DOCUMENT RESUME - ERIC · DOCUMENT RESUME. 1. ED 022 906. VT 005 795. STATEMENTS RELATING TO TEE IMPACT OF TECHNOLOGICAL CHANGE. TECHNOLOGY AND THE AMERICAN ECONOMY, APPENDIX VOLUME

1DOCUMENT RESUME

ED 022 906 VT 005 795STATEMENTS RELATING TO TEE IMPACT OF TECHNOLOGICAL CHANGE. TECHNOLOGY AND THE AMERICAN

ECONOMY, APPENDIX VOLUME VI.National Commission on Technology, Automation and Economic Progress, Washington, D.C.Pub Date Feb 66Note- 242p.Available from-Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 (GPOY3.T22- -2T22/App/VI, $1.50)

EDRS Price MF-$1.00 HC Not Available from MRS.Descri tors-*AUTOMATION, *BUSINESS, ECONOMIC DISADVANTAGEMENT, EMPLOYMENT, *INDUSTRY,

INSU(ANCE COMPANIES, *LABOR UNIONS, MANUFACTURING INDUSTRY, PUBLIC POLICY, STEEL INDUSTRY,*TECI-INOLOGICAL ADVANCEMENT, TELEPHONE COMMUNICATIONS INDUSTRY, UNEMPLOYMENT

Forty-seven statements by industrial and business spoke-zrnen, union andassociation representatives, and professors concern the broad impact oftechnological change on individuals, establishments, and society in general. Some of thelonger presentations are (3) "The Poverty and Unemployment Crisis," by WalterBuckingham, (2) "Technological Change-Past and Present," by Clyde E. Dankert, (3)"Automation--Its Impact on Employment and Unemployment," by the General ElectricCompany, (4) "Automation--A Position Paper," by the International Chemical WorkersUnion, (5) 'Role and Pace of Technological Change," by the Metropolitan Life InsuranceCompany, (6) "The Impact of Automation on American Unionism and Its PossibleConsequences," by Julius Rezler, and (7) "Automation-Promise and Problems," by theUnited Mine Workers of America. Other appendixes to VT 003 962 are VT 003 960, VT003 961, and VT 005 794-VT 005 797. (EM)

s TATF m. FN. ors

RELATING TO THE IMPACTOF TECHNOLOGICAL CHANGE

Appendix Volume VI

TECHNOLOGY AND THE AMERICAN ECONOMY,

The Report of the Commission

Prepared for the National Commission on Technology, Automation,and Economic Progress February 1966

ED 022906LoN

Ii

U.S. DEPARTMENi OF HEALTH, EDUCATION & WELFARE

OFFICE OF EDUCATION

THIS DOCUMENT HAS BEEN REPRODUCED EXACTLY AS RECEIVED FROM THE

PERSON OR ORGANIZATION ORIGINATING IT. POINTS OF VIEW OR OPINIONS

STATED DO NOT NECESSARILY REPRESENT OFFICIAL OFFICE OF EDUCATION

POSITION OR POLICY.

STATEMENTSRELATING TO THE IMPACTOF CHNOLOGICAL CHANGE

IAppendix Volume VI

' TECHNOLOGY AND THE AMERICAN ECONOMY,

I The Report of the Commission

Prepared for the National Commission on Technology, Automation,and Economic Progress February 1966

For sale by the Superintendent of Documents, U.S. Government Printing OfficeWashington, D.C., 20102 - Price $1.50 /

NATIONAL COMMISSION ON TECHNOLOGY, AUTOMATION, AND ECONOMIC PROGRESS

MEMBERSHIP IN THECOMMISSION

BENJAMIN AARONJOSEPH A. BEIRNEDANIEL BELLHOWARD R. BOWEN, ChairmanPATRICK E. HAGGERTYALBERT J. HAYESANNA ROSENBERG HOFFMANEDWIN H. LANDWALTER P. REUTHERROBERT H. RYANROBERT M. SOLOWPHILIP SPORNTHOMAS J. WATSON, JR.1WHITNEY M. YOUNG, JR.

