Automation and Skills: A Love Story

McDonald’s, the world’s largest restaurant company, recently announced a strategic partnership with?IBM in an effort to accelerate the development of automated?drive-thru lanes at its restaurants. This should come as no surprise for those following the fast-food business in general, and McDonalds in particular. According to its most recent earnings report, the average wage at McDonalds-owned U.S. restaurants increased 15% on average this year, causing the chain to raise prices by over 6%.

In the context of short-term new cycles, this announced push into automation by McDonalds is happening against a backdrop of striking workers at Kellogg and Deere, as Amazon is facing pressure by activists to unionize, and the Great Resignation movement where millions of people, from frontline workers to senior executives, are shortsightedly quitting their jobs for varying frustrations or reasons.

In a slightly larger context, the move comes as companies across the country struggle mightily to fill skilled positions. Automation is also a response to the populist push across many states and the federal government for higher minimum wages, despite the stagnated productivity of most positions at that level of pay and the competitive challenges and, as in the case of McDonalds, the higher prices to consumers that such result from such heavy-handed changes.

Across virtually every industry, for forward-thinking companies who seek to retain or enhance their long-term competitive positioning and viability, automation is an important solution towards which many are gravitating. The idea that automation is bad for the economy because it replaces workers is a popular misconception, disseminated by the oft ill-informed (and predominantly unionized) American media. Automation substantially increases the number of higher-paying jobs (equipment design, build, programming, installation, and maintenance) while eliminating the lower-paying dead-end jobs currently filled by unskilled workers. This upheaval shines a light squarely on the importance of value-adding skills, as opposed to simple existence, attendance, and robot-like performance.

As hard-nosed as it sounds, every single employee at every level of every company is either a net positive or net negative for the business. This evaluation is essentially the net differential of the total economic and non-economic contributions and cost of the employee to the organization. Those who are net positive add value, while those who are net negative reduce value.

The minimum wage and other compensation laws (such as higher overtime pay), well-intended as they may be, assign an artificial value to the employee irrespective of the actual value that that employee adds to the company. Raising the minimum wage increases the pressure on the organization to extract additional value from the employee, which in the case of an unskilled worker, is too often value that does not exist. This is not meant to offend moral sensibilities – it’s simply factual. Avoiding this fact or demanding companies ignore it in the name of social engineering only exacerbates the innate problematic value equation of unskilled labor. And since businesses cannot responsibly operate while maintaining net negatives, those jobs in their current form will be eliminated. ?

But that in and of itself is not bad news. Entry-level jobs for unskilled workers are not – and have never been – intended to result in lifelong occupations at minimum wage. Too many companies make the mistake of treating entry-level positions as nothing more than revolving doors of temporary workers. Companies employing entry-level minimum-wage workers should focus on training them for skills that will enable upward mobility. This should not be viewed as an expense, but as a long-term investment, one that most businesses are comfortable making, providing the future benefits outweigh the short-term costs.

But the onus in not just on the employers. There are far too many employees who lack the understanding, discipline, or motivation to aggressively and enthusiastically pursue the development of skills necessary to provide the kind of value to employers that will justify higher wages. Employees have a responsibility to embrace training and continuously develop the skills that will provide value to their employers.

Perpetuating the myth that automation is harmful to the economy and to jobs is as insulting and as much a disservice to the workforce as is propagating the fiction that employment and continually rising wages are an innate right, regardless of value provided.

What can be automated, should be automated. To succeed and advance, employees must offer greater value -and a greater return – than machines. This requires skills, which differ from industry to industry, and which are continually shifting over time. The focus for each participant in the workforce, from youth until retirement, must be on the continuous development of skills. And the focus for each business needs to be on the pursuit of automation alongside the continuous training and upskilling of its workforce to provide the kind of enhanced value that not only justifies but demands increased compensation.?

Automation is an enabler and an ally, offering the promise of a more successful future for both businesses and their employees. It is delivering on that promise and achieving that future which poses the fundamental challenge for those same very businesses and their employees.