Rise of the Machines

The Terminator mythology aside, it looks as if the machines are indeed winning out over humanity … at least as far as corporate spending investments are concerned.

It also seems that, regardless of how many times we repeat the mantra "people are our most important asset" and how many politicians say their top priority is getting the American people back to work, we're still not ready to actually light the fuse under the glutted job market and invest in people.

An article published on Bloomberg.com last month gave me the answer I've been looking for as to why the jobs market has yet to heat up to the degree I thought it should be by now. Based on the report Man vs. Machine, published by Bank of America Merrill Lynch, the Bloomberg article details how current tax breaks offered to businesses aren't supporting job creation, but are instead promoting investment in capital spending for equipment upgrades. Add to that a low rate on borrowing and it only makes sense for the recession-timid (and soulless) business world to build capacity cheaply without adding year-over-year cost in the form of personnel. Score one for the machines.

Top that off with uncertainty in the realm of health care spending and, well, it really seems better to not spend money now on employee salaries that could end up costing more than expected as new aspects of health care reform come into effect. Wouldn't it be cheaper to just launch an AI control satellite into space to make our machines more efficient? Score two.

The direction of the current corporate low road is producing an unprecedented post-recessionary gap between capital spending on new equipment and investments in staffing. So while money is flowing into the economy and steady productivity gains are once again being achieved through these investments, the job market and, vicariously, the consumer markets and spending are seeing no more than gradual and shaky advances. And as long as productivity continues to increase by investing in more efficient machines, longer-term investments in people will remain stunted.

And the fictional Cyberdyne Systems of the Terminator franchise isn't the only profit-blinded company behind this mechanical coup. It seems that far too many have forgotten the important lesson of building up markets by building up the working class (consumers) with jobs and disposable income. After all, robots don't eat out at restaurants, go on vacations or buy any of the household goods that comprise the biggest part of gross domestic product.

The machines are getting smarter and more efficient, inventories are being rebuilt … but mass consumer markets are still depressed due to slow/moderate improvement in unemployment rates and only trickles of investment going into salary and wage increases that were stifled during the recession. And while bonuses are back with a vengeance for those at the top, the money isn't trickling down far enough in the form of pay raises to significantly kick off the consumer spending that would support overall and sustained market growth.

Now, while I don't want to get on the bad side of our future mechanical masters, I contend that this current trend may be stifling humanity's last great hurrah for the sake of inflated productivity that isn't tied to a well-balanced and middle-centric consumer sector. That's bad for us squishy meatbags.

On the other hand, I also think that the machine-made productivity gains currently choking off long-term employment growth may be serving as an important buffer period before the job market heats up and a messy talent war begins. In other words, it might be helping to control the inevitable churn among workers that's currently predicted based on historically low satisfaction and loyalty rates. This is why more strategically focused organizations are already shifting emphasis to the retention of top talent and shoring up their employment brand and reviewing their total compensation package. Perhaps a slower simmer in the job market will allow for more gradual increases in spending on salaries, benefits, recruitment, development, etc.

As I post this blog and find myself yet to be stopped by killer cyborgs or freedom fighters from the future, I'll remain optimistic. This period may not be the machines' economic salvo before my Rumba achieves sentience and tries to take me out at the ankles (but I'm still not turning my back on it).

For those still waiting for jobs and lamenting the unusually slow pace of recovery, all I can say is "there's no fate but what you make."

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