MEMBERSHIP IN THE INTER-AGENCY ADVISORY COMMITTEE

GARDNER ACKLEYJOHN T. CONNOR, CochairmanWILLIAM C. FOSTERORVILLE L. FREEMANJOHN W. GARDNER2DONALD F. HORNIGROBERT S. McNAMARAGLENN T. SEABORGJAMES E. WEBBW. WILLARD WIRTZ, Cochairman

1 Appointed July 31, 1965, following the death of John I. Snyder, Jr.2 Appointed Aug. 18, 1965, following the resignation of Anthony J. Celebrezze.

iii

STAFF OF THE COMMISSION

Garth L. Mangum, Executive SecretaryFrazier Kellogg, Deputy Executive Secretary for Manpower and Employment

William D. Drake, Deputy Executive Secretary for Technology

Senior Staff AnalystsPeter E. HaaseArnold L. NemoreR. Thayne Robson

Charlesana BriggsW. Scott ButcherOpal M. ChurchCheryl E. Finnell

iv

Professional Staff

Staff AnalystsG. Randolph ComstockJohn W. Ferris, Jr.Robert J. FlanaganMarte KornegayJoseph P. Newhouse

Administrative and Clerical StaffWilliam W. Brazeal, Jr., Administrative Officer

Elois KingCecelia A. LatimerMartha S. MetheeBetty C. Mullins

Editorial Consultant, Judith Huxley

Barbara PedersenGlenda S. SamsOphelia Wilson

PREFACE

This is the sixth of six appendix volumes of Technology and the American Economy, the reportof the National Commission on Technology, Automation, and Economic Progress. The full seriesof appendix volumes is as follows:

I. The Outlook for Technological 'Zhange

II. The Employment Impact of Technological Change

III. Adjusting to ChangeIV. Educational Implications of Technological Change

V. Applying Technology to Unmet Needs

VI. Statements Relating to the Impact of Technological ChangeThe first five volumes contain studies prepared for the Commission. This appendix volume

consists of a group of statements by various interested organizations and individuals in responseto a request from the Commission for their views on the impact of technological change. Thoughthe Commission does not necessarily endorse the information and views presented here, it con-siders them of sufficient value to have directed their publication. The statements were writtenbetween June and December of 1965, which accounts for occasional discrepancies in data.

A number of the responses are not included in this volume. In several instances, respondentsasked that their replies be kept confidential. Pertinent articles and speeches which have beenpublished elsewhere were also omitted, as were a number of very brief replies.

The Commission found these materials most helpful in its deliberations and wishes to expressits gratitude to all who replied to its query.

This volume was edited and prepared for publication by Judith Huxley.

Garth L. Mangum,Executive Secretary.

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PrefaceNames of staff meml,ersNames of Commission members iii

Commission's letter requesting statemAir Line Pilots Association 3American Federation of State, County, and Municipal EmployeesAmerican Iron and Steel Institute

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Page

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American Society of Tool and Manufacturing Engineers 23

