When younger, my concept of automation was based upon Robby the Robot, the butler in the great 1956 sci-fi movie Forbidden Planet. One could toss ingredients into his hopper and out would come an incredibly slinky dress for Ann Francis, or a gourmet meal for twelve. Automation nearly 80 years later still hasn’t gotten that far, but it is trying.
My most recent substack post covered what one might call drone mining equipment, machinery to be used in underground mines, operated from afar by a trained “miner” sitting in an office somewhere, who can be someone of any gender, physique, or strength as long as they can handle the controls on their computer.
The equipment will be used in a new zinc/manganese mine in Arizona set to open in a few years, and will help solve a big problem, that there is currently a shortage of skilled underground miners which will be getting worse. Given how unpleasant the working conditions are a mile or more underground, few people are lining up to take jobs when many older miners retire in the near future. We need the output of those mines, and if this equipment works as promised, this could be the future of underground mining.
Innovation in machinery has been in the news in a different industry, with articles mentioning a big increase in automation developing in fast food restaurants and other retail establishments, especially in California in response to the recent large increase in the minimum wage for fast food workers. Ordering kiosks have been spreading fast everywhere for some years, but now restaurants are automating cooking and delivery. Given that few humans can flip burgers fast enough to justify $20/hour that California requires that they be paid, there is a major push by every large chain to develop ways to eliminate humans in the operation as much as possible.
This raises an interesting question. We have two examples of automation, one in mining, one in restaurants. My question to readers is, are they both effectively the same thing? If they are different in some fundamental way, what might that be?
What these two automation efforts have in common is that they are both designed to reduce labor costs. Doing so benefits the businesses that employ the automation, and ultimately their customers by allowing the businesses to keep costs, and prices down.
However from the point of view of the economy and our society, I believe they are fundamentally different.
Automation in mining solves a genuine problem in the real world, a growing shortage of people both qualified and wanting to be underground miners. Automation in restaurants, however, solves a problem that does not exist naturally, and only exists because the government intentionally created it.
There is no shortage whatsoever of people willing to take jobs in fast food, where the pay might be low, but the benefits are multiple. These restaurants will normally hire entry level people who need some learning and experience in business on their resumes to get better jobs. A McDonald’s might look like a business, but it is equally a school for many of its employees in how to work at a job.
One of the laws of economics is that free market prices, including wages, are not random numbers that can be altered without causing problems. That is because market prices are reports from reality on the point where supply and demand for something equal out. They are a map of the real world, and businesses and consumers use that map to make decisions to help reach their goals. If the government imposes a price different than the market price, then that is a map of some place other than the real world. People using a false map get lost and harmed.
If there were a shortage of unskilled, entry level workers in California such that the going market wage rate for the newly hired and as yet unproductive employees were $20/hour, then that would tell businesses not to organize themselves in a way that requires lots of unskilled labor to produce their output. The message would be, if you want to make a profit, then hire as few unskilled workers as possible, and automate as much as possible so you don’t need the unskilled.
But that isn’t the reality. It is magical thinking on the part of the state that its entry level workers can produce much more value than they actually do.
One of the iron laws of economics based on human nature is that nobody will spend more for something than they think it is worth to them. If you think that a certain shirt in a store is only worth $30 to you, you won’t pay $50 for it. If the state requires the price to be $50, it’ll just sit there unsold until it finds someone to whom it is worth more than $50.
Owners and managers of restaurants are human beings, too. If a new employee—perhaps because they were poorly educated in inner city schools, or they are a new immigrant who hasn’t yet learned much English—is not very productive, and can’t do anything that is worth more than $10/hour to the restaurant owner, then the owner will refuse to hire them or lay them off if already hired, if forced to pay $20/hour. The CA government has made it make sense for restaurants to fire employees and automate. Makers of food handling robots, kiosks, and other restaurant automation are doing very well now.
But the “shortage of entry level workers” message that the $20/hour imposed wage transmits is a false one. There are plenty of willing workers at lower wages. They just want a chance to get on the bottom rung of the ladder up, and the government is forcing restaurants to cut off those bottom rungs, condemning those would be gainfully employed to unemployment and membership in the underclass where the only work they can get is illegal.
It is not fair to them, and it isn’t fair to the rest of us in another sense. We don’t have an infinite supply of good designers of automation equipment. These things are difficult to get right. It has been more than sixty years since robots were first introduced in a GM factory, and they still haven’t taken over all the production in most factories, let alone do things in other business contexts.
Why do we want smart designers to work on ways of keeping unskilled people on welfare or in the crime business? Wouldn’t we be better off if they continued to do what free market prices not overruled by politicians would suggest they do, which is help automate genuinely expensive, dangerous processes, like underground mining, and not eliminate lower paid jobs many people are happy to take?
If you have read my book or my substack posts, you know that one of my pet concepts is “pyramid workers,” referring to the pyramid construction projects in ancient Egypt that demanded so many resources that living standards were likely very low, despite the country’s great wealth. The US and developed countries have living standards far below what they should be, and face steady inflation that especially harms lower income people.
One cause for this underperformance is the cost of paying for our massive, parasitic governments. But it isn’t as if the private sector can go its merry way making us rich while the government does its best to siphon away as much as possible. Much of the private sector consists of businesses either directly doing the government’s bidding, or working to solve problems that don’t really exist in nature, but exist only because the government willed them into existence.
Yes, fast food restaurants who automate in response to excessive minimum wages have a better chance to survive, so one can’t criticize a robot designer who comes up with products that will help those restaurants cope. But if the minimum wage were eliminated, there wouldn’t need to be restaurant automation. Instead, those entry level would-be workers who are now condemned to unemployment, welfare, and crime would become the gainful members of society that they want to be. The designers would then be available to solve real problems, not ones needlessly created by the government.
“There is no shortage whatsoever of people willing to take jobs in fast food, where the pay might be low, but the benefits are multiple.”
Rick, this may be true for densely populated areas but in many places, like the Cape, there are no available workers. The reasons are many, but the impact is real. There are many businesses that will not open for business this summer.
Maybe not a bad thing.