The Economics of Automation

Source Last week I was in a banking hall for the first time in at least a year, and my absence from banking halls had very little to do with reduced transactions and more to do with technological advancements in the banking industry.

Like most other industries, technological advancements have greatly influenced the banking industries and my local banking hall that would usually be packed to the rafters with tellers overworked just had a handful of people in it mainly speaking to customer service attendants in a bid to fix one medium of internet banking or another.

It would seem like the automation of industries is making chores we used to take forever to perform become seamless and a lot less difficult.

So is it in our best interest to push towards complete automation?

There have been countless worries from economists and people who seem to be concerned about economics that new technologies and automation as a whole would make many jobs obsolete leading to workers losing their source of livelihood and driving down the cost of wages of workers.

Their concerns are credible as robots and AIs are poised to take over so many jobs humans are currently doing and seeing that the cost of running these machines in the long run, is cheaper than it is to keep humans on the job, more and more industries would rely more on these technological advancements to perform tasks.

Jobs like the painting of cars, assembly of machine parts and even spreadsheet manipulations are presently done by computers and robots. In the long run, only highly educated workers adept at programming or installation of these robots would remain valuable, others who can be replaced would most likely lose their jobs or accept to work at very low salaries.

In the first Information Technology (IT) revolution, jobs that required quick judgement or initiative stayed put while those that involved routine repetitive actions were the ones shown the door. Although they were able to find a level playing ground in the long run that showed employment rates soar up until the pandemic, it still had an effect on the employment levels of workers.

This time seems a bit different as Artificial Intelligence means that machines can learn as they go on and be able to handle non-routine tasks like proofreading. bookkeeping and even as doctors as AIs can now be tasked with performing surgeries.

The term Luddite is used broadly as a term to describe one who is opposed to technological change especially in the 19th century. It would seem like their scares that technology would make everyone jobless were not completely true because in the long run, the standard of living of humans has greatly improved and unemployment in technologically advanced countries are still minimal.

However, there is no hope that the employability of humans would survive another IT revolution as we do not what will happen just yet, but the impact since the '90s of technological advancement and automation has been largely negative.

This is because large cooperations now decide to automate when clearly in a particular regard humans seem to be more productive than machines.

This is known as excessive automation that tends to reduce the GDP rather than contribute to it. One reason is that employers have to pay payroll taxes on labour but not on robots. This means they get a tax rebate for investments in robots since it is easier to claim depreciation on them and greatly reduce taxes paid at the end of the fiscal year.

This tax incentive gives employers an incentive to automate even when it will be cheaper and more productive to keep workers performing the given task.

Although there are still jobs that machines can't replace like writers of original content, lawyers, scientists et al. although they have made many aspects of their routine chores a lot more easier.

This makes us understand that the purpose of technological advancements is to make the tasks in our lives easier and not some sort of witchhunt aimed at seeing workers unemployed.

In conclusion, a balance must be achieved where the chores of the everyday man are reduced and made to be done at great accuracies without completely making his source of living become obsolete.

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