The New York Times recently chronicled the rise of machines in manufacturing that used to be the domain of low wage humans. It noted that even tasks previously deemed too complex for machines to do or too subtle for mechanical manipulation have been solved by engineers. To a manufacturer, the advantages of using robots for any task that can be automated are well known: 

•  robots don’t go on strike
•  robots can work 24 hours a day, 7 days a week, year round
•  robots don’t have to take breaks during their shifts
•  robots don’t have pension obligations

The primary disadvantage to manufacturers is high capital expenditures to purchase expensive equipment. This high cost translates to potentially higher hourly cost of production relative to using human labor. The cost is also upfront and inflexible since you can’t simply lay off and rehire a robot. Humans only require minimal upfront investment — just basic training — to do manufacturing/assembly jobs.

As a result, every manufacturer does an analysis to figure whether the high upfront investment in machines translates into enough production efficiencies compared to minimal investment in humans. On the whole, we’re still largely using people across all sectors and geographies; however, that could soon change pretty quickly. Obviously better engineered machines means more things can be automated but a surprising accelerator may be The Federal Reserve (The Fed).

To combat unemployment and economic stagnation, the Fed has kept interest rates at practically 0%. The idea is to make loans incredible cheap to stimulate investment by companies which should create jobs (enable companies to borrow cheaply to invest in expansion) and spur consumption (enable consumers to borrow cheaply to buy a car or house). 

The unintended consequence is the cost of investing in machines has dropped to near 0%. As a manufacturer, I can get robots practically for free upfront, use them to produce goods cheaper, sell those goods, and then pay back the low interest loan. I am actually now much more incentivized to increase production through investing in machines than in people.

As a result, The Fed could be making unemployment worse inadvertently. It may be achieving its goal of stimulating the broader economy, but it may be exacerbating the unemployment problem which largely exists among unskilled labor which is primarily used in manufacturing and construction. It is becoming cheaper and cheaper to automate with robots than it is to hire people. 

I just hope the machines will have the human decency to spare Ben Bernanke for all he’s done when they finally take over.