One of the reasons automation is so attractive to employers is that it has the potential to lower labor costs. For example, a machine might allow one worker to do a job that had previously been done by ten. Another aspect of automation, however, is that more sophisticated machines often demand less skill from their operators, and so employers can hire less-skilled workers who are more easily trained and more easily replaced. So not only are we reducing labor costs by reducing the number of workers — we are reducing them by shifting from hiring workers with scarce skills to workers with widely available skills. Ashwin Parameswaran observes that this dynamic obtains even in the knowledge-intensive financial services sector:
From an economic perspective, it is not worthwhile to maximise the skill of the human user of the system. What matters and needs to be optimised is total system performance. In the era of the ‘control revolution’, optimising total system performance involves making the machine smarter and the human operator dumber. Choosing to make your computing systems smarter and your employees dumber also helps keep costs down. Low-skilled employees are a lot easier to replace than highly skilled employees. …
Since the advent of the assembly line, the skill level required by manufacturing workers has reduced. And in the era of increasingly autonomous algorithmic systems, the same is true of “information workers”. For example, since my time working within the derivatives trading businesses of investment banks, banks have made a significant effort to reduce the amount of skill and know-how required to price and trade financial derivatives. Trading systems have been progressively modified so that as much knowledge as possible is embedded within the software.
But Ashwin notes a major downside of deskilling:
Although computers do most tasks, we still need skilled humans to monitor them and take care of unusual scenarios which cannot be fully automated. And humans are uniquely unsuited to a role where they exercise minimal discretion and skill most of the time but nevertheless need to display heroic prowess when things go awry. As I noted in an earlier essay, “the ability of the automated system to deal with most scenarios on ‘auto-pilot’ results in a deskilled human operator whose skill level never rises above that of a novice and who is ill-equipped to cope with the rare but inevitable instances when the system fails”.
In other words, ‘people make poor monitors for computers’.
This progressive deskilling of the labor force helps explain why many U.S. business enterprises are so keen to increase less-skilled immigration, a subject I’ll revisit in the next post.