business news in context, analysis with attitude

The Wall Street Journal has an interesting story this morning about how "a long trail of empirical evidence shows that the increased productivity brought about by automation and invention ultimately leads to more wealth, cheaper goods, increased consumer spending power and ultimately, more jobs."

The story is relevant because of last week's stories about a) Amazon opening a checkout-free store in Seattle, and b) President-elect Donald Trump nominating fast food executive Andy Puzder, who in the past has stated a desire to automate his franchises, as his new Secretary of Labor. Both stories elicited varying protests from people who thought that these developments were bad for American workers.

The Journal piece quotes James Bessen, an economist who teaches at Boston University School of Law, as pointing out that "in the case of bank tellers, the spread of ATMs meant bank branches could be smaller, and therefore, cheaper. Banks opened more branches, and in total employed more tellers."

Automation can have negative impacts, of course: "Some individuals are uprooted and suffer. In 1900, 40% of U.S. workers toiled in agriculture; today, that figure is less than 2%. Manufacturing employment in industrialized countries has declined in recent decades, as fewer people make more goods. But society, on the whole, has come out ahead."

At the same time, the story quotes a Deloitte LLP study saying that "technology alters the quality, as well as the quantity, of jobs ... The authors found big increases in both low-paying and high-paying jobs. There are more barbers and barkeepers. But there also are more accountants and nurses, reflecting the rising complexity of the modern economy." And paradoxically, "many of the fields most transformed by technology have produced the biggest increases in employment, from medicine to management consulting."

That said, the Deloitte piece concedes that "bifurcated labor markets have ill effects. Disappearing factory jobs have largely been replaced by jobs in the service sector, where highly skilled workers, like doctors and computer programmers, are paid more, while many others see to the comfort and health of the affluent. In the middle, wages have stagnated, helping spawn our current age of populism."
KC's View:
In other words, you can't make an omelette without breaking a few eggs. The problem, of course, if you happen to have the job that goes away because of automation, and you're not prepared for what comes next, and where the opportunities may be, the whole notion of not being able to stop progress rings kind of hollow.

I also suspect that the people in the trenches - or rather, the people who are losing their jobs in the trenches - will be unimpressed by such pronouncements from management consultants and academics. But I found the piece illuminating, and worth reading before making knee-jerk comments about how automation is evil.