Technological Improvement, High Automation and Unemployment
There is an ongoing debate about continuous technological
improvements happening in our society with high degree of automation occurring in
almost all areas which were previously flowing with personnel now filled with
the latest automatic and robotic machinery that create more unemployment than
employment. The saddest part of this scenario is that the process of rapid
change occurring in almost all sectors of an economy means that the resulting
gaps between skilled and unskilled or semi-skilled people are enlarging to such
an extent and without any control that even those who are very specialized are
not able to keep in line with the stupendous advancement in technology and this
shows that a time would sooner or later arrive when most part of the population,
skilled or semi-skilled, would be rendered absolutely useless.
This scenario has become one of the most intriguing phenomena that
have raised serious doubts as to whether economic progress means welfare of the
machines or that of the human beings. This problem is faced not just by skilled
people only, but the problem has become a force to be reckoned for even the
highly specialized, qualified and experienced individuals and the die hard fans
of automation too. Never in their life had they dreamed that they would be
creating a Frankenstein monster which sooner or later would be engulfing them
too. This is something analogous to the die hard capitalists of the world who
bent upon making money itself do their work easier and make more profits
without any limits drawn whatsoever and without even duly considering the real
economy such that eventually everything ended up into a world wide economic and
financial crisis in the year 2008 of which they nor their governments had any
control at all. The same is quite true here too.
It is now seen that high technology firms or companies have now
taken yet another route towards even greater trouble for the unemployed of our
world today. These companies and organizations have resolved to create and
invent technologies that are by far even more superior to what we see in the
world, but even to beat and stay ahead of competition by feeding into a supply
chain that is already thriving on technology with even more and more automation.
In other words, these companies are now aiming at achieving to revolutionize
the very art of innovation in automation and take it to a very high level where
they actually get into a more secured position of competitive advantage by
manufacturing only very high sophisticated automated products for those
searching for more automation and thereby feeding into an already saturated,
non-manned system ensuring a full fledged supply chain of simply robotics and
nothing else.
The Curse of Value Concentration
The greatest threat faced by human beings on our planet is the
curse of value concentration. This means that where there is constant rate of
value addition it also inevitably means that there is constant rate of
automation process in each of the firms in a supply chain. It is only through
the process of automation that more and more values to a product can be added
and the customers get the best for their money. In other words, this also means
that manual work and efforts do not add as much value to products as automation
does. This again brings us face to face with another shocking yet revealing
picture and that is human beings are at best a physically disabled specie and
although good at initial creative efforts for further development of technology
and automation they are rather insignificant in their contribution for fast and
constant repetitive process that automation is capable of. This is the Curse of
Value Concentration.
In our socio-economic society a physically disabled person is not
the only person with disability, but the most perfect men and women whom we
talk about are only just less disabled than the rest and never quite abler enough
to be anywhere near to that of the machine. This is the reality.
This aspect is very important if we are to understand the nature of
employment and the subsequent unemployment that people are subject to due to
rapid advancement of automation. Without understanding the picture in its
proper perspective it is almost impossible for us to understand why rules and
regulations are important equally for the employee, employer, industries,
business class, multinationals, venture capitalists, contractors and so on and
these will be shown later on in subsequent paragraphs. If we do not understand this phenomenon then
we remain mute observers to ideological conflicts, tensions, aggressive
politics and overall bitterness and rivalry.
There are several advantages to automation as not only it saves
time, avoids clumsiness, but also brings about repetition and perfection for
replicating products and services by drastically reducing costs and overhead
expenses and thereby bringing about economies of scales. This means that no
human being is capable of beating the perfection brought forth by technology and
hence as stated earlier we as specie are rather disabled physically in front of
automation. The high level of automation brings forth unsurpassable value
addition to human consumer goods and services as well as overall well being for
the consumer who is employed and able to provide for it.
However, in sharp contrast, products made out of hand or
semi-automatic machines by far just remain only a poor cousin to the high level
of technology and automation that larger firms employ. The same is the case with smaller firms in a
supply chain that has not the power or the financial prowess to match the
giants in the same supply chains and may not be able to keep with the level of
quality demanded by the larger and highly automatic technologically driven
firms. These firms would sooner or later exit from the supply chains and the
larger firms would soon enough drive their own level of automation to even
higher stage where they wouldn’t need the service of the smaller firms
resulting in huge unemployment. This surely means that the larger firms under
no circumstances would absorb the displayed workforce even if special training
is enforced and the requisite skill is gathered by the workers. This results in
huge overall cost reduction for the larger few firms in a supply chain
resulting in passing on the benefits of high value to the end consumers.
