Do you think lack of labor will force automation?

Was having this discussion with my brother. The labor shortage is so bad right now and even after unemployment benefits ended, it still remains a major issue. I am hearing this will continue and employees have more bargaining power. My big issue is that if this remains a long-term problem, that eventually corporations will wise up and accelerate a push to automation in the work place. I understand not all jobs can be automated, but I am sure several could. I could see huge repercussions (maybe 20 years out). Am I being a doom and gloom thinker or is it possible?

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Comments (28)

Oct 18, 2021 - 10:46am

Kind of agree with you. But, I don't think that Automation will have as big of an impact as you think.  Like even of you look at Amazons warehouses, extremely efficient but they are still trying to hire 150,000 people for the holidays.  Also, I think the one main thing with automation is the resources required to run automation.  depending on how useful the automation is, there may not be a need for automation, as humans may be cheaper.   

Oct 18, 2021 - 10:56am

It is a balancing game.  Automation tends to start in high labor low value add jobs and progresses up from there.  The primary issue involves fundamental restructuring of the economic system and what that does to long term expansion of automation.    If you create so much automation that there is no choice but a fully redistributive governance model well then you kind of killed your ability to continue innovation.  This idea that well there will be a baseline living standard but people can work to move themselves up from there.  If there is nothing left for most people to do their lives will be pointless and aimless.  This is where revolutions come from more than just poverty.  A lack of purpose coupled with poverty creates the conditions for radical change.  The automation change needs to be managed carefully from a corporate level.  I don't want the government anywhere near this.  We almost need a price fixing style cabal to enforce compliance with the speed at which organizations can automate.   But this will basically be impossible to do because there is too much advantage to being early.  

Oct 21, 2021 - 12:21pm

It absoultely does if you do not want violent revolution.  Do you really think vast swaths of the populace will be okay with nothing to do with their time and productive energies?  Do you really think people will just sit around indefinately watching the world change around them?  I used to think you were stupid.  Now I just think you are mentally challenged. 

Oct 18, 2021 - 11:02am

I think its reasonable but 20 yrs not likely. Once automation begins, labor supplies will still be relatively the same so maybe wages will fall… But in the short run, this will likely only continue to impact low skilled labor. The bigger question: how do you protect yourself/your career and how do you adjust your portfolio if required?

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Oct 18, 2021 - 11:22am

This kind of protection is heavily group/product dependent.  There is no real way to predict what will be automated, only suggested.

No pain no game.

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Oct 18, 2021 - 11:26am

IMO tech is not close to being there yet for scalable implementation of these types of functions. If you take a step back and think how nascent "technology" actually is, we're still in the first inning. The internet went mainstream only 20 or so years ago. Consider this: we can't even get different healthcare provider silos to communicate and transmit medical records efficiently among themselves. Most records are still stored in fragmented electronic databases or literally written on paper and filed in a cabinet. Tech is still trying to consolidate and streamline medical records and it has proved to be a big challenge for 10+ years already. 

Now if you consider next-order type applications of technology--fully autonomous vehicles as a mainstream element, robots replacing low-skill labor on a scaled basis--I think we're still very far off.

Oct 21, 2021 - 12:00pm

This is a bad comparison because healthcare records are extremely complex systems where doctors, nurses insurance companies, pharmacists, medical device companies, and patients are involved, and in many cases they're done differently.  Likewise, it would be very difficult to automate the geezers in your company who enter in every data point in excel by hand due to how specialized and complex whatever they do is. 

A self-driving car or a robot that flips burgers is completely standalone. 

Oct 21, 2021 - 12:07pm

Drumpfy

This is a bad comparison healthcare records are extremely complex systems where doctors, nurses insurance companies, pharmacists, medical device companies, and patients are involved, and in many cases they're done differently.  

A self-driving car or a robot that flips burgers is completely standalone. 