Association of American Railroads 27

Automobile Manufacturers Association 31

Bell Telephone Laboratories 39

Walter Buckingham 43/Building Service Employees' International Union 55

Burroughs Corporation 61

Clyde E. Dankert 67/Edison Electric Institute 79

FMC Corporation 85

General Electric Company 89

General Foods Corporation 109

General Telephone and Electronics Corporation 113

Honeywell, Inc. 119

Inland Steel Company 123

International Brotherhood of Pulp, Sulphite, and Paper Mill Workers 127 ,

International Chemical Workers Union 135 -

International Longshoreman's Association 149

International Union of Mine, Mill, and Smelter Workers 157

John Hancock Mutual Life Insurance Company 161

Raymond H. Kahn, M.D. 165

Lockheed Aircraft Corporation 169

P. R. Mallory & Co., Inc. 173

McGraw-Hill, Inc. 177

Metropolitan Life Insurance Company 181

National Association of Manufacturers 189

National Farmers Union 201

National Marine Engineers' Beneficial Association 205

National Tool, Die, and Precision Machining Association 209

North American Aviation, Inc. 217

Northwestern Mutual Life Insurance Company 225

Office Employes International Union 233

Radio Corporation of America 239

Retail Clerks International Association 245

Julius Rezler 253

Standard Oil Company of New Jersey 261

Socony Mobil Oil Company, Inc. 265

Swift & Company 269

The Equitable Life Assurance Society of the United States 273

The Prudential Insurance Company of America 277

United Air Lines 281

United Federation of Postal Clerks, AFL-CIO 285

United Mine Workers of America 293

Xerox Corporation 303

vii

OTHER APPENDIX VOLUMES PRINTED UNDER SEPARATE COVER

I. The Outlook for Technological Change

II. The Employment Impact of Technological Change

TH. Adjusting to Change

IV. Educational Implications of Technological Change

V. Applying Technology to Unmet Needs

Commission's Letter Requesting StatementsThe National Commission on Technology, Automation, and Economic Progress was

established by Public Law 88-444 and directed to report to the President and Con-gress by January 1, 1966 on an unusually wide range of issues relating to the impactof technological change upon our economy and society.

The mandate to the Commission is as follows :

(a) Identify and assess the past effects and the current and prospective role and pace oftechnological change;

(b) Identify and descObe the impact of technological and economic change on productionand employment, including new job requirements and the major types of worker displacement,both technological and economic, which are likely to occur during the next 10 years; thespecific industries, occupations, and geographic areas which are most likely to be involved; andthe social and economic effects of these developments on the Nation's economy, manpower, com-munities, families, social structure, and human values;

(c) Define those areas of unmet community and human needs toward which application ofnew technologies might most effectively be directed, encompassing an examination of tech-nological developments that have occurred in recent years, including those resulting from theFederal Government's research and development program ;

(d) Assess the most effective means for channeling new technologies into promising direc-tions, including civilian industries where accelerated technological advancements will yieldgeneral benefits, and assess the proper relationship between governmental and private invest-ment in the application of new technologies to large-scale human and community needs;

(e) Recommend, in addition to those actions which are the responsibility of managementand labor, specific administrative and legislative steps which it believes should be taken by theFederal, State, and local governments in meeting their responsibilities (1) to support andpromote technological change in the interest of continued economic growth and improvedwell-being of our people, (2) to continue and adopt measures which will facilitate occupationaladjustment and geographical mobility, and (3) to share the costs and help prevent and alle-viate the adverse impact of change on displaced workers.

As you can see, the mandate is very comprehensive. The Commission cannot hope

to successfully accomplish its assignment in the brief time available without theassistance of knowledgeable persons in industry, labor, and the imiversities. Sinceextensive hearings are not possible, we invite your opinions or statements on theissues that are quoted above. In the event you wish your reply to be treated asconfidential, we would do so. However, with your permission, we are consideringhaving these statements published separately by the Commission.

Your response to this request can be a valuable contribution to the work of thisCommission. We would be happy to receive anything you care to contribute withwhatever evidence you are able to provide, and assure you that your reply will becarefully studied by members of the Commission and the staff.

Sincerely yours,

Garth L. MangumExecutive Secretary

1

STATEMENT

Prepared for the Commissionby the

Air Line Pilots Association

Chicago, Illinois

Statement by the Air Line Pilots AssociationThe following comments are confined to the

air transport phase of the aviation industry asit applies to flight deck operating crew membersemployed in common carriage air transporta-tion and relatea to the people we represent inthis industry.

We cannot answer the questions posed inyour letter in the true sense for which theyare intended and the general application withwhich automation is generally looked upon.The activ ities associated with the flight deckoperating crew, or for that matter the cabincrew, are not generally adaptable to a _to/nationwithin its general sense of reference. By andlarge, this industry could use more automationwhen and if it is technically feasible withoutits having any effect on the number of personsemployed to perform the service.

