Tolerating Inefficiency
Through the implementation of Information Technology (IT), business productivity—the ratio of results turned out to resources used—has increased substantially over the last twenty years. Two key marks just keep moving in opposing direction: sales per employee, going up; number of workers, going down. IT is eliminating jobs by the thousands in every business sector and unemployment everywhere will eventually reach levels unseen before.
As companies optimize their business processes, jobs are being replaced by admirably designed combinations of software and hardware. Not only core business functions are done much more efficiently today by computer programs with minimum human intervention but also tasks that were performed in the past by internal personnel are now carried out through input submitted directly by “unpaid” customers. The need of intermediaries between sources and destinations—factories and consumers, service providers and users, print shops and readers, movie producers and viewers, transportation industries and travelers—is shrinking when not disappearing.
The time to tolerate some inefficiency and to slow down business process optimizations has come. Or maximized productivity will kill us. The financial evaluation of manpower reduction projects—are there projects which are not?—should at least consider the social cost of eliminating jobs; perhaps a “societal” charge should be added to cash flow analyses. Reasoning is straightforward: Unemployment leads to crime, which demands preventive and corrective measures, which costs money, which governments should pay, which requires additional taxes. Such hypothetical charge is simply the cost of maintaining some socially-inconvenient-to-eliminate positions.
Tolerance to inefficiency must be even bigger in underdeveloped countries where unemployment is already very high. In such countries, the jobs that develop the replacing technologies are located somewhere else in the global chain; no new openings—no job counting compensation—occurs locally.
Commodity distribution is a good example for the kind of tolerance is worth considering. Every new huge supermarket and every giant department store cut jobs by the hundreds; for the same total throughput in a given community, many more people, obviously with lower salaries, would get a weekly pay with the traditional approach of small shops in every block. The sales per clerk of the former (the more efficient big stores) are several times larger than the same index of the latter (the small ones).
The world economy is moving to a scenario in which having a job is going to become a luxury, a privilege. Article 23 of the Universal Declaration of Human Rights, adopted by the United Nations General Assembly in 1948, establishes that “everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment.” This civilized and well intentioned prerogative is now an endangered right, impossible to sustain as such when worldwide unemployment rates get to the 30-40 percent ranges.
It is extremely difficult to come to terms with tolerating inefficiency. The idea is not pursuing it by breaking healthy processes down where IT is already in place. Still recognizing the social worth of keeping “already existing” jobs, when their elimination is not absolutely necessary, is an issue to review. At the very least, the magnitude of the core problem—potentially massive unemployment—deserves both a thoughtful debate and the anticipated search of possible lines of actions.
Gustavo Estrada
Atlanta, September 9, 2009
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