Hail to Automation! J.C. Sparks

HAIL TO AUTOMATION SOCIETY is often viewed as something so complex that it needs an equally complex organization to run it. Conse quently, there is a tendency to justify acts of organiza tions or groups that cannot be morally justified for in dividuals. This is like devising special rules of mathematics to be used only when large numbers are involved, or suppos ing that water in a small cup would be different from the water in Lake Erie. The natural laws of God pertaining to man in society are not temporarily arrested simply because more people, greater sums, or longer distances are involved. Yet every day we observe supposedly intelligent men succumbing to the fallacy of complexity. Recently, I participated in a panel to seek solutions to the problems arising from automation. One panelist, a professional labor union leader, went into great detail describing proposed labor legislation and contract objec tives that he believed would result in more jobs to offset those allegedly eliminated by automatic production equipment.

Mr. Sparks is a business executive of Canton, Ohio. 66 HAIL TO AUTOMATIONl 67 He proposed a 30-hour week, an annual IS-week vaca tion, and a one-year-in-seven "sabbatical" -all, of course, at the original pay received for a full year of 40-hour weeks. The reasoning went like this: If each employee works fewer hours out of the total hours required toop erate a factory, then more people must be hired-there fore, more persons will have jobs than before. As the labor official spoke, a picture came to mind of a man I had known in my youth. Old Jim lived in a small house on a large lot one block from our abbreviated downtown section. There in the summertime grew all kinds of vegetables-rows of tall corn and tomato vines shored up by poles-with scarcely a spring or summer day that did not find Jim busily at work in his huge gar den. He lived alone, and I never ceased to wonder, as a boy, how he could possibly eat all his garden yielded.

Later, I found that Old Jim canned his vegetables and thus supplied his own food for the entire year. The little money he needed probably came from occasional odd jobs. His house was neat and in good repair. His enter tainment seemed to come from children, like me, whose endless questions never failed to amuse him. Now it came to me why the labor panelist had brought to mind Old Jim, of whom I had so often asked in my youth, "You always work so hard; why don't you take a vacation?" His reply never changed, "Can't afford to." "Why not?" I would press. "Because I like to eat when the snow flies," he would chuckle. It made sense, for one could plainly see that 68 JOHNC. SPARKS nearly all of his possessions came directly from his own work. If Jim did not make it or growit, chances are he did not have it. As the labor official spoke of an annual I3-week vaca tion, I could hear my boyhood self asking, "Why· not take a I3-week vacation, Jim?" Jim most surely would have replied, "Thirteen weeks vacation would starve me to death,boy!"

Perhaps not starvation, but obviously if a person were to cut three months of production effort out of a year, his material level of living would be drastically reduced. Is organized labor suggesting that .its members have their real income cut back by one-fourth? No, they intend that ·each employee shall receive his entire year's pay-four fourths-even though he produces only three-fourths; and the gullible stand ready to believe the impossible if some one promises it to them. The complexity introduced by dollar bills causes the labor official to say, in effect, that a vacationing employee can have his cake and eat it, too. No one can perform such hocus-pocus any more than Old Jim could have had food in the wintertime from vegetables neither planted nor canned had he taken a three-month·summer vacation. Can Get Only What Is Produced If there were no government interference in agricul ture to cloud one's common sense, it would be clear that the purchasing power of a farmer is the corn, wheat, and HAIL TO AUTOMATION! 69 other produce he raises. If he wants more purchasing power, he increases his output through more effort and bigger investment. A farmer who produces 4,000 bushels of corn has more purchasing power than his neighbor who has produced 3,000 bushels. The same principle ap plies with respect to tires, roller bearings, ceramic tile, shoes, and so on. For example, let us suppose a factory employing 120 production workers makes 12,000 color TV sets a year. The sets are sold to distributors for $150 each. Here is a breakdown of the company operations: SCHEDULE A Wages' Materials, etc.

Fixed Costs EarniIlgs* Sales Each Set $ 50.00 60.00 32.50 7.50 $150.00 12~OOO Sets $ 600~000 720,000 390,000 90,000 $1,800,000 '*' 12%, before taxes, as return on $750,000 investment. The minimum sales price to cover all costs and the in vestors' 6 per cent (after taxes) is $150. The firm could not charge less and pay its obligations. Competitors' prices probably keep the company from charging more. Jus t as the farmer's purchasing power can be measured by the bushels· of grain he grows, so can these productive workers measure their purchasing power by the TV sets they produce, that is, to the extent that their efforts con tribute to the total market value of each set. In the above example, the labor is one~third of such value, $50 of the total $150 sales price. Since 12,000 sets were produced by 70 JOHN C. SPARKS 120 production workers, the average is 100 sets each. One.. third of 100 sets equals 33~ sets, the average purchasing power of each production employee. It can also be stated in dollars by multiplying 33~ sets by the sales price, $150.