The nature of this industry is such that anyautomatic devices or equipment must adhereto a fail-safe philosophy in order to be accept-able from a purely safety standpoint. As an ex-ample, the automatic pilot is a device whichh as the capability of flying the airplale withincertain regimes of flight. However, it must havefail-safe characteristic limits established overwhich it cannot exercise excessive control. Itmust also have instantaneous disconnect inorder that the human pilot can continue to fly

the aircraft with the automatic pilot discon-nected from the control functions. These re-quirements are necessary so that excessive loadsnot be imposed on the aircraft during theregime of high speed flight to avoid destructivestructural failures on the aircraft or itscomponents.

Automation, as suck when and if establishedwithin the foreseeable future, will enable theindustry to operate with lower weather mini-mums than are presently foreseeable. This willnot result in a reduced number of personnel.required to operate the aircraft.

This industry, by and laxge, has been agrowth industry over its entire period of ex-istence with only a few leveling out periods,resulting in a steady increase rather than de-crease in total employment. The air carrierindustry within the United States and the U. S.carriers operating foreign service perform com-plete service requirements with a flight crewcomplement of slightly less than 24,000 people.So, in sofar as flight deck crew members arecon cerned, this industry is a relatively smallportion of the total work force, particularlywhen one considers the total public service ren-dered in terms of passenger miles and cargo tonmiles flown.

5

STATEMENT


American Federation of State, County, and

Municipal Employees

Washington, D.C.

Statement by the American Federation of State,Count'', and Municipal Employees

AUTOMATION

In November of 1965, Jerry Wurr, presidentof the American Federation of State, County,and Municipal Employees, told a seminar at theNew School for Social Research in New York :"While the threat of automation to destroy jobscertainly exists in some sectors of the economy,that will not be the case in local government."This statement is substantiated by a survey onautomation conducted by the Education and Re-search Department of AFSCME.

7:a order to determine the extent and effectof automation in State and local government,the department conducted a survey. Question-naires were sent to various State, county, andlocal agencies and to union councils.

The department was primarily interested inhow many agencies had implemented electronicdata processing (EDP) and what their experi-ence was in regard to increases or decreases inemployment because of EDP, retraining ofworkers to operate new equipment, types oftraining, and the fate of displaced employees.This information was then used to determinewhat courses of action are required to protectthe jobs and status of the union membership.

The results of the survey showed the fol-lowing:

In one form or another 63.7 percent of theagencies responding had installed EDP sys-tems. The size of the operations varied fromdepartments employing four or five people todepartments employing several thousand. Theremaining 36.3 percent of the agencies whichanswered the questionnaire were not presentlyoperating EDP systems, but many were con-templating the use of EDP in the future.

Of the agencies using EDP, 44.2 percentshowed an increase in the number of employeesafter the systems were installed. The level ofemployment in 38.5 percent stayed the same,while only 17.3 percent claimed that employ-ment had decreased. In order to determineoverall employment increases, the total person-nel in all agencies before and after EDP wascompared. Employment increased by about17.3 percent while overall displacementsamounted to approximately 1.0 percent.

The fates of the displaced 1.0 percent are asfollows (in percent) :

Retired 1.3Placed in jobs outside .3Laid off or voluntarily quit 6.5Downgraded 6.5Reassigned 21.2Promoted 64.2

In most agencies employees were retrained tofill the newly operated positions. The respond-ents in 55.8 percent of the cases indicated theyhad definite programs for retraining workers.The other 44.2 percent had no such programsand approached the situation in a hit-and-missfashion. It was in the latter cases that trainedEDP operators were often brought in from theoutside, displacing other employees. (The valueof a formulated workable retraining programcannot be underestimated.)

An Example of a problem-free conversion toautomation was the Michigan Liquor ControlCommission. The commission installed itsEDP system in August 1964. Before automa-tion the department employed 24 people 23 ofthem were retrained for EDP. The person notretrained was reassigned to another departmentwithout loss in grade or pay. From the outsidelabor market four people were hired, bringingthe total for the department to 27. In thiscase the conversion to EDP was made with aminimum of inconvenience, but in large part,this was the result of joint consultationswhich worked out all pmblems prior to EDPinstallation.