The below given diagram represents the automation process by firms
in a supply chain in a form of a pyramid where the bottom level ‘a’ is the
least automated stage while the ‘z’ is the stage of complete automation. At ‘b’
stage the firms in a supply chain tends to automate or mechanize grass roots
manual tasks while as the level goes up to ‘d’ or ‘e’ the firms have more or
less optimized the requirement of automation with that of enabling workers to
perform tasks to the best level resulting in apparent ease and comfort of doing
their tasks. Here, there is no unemployment as such and workers are made
comfortable to do their task with least efforts with the machines in their
hands or technology at their disposal. Here the rate of efficiency of manpower
is the highest and so also the minimum level of value addition that customers
are quite comfortable with.
The ‘p’ stages varies according to the type of supply chains and is
not limited or extended to what is shown in the diagram. The ‘p’ stages are the
stages where workers are subject to the harsh reality of facing up to rapid
advancement of technology and automation rendering their own jobs as useless. Here,
in these stages value addition is paramount and goes up very significantly
relative to the additional value created at ‘d’ or ‘e’ levels.
At the top of the pyramid namely the ‘x’ stage the value addition
is unsurpassable although there will be sparse manpower managing the super
powerful automated machines. At this stage there will no need for low skilled technicians
or even technologists too. Entire operations would be handled by a handful of
highly skilled and experienced staff only. The supply chain would attain a
status of highest degree automation whereby a majority of the firms in the
chain would exit resulting in mass unemployment.
At stage ‘y’ there will be no need for even the highly or
extraordinary skilled personnel as few directors of the companies would be able
to handle the entire operation by pressing buttons.
At ‘z’ stage there will be perhaps only less than a dozen people or
one or two individuals where employment of skilled, highly skilled and
technologically experienced would become absolute zero. Maximum value is
achieved by the consumers yet unfortunately this may backfire as the purchasing
power of people due to mass employment would get drastically reduced. There
will be only one or two or perhaps at the most three very large firms exercising
control over the whole chain. In reality no firms has reached this stage, but
with no proper rules or regulation on businesses this may be achieved in the
near future. Undoubtedly, this would lead to mass unemployment unless otherwise
other unique supply chains emerge to fulfill the gap.
Unpredictable Swings in Economic Cycles
When there is mass unemployment due to high degree of automation as
shown above the economy becomes very volatile. The business cycles would be
become extremely shorter as firms in the majority of supply chains would be
producing better and better value added products yet due to unemployment there
will be no off-take for the same due to paucity of funds with the lower levels
of populace and lower production levels. Here not only workers become
unemployed, but smaller firms in the supply chains exhaust their capital
resources and exit from the scene altogether resulting in inability to purchase
more capital goods. A vicious unforeseen cycle follows and the larger firms at
best try even harder to create conditions that force the smaller and medium
industries exit hoping to monopolize full or part of their whole supply chain.
This will result in sudden short periods of recovery and followed
by recession and sudden depressions that would render economic instability and an
ungovernable economy. For the economy to go through path of more sustainable
recovery there is need to push demand of products and services from the lower
bottom of each of the pyramids in an economy namely ‘a’, ‘b’, ‘c’, or ‘d’ stages
when employment is maximum alongside some automation that has made the jobs
easier and more comfortable to handle. This can be only achieved with direct interventions
by the governments as society exists for human beings and not for machines. The
problem can be rectified with newer supply chains appearing on the scenes yet
this is not as easy as it sounds in a recession headed economy.
It is also seen that however fast a person may have been trained
and skilled it still remains considerably lower when compared to the progress
of technology and recurring updating the ongoing process of higher levels of
automation receives periodically such that a person is always like a nomad searching
for a suitable pasture This is true for
firms that are small and medium and trying to make their best efforts for
catching up with larger highly capitalized firms and thereby losing out of the
race due to dearth of capital and demand within their own supply chain. It is
no secret that a sound education and training may go a long way in solving some
of the problems resulting out of low level of skills by workers, yet this takes
time and may not match with the steady process of value addition through
continuous process of automation.