Next, let's try the 13-week vacation idea on our theo retical manufacturer. If one-fourth of the workers are to be on vacation at all times, the company must hire 40 addi tional people, making 160 .production workers, each working nine months a year rather than twelve. If each performs at the same rate of productivity as before, the total number of TV sets produced will be the same 12,000-since only 120 workers will be producing at any one time during the year. Those on vacation do not pro duce any sets. The company has only 12,000 TV sets to sell, the same as before. Presumably, the selling price is as high as the company can ask. Possessing no magic wand that will cause the consumer to pay a higher price and having no increased number of sets to sell, the company cannot pay more total dollars for labor than it did be.. fore, namely, $600,000. This time, however, the $600,000 is divided among 160 employees rather than 120. The av erage income earned annually is now only $3,750, down from $5,000. Instead of the previous 100 sets produced per worker, 12,000 sets divided by 160 employees equals 75 sets a year-down 25 per cent because each worker now vacations 25 per cent of the year. Since he receives one-third the total value of the sets he produces, he now receives the equivalent of 25 sets instead of 33~.

But, no, says my fellow panelist, the $5,000 dollars HAIL TO AUTOMATION I 71 Previously paid for twelve months' work now must be paid for nine months' work! There are only two ways to accomplish this feat, either by inflation (government fiat), or by raising the selling price. The first is a deceptive method so that while the worker, in fact, will be paid $5,000 as before, the dollars will have shrunk in value. His purchasing power re mains the equivalent of only 25 sets, still down from 33Y3 sets. It matters not whether his annual wage is 50,000 or 500,000 paper dollars. It matters only what the dollars will be able to buy in the market place-and they simply cannot command more than the value of the 25 TV sets he has made. As previously discussed, it is futile to try to raise the selling price, unless quality is improved or new features added. To attempt such noncompetitive action would probably lead to disaster for the company and an end to the jobs it has provided.

Answer-Produce More The solution to the "problem of automation" is to understand and support the goal of better tools for man kind. We should embrace, adopt, welcome, hail-auto mation! Work with it, not against it. Easy enough to say, some may think, but the person displaced by automation seldom sees it that way while he sits on the sideline jobless or makes the necessary adjust ment and preparation for a new job. The painful necessity to change jobs may draw sym72 JOHN C. SPARKS pathy from friends and acquaintances, but it is hardly sufficient reason to abandon the economic "system" that yields so plentifully to so many. Every day finds some persons unwillingly relinquishing their economic position to the newcomer or the upstart. The downtown store· keeper sees his suburban competitor pass him by. The top.ranking movie heart·throb of a decade ago loses his popularity with the younger female fans. The hula.hoop manufacturers rise rapidly to the top and just as rapidly skid to oblivion. Less publicized are thousands who at· tempt unsuccessfully to launch new businesses. Are all of these any less deserving than the wage or salary earner hurt when the changing character of the market place also touches him?

Lack of understanding breeds suspicion and distorted vision. It is important to understand how automation has been applied in the past and how it will apply in the fu· ture if unimpeded by artificial restraints. Let us revise our earlier example accordingly. How Auton1ation Raises Product Availability The owners are convinced that they should invest an additional $250,000 to improve mechanization. This win enable the 120 production workers to produce 18,000 sets a year, an increase of 50 per cent over the 12,000; sets made with the older equipment. Following is a revised breakdown of the same company's operation with better equipment (automation) and the same number of em ployees: Wages Materials, etc. Fixed Costs Earnings* Sales HAIL TO AUTOMATION! SCHEDULE B Each Set $ 33.00 60.00 21.67 6.67 $121.34 73 18~OOO Sets $ 600,000 1,080,000 390,000 l20~000 $2,190,000 * 120/0' before taxes, on original $750,000, plus $250,000 new invest ment for automation.

Note that in this illustration 18,000 sets (instead of 12,000) have been produced with the same total labor costs and fixed costs, the same cost of materials per set, and the same 12 per cent earnings before taxes on capital invested; which means that the minimum sales price needed to cover all obligations is now $121.34 a set in stead of $150. The company thus is much better able to compete than before. Though the savings were all passed on to the consumer for purposes of this illustration, it is more likely that some would go to the production worker, some to the office employee, some to the salesman, and so forth. Note, too, that while fixed overhead costs remain the same in total, the fixed cost per set drops from $32.50 to $21.67, a significant gain as the next example will further illus trate. So, through automation, each production worker is able to turn out 150 sets, instead of 100, in contrast to the "big-vacation, create-nothing" scheme of the labor panelist.

The bogeyman feared by my fellow panelist is that of a plant automated to produce only 12,000 sets as before, 74 JOHN C. SPARKS but with fewer workers. Let us apply this idea to the first example, assuming that additional investment would be available under these circumstances. Following is a revised breakdown using only 80 production workers to produce 12,000 sets on equipment that can produce 50 per cent more than the old equipment: SCHEDULE C Wages Materials, etc. Fixed Costs Earnings * Sales Each Set $33.33 60.00 32.50 10.00 $135.83 12~OOO Sets $ 400,000 720,000 390.000 120,000 $1,630,000 • 120/0, before taxes, on original $750,000, plus $250,000 new invest ment for automation. Although each production worker in this illustration produces 150 sets (12,000 sets -;- 80 employees) , note that no savings occur in the fixed overhead, and the minimum sales price to cover all obligations is more than $14 higher than that shown on Schedule B.