Not really, The real world is an incredibly complex system. Rote tasks that you would intuitively think are easily automatable become incredibly complex to automate when you consider the vast amount of variables that can serve as inputs into a system. For a human mind that is used to adapting to novel cases easily, it's not an issue. For a robot or machine, it becomes much more complex when you have to program/code for these things. We're not there yet. 

Oct 18, 2021 - 11:30am

From a pure economics point of view. Automation is considered a technological improvement. This is simply an input into the Solow growth model. Meaning we should grow at a faster rate.  

It is also simple economics with the workers. Incentivize workers by offering higher pay or lose out on producer surplus due to deadweight loss, because you have a shortage in quantity supplied. (This is literally intro econ). As soon as it is marginally beneficial for a firm to raise wages they will. 

Oct 18, 2021 - 12:30pm

In the long run, I think people's desire to not want to be homeless will force the crisis to end.  It's ridiculous how long the benefits lasted, but I think their current bargaining position will prove short lived.  

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Oct 19, 2021 - 11:04pm

A key assumption often overlooked is whether or not technology and labor are substitutes. If you think of automation in the self-driving trucks replacing truck drivers, it seems like that are. However consider a technology that lets someone perform their job more efficiently (cloud storage over emailing files back and forward), it seems like this technology saves labor hours and increases the marginal product of labor: hence this case technology is complementary to labor.

  • If technology and labor are substitutes: reduction in labor supply --> increase in wages --> increase in technology demand and therefor price, use, and 'automation'
  • If technology and labor are complementary: reduction in labor supply --> increase in wages --> less demand for technology, lower price, less investment in technology

Also, consider whether technology might be complementary for certain groups but a substitute for others. For example, high-skilled professions may find new technology to be complementary but be a substitute for lower-skilled works (ex: a technology that auto updates slide decks to latest market data may increase the effectiveness of a VP but reduce the demand for analyst hours by 1%) (a more realistic ex: an auto scheduling technology may make the life easier of a professional that has a lot of meetings but reduce the demand for secretaries who manually do this).

I suspect this is the thesis playing out: technology is a substitute for low-skilled workers but complementary to high-skilled workers. Hence, it is therefor also likely a contributor to wage inequality as those in the highest wage quartile will be more effective and have a higher marginal product of labor and therefor wage, whilst those in the lowest quartile will be less in demand and have downward pressure on their wages. Although we can only a correlation, we have seen wage inequality rise since the 1960s in the USA in line with technological progress.

As for your question: how does a labor shortage effect automation (/ technology). This depends on the substitution elasticity of tech and workers, but I suspect if they follow a pattern as outlined above then a labor shortage will lead to overall increase in wages, however a larger increase for high-skilled workers, and an overall increase in wage inequality and technology investment.

(This argument is mostly outlined in Acemoglu, Karabarbounis literature)

Oct 19, 2021 - 11:41pm

Automation has had nothing but a short term and localized impact on unemployment over the last 200 years when things have been automated.

Even though that pussy Yang lost both times, he managed to get automation = bad in the minds of many Americans.  I do think there should be some sort of retraining for late career workers whose jobs have been automated though.

Oct 23, 2021 - 1:45pm

We just experienced a recession on the scale of the Great Depression, the media frames massive unemployment as a labor shortage because it doesn't sound nearly as bad. We are absolutely deep in the shit, not nearly as bad as it was earlier, but large swathes of the financial world are unsurprisingly insulated from this. The new infrastructure bill is something like a New Deal, and maybe a lot more people will go into trades and get back to work.

On Wall Street, you have some guy on a trading floor who made record profits from the exact same crash, or you have a bank that got bailed out by the fed. If the fed keeps printing Bidenbux and handing them out, it is going to be a threat to our financial system. Money is a unit of trust, it is a product of value through work. If you are paying people massive amounts of new money to add nothing to the GDP, you are going to devalue your currency.

Oct 23, 2021 - 2:44pm

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