Will Technology Turn Job Creators Into Job Erasers?

I had always bought the story that Henry Ford paid his workers enough to buy the cars they made.

Looks like I was wrong.

Turns out his real motivation had more to do with reducing turnover than with building a middle class. Altruism myth busted.

The thing is, it doesn’t really matter why he did it. What matters is the effect of the decision: the fact that other manufacturers had to increase their wages in order to compete, the fact that a growing middle class was good for the entire economy, and the fact that Ford ultimately benefited from paying a fair wage rather than a minimum wage.

Regardless of motivation, the reason Ford was able to afford to pay such a ridiculously high wage was, of course, the increased productivity offered by his assembly line. And if a little increase in productivity is a good thing, a big increase in productivity must be a GREAT thing, right?



Not necessarily, of course. Ford’s increase in productivity allowed workers to be paid more --workers who were likely to spend that higher income on goods and services, multiplying the net economic effect and improving conditions for a large section of society. But in a well-reasoned and thought-provoking piece called “How the Internet is making us poor,” Christopher Mims argues that certain types of productivity increases have the opposite effect, as improvements in robotics and automation continue to eat away at middle-class jobs.

“In a gleaming new warehouse in the old market town of Rugley, England, Amazon directs the actions of hundreds of ‘associates’ wielding hand-held computers… Each person’s performance is monitored, and they are given constant feedback about whether or not they are performing their job quickly enough… ‘You’re sort of like a robot, but in human form,’ one manager at Amazon’s warehouse told the Financial Times. ‘It’s human automation, if you like.’ And yet despite this already high level of automation, Amazon is already working on how to eliminate the humans in its warehouses all together [sic].”

If you are running Amazon, and you eliminate the majority of your workforce while improving productivity, you’re doing a great job. The problem lies in extrapolation: If all companies eliminate the majority of their workforces, the economy collapses.

In a perfect world, we would be able to process the emergent effects of our decisions on the complex systems in which we operate. We would have some way of reconciling the micro and the macro, of understanding the fact that sometimes the decisions that make the most sense for us as individuals or organizations don’t do us any good when everyone is making those same decisions.

In this perfect world, we would think like critic Evgeny Morozov, who, as described in the Columbia Journalism Review, wants us to “integrate the debates about technology into the broader debates about politics, economics, history, and culture… When discussed in purely digital terms, for instance, letting a company like Uber transform a city’s taxi service is a no-brainer. When the digital is integrated into the political, however, this becomes a more complicated debate about regulation and infrastructure and the rights of cab drivers.”

Let’s be real, though: that’s not going to happen. If Uber founders Garrett Camp and Travis Kalanick had stopped to consider the political implications of their service, someone else would have stepped right in.

If we can’t adequately contemplate the macro effect of our actions, and if behavior that has a positive effect at the individual level creates a negative effect at the collective level, we have to challenge other assumptions. Assumptions like the idea that we can’t just pay everyone a universal wage. But that’s a discussion for another day.

Back to Christopher Mims, who said, “as technology aids the gutting of the middle class, it destroys the very market required to sustain it.” Whether it was Henry Ford’s intention to boost the middle class or not, it was the outcome. He was lucky enough to have his micro and macro stars align. Will we be so lucky?

7 comments about "Will Technology Turn Job Creators Into Job Erasers? ".
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  1. Mike Browne from BIG, January 10, 2014 at 11:22 a.m.

    Hey Kaila, I do like your blog ... or is this an article?? At any rate, you are absolutely correct that nothing is ultimately going to stop technological progress that develops more productivity because a business owner is always (she has to) going to push for productivity because that is what generates profits.
    I even agree with you that the technological innovations WILL impact the current middle class but that is nothing new and has been happening in the U.S for the last forty years as we have made the transition from a manufacturing economy to an (fill-in-the blank ... information, digital, post-industrial etc.) economy.
    The GOOD NEWS is that this push will finally do for our woeful education system what all the "Thinkers" and "Bureaucrats" could not do and that is have individuals make their own choices based upon their own SELF INTEREST in finally figuring out that they MUST be educated to keep up the the new economy (whatever we call that new economy).

  2. Paula Lynn from Who Else Unlimited, January 10, 2014 at 12:12 p.m.

    It cheapens human life. Humans are needed to buy things in mass, but not needed to produce them. With earth's population growing beyond what the earth can support without dire consequences, the tipping point is coming soon if not already in our face with many of us humans not wanting to face it. People and their ideologies fight as in wars when there is not enough to live, not when there is too much as one major reason the uneducated/desperate hook up to the ideologicals/psychopathic power grabbers. Producing huge quantities of things people cannot have with no hope to have create resentments that bags of rice will not help. Cassandra could go on....(For those who don't know who Cassandra was...she predicted the future, never believed and it always came true.)

  3. Pete Austin from Fresh Relevance, January 13, 2014 at 5:31 a.m.

    The theory is that improving efficiency will boost the whole economy, so a lot of new companies will be created. For example 1 million companies, with an average of 200 employees, means 200 million jobs. But 3 million companies, with an average of only 90 employees (each having eliminated most of their workforce) means 270 million jobs.

  4. Kaila Colbin from Boma Global, January 13, 2014 at 1:51 p.m.

    That is the theory, Pete, but the question is who works those 90 jobs. The Mims article refers to "skills-biased" and "capital-biased" technological change -- basically, we've got 270 million jobs that only highly skilled people can do, so if you're a hotshot, you're sitting pretty, but if the education system hasn't quite caught up with you yet...

  5. Paula Lynn from Who Else Unlimited, January 13, 2014 at 7:05 p.m.

    Pete: According your comment, it appears that there is an assumption that there will be triple the number of jobs and all those jobs will be living wages. Would 20 of those jobs be "good" jobs and the rest fast food or retail ? Now add it Kaila's comment and we will find there are not enough spokes in the wheel. There are also other short comings of this kind of assumption.

  6. Paul Robinson from Viridian Development Corporation, January 17, 2014 at 12:42 p.m.

    The only reason a lot of 'rote' and low-skill jobs are still there is because the cost to automate them is more than the operator of the business can afford to automate them.

    There's no reason you need any employees to run the typical fast-food outlet. You can have automated cooking equipment, the cash or credit card charges can be processed automatically, and the food can be packaged and delivered automatically, even to asking for special orders. It's just very expensive in capital costs to do it that way. On a short term basis - the 3 to 5 year term - it's cheaper to hire people, but as people become more expensive it becomes more cost effective to switch to automation. So when employees start asking for $10.10 an hour for minimum wage for a fast food outlet, the person who can't figure a way to automate the whole process within what they can afford is the one who has to hire people and it costs more, long term. The one who can afford the cost of automation will be able to get rid of everyone except for the guy who brings the stock in and loads the back room with supplies.

    And that's only because the store can't be loaded by drone from the warehouse!

  7. Paul Robinson from Viridian Development Corporation, January 17, 2014 at 12:47 p.m.

    Plus with automated restaurants the computer would always get your order perfect, no surprises, no error and it never varies, just like when you get your bank statement or credit card statement, it's exactly right, to the penny. Those statements used to be done by hand. Just like phone calls used to all be made by operators, now everyone makes their own, we can make lots more calls faster, and phone service is much less expensive.

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