The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren't there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman's response: "Then why not use spoons instead of shovels?"
Businesses relentlessly look for ways to replace workers with machines. The machines get better and smarter. We go from spoons to shovels to excavators, not the other way around. The president calls this a structural issue—we usually call it progress.
But should we call this progress? In a sense it sounds like a deal with the devil. Replace workers with machines in the name of lower costs. Profits rise. Repeat. It's a wonder unemployment is only 9.1%. Shouldn't the economy put people ahead of profits?
Well, it does. The savings from higher productivity don't just go to the owners of the textile factory or the mega hen house who now have lower costs of doing business. Lower costs don't always mean higher profits. Or not for long. Those lower costs lead to lower prices as businesses compete with each other to appeal to consumers.
The result is a higher standard of living for consumers. The average worker has to work fewer and fewer hours to earn enough money to buy a dozen eggs or a pair of shoes or a flat-screen TV or a new car that's safer and gets better mileage than the cars of yesteryear. That higher standard of living comes from technology. It isn't just the rich who get cheaper TVs and cars, plus the convenience of using an ATM at midnight.