President Obama may have proven that he is even more clueless about economics than previously thought. On NBC News, he claimed that his misguided Keynesian policies had nothing to do with companies’ unwillingness to hire new employees. He instead placed the blame for high unemployment on machines. He said that:
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.
Let’s put this economic fallacy to rest. Machines are not taking away jobs from us. Automation is the source of growth. President Obama is only focusing on the consequences that are seen and ignoring those that are not seen. As Henry Hazlitt wrote in Economics in One Lesson, “the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” In the long run, machines like ATMs create more jobs and revenue while making life easier for all of us.
Businesses should not be blamed for being innovative. As George Mason University Economics Professor Donald Bourdreaux asks “do you, Pres. Obama, really wish to suggest that the innovations you blame for thwarting your fiscal policies are ‘structural issues’ that ought to be corrected?” It’s difficult to justify that we were better off without ATMs or kiosks at airports. These groundbreaking inventions have increased output per worker while increasing consumer convenience.
President Obama is not seeing the whole picture. Someone has to make ATM machines and kiosks. He is failing to see the new computer programmers and IT professionals hired to manage the machines. CEO of the ATM Industry Association Mike Lee says that “President Obama should never use ATMs as an example of how technology replaces human labor because ATMs today play a critical role in providing extensive employment in the ATM and cash-in-transit industries.” Machines do not reduce employment but rearranges it to more efficient applications. We must look at all the secondary consequences that may be less visible to the eye. Machines often replace any lost jobs with a greater number of new jobs.
ATMs have not entirely destroyed the demand for bank tellers. Many people still prefer to deal with a human rather than a machine. President Obama believes that ATMs have significantly reduced the number of bank tellers in the United States. That’s difficult to argue since the Bureau of Labor Statistics (BLS) reports that the number of bank tellers actually grew by 31 percent between 1997 and 2006. (h/t St. Lawrence University Economics Professor Steve Horwitz). The BLS projects that the number of bank tellers will grow from 600,500 in 2008 to 638,000 in 2018.
Cato Institute scholar Andrew J. Coulson writes that increased automation does not necessarily reduce employment even in the industry being automated. To prove his point, he tells the story of a social movement in the 19th century British textile industry. A group called the ‘Luddites’ destroyed mechanized looms fearing that these machines would replace their human labor.
The Luddities were guilty of destroying private property and committing a major economic fallacy. The assertion that machines reduce employment has become known as the Luddities fallacy. The new mechanized looms left everyone better off. As Andrew J. Coulson states that “the new technology proliferated, textile industry employment rose. Among other reasons, increased efficiency drastically lowered the prices of textile goods, that shot demand through the roof, and to meet the new demand new workers were required to operate and maintain the new machinery.”
Innovation does not kill jobs. IowaHawkBlog wrote a clever tweet that says “ATMs don’t destroy jobs. Politicians who treat the country like an ATM destroy jobs.” President Obama would be better directed to look in a mirror than blame machines for destroying private sector jobs.