Mimsy Were the Borogoves

Editorials: Where I rant to the wall about politics. And sometimes the wall rants back.

Is job loss to automation inevitable?

Jerry Stratton, January 4, 2017

Trump has made a lot of promises. One of the easiest to deliver on is more good jobs in the United States.

But Trump’s policies are at odds with his promises. A tax on companies who leave the United States reduces the benefit of creating a company in the United States. Reducing the benefit of creating companies in the United States will reduce the number of jobs created in the United States, not increase them. New companies that would once have chosen to start up inside the United States will instead choose to start up outside the United States, in order to preserve their future options.

And if his threat to increase tariffs is more than just a bargaining tool, it will also reduce jobs: increasing the price that companies pay to buy materials in the United States increases the cost of doing business in the United States, especially compared to the rest of the world. Tariffs on imported supplies make United States companies less competitive and more likely to go out of business.

If we want to increase jobs in the United States, we must make it more beneficial to create jobs in the United States. We must reduce the cost of doing business in the United States by simplifying the regulatory mess, and by not adding artificial costs to the costs of doing business in the United States.

If you listen to establishment figures on both sides of the aisle, it sounds like we’re going to have to be content with more unemployment and stagnant growth forever. But this is wrong. We only have to be content with that if we keep the government’s thumb on the scale holding back new businesses and new growth.

The notion that we’re going to lose jobs because of automation and cheaper labor overseas is bullshit. That’s all it is. Just bullshit. It’s always going to be easier to hire and manage employees locally than to hire and manage them on other continents.

Unless government regulations make it more difficult.

That’s our problem right now. The federal government, and many states, have made it so expensive to hire new people, and so difficult to innovate quickly enough to stay in business, that companies find it easier to manage overseas employees in overseas factories that can be retooled quickly enough to stay in business. The idea that company executives want to have to deal with time zones and 24-hour plane rides and managing people through interpreters, and that job loss to overseas is therefore somehow inevitable, is insane. Job loss like this is only happening because federal and state regulations have become insane.

Job loss to automation is similarly non-inevitable. Normally, automation is a slow process, allowing employees to transition to different kinds of work in small numbers as the automating process both removes jobs of one kind and creates jobs—usually better-paying and easier—of other kinds. As long as government regulations don’t drastically increase the cost of employees over the cost of automation, forcing companies to automate before they otherwise would have.

We have a global market; every company is competing not just against other American companies but against companies outside of America. Every United States law that requires per-employee paperwork increases the cost of hiring in the United States. Every law that increases the cost of hiring employees in the United States, makes it necessary, if a company wants to stay in business, to either automate those jobs away before they otherwise would be, or to hire outside the United States even though it’s easier to work with employees locally. When the added management costs of hiring overseas is less than the management costs of hiring locally, companies that want to stay in business in this global market must hire overseas. Those that don’t will still end up letting their employees go when the companies lose business to more competitive overseas businesses.

Every United States law that kicks in at a specific number of employees or that adds to the cost of each individual worker is a weight on American businesses that keeps them from expanding and hiring more American workers.

Especially Americans who most need jobs. It’s not the regulators and the lawmakers who suffer.

The solutions are simple, but the establishment class won’t like them. We must reduce the barriers to starting businesses by reducing the number of lawyers, tax experts, and other non-core experts that businesses need to hire. That means making taxes so simple that experts are not required to calculate them. That means getting rid of the crazy idea that car companies and grocery stores need to be experts in health insurance and stand between employees and health care. It means getting rid of the maze of regulations that make it difficult for an American to open a new business when an American has a great new idea.

It means letting American businesses focus on their core business, instead of becoming de facto health care organizations or pension plans with another business tacked on or tax collectors.

Human beings can reprogram themselves faster than machines, but current regulations practically make it illegal for employers to take advantage of this benefit of hiring humans. Government regulations prefer to treat employees like cogs. But real cogs will always be better at being cogs than humans will. Government regulations speed up automation because they redefine work to be something that machines do better.

In response to The Bureaucracy Event Horizon: Government bureaucracy is the ultimate broken window.

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