Are ATMs Stealing Jobs? Technology and Unemployment

Let us cut to the chase: no, ATMs are not stealing jobs. BUT (dont jump to the gossip sites just yet) there is a skill bias in the economy and it favors technologically proficient workers. Education matters, productivity matters and effectiveness matters.

So, part of the unemployment problem is that there are lots of workers all over the world who can do what Americans and Europeans can - skilled or unskilled - and who will do it for less. Older workers who are expensive and workers of any age whose skills are not up to date are going to be hurt as a result.

The Luddites were not quite right in the 1700s: technology would not destroy their livelihoods forever. Same is true today. But the technology adoption cycle can take decades and their are casualties along the way. Next time you pull cash out of an AMT dont kick the poor machine. Just look at it as a reminder that there is always more to learn. JL

The Economist comments:

IN an interview on NBC News, Barack Obama used the example of ubiquitous automatic teller machines to illustrate how technological progress is allegedly impeding job creation: "There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.

This got right-of-center bloggers linking gleefully to classic debunkings of the hoary fallacy that machines create unemployment, and started a minor Twitter meme mocking the idea that ATMs are taking our jobs. ATMs have not in fact displaced bank tellers. According to this 2004 Charles Fishman article in Fast Company: "At the dawn of the self-service banking age in 1985, for example, the United States had 60,000 automated teller machines and 485,000 bank tellers. More recently, the Bureau of Labour Statistics reports there were 600,500 bank tellers in 2008, and the BLS projects this number will grow to 638,000 by 2018.
Mr Obama clearly picked a poor example. It's worth noting that the advent of the ATM also created demand for ATM maintenance workers. According to the BLS, there were 152,900 "computer, automated teller, and office machine repairers" in 2008. I'm not sure how many of these are in the ATM repair biz, but the BLS expects a mild decline in this line of work due to increasingly reliable machines and declining replacement costs. Evidently, the relationship between technological advance and employment is complicated.

In a recent post, Karl Smith clearly encapsulates the basic economic logic of the relationship between machines and workers:

Typically we think of [capital and labour] as complements.
Lets take some obvious examples. Suppose to create welded metal I need both a welder and welding torch. The welding torch goes down in price. That means that its actually cheaper to create each piece of welded metal. This will allow me as a factory owner to either lower my price, [or] sell more welded metal while maintaining my profit margin.

However, to do this I will need more welders. So a fall in the price of welding torches, increases the demand for welders. On the other hand suppose that I am an airline considering whether to have more booking agents or whether to invest in more sophisticated booking software. Specialized software can run well into the multi-millions but if it gets just cheap enough it might actually be a better deal than new agents.

So the falling price of capital alone isn’t enough. It depends on how the capital interacts with the workers. Moreover, it would take some fancy math to show this, but until capital can do everything labor can do – that is until the singularity – some types of jobs must be complements to capital.

Those jobs will always be in more demand as capital get cheaper. The question is how much skill you need to do those jobs. This is the whole issue of skill-biased technological change.

I think it's plausible that as demand began to pick up after the recession hit bottom, many firms chose to invest in updated technology that further increased the productivity of skilled workers they did not dismiss rather than re-hiring workers whose skills are less augmented by better tech. I wouldn't blame ATMs on our jobless recovery, but surely the general skill-bias of technological change is an important part of the issue. I suspect Tyler Cowen may be right that the recession created an occasion for firms to shed "zero-marginal-product workers". In that case, the ranks of the unemployed are filled with wannabe workers whose labour is at present worth less to employers than the cost of employing them. This puts Mr Obama in a politically perilous position. We can expect rising aggregate demand to make it pay for some firms to once again employ some significant number of relatively low-productivity workers, but we probably can't reasonably expect the unemployment rate to return to its pre-recession level, at least not in the absence of politically unlikely employment subsidies or government make-work schemes. Given the current creeping pace of growth, the unemployment rate may not improve very much before next fall, which would bode ill for incumbents. Mr Obama can blame it on the machines and deny Republican charges that his administration made the recession worse. But jobless voters and the voters that love them tend to blame the guy in office, no matter who's really to blame.