Last week, the U.S. Labor Department reported 7.4 million unfilled jobs in the United States. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis conceded the possibility that unemployment benefits might play a part. Congress passed bills providing an additional $300 a week on top of regular state benefits to the unemployed. This average $318 a week, according to the Labor Department. As a result, an unemployment recipient earns better than the equivalent of working full time at $15 an hour. This is available through September 2021, for a maximum of almost 18 months. This is triple what most states typically allow. (ref)
If you cannot hire someone to do a job, you might have to automate it. Thus, the question becomes whether unemployment benefits are driving innovation. I wrote about this situation on September 7, 2020 in my post, “Why Do We Celebrate Labor Day?” In light of the recent job market, it has become even more pertinent.
Costs of Labor
Simultaneous with enhanced benefits, well-intended calls to increase the minimum wage have further pressured businesses to reconsider their labor costs. The costs of human labor include:
- Wages and wage inflation.
- Training and non-wage benefits.
- Payroll taxes.
- Auxiliary safety equipment.
- Worker’s compensation insurance.
Additional, intangible costs include:
- Safety risk due to human error.
- Product loss / rework due to human error.
- Slower pace of human labor compared to automated processes. (ref)
Because labor prices are typically fixed but usually rise, it is easy to calculate the ROI for automation. Typically, automation costs are front-loaded but break-even points are predictable.
Unemployment benefits indirectly drive innovation by enhancing the ROI to automate processes. Every time a human makes a decision or input that could be automated, there is a greater risk of error. Humans are typically slow to calculate and process data. In comparison, machines and computers never take vacations. The costs are rather fixed and computing power and efficiency tends to improve over time.
Every Business can Innovate
Automation is not limited to vehicle or semi-conductor chip manufacturing. As an intellectual property firm, we routinely automate repetitive tasks better accomplished through technology. For example, when an email goes out through our firm there are numerous automated processes:
- Populate the email with carefully authored templates.
- Transmitting the email;
- Docketing a follow up date;
- Calculating the precise date of the follow up.
- Saving a record of the email to immutable storage;
- Logging the email was sent;
- Associating the sent email with the particular matter;
- Attaching any relevant documentation to the email;
- Assigning any follow up to a particular staff member.
From a single-page interface, we accomplish all these functions through SQL stored procedures, SMTP services and cloud storage API integration. The development took approximately two weeks. However, when hundreds of emails are transmitted each day, we’ve recaptured at least 90 minutes of time each day per staff member. Furthermore, because of the tight constraints and structure of the system, there is virtually no opportunity for error. Our staff has more time to make thoughtful, non-repetitive decisions. In addition, there is less stress about making a simple date or calculation error because the system checks the data or automatically populates it for the employee.
Without this and other automation, we likely would need at least two or more additional staff members. Because the work we do requires extreme precision, manual work requires additional oversight. Thus, a two-week investment in time produced a single year ROI of at least $150,000. Over ten years, that automation ROI increases to $1.5 million.
Double-Dipping with Automation
Automation not only benefits the individual business, but commercializing those innovation generates revenue. If the automation gives the business an advantage on margin then it can stop there. However, patenting and licensing the technology produces additional passive revenue for the business. The patent process takes the technology out of the public domain and gives the business exclusive rights for 20 years. Patents are also extremely time-sensitive. If you do not expeditiously automate, your competitor might do so first. Worse, the competitor may patent the automation effectively barring your company from practicing it.
How to Start with Automation
Management is often blind to automation opportunities. I personally have a low tolerance for busy work but if I don’t perform that work I cannot help. Furthermore, a good staff (as we have) rarely complain about the current system. However, we encourage them to offer suggestions and improvements. Sometimes those suggestions are technically impractical (alternatively, just tell an engineer or developer something cannot be achieved….). However, many of the most valuable innovations we enabled came from otherwise non-technical employees. Every year, I want to recapture more free time for our employees.
Innovation and Unemployment Benefits
Are unemployment benefits driving innovation? Logically, it does play some part. Once a job or task is automated, the capitalization is done and that job or manual activity is essentially gone forever. Of course, the opportunities for engineers, scientists and programmers look brighter than ever. It is difficult to say what will be left for unskilled workers. How or if these considerations play a part in policymaking is beyond the scope of this post. Nevertheless, increasing labor costs and unavailability clearly appears to foster a drive to innovate and, relatedly, patent those new solutions.