To Be Worthwhile, Labor-Saving Technology Must Cost Less than the Labor that It Saves

by Don Boudreaux on July 27, 2018

in Technology, Work

In my latest Pittsburgh Tribune-Review column I explain that using technology in place of labor isn’t alway an advance. A slice:

Economists have long explained that the availability of labor-saving machines such as self-checkout kiosks and package-delivery drones is one reason why minimum wages cause long-term unemployment for many low-skilled workers. If a machine can do for a cost of $7 per hour what a worker must be paid at least $7.25 per hour to do, the machine gets the job while the worker gets unwanted leisure.

When I explain to my students that minimum wages prompt firms to substitute technology for labor, they often react as if this greater reliance on technology is an upside of the job-destroying nature of minimum wages. But my students are mistaken.

Technology is unquestionably a great boon to humanity. Yet like almost everything else in reality, not every additional amount of it is worthwhile.

Technology isn’t free. Human effort is required to invent machines, and scarce resources are necessary to produce, power and maintain them. Using these efforts and resources to produce and operate labor-saving machinery renders these efforts and resources unavailable for the production of other goods and services, such as food and housing, that would enhance our standard of living.

And so what we want is not maximum possible technology. We want only technology that is worth its cost.

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