Disruptive Technology – It’s a First World Problem

 

800px-Mexican_construction_workers

Picture is courtesy of Wikipedia.

With all of the discussion about how automation technology will be replacing a job near you, I had a very enlightening conversation with a couple on my recent trip to Mexico.

Now let’s start off by stating that technology is still being employed in Mexico, but the process is different, it is creating jobs where none existed as manufacturers transfer production to Mexico.

But if you take the story I was told you will see something interesting.   This is not so much a story about “High Technology”, rather a story about the employment of capital equipment vs. labor.

 

The Story

The daughter of the couple that I was talking to is doing mission work in Guadalajara, Mx. They have a traditional colonial style house, but wanted a bit of home on their property in the form of a Lawn. It so happens that her parents, the couple that I was talking to, run a residential landscaping and irrigation business in Winnipeg, Mb, and were more than happy to help.

The parents come down and start to assess the situation, and her father taking a typical “Canadian” construction management approach decides that they need so many cubic yards of dirt, and a Skidsteer. The daughter laughs, the dirt is easy, but the Skidsteer, not very likely. In the end over a week they were able to get the lawn and irrigation put in, but they never did rent the Skidsteer. It was all done with shovels and manual labor.

The story here is that there is such a price differential between the value of labor and the value of capital equipment, it is far easier to hire 10 guys at Mexico’s minimum wage than it is for someone to invest in the Skidsteer, even for a rental company, they will never earn a reasonable return on investment because labor is so cheap by comparison. You see it everywhere you walk, guys toiling in the heat were we at home would have a machine doing the work you are witnessing.

If we take this to the next level of robotics, well they are expensive, and at some level for some types of work will never be used. Way back in the 1980’s my friend’s father warned us that we had to stay in school, because if we didn’t, “Well they are never going to stop making shovels.” So if you want low pay and very hard work, it will always be available, but it will be commodity priced. Now my friend runs a Stucco Exterior Finishing company, very manual work, but also very artisan, and it is in the area of artisan’s that technology will not likely disrupt, at least not in the First World Economies.

If you go to Mexico, a large portion of the population is involved in the artisan trades, crafting unique items in very small-scale production.

In modern economies we simply have a problem of ever-increasing wages at the same time as the cost of capital equipment, high technology, is dropping and at the convergence point people lose jobs.

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