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This page contains a single entry by Westley Annis published on October 28, 2011 8:19 PM.

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The Cost of Labor Compared to Materials

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I suppose this is one of those things that has been gnawing at me for a while and it has finally reached some point of manifestation. It may not be completely formed out yet, but it's time to get it down on pen and paper, even if it is electronic.

Even with the economic down turn of the last four years, the wealth of the world is constantly growing larger, but it seems as if the richer the world gets, the less we can afford.

Take a look at some of the old Catholic Churches from around the world. St. Joseph Co-Cathedral in Thibodaux, La., constructed from 1923-1925, is relatively modern, but a church of this grandeur would never be built today. It would be considered too expensive.

If this church could be built not even 100 years ago, with the world richer today then it was 100 years ago, why would a church of style be considered too expensive?

Take a good look at your next car repair bill. I'm willing to bet the cost of the labor will be three to four times the cost of the parts.

In my own field of computer repair, it is getting to the point where sometimes I think it is cheaper to tell a client to buy a new PC rather than have me do any type of repair on it (what deters me, besides sabotaging my own livelihood, is knowing the amount of time that it takes to set up a new PC is not brief either).

All of this is a prelude to an interview with Erik Brynjolfsson and Andrew McAfee about their new book, Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy. In the book, Brynjolfsson and McAfee argue that technology is reducing the ability to create new jobs for humans. They contend that as the economy recovers, employment levels will not return to where they were just a few years ago (could this be the "new normal" President Barack Obama spoke about back in November 2010?).

In the interview, Andrew McAfee talks about how technology is changing the way customers interact with businesses. Consumers no longer need clerks, cashiers, or salespeople. Computers are taking over most of those jobs.

The one thing I think McAfee is leaving out of his equation is the loss of common respect within these customer interactions between both the consumer and clerk or cashier.

How often have you walked into a Walmart or McDonald's and received lousy service? Have you ever had to walk around forever looking for someone in Walmart to help you find a particular item?

The wait staff in service organizations has gone down in quality at the same time some consumers expectations have risen to celestial levels. When I walk into a McDonald's I expect to get a hamburger, fries, and a drink prepared correctly and in a reasonable of time. Others seem to think that all employees in the restaurant should stop whatever they are doing and wait on them exclusively. It is a double-edge sword here.

As some customers attempt to ratchet up their demands, without ratcheting up the amount they are will to pay, businesses will attempt to lower their costs to meet those demands, no matter how ridiculous they may be.

Besides lowering the cost of producing, computers also take another human factor out of the equation: expectation.

Several years ago, Danny & Clyde's, a New Orleans convenience store that also has a po-boy sandwich shop inside, installed kiosks in their stores for you to place your sandwich order. You could completely customize the sandwich to your tastes. As a result, the number of orders that were made incorrectly went down.

I think a strong reason for that is because the computer has no preconceived notion of how a sandwich should be dressed. A human order-taker knows how they like their po-boys and find it difficult, even if subliminally, to write the order exactly as given (how many people have to have cheese on their sandwich and automatically question the person who asks for no cheese?).

Is it no wonder Danny & Clyde's would install these? Computers work 24/7 with no smoke or coffee breaks. They take the order down correctly. They don't ask for vacation time, health insurance, or retirement.

I think Brynjolfsson and McAfee are right. Those at the lower and upper end of work force will have no fear of unemployment. Those in the middle, especially the lower-end of the middle, should be very afraid. If they cannot find a way to make consumers demand that businesses give them a human to interact with, they will find that an iPad has replaced them in the workforce.


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