The only way that a government may govern is by controlling the
stages of these pyramids at the bottom levels with extraneous and intrinsic
interventions aiming at raising employment than simply reining in technologies
and the process of automation. This will ensure better aggregate demand in the
economy and in turn reducing the volatility of economic cycles. This would also
mean that on the higher levels of automation even the large firms would
experience the heat and subdued demand from the general populace as well as
small and medium investors rendering the automation itself as
self-destructive.
Although newly emerging supply chains may provide some respite yet
they may not prove to be enough to absorb the displaced unemployed. This is the
Curse of Value Concentration and it affects the business cycle too and makes it
too volatile. In fact, the cycle would resemble something like a series of
continuous “W’s crisscrossing on the narrow parallel lines on the graph. This
means for every few weeks of robustness shown there will be a few quick weeks
of fall followed again by some quick temporary sort of recovery followed again
by a sudden fall. This is due to improper off take of demand for goods and
services in an economy.
At stages ‘x’, ‘y’ and ‘z’ things would go worse if all or almost all
the pyramids in different supply chains attain that stage with full automation
and exemplary values.
Extraneous and Intrinsic Interventions
It must be understood that to check the proliferation of the
automation process governments may not be able to intervene substantially and
thoroughly as one would like to imagine. It is in fact quite impossible for
countries to stop the R & D centers and put a bar on human curiosity. Again,
nations may differ and those agreeing may still secretly carry out automation
for getting that highly enviable comparative advantage for their economy. It is
to be noted that technological inventions and technological flow into firms
rather than being halted can be very well channeled based on sound extraneous
and intrinsic interventions. This is where the supremacy of human intelligence
is displayed versus that of the machines. The basic understanding and the need
for a stable platform for a positive social order comes out of the
understanding that the economy runs for the human beings and by the human
beings and along with other human beings. A company and labor are not separate
entities, but their merging is essential for a just society. Hence, regulatory
authorities and the government must make it mandatory to enact laws, rules and
regulations so that a just social order is achieved and which in turn would
instill growth through the purchasing capacities of a larger spectrum of
employees and small and medium businesses. It is no secret in the present times
that the small and medium businesses are more labor intensive than larger ones.
It also stands to reason that when there are sound and leak-proof
policy frameworks in place then over a period of time newer supply chains would
emerge to semi-automate or provide specific tools for the industries in other
supply chains that have reached or are in the process of reaching the ‘d’ or
‘e’ stage of the above pyramid. This would ensure more jobs for the people and
better opportunities as well as bring about increase in purchasing capacity of
the employees for buying consumer products and services and for smaller
industries the required cost effective tools for increasing economies of scale.
This would entail the industries at stages ‘d’ or ‘e’ to remain profitable and
sustainable and needn’t exit due to lack of capital funding by forcing them to
compete with larger industries in their particular supply chain.
Extraneous Interventions
The extraneous interventions by the regulatory authorities or the
government by the process of law would be to provide a platform for the
distressed or the unemployed outside the existing supply chains of an economy.
This would mean that the government would make budgetary provisions for giving
jobs to the unemployed or semi-employed directly. In India we have the Mahatma
Gandhi National Rural Employment Guarantee Scheme (M.G.N.R.E.G.S). This is an
excellent way to tackle the rural unemployment that come in the wake of
drought, untimely monsoon, Tsunami, floods, earthquakes, crop failures, pest
attacks and other calamities.
Similarly, a country may also provide a welfare fund allotted for
those that are unemployed in the urban areas for a specific period of time. The
framework of these laws may be carried out by keeping in mind the fiscal
deficit of a country. In similar way the government may interfere directly in
certain areas like self employed, small or medium industries and provide incentives
and restructure taxes in such a way that they may remain profitable and employ
more people in the process.
The pros and cons of extraneous interventions are as below.
Pros
·
There is a direct
mechanism for intervention by the government or governing bodies to provide
relief to a section of the affected unemployed populace
·
There is a minimum
basic pay for the efforts of the employees till such time they find work in
other supply chains.
