Monday, January 9, 2012

The Cost of Labor SHOULD be High

Conservative politicians and commentators repeatedly assert that employers need to reduce “labor costs” to stay competitive(Examples here and here).  They assert that lower wages will be better for the country by creating more jobs and cheaper products.  These assertions do not stand-up well against 30 seconds of critical thinking.  Putting aside the morality of lowering wages, The cost of human labor should be high for very practical reasons.  High labor costs is what drives employers and customers to find new ways to automate everyday jobs.

Despite the current depression we are in, the manufacturing capability of U.S. factories is greater than it’s ever been.  This may go against conventional wisdom that says manufacturing is dying in the country.  That is simply not true, it just quit hiring as many people.  Of the people who still work in U.S. factories, their productivity is so great that even with fewer workers, they are able to produce more than their counterparts of 50 years ago.  By automating factories, employers can produce more with fewer people and the result is cheaper prices.  In a perfect economy, those no longer needed to work in a factory would get different jobs and produce something else and we’d all end up with more overall wealth. Now this is progress that liberals should cheer(Of course, in today’s economy, those employees have no where else to go. The reasons of which are far beyond the scope of this post)

Employers automated all those factory jobs because it was cheaper than continuing to pay workers for the same work.  If their cost of labor had been low, as conservatives want it to be, that automation would never have occurred and auto workers would be putting together Ford cars the same way they assembled Model Ts.  Conservative policies of lower wages holds society back.

You might think, “Sure, that works in factories, but you can’t automate services or retail jobs– their wages must stay low for my benefit.”  This is not true, automation in retail has already occurred and will continue to occur.  Think of how much time is saved by bar code scanners.  How much time is saved by a clerk no longer needing to manually type in the price of a product.  Add to that automatic inventory tracking.  Also Security tags that sound alarms when leaving a store reduces the cost of having to hire an army of security guards to prevent shop lifting.  If the cost of labor was low to hire these people, employers would never have been interested in investing in these things.  And These are just the things that have already been automated.  Heaven only knows what else might be automated if the cost of labor was higher.  Maybe automatic baggers at the grocery store.  Maybe carts that restock the shelves.

With higher labor costs even services that seem impossible to automate might be ripe for an enterprising entrepreneur.  It is not unheard of for services to be automated.  The number of household with maids went down considerably with the invention of things like the washing machine and dishwasher.  If the cost of hiring a maid was low, these inventions would not have caught on because it was still cheaper to just hire someone to do it.  Just like in retail, there are still several services that could be automated.  For instance, there are already robotic lawn mowers.  How long will it be before owners of golf courses or other owners of other large tracts replace yard workers with automatic mowers and leaf baggers.  The answer, of course, is as soon as the machine costs less than labor.  If the cost of labor was higher, this automation would happen sooner.  If we continue to follow conservative policies of low wages, progress like that will never occur.

I don’t mean to belittle or down play the suffering caused by people who have their jobs replaced by a machine.  However, I think that calls for a much stronger social safety net, and does not justify holding back progress.  Technology and putting it to use by investing in new automation is what helps increase overall wealth in the economy.  Conservative policies of low wages are not only heartless, but hold back the economy and our country from greatness.
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