

[Marc]

This sounds like the restrictive work rules demanded by unions

Nope - Unions had nothing to do with it. The government wanted to keep people employed. They lived in poverty, but all things considered they at least had some basics such a food.

billboard that said they were hiring people at $13 rather than $7.25 an hour. Target starts entry-level people at $13 an hour.

Even in a rural area, in the US it's hard to live on $26,000 a year. On $7.25 and hour it's

Living wage - Wikipedia is the issue.

Minimum wage:

I remember that within the last few years there was an interesting discussion on turnover. The person starting the discussion was wanting ideas on how to reduce it. If I remember correctly the company was in Tennessee and paid about $10.00 an hour. If in the area McDonalds pays $13, keeping people is difficult.

As automation makes jobs more productive, the jobs can pay more.

CAN pay more doesn't mean they will pay more.

The US tax cut of 2017 has shown that companies used (and are using) their tax cuts for stock buybacks, etc., not to mention tax receipts have dropped significantly and the US deficit has exploded. Consider: It’s official: The Trump tax cuts were a bust

Corporations, big shareholders and top corporate executives reap the lion’s share of the gains from the 2017 tax cut, which should be renamed the Shareholder and CEO Enrichment Act of 2017. It didn’t boost economic growth that much, didn’t start a capital spending boom or U.S. manufacturing renaissance, didn’t bring overseas profits back home, and might have led to modest job growth but little discernible wage increases. And we’ll all be stuck with the bill for a long, long time.

Thoughts about the "Deficits don't matter" mantra: (broken link removed)

Henry Ford and Charles Sorensen described the issue as follows. We cannot pay four people decent wages to do one person's job. Sorensen wrote that it is better to pay one person $8 a day (this was in the 1930s when this was a lot of money) to do a job than pay four people $2 each for the same job because the high-wage worker has disposable income whose expenditure (or investment) will create more high-wage jobs.

Which leads to: Income Inequality - Inequality.org and all that entails. Henry Ford and Charles Sorensen had their opinions, for sure. So did GE's Jack Welsh. No empirical data exists to support their theories. Like the "trickle down economics" theory made popular during the Reagan era, many people still say they believe it but the data says otherwise.

 

[Bill Levinson]

Ford's industries tended to abolish poverty wherever they appeared, because Ford's high-paid workers spent their money locally (which is admittedly not guaranteed today). This is something I found a few minutes ago: Read “Toward Abolishing Poverty,” by Henry Ford and Samuel Crowther. Published August 16, 1930. I think it reproduces some material from My Life and Work, but this is not something I have seen before.

 

[Ronen E]

Ronen E: wrote, "Fast forward to a day where 1 person (with the right equipment) can manufacture everything that person and another 999 need. That person is employed and is getting compensated so all good for her/him. What about the other 999? Where will they go? How will they support themselves? " We have already reached the point where 1 person with the right equipment can do the same job that required 100 people two centuries ago. A book written in 1915 describes hundred-fold efficiency gains at the Ford Motor Company. The result was not loss of jobs, but the creation of more jobs not just at Ford but also in other industries that were needed to feed Dearborn's new appetite for iron, coal, rubber, fabrics, and countless other materials.

You circumvented my point. You relate to a snapshot from a century ago, and I'm not even talking about now. I'm talking about where we're (or our children) heading - 30, 50, 100 years from now. You are talking about 1:100 efficiency rate, I asked what will happen when we reach 1:1,000, and if that's not enough for making my point, how about 1:10,000? It's a matter of principle that is, IMO, unavoidable in the (not so) longer run. What Ford represents is a trend set in motion - that process has matured a lot but it's still going. I'm wondering about the end point. By the way, I'm not arguing whether it's "good" or "bad", because I think it's inevitable and thus such value judgement is moot. To me the interesting question is how societies and governments can better prepare for the future.

As matters stand, we now have something like 3.5% unemployment, and I saw online a McDonalds billboard that said they were hiring people at $13 rather than $7.25 an hour. Target starts entry-level people at $13 an hour. As automation makes jobs more productive, the jobs can pay more.

Unemployment figures may be meaningful for macro-economists (may be; since the 2008-9 crash I doubt that anyone really has a good handle of macro-economics), but in terms of really understanding what's going on around us I treat them with a lot of suspicion. Not that's it's a conspiracy or anything; it's enough to look at how terms are defined and how those statistics are collected, analysed and presented to understand that they're almost meaningless outside of political campaigning. The figures go up and down with very loose correlation to the average person's reality.

"As automation makes jobs more productive, the jobs can pay more." True, but to less people.
McDonalds and Target are excellent examples, because most of their workforce is replaceable through technological means in the very foreseeable future. I can easily envisage machinery that prepares the perfect burger and then serves it to the customer quickly, without fail. Part of that process was already automated in the past 5 years or so - the ordering touch-boards at Macca's helped eliminate any ordering queues and I'm sure they enabled reducing staff. Automated check-outs at K-mart (and practically any supermarket here) hardly existed 10 years ago and now they're in almost every shop above a certain size. Since their introduction there are less and less (sometimes none) conventional check-outs open at any given time in such shops, and I'm sure this has reflected on the numbers of cashiers employed.