·
Employees are
socially accepted and they have an aspiration for living a good life sooner or
later.
·
The small and
medium industries stand a better chance of remaining profitable and sustainable
without the fear of being obliterated from the scene by large industries with
high level automation and obstructionist capital formation by larger
industries.
·
Capital formation
and worthiness for institutional finance are much easier and readily offered to
them as the rule of law is a guarantee of business success and sustainability.
Some industries may be given special incentives like tax rebates. Some areas which are labor intensive can be given structural support by the government. Here, banks may lend with reduced risks too.
·
Supply chains are
not narrowed for the benefit of a few large highly automated industries, but
broadly provided for generating more demand for consumer goods and services as
well as for capital products as on a broad footing the populace have more money
at their disposal to spend
·
The GDP will
increase sustainably and there will be no more volatile short economic cycle
which is actually a bane for policy makers.
Cons
·
It may have a
direct impact on fiscal deficit if the amount allocated is more than the
country can afford after due budgetary allocation for other important
investment proposals and welfare measures. It must be targeted for those that
are eligible for it and not every one of the population
·
Some leakages may
occur yet these are to be tackled firmly and with proper digitalization of the
process of payment and allotment of jobs
·
The jobs are to be
economically viable if not in the present then at least in the future. Allotted
money shouldn’t be used for the sake of employment.
·
Tasks performed by
the labor should be economically viable as in the short time or future
government may be able to levy taxes and other duties to recover the money
spend in order to shorten the fiscal deficit.
Intrinsic interventions
These are interventions by the regulatory authorities or the
government directly through and into the supply chain activities. Here, laws
are framed so that there is lesser chance of smaller and medium industries to
exit from the scene or made to do so easily by competitive forces exerted by
larger industries. By and large financial institutions too become flexible in
lending to the series of such steadied firms that law has made provisions for.
Pros
·
Rules and
regulations are laid down so that a section of the products are mandatorily purchased
by the larger firms from smaller firms existing in the same or other supply
chains irrespective of high automation potentials.
·
Broad based
lending by financial institutions are made possible and risks spread over a
broader area
·
Different rates of
taxations on firms within the same supply chain below the stages of ‘e’ or ‘d’
levels. On higher stages firms are taxed more due to runaway automation process
detrimental to the interest of the smaller firms as well as employees of the
society. This means that larger firms would attract more taxes than smaller
firm depending upon the stage they are.
·
Industrial zones
may be segregated from real estate and land ownership as a firm may be
purchased or sold by one or more manufacturing firms strictly and not by or to an
outsider with interest in land value only. In other words, an industrial zone
land may not be purchased by an old age home shelter or a beauty saloon, but
must be available only for manufacturing alone.
·
Shops and
establishments must be only sold for the very purpose of running shops and
establishment and not for residential purposes. Capping of such wanton or free
transfers for any other purpose is in the best interest of the businesses, employees
and society on the whole and there must be stringent laws for these. Where
empty shops remain it will serve as good bargain purchase for yet another set
of new investors without hiking of rentals or property prices abnormally
·
The supply chain
has more employment potential and generates its own demand to feed the products
and services produced by larger industries in the same supply chain. In other
words, demand generation both for consumer products and industrial products
would be high and steady.
·
There will be much
less volatility in economic cycles
·
There will be no
direct effect on the fiscal side unlike the extraneous interventions as taxes and
duties are directly imposed on all units and with broader improvement the
return by way of taxes would also be high. In fact, this wouldn’t unbalance the
fiscal picture.
Cons
·
There may be stiff
opposition from larger firms in a supply chain as they would like to maximize
their profits to the maximum with least human labor as possible.
·
Some leakages may
still happen and the law should be enforced strictly without any loopholes
·
Some spaces or
supply chains like e-commerce would need a separate definition and rules so as
to get the maximum benefit to the society and the public for full employment
potential
·
Value concentration
may at best remain in areas of health care only
Hence, while formulating policy frameworks for better job
opportunities in supply chains the government may act with prudence and better
understanding of different types of supply chains and their potential to absorb
manpower and thereby increase aggregate demand for products and services. A
comprehensive data may be collected for different types of supply chains in an
economy so as to make things easier for governance.
