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Thursday, September 27, 2012

How Technological Advances in Automation Affect Unemployment

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When the word technology is mentioned, a vast majority of the population envision an increase in the level of society with innovative new advancements that will guide them into a new millennium and towards a positive, future economy. In order to achieve this level of economic welfare, growth is necessary. One of many aspects of economic growth calls for an increase in technology. Technological advances are important to any society to grow, big or small. However, not everyone shares this image of a glorious new future when the word technology is uttered. They see an image of a vast machine that replaces manpower and takes over their jobs. Massive assembly line machinery and a newer kind of automated technology self automated machines. Some examples are pay at the pump gas stations and self-checkouts. This paper will examine different types of automation; discuss how it affects unemployment and what that means to a full employment economy.


Automation is a system of manufacturing that is designed to more effectively perform certain tasks formerly done by humans, and to control sequences of operation without human intervention. This is used in the fields of aviation and communications as in automatic pilots and automated telephone switching equipment. Knowing how to get things done as quickly and as efficiently as possible can help any business succeed. In the 10’s the American auto industry was able to create an integrated system of production with the goal of an automated assembly line system which would lower the cost of making a car by lowering the number of workers to a minimum. This trend continues even today. Because of this, the fear of technology is just as prevalent today as it was in the 1880’s but it is less visible in today’s society which mostly only looks favorably on technological advancement.


Another form of automation designed in the advancement of a society is self automated equipment such as self-checkouts, pay at the pump gas stations, and atm machines. The bottom line for users here is control. Waiting in line, at least for now, is a fact of life�even in self-checkout lanes. But most customers do not mind waiting in line in a self-checkout lane because they want to check out their own items�even though most people are slower than cashiers and it might take longer the fact that they are doing it themselves and they are engaged, people tend not to notice. It is like seeking an alternate route during a traffic jam. The driver who sits in traffic often becomes frustrated. The driver who takes an alternate route may drive farther and longer, but is usually less annoyed. It is like seeking an alternate route during a traffic jam. The driver who sits in traffic often becomes frustrated. The driver who takes an alternate route may drive farther and longer, but is usually less annoyed because control is taken of the situation. Pay at the pump gas stations are just one of various types of self automated machines. Other examples are automated teller machines (ATM). A person is able to conduct his or her daily banking transactions without stepping foot into the bank and seeing a teller. The idea of control is that the customer is doing his or her own service, paying and leaving. This kind of technological advance is on the uprising in the United States, it is becoming more common everyday.


Unemployment is a normal occurrence in every society. Full employment sounds like a perfect term but it can include certain types of unemployment. Full employment does not mean that everyone is employed. In the United States, full employment is defined as, according to Irvin and Tucker, “when an economy operates at an unemployment rate equal to the sum of the friction and structural unemployment rates.” In other words, in a dynamic economy there will always be some amount of unemployment, when combined, gives the natural rate of unemployment caused by recession. The natural rate of unemployment is when unemployment is not affected directly by the business cycle. Unemployment is further categorized into three different types cyclical, frictional, and structural unemployment.


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The only type of unemployment that is not present during full employment is cyclical unemployment. Cyclical unemployment is unemployment caused by a drop in the level of economic activity. Recession occurs during this contraction phase of the business cycle. The foremost dramatic event that occurred was the Great Depression where there are fewer jobs available than workers. During the Great Depression, there was a lack of consumption causing a lack of production. With the lack of demand, came a lack for supply.


One of the two accepted types of unemployment during full employment is frictional unemployment. Frictional unemployment is only a temporary situation arising from the normal job search process. Many young people in search for their first job, temporary layoffs and unemployment between projects are just a few examples. There are other types of people that are considered frictionally unemployed. Among them are seasonal workers. Seasonal unemployment is when the person is currently not working due to seasonal activities, such as ski lodge employees in the summer or farmers during certain non-harvest seasons. There are also those who are transitionally unemployed, meaning the person is “in between jobs” is or is pursuing a new job opportunity and waiting for the new position to begin, this is all during a temporary, transitional time. Frictional unemployment is essentially unemployment that is temporary and usually is not cause for major concern. It actually helps the economy function more efficiently by allowing our economic system the ability of job options.


The next type of unemployment that is normal during full employment is structural unemployment. Structural unemployment is a result of organizational changes. Structural unemployment is caused due to the mismatch of the economys capital structure and the size of abundant labor force. Many people who are structurally unemployed do not have marketable skills and may face prolonged periods of unemployment. Structural unemployment is caused from changes in people’s tastes and/or new technology. Consumers’ tastes change throughout the years and it may have an affect on what items are produced. New technological advances may require new skills to operate them and produce certain new products that appeal to the masses.


Technological advancement has caused a shift in the demand for labor, from low skilled to high skilled labor. After this it becomes difficult for the displaced labor, i.e. low skilled employees, to acquire the demanded new skills because to do so would require massive amounts of reeducation which is likely too expensive. This has been called the structural unemployment debate or the technological unemployment debate. One side of this debate state that the technological change gives new rise to different compensation mechanisms which can create new jobs, and that these compensation mechanisms work smoothly and without any lags. While the other side claims that there is no guarantee that the compensation mechanisms can ensure full compensation of lost jobs at any time and under all conditions. In North America’s internationalized economy, it cannot be taken for granted that the new jobs that have been created by the labor-saving technologies will equal the number of jobs lost to the same technologies.