Major gains can come only through increased total production, not through constant output with fewer employed personnel. If the last two examples had re flected the operating decisions of two different companies competing against each other, it can readily be seen that the first company (Schedule B) is in a much more favor able competitive position than the second company (Schedule C). Company B has room to undersell Com pany C by 10 per cent and still cover its obligations. DeHAIL TO AUTOMATION! 75 mands by labor and price competition can be met more easily by B than by C. Indeed, it is in this manner that all levels of material living have risen throughout industrial history. Successful firms have utilized better tools and equipment-that is, automation-to bring more and bet ter goods to market at lower prices. Companies failing to follow this route usually fall by the wayside. Here we encounter another automated bogeyman. Says my fellow panelist, warehouses soon will be so full from overproduction that all wheels will stop. Nonsense! It is nonsense, that is, unless normal economic exchange is stopped by a synthetic rigor mortis of artificial restraint applied by government directly or by other organizations operating under special privileges.

I've never known a person whose wants in clothes were satisfied, particularly the "she's." Nor do persons seem to reach a saturation point for cars, books, high-fidelity records and players, swimming pools, boats, camera equip ment, or electronic organs. No college has sufficient fa cilities, no library enough books, no hospital without need for additional beds and technical instruments. It can be fun but frustrating to make one's own list of de sirables that are currently beyond the reach of the old checkbook. These desirables can be attained only through greater production. The fear of general "overproduction" through automation is out of order in a free market econ omy. An occasional manufacturer may misjudge the de mands of the people, producing a product no one wants at the price being asked. This, of course, is his error alone and his responsibility.

76 JOHN C. SPARKS Automation Is Key to Better Material Living Automated production methods give increased sup plies so that more goods may be utilized by more people. At the same time, automation allows costs (and selling prices) to drop, helping to augment sales and thus build ing ~dreams into realities for more and more people every day. Compare the inexpensive pocket-size radio of today with its higher-priced and poorer-quality counterpart of 35 .years ago. Or, consider the change in the price and quality of television sets from 1948 to 1964. The telephone service is a good illustration of an in tensely automated industry. Compare these statistics from annual reports of the Ohio Bell Telephone Company: Employees Annual payroll Xelephones Long-distance calls 1940 9,894 $18,400,000 827,000 29,000,000 1960, 19,795 $113,700,000 2,705,000 128,000,000 The number of employees doubled from 1940 to 1960, but they were able to service more than three times the number of telephones and handle more than four times the number of long-distance calls. The long-distance day station-rate has declined, even when today's rates are stated in inflated dollars. In 1920, this rate was $14.10 to call from Canton, Ohio to San Francisco, California. In 1940, it was only $3.75. In 1960, the rate dropped to $2.10. Furthermore, the area of "free" calling (formerly long-distance calls) has expanded tremendously. AutoHAIL TO AUTOMATION! 77 mation has been the means of reducing telephone rates for both local and long-distance calls while improving the quality of service and connecting more users than ever before. This telephone company example is not an iso lated case, but is typical of the widespread accomplish ment of automation.

Better manUfacturing methods, improved parts, and more efficient distribution bring increasing varieties of commodi ties wi thin the purchasing power of all con sumers. Automation and its fruits are thus shared unless blocked by ill-advised labor contract restrictions or legis lative prohibitions and penalties. Machines and men together produce these fruits. The closer man works with tools the better his prospects for economic well-being. It is that simple. The transition from a 12-hour day to 10 and 8 and perhaps eventually to 6 should be the result of the voluntary choice of each per~ son. Historically, such reduction in hours is closely. tied to the availability and use of better tools and equipment. Primitive man, lacking tools, had to labor all of the day time hours and much of the night just to scratch out a bare minimum existence. A six-hour day certainly would have brought starvation to him and his family. With more and better tools, human operators can afford to work fewer hours. A person tends to work with diligence to provide to the best of his ability what he considers a proper and balanced living. If he can achieve these de sires in less time-through skills, and especially through better tools-he may no longer want to work the same number of hours as before, preferring additional leisure 78 JOHN C. SPARKS to enjoy more satisfying mixtures of physical, mental, cultural, and spiritual objectives.

To best achieve his evolutionary destiny, his Higher Consciousness, man must have the time and energy to reflect upon the spiritual and the philosophical. But such progress will not be forced through legislation. Man grows in spirit and in truth only according to his own determination. Less effort expended yields fewer fruits, no matter what the starting point used for comparison. An early Ameri can colonist would have reduced his purchasing power had he stopped working a quarter of his time. The same was true of Old Jim. And the same holds for a present day employee no matter how highly automated his job may be. The introduction of an electronic assembling machine in a factory, or of fertilizer in Jim's tomato patch, merely allows mankind to move toward better days. Condemning and interfering with such burden saving devices is scarcely what one should expect from the creature God has endowed with the twin potentials of intelligence and moral judgment.