Brace Ourselves: Pandemic Will Accelerate Automation
As the infected workspace poses increased risk to humans, capital will ramp up efforts to make labor obsolete
original Alton Drew | Contributing Editor
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The coronavirus and the disease it causes, COVID-19, will move up the timeline for further obsolescence of labor.
Capital abhors a vacuum and seeks certainty in returns on and to itself. It’s two biggest threats involve humans both as sources of consumption and sources of labor. This virus did not attack cables, factories, refrigerators, automobiles, etc. It attacked humans, reducing their availability for work on supply chains, in factories, and in offices.
Capital wants to, going forward, avoid the declines in economic opportunity it has been witnessing over the last eight weeks. Automating production and mitigating human risk will be key.
While there will be significant sunk costs for deploying, upfront, more technology in the work place, low interest rates will mitigate upfront costs. As technology reduces costs in the longer run, banks will be further assured of repayment of debt where borrower costs of production have been reduced - hopefully along with an increase in revenues. Also, producers may see a reduction in tax liability where they can depreciate and write off expenses from deploying new technology.
Public policy will have to account for the human costs of unemployment. As Federal Reserve System chairman Jerome Powell shared last week, unemployment goes up faster for lower income communities, particularly Black and Latino communities. Those who are least able to bear a downturn have little cushion to protect them. This concern will have to be addressed by monetary and fiscal policy.
In addition, investors, banks, and the labor markets will have to keep an eye on the industries that may not come back. For example, billionaire investor Warren Buffett signaled his concern about the future viability of the airline industry when his firm Berkshire Hathaway sold off its positions in a number of airlines. Also, Mohamed El-Erian, chief economic advisor to Allianz, shared his views during an interview with CNBC that investors have to seriously think about the ten percent of the economy that is not coming back.
One of the legal issues we see arising from labor being disrupted is how companies will be treated tax wise in an automated economy. A public policy issue that was at one time just beyond the horizon, but is now staring commerce in the face is how displaced labor will be treated. Banks in general should keep an eye on these issues, especially issues of economic displacement given their current role as defacto agencies for distributing government backed aid in the form of small business loans and payment protection checks to displaced workers.