We can keep living in the past and keep thinking "not my problem, I'm smarter than that", "adapt or perish", "outsmart the competition" etc., but at some point it's going to be everyone's problem - if not yourself then your family or friends. The biggest difficulty is the "each to their own" mentality - "I'm fine so the person next to me can rot". But then what do you do when it's you rotting?... Too late.

 

[Watchcat]

often times posters immediately think in terms of big manufacturing companies and neglect thoughts related to small companies

True, but the recent conversation...assembly lines, mass production...fits large companies, not small, IMO. In addition, most sectors in this country is well into consolidation, big fish having eaten the little fish, now eating each other, until each one comes down to handful of big players. So I think the conversation becomes a better fit as time marches on.

 

[Bill Levinson]

Ronen E wrote "I'm talking about where we're (or our children) heading - 30, 50, 100 years from now. You are talking about 1:100 efficiency rate, I asked what will happen when we reach 1:1,000, and if that's not enough for making my point, how about 1:10,000? "

It's conceivable that we are already at 1:1000 versus pre-industrial times when people often went barefoot in summer because they could afford only one pair of shoes, and maybe owned only one or two items of clothing. Steam and water power helped by getting rid of some of the backbreaking labor. The hundred-fold increase cited in the 1915 book about Ford came after the Industrial Revolution and organized factories, so we could already be at 1000 to 1 versus what humans could do in medieval times. As things get cheaper (due to removal of waste or muda), more people can afford them and there will be demand for more output.

"I can easily envisage machinery that prepares the perfect burger and then serves it to the customer quickly, without fail. Part of that process was already automated in the past 5 years or so - the ordering touch-boards at Macca's helped eliminate any ordering queues and I'm sure they enabled reducing staff. " There is an automatic burger-making machine available, and suppose (for example) it does the work of three or four burger-flippers. Somebody has to maintain and fix the machine (skilled work) and the employer is going to have to pay that somebody well over minimum wage. Also, making burgers and taking orders at the cash register are not particularly interesting or enriching forms of work, and automation tends to replace drudgery with not only better-paying but also far more interesting work. Ford's assembly line was admittedly an exception because the work was extremely repetitive, although designed to minimize physical exertion and repetitive motion. It nonetheless paid well, and the less interesting tasks were automated as rapidly as possible.

As another example, shoveling holes does not make much use of a person's intelligence although it sends him home with aching muscles (and meager pay) at the end of the day, but operating a backhoe or bulldozer is skilled and also highly respectable work (because not everybody can do it). Mining with pick and shovel destroyed miners' bodies and returned very poor wages but powered mining tools reduced the physical labor and, by allowing miners to obtain far more material per hour, increased mining wages enormously. The Average Salary of a Surface Coal Miner "According to the BLS, production and nonsupervisory miners earned a median wage of around $29 per hour in 2018. The median wage represents the center of the coal miner pay scale. First-line supervisors, installers and mechanics make around $41 per hour, while machine operators take home about $24 per hour." These jobs do not seem to require college degrees but pay more than many jobs that do (except for engineering, science, and possibly accounting).

I suspect that the self-checkout stations allow cashiers to move to other work (work balancing, same as cross-trained workers moving from one task to another as needed) which is likely to be more important than running a cash register and also a lot more interesting. When we do the job ourselves at the self-checkout stations, we can see how boring this might get after even 30 minutes let alone 8 hours (every day). In any event, the "excess" people are obviously not unemployed because I read in today's paper that employers cannot get enough people to fill the jobs.

 

[Ronen E]

@Bill Levinson I'm not sure how most of what you wrote addresses my concern. Some of your arguments made a lot of sense in the late 20th century / early 21st (some even still make sense), but going into the future, are you saying that regardless of ever-growing efficiency there will always be enough sufficiently-paying jobs for the majority of potential workforce?...

I suspect that the self-checkout stations allow cashiers to move to other work

That's a popular assumption, but even if it's still true to a degree, there's a limit to retraining. Even if we ignore the inherent abilities of the average-and-below (i.e. not sure a supermarket cashier will be able to retrain as a nuclear physicist), there will come a point where the number of workers necessary across the entire economy will simply be much smaller than the number of people looking for work. It will come to simple arithmetics. Pick whatever efficiency ratio you think we're at right now (with reference to whatever starting point you choose), then multiply this by 10, 100, 1,000. Surely you can see that at some point the ratio will be such that the vast majority will end up unemployed and unable to self-sustain, unless organised upfront planning and action takes place.

In any event, the "excess" people are obviously not unemployed because I read in today's paper that employers cannot get enough people to fill the jobs.

Not so "obvious".
Anything you "read in the paper" is written by someone. Any such someone has a world-view, opinions, maybe an agenda - are you taking them into account? Do you know what they are?
Even if "employers cannot get enough people to fill the jobs" is a true fact, there are at least several possible explanations other than the excess people "obviously" being happily employed. There have even been several discussions at Elsmar about that exact question.
Either way, whatever we think we currently see is a snapshot. The general trend is increasing technology and increasing efficiency, including replacement of high-end professions with the advent of AI (watch this space during the next 10-20 years). I think that it's time to face that brave new world and maybe cut some of the old proverbial knots, as scary and painful as that might seem.