Some labor leaders and economists argue that automation causes unemployment and, if left unchecked, it will breed a vast army of unemployed that could disrupt the entire economy. The reason it has not been seen right now is that the growth in government-generated jobs and in the service industries has absorbed those who became unemployed due to automation. They believe that soon these industries will become saturated or the government-programs will be reduced and then the cost of automation will become apparent. Much of the fear of human-capital depreciation is grounded in the recent massive layoffs in the North American automobile and steel industries.


Another more apparent, direct cause of unemployment from automation is self serve type equipment where retailers are able to reduce man-hours. The latest phenomenon has caused a craze where customers provide free labor. Big retailers, especially grocery stores, have joined the bandwagon and created a new technological advancement in automation self-checkout. Self-checkout machines typically include a scanning device to read UPC bar codes on packaged items, a scale to weigh produce, a touch-screen monitor to guide consumers through the process with a menu (there are also synthesized voice prompts), a payment mechanism (credit card swiping device, cash and coin feeder) and a conveyor belt to carry goods to the bagging area. Customers scan their purchases (or look up prices on the screen for items such as produce) and place those items on the belt. Some systems have a security feature that will examine the dimensions of the item to make sure that what is placed on the belt was actually scanned and recorded. It is typically a four-lane setup and stores generally deploy one clerk to monitor the bank of self-checkout machines in order to train customers or bag items. With the reduction of man power, it creates unemployment. Arguably, self-checkout machines may also be helpful in providing better customer service by freeing up employees. For example, according to the current situation analysis for the University of Arizona Library, self-checkout machines will enable redeployment of staff, using librarians as a guide to information found both in the library and online and even creating workshops. The current situation analysis (CSA) is a process of collecting, analyzing, and reporting information that describes the current situation of the library, as well as anticipating changes in the future environment. The CSA is part of the cyclical strategic planning process that informs the library’s goals and objectives. It states that, ‘self-checkout units enable borrowers to record their own loans of books,” therefore alleviating the queues at the check out desk.


Some leaders and business executives’ claim that automation generates more jobs that in replaces. They point out that although some laborers may become unemployed many more will be employed in the industries producing the automated machinery. The computer industry is an example of this. However this also shows that the shift of labor from low skilled to high skilled is to be expected if automation continues. The future looks bright for consumers as prices plummet due to automation, but the future of the labors is much less unsure. Soon automated plants will be the norm and the workers that do remain will have to operate, and maintain the technologically advanced machines and will be required to have education and experience levels far above those workers that were forced to leave. The only workers that will be required in these very high tech plants will be maintenance engineers, electricians, and toolmakers, all of whom are necessary to keep the automated machinery in good operating order. The automated machines will do the rest of the work. Outside these advanced automated plants hundreds of thousands of blue-collar workers will be unemployed and since their skills will be


obsolete they will be unable to find any work. At this point a huge workforce will be available, and service industry employers will take advantage of this by lowering wages since the unemployed will take any job that they can find. Soon the blue-collar works will be working for next to nothing. Based on all the information available although the recent technological advancements have lowered the cost of goods for the consumer, the employees have been forced to attempt to look for new jobs or to remain unemployed and collect unemployment. It would seem that the problem of worker displacement will worsen steadily because of increasingly powerful information technologies that can now automate large segments of virtually ever kind of work (including lawyers, accountants, and physicians). It may destroy future employment opportunities because of the massive amount of retraining that would be needed.


Structural unemployment is caused directly by these new advances in technology. From automation in factory machinery to self automated, self serve technology, there will be some sort of man-hour reduction. Advances in technology encourages a better way of life and with this new technology comes the chance of a different type of labor.


Fears of technology first appeared in the early 1880’s in a group called the Luddites. These people were uneducated workers who destroyed textile machinery and other symbols of advancing technology because they believed that these technologies would take over their job and forces them out of the labor market. The early elements of automation where developed in the last half of the 18th century and were first discussed by British economist Adam Smith in his book Wealth of Nations in 1776. This resulted in the division of labor to increase production and allowed a reduction in the level of skills required of workers. Then mechanization was the next step for ‘technological advancement’ which created machines that duplicated the motions of workers.


In order to determine how technological automation affects the economy, one must examine it from the several, different prospectives. If speaking only about the unemployment rate then technological advances in automation affects the unemployment rate by increasing the number of unemployed people. Automation causes loss of jobs and fewer needed man-hours. However, if looking from an economist’s point of view on the literal definition for full employment, structural unemployment is part of the natural rate of unemployment. Therefore, even though advances in technology, by creating more automation processes, increase the rate of unemployment, it does not affect the full employment status of the economy. Structural unemployment is required for the essential growth of any strong economic system.





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