Friday, December 09, 2016

Carrier to Use Tax Credits to Automate

You knew this was coming, right? Remember Trump's defense of his business practices by saying a businessman's first duty is making money for his family and his company? Carrier believes that too. And, truth be told, you go out of business if you don't make a profit.

Part of the $7 million Trump/Pence/Indiana tax incentive deal was Carrier's promise to spend $16 million on their Indiana facility. Sounds good. Carrier is putting down major roots in Indiana. But not in terms of jobs. Most of that is going toward automation because that's the only way the company can stay in business.
"We're going to...automate to drive the cost down so that we can continue to be competitive," he said on an interview on CNBC earlier this week. "Is it as cheap as moving to Mexico with lower cost labor? No. But we will make that plant competitive just because we'll make the capital investments there. But what that ultimately means is there will be fewer jobs."
As with farming, because of automation U.S. manufacturer production is booming even though jobs have declined. Production is up 150% in the last 40 years.
All together, U.S. factories are actually producing more products today than they did in the post-World War II era, according to the Federal Reserve's reading on manufacturing output. Output at U.S. factories is up 150% in last 40 years. But U.S. manufacturing jobs have plunged by more than 30% in that same period. And automation is a big reason why.
That also means both food and manufactured products are a lot cheaper than they would be if production required lots of human labor. So, it's a big win for the U.S. standard of living.

This post is dedicated to my friend MaxRedline who has long warned about the law of unintended consequences in most feel good labor schemes.


MAX Redline said...

Humm. Well thanks, although you've seen this coming as well. I'm not a Luddite, but it remains that automation is a huge factor in the elimination of low-wage and moderate-wage American jobs while the few relatively high-paying jobs increasingly go to those with the skills to maintain the robots.

In the Carrier example, they'll eliminate about 40% of their jobs as they begin the process of automation - which will initially provide economic benefit to the state of Indiana because they'll have to buy equipment and hire people to do the installation and programming. Additional jobs will be lost as installations are completed and automated production gets up to speed. Over the next few years, the "thousand American jobs" touted by Trump can be expected to be reduced to a few dozen.

And if you think that's bad...Amazon has plans to build out over 2000 grocery stores (Walmart has about 2800). Unlike Walmart (the company everybody hates), Amazon's will have zero checkout people and their restocking processes will be automated. More robots, fewer people.

No mandatory break periods, no mandatory lunch periods, no paid holidays, no paid vacations, no paid sick leave, no artificially high minimum wage, no mandatory "defined scheduling", no mandatory health insurance coverage, no Democrat/governmental mandates, period.

Employers didn't generally object to break times, because they recognized that providing them improved safety, morale, and other tangibles. But today, Democratics are imposing mandates that businesses view as not beneficial and in many cases harmful. The upcoming mandate for "defined scheduling" ranks high among them.

What the Democratics are going to discover is that they've mandated over 2 million more people out of jobs. But at least they felt good about themselves.

And what does that do to the U.S. standard of living?

T. D. said...

US entrepreneurs have to figure out how to use the US workforce in constructive ways--as they did when millions left the farms for the cities. What won't work is pretending the old ways will work. Because someone smart in another country will use either automation or lower wages, get sales and the US business will go belly up. We have to learn to use our pluses to the best advantage. And we seem to be good on innovation. We are not good on government urging or control. Is there a single industry that has been made strong via government benefits or threats? Maybe there is, but one doesn't come to mind.

MAX Redline said...

Is there a single industry that has been made strong via government benefits or threats?

Hey, there's always another Solyndra, and another ReVolt, and and another SoloPower, and another Vestas, and....

T. D. said...

Great list, Max! Heh.