Multimodal Essay

Alistair Plotnick

Mike Lehman

English 1102

10 February 2023

When outsourcing labor to automation does not become profitable

Since its creation in the mid 1930s, automation has been a business owner’s best way to cut labor costs, usually human, and in return to buy long term equipment that can replace their job instead. At the beginning, it was simple machines that could perform simple tasks such as replacing a human’s task on an assembly line to today transforming computers that have lines of code to do tasks such as write memos or review resumes of job applicants. Although all these innovations are great, there is a cost for all of them and that is people’s jobs. The argument there is that when one industry automates, the labor in the job loss can lead to better time spent such as education or a new emerging industry. But it gets to a point where too much is automated to where the economic flow of a society stops. It occurs when too much is automated to where not enough people have a job to be able to purchase goods and services that these automated industries are producing because of their loss of jobs. This is the point where automation does not become profitable anymore.

First, in order to gauge the current scope of automation today, its origins and trends are necessary to understand where it is now. Automation originally started with the car industry specifically with a man named D.S Harder in which it really took off “in 1946 when established the automation department when he was vice president of the Ford Motor Company” (Hitomi 122). Just from this simple automation, the automotive industry slashed its production costs and profits soar, a true capitalist’s dream. At the time, automobiles were considered luxury items and getting rid of the labor did not decrease from the market they were selling towards. In this example the automation is not doing much harm as it is not decreasing its market. But the world of automation has developed milestones since then. Today an automation system looks more something like: 

(Hitomi 128). With lots of intricate processes and minor systems. Automation has become much more complex than its roots.

Depicted below is an image of what people believe what modern day automation may look like. Now, although an extreme interpretation, the reality of the ratio of human capital to automation can hold somewhat in specific industries today such as the automobile industry. The idea of robots working on computers of course is not realistic as the robots themselves are the computers, but the thought that code can create code itself is one.

Counter arguments that have arisen to this notion that an excess of jobs is lost to automation make the claim that new jobs are created in turn of that. That automation just doesn’t create jobs, it transforms them. The model of thinking of how when one door closes, another one opens, and how automation has allowed new occupations to be created as we let technology take over old roles and allow new roles for humans to be developed in the workplace. Although practical in idea, this cycle comes to an end when the market for the product decreases significantly because its base is now unemployed. As stated in a Harvard business article, “technology can and will fail. And when it does, firms will confront the prospect of making nice with the very workers who — during automation’s better days — were short changed. But adopting bots can push firms further into the red. Technological singularity — the idea that machines know all, and can fix calls — remains, despite what we’re told, a long, long way away” (Harvard). These warning signs that can cause issues when automating should warn businesses to regulate the amount of automation done and to some degree an amount of human labor. 

The proposed idea is basic level labor is essential for having an economy which supports itself. If too much of labor becomes automated, there will be no need to buy the goods and services that automation provides because the working labor class will not be able to afford it anymore due to their income being stopped from loss of their job. When this point happens, society will be forced to move back into the way it was because profit will have had to start decreasing. But, with how many people there are in the world making the market size for any product large, this will not be something that happens soon as for something this drastic to occur would take a very long time to show actual negative net profit. Here is an illustration of what this process would look like.

For an example, let’s say that there is a small town in Nebraska in which 75% percent of the market is for the hometown cookie brand. The cookie factory is all within the small town and it employs a large portion of the citizens there as it helps foster the economy. But, one day the factory decides to automate the majority of its manufacturing process and in turn lays off over half of its workers. The prior employees are now without a job and a steady flow of income, meaning they have to cut their spending on certain luxury goods such as the cookies. The size of the market shrinks incredibly to a point where the company is just able to break even and generate no profit. So, as a response they decide to scrap the automation and rehire the workers in order to stimulate the economic flow again. Although a niche example, this process can be thought of on a larger scale that has similar market types that are small or to a certain customer, and if a company decides to automate and get rid of its labor that also is their customers it can in turn have a negative effect. 

Arguments that industries need more robots and automation, and that we do not have enough. Ezra Klein, editor-at-large and cofounder of Vox, makes the argument here about the opposite of the automation apocalypse. He believes that there are still more ways to maximize efficiency with automation. Yet mentions in the video how it is not impossible that automation may take over, but currently he says it is not, but provides an interesting perspective about how we value jobs. 

https://www.youtube.com/watch?v=F4ak6GWD79Q.

(The video would not embed, but if you click the link it should open in a new tab)

A visualization for Klein’s argument looks like this:

Klein explains that as time goes on, occupations with lower social capital will decrease due to automation but jobs of higher social capital such as lawyers and management consultants will stay relevant and not automate. But Klein does not address what will happen once lower social capital jobs have disappeared over time, how or if sustainable if everyone acquires a high social capital job and does not realize that society needs people in both to function. 

When evaluating the rate in which the world automates and if it will ever become too much, it is a case-by-case basis. On a macroeconomic scale for a firm, it is not as probable, but on a small business with a niche market base, certainly so. If current trends concerning automation continue, a lack of jobs will create a lack of income, which will lead to the loss of markets, which will lead to the de-stimulation of the economy. 

Works Cited

bigthink. “Automation Apocalypse: Too Many Robots? More like Not Enough. | Ezra Klein | Big 

Think.” YouTube, YouTube, 10 Feb. 2020, https://www.youtube.com/watch?v=F4ak6GWD79Q. 

Images, Getty. “Automation Makes Us Dumb.” The Wall Street Journal, Dow Jones & Company, 

23 Nov. 2014, https://www.wsj.com/articles/automation-makes-us-dumb-1416589342. 

Harvard “Automation Doesn’t Just Create or Destroy Jobs – It Transforms Them.” Harvard Business 

Review, 2 Nov. 2021, https://hbr.org/2021/11/automation-doesnt-just-create-or-destroy-jobs-it-

transforms-them. 

Hitomi, Katsundo. “Automation- Its Concept and a Short History.” Science Direct, 14 May         

2002, https://www.sciencedirect.com/science/article/pii/0166497294901015.