The upside — and down — of letting machines replace employees
DRUG STORE behemoth
Some bemoan the lack of service, resentful of the new work they must do — including bagging! — and longing for the helpfulness of a knowledgeable clerk. For some smart investors, that suggests new business models — ones that cater to those who crave old-fashioned service — and, indeed, the department store
But for every Nordstrom, there are many more discount stores with minimal service, and the reason is simple: most of us prefer to save money. Service doesn’t come free. Minimum wage requirements, unemployment insurance, FICA contributions, health care mandates, and the inevitable lawsuits when someone is terminated or disciplined all add up. The machines may be expensive upfront, but over time they are far cheaper — and more accurate and less prone to the human foibles of theft and deceit.
From an economist’s point of view, the new machines represent an economic boon. They are the classic substitution of capital for labor. Productivity — how many people it takes to generate a certain amount of wealth — is a key measure of an economy’s success; with the new machines, for instance, CVS can now run the same store with fewer employees. That creates greater wealth which, in general, should be a good thing.
The downside is that people are losing their jobs. Thus, as ever-more drivers have affixed Fast Lane (soon to be E-Z Pass) tags to their vehicles, the number of toll lanes staffed by collectors has declined, leading to a spate of layoffs. Toll collectors have never been especially beloved (in large part because the position has often been seen as just an easy sinecure for the politically well-connected), but still, these are real people with mortgages and families.
It is a problem that has bedeviled us since the dawn of the industrial age. Just as sewing machines once replaced seamstresses, so too today’s check-in machines replace hotel receptionists. Both circumstances prompt many to wish the machines would simply go away, a hope that brings to mind an old story of a man visiting the former Soviet Union and watching workers dig a trench with shovels.
“Why not use a steam shovel?’’ he asks the foreman.
“If we did, all of these people would be without jobs,’’ comes the answer.
“If it’s jobs you care about,’’ replies the visitor, “then why not give them all spoons?’’
Today’s high-tech machines are, in a sense, no different in kind from steam shovels. They’re all job killers. But just as we would no more expect to see people going back to digging trenches by hand, so too will we someday soon regard check-out machines as an unremarkable fact of everyday life.
The good news is that, over the long run, jobs don’t go away. The worker with the shovel was replaced by a steam shovel operator. The clerks displaced by machines will give rise to jobs repairing those very machines. In theory these are better jobs, requiring less in the way of manual labor, more in the way of brains, and ultimately offering improved working conditions and higher pay.
But the people getting these new jobs are, in all likelihood, not the same as those who are losing the old. The genius of a dynamic and open market such as America’s is “creative destruction’’ — the constant upending of the status quo by new ideas and new technologies. In its absence we’d be far the poorer, an economic laggard like Russia itself. Still, for the 30-year employee of a CVS now finding she is out of work, “creative destruction’’ is just jargon for unemployed.
Tom Keane (email@example.com) writes regularly for the Globe.