October 28, 2014

McDonald's makes further moves towards automated labor

McDonald’s has announced moves to automate its meal-ordering system to reduce worker costs.

The measure is widely seen as a response to the company’s disappointing quarterly results, within the wider context of the debate over raising the US minimum wage.

In the words of one Wall Street Journal columnist: “Forcing businesses to pay people out of proportion to the profits they generate will provide those businesses with a greater incentive to replace employees with machines.”

There is an increasing awareness that a wide variety of roles stand to be automated in the coming decades. A paper published last year by the University of Oxford stated that 47% of jobs in the USA are at high risk from automation. Job areas such as sales, service, and office support, as well as many traditionally middle class professions, will be at risk.

The Guardian has also reported on the likely effects of advances in artificial intelligence, commenting that “almost nothing is impervious to automation.”

Elsewhere, The Economist warned that “the benefits of technological progress are unevenly distributed, especially in the early stages of each new wave, and it is up to governments to spread them.” Indeed, in the industrial revolution, it took decades for the majority of workers whose jobs had been displaced by machinery to find employment in other industries.

Daniel S. Hamermesh discusses whether labor costs decrease companies’ demand for labor. He concludes that higher labor costs, stemming from government measures such as higher minimum wages or more regulation, can either reduce worker hours or total employment.

David Neumark has come to the same conclusion, with specific reference to minimum wage levels. This issue is particularly acute in the face of probable automation for 47% of occupations.

In an upcoming IZA World of Labor paper, Richard B. Freeman tackles the issues surrounding the future of labor. He writes that, as artificial intelligence and machinery become increasingly more productive than human labor, capital, not labor, will become the bedrock of the economy.

Freeman warns that the owners of that robot capital may therefore reduce the jobless majority of workers to a serf class unless government redistributes the proceeds of capital, or humans own shares in it. Freeman promotes the latter option over the former.

Read more here.

Related articles:
Do labor costs affect companies’ demand for labor? by Daniel S. Hamermesh
Employment effects of minimum wages, by David Neumark