A less desirable situation exists in Mult-nomah County, Oregon. There, the implemen-tation of EDP has existed for some time. Un-der the laws of Oregon there is a provision thatallows machinery to be set up which would rec-ognize unions as the bargaining agents for civilservants in classified positions. The law, how-ever, does not apply to temporary employeos.Consequently, there are many employees doingthe same work as classified personnel, but whohold only temporary status.

The reason for this plight is that manage-9

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10 STATEMENTS: IMPACT OF TECHNOLOGICAL CHANGE

ment is fearful of the effects EDP will have onemployment. Rather than be faced with theprospect of having to lay off permanent em-ployees, management's conscience is eased bykeeping an army of temporary workers. Shouldthe need arise for layoffs, the temporaries canbe terminated with no repercussions. It is ob-vious management is exploiting a weakness inthe Oregon law. The employers realize that ifall the employees were permanent and wererepresented by an authorized union, such apractice would not be tolerated.

The effect has been for the workers to live ina state of limbo, always fearful of the day theywill be thrown out of a job.. The situationshould not have been allowed to deteriorate tothe state it is in now. By establishing a jointconsultation committee the problem could havebeen averted.

These cases are shown as examples of theway conversion to EDP should and should notbe managed. In the survey there were manycases which fell in between the two cited. Thefollowing section provides the means by whichthe union can help eliminate the adverse condi-tions of automation.

Union Role in Automation

Through the realization that automation can-not be prevented, the union can best help itsmembership by making every effort to alleviatepotential fears the employees may have. Thiscan best be done through negotiations.

Where possible, provisions should be writteninto agreements or laws which would causeemployers to inform and educate workers aboutchanges to be made. The most effective way topromote the interests of employees is throughjoint consultation committees. The commit-tees should consist of representatives of man-agement and the union. These representativesshould have authority to make decisions con-cerning the methods and procedures by whichthe conversion to EDP will take place. For thejoint consultations to be successful, it is imper-ative that meetings be held far enough in ad-vance of a change, so discussions and decisionswill be constructive and meaningful.

Areas of Negotiation and/or joint Settlement

Training. It is often more expedient for em-ployers to hire experienced personnel fromwithout than to retrain employees from theexisting work force. Although EDP requiresnew skills, most of them can be acquired bypresent personnel through training. It is essen-tial to the stability of the union membership(and incumbent employees) that the present

work force be given the first opportunity to fillnewly created positions.

A problem involving seniority may arise inthe selection of personnel to be trained. Eventhough ability is necessary, seniority is thebasis on which those qualified should be selected.

It is also important to establish what type oftraining is to be given and who is to pay for it.There are any number of training programswhich can be set up. Some State and local gov-ernments have their own on-the-job trainingprograms. Others use the programs providedby the EDP equipment manufacturer. One ofthe most overlooked but accessible trainingprograms is that provided by the Federal Man-power Development and Training Act underthe U.S. Department of Labor, Bureau ofApprenticeship and Training.

Displaced Workers. If workers must be dis-placed, it is necessary that they be placed inother jobs commensurate with their presentpositions. All attempts should be made to getthem reassigned or promoted. If this is notpossible, they should be aided in finding otherwork outside the government. They are en-titled to all the help which can be given inorder to maintain their economic status.

Liberal severance allowances and continua-tion of fringe benefits are items which arenegotiable. Also, if moving expenses are in-volved when people change jobs, arrangementsshould be made whereby the employer pays thecosts.

Safety and Working Conditions. EDP meansmachinery, and where machinery is being usedspecial rules must be established to protectworkers from injury. Unions, through safetycommittees, should study all danger possibilitiesand see that an effective safety program isinitiated.

