This article was first published at the McAlvany Intelligence Advisor on Friday, September 19, 2014:

Rage Against the Machine

Rage Against the Machine (Photo credit: Wikipedia)

Jesus Fernandez got nervous when his company installed 21 new Universal Robots that were supposed to make his life easier and safer by helping him move parts in and out of its metal-cutting machines. At $20,000 apiece, the robots threatened to replace him altogether, or so he thought: “At first, I had doubts the robots could do what I did, moving the parts around, handling the parts.” But he timed himself against one of them and concluded: “I’m fast, but the robots are faster.” Fernandez accepted the new and now operates three of the so-called collaborative machines, reducing labor costs for his company while simultaneously increasing his take-home pay.

Fernandez’s boss, Gregg Panek, president of Panek Precision, Inc., a machine shop in Northbrook, Illinois, said one of the reasons for the improved efficiency is “because robots work overnight and don’t take lunch breaks and they just keep going.” He added: “Having the robots has allowed us to move our existing workers into more useful tasks. We’ll always need people.”

In 1779, the first Luddite, an unschooled youth named Ned Ludd, smashed two stocking frames in an English textile company, believing that the labor-saving inventions were going to put him out of work. The Compact Oxford English Dictionary now defines the term “Luddite” as “describing those opposed to, or slow to adopt or incorporate into their lifestyle, industrialization, automation, computerization, or new technologies in general.”

Today, the term often applies to Progressives who, like President Obama, oppose self-operated elevators and ATM machines because they put people out of work. They may more properly and accurately be called “regressives,” wanting in essence to put millions of Americans back on the farm. At the turn of the 20th century, agriculture employed more than 70% of American workers. Today, thanks to vast improvements in machinery and technology, that industry employs less than 2% while not only feeding America but much of the world as well.

In an ironic juxtaposition of and ideology, Applebee’s announced the introduction of table tablets to replace its servers the day before Obama announced his drive to raise the minimum wage. The table tablets, made by Presto, were already in place at Chili’s restaurants around the country. National Review’s Annie Lowery explained the iron law of economics regarding Presto this way:

Each console goes for $100 per month. If a restaurant serves meals eight hours a day, seven days week, that works out to $.42 per hour per table – making the Presto cheaper than even the very cheapest waiter.

Moreover, no manager needs to train it, replace it if it quits, or offer it sick days. And it doesn’t forget to take off the cheese, walk off for 20 minutes, or accidentally offend with small talk, either.

As the minimum raises the cost of labor, the incentive to replace that labor with cheap table tablets and now “collaborative machines” in small manufacturing companies has become almost irresistible.

There’s a large jewelry manufacturing company in Lafayette, Louisiana, named Stuller, Incorporated. It invested in a collaborative machine that the company workers immediately named Fred. Fred looks like a tall water cooler on wheels, and roams throughout the company’s enormous 600,000 square foot plant delivering tools to the company’s workers and then putting them away when they’re done. Fred is working out so well that Stuller plans to invest in a second robot for its stone cutting division.

There’s a toy maker in Hatfield, Pennsylvania, that bought a robot from Rethink Robotics, which company workers quickly named Baxter. Baxter has been programmed to pick up and replace parts and even do some simple assembly of them. It not only makes the workers more efficient, it makes the company more competitive, according to Michael Araten, the president of K’NEX Brands: “When something comes off the line and has to be handled, it becomes labor intensive and that makes us not globally competitive. So it’s important to make that automated.”

Robots have been used in large manufacturing facilities for years, putting together automobiles, refrigerators, and other hard goods. But with the entry of low-cost robots, the economy will be enjoying another iron law of economics: when the price of something comes down, more of it will be demanded. Put another way: when the price of something comes down, paychecks are stretched further and last longer, which translates into a higher standard of living. While it’s true that American agriculture displaced, over time, most of its workers, it would be hard to find a single one of those workers who would now like to go back onto the farm and work 16 hour days for yesterday’s standard of living. The robot revolution is not only continuing to improve Americans’ lifestyles, but also spoiling the Luddites’ contentions that such improvements are counterproductive. It’s a joy to watch.

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Sources:

The Wall Street Journal: Robots Work Their Way Into Small Factories

The National Review: The Minimum Wage and the Rise of the Machines   The robot future is coming

History of Luddites

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