Special work surroundings also are some-times required with EDP. For instance, areaswhere computers are placed sometimes requiretemperatures to remain at a level which is un-comfortable for people. Better lighting maybe needed. Th.ese are some of the kinds of con-ditions which must be dealt with and satisfied.

Economic Effects of Technological Change

There is no doubt that automation increasesefficiency, raises production, and frees peoplefrom dull routine. This is salutary, but toooften it not only frees people from the dullroutine of a particular job, it frees them to nojob at all. Therefore, in spite of the "advan-tages" of automation, if those adversely affectedwere given the alternatives of a dull job or no

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STATE, COUNTY, AND MUNICIPAL EMPLOYEES 11

job at all, it is not hard to see which they wouldchoose.

It has been said that society has chosen tech-nological change as a means to gain a fuller andmore varied life away from the job. This is apeculiar assumption. Society does notnordoes it have the continuity of interests to.make such decisions. The decisions aye madesingularly by those seeking higher profitsand/or lower costs. The human considerationsinvolved in such decisions are given secondarystatus and at times appear to be nonexistent.

As in all instances of technological change,its effects permeate the whole social systembefore they are fully realized. Although there isno need to elaborate on the fate of the coalminers and their experience with automation,we must face the fact that we have not yetfound a satisfactory way to deal with such sit-uations. Whole communities are still feelingthe economic squeeze which can be laid toautomation. The competition for the diminish-ing supply of unskilled and semiskilled jobs isoverwhelming. There is nowhere for many toturn except to charity and welfare.

The argument of whose responsibility it isto protect society from the ravaging effects ofautomation still goes on. Nobody wants to paythe costs ; but how can we afford not to?

There are many who argue that the powersthat control the wheels of progress and offerthe great promises that-, automation can bringshould pay the whole cost. This is not en-

tirely true. However, let them make sure thatthose who must bear the costs at least share inthe benefits derived from change.

The Federal, State and local governments,which are often the villains of automation, arebest si tuated to be the heros. They are by farbest a dapted to establish training programs,coordinate labor supply and demand, and,where practical, create jobs. There are manyneeds for conservation, recreation, beautifica-tion, and highway programs at all levels ofgovernment. However, for there to be enoughof this type of program to be effective, thepoliticians are going to have to show more in-testinal fortitude and imagination than theyhave up to now.

Unions are the catalyst which can start thecauldron boiling. By providing resistance tothe adverse effects of automation, they are wak-ing society to the injustices which have pre-vailed. Furthermore, they are furnishingmany of the ideas and methods which will giverelief and equity to the victims of automation.

Individuals, as members of society, also havetheir role to play. With the effects of automa-tion obvious to all, it is imperative that indi-viduals begin to realize that they too have acontribution to make. The most effective giftthey can give is to upgrade their skills in orderto keep abreast with progress and change. Notall can do this without help. However, throughthe cooperative efforts of unions, business, andgovernments, they should be given everyopportunity.

_

STATEMENT


American Iron and Steel InstituteNew York, New York

Statement by theAmerican Iron and Steel Institute

Technological Change and Employmentin the Steel Industry

In the public debate over the impact andrapidity of technological change, the steel in-dustry has received a good deal of attention.Starting with somewhat exaggerated notionsabout the implications of the introduction ofbasic oxygen furnaces for steelmaking and"automated" rolling mills for steel processingand the downward trend in steel employmentover the last decade, some people have conjuredup a picture of future employment opportuni-ties in steel nearly as bleak as that in bitumi-nous coal mining. As only one example of this,the president of United Steelworkers of Amer-ica, Mr. Abel, has said that if all steel producedin the United States were made in plants em-ploying the most up-to-date available equip-ment, our total annual requirements could bemet with a mere 100,000 production and main-tenance employees instead of the present500,000.1

Since, to a large segment of the public, steelis symbolic of basic industry, and developmentsin the steel industry attract attention out of allproportion to its actual impact on the economy,it is important that the Conunission have abalanced view of both current and futuretechnology and employment in steel.

1. Rates of Technological Change

There is no direct measure of the overall rateof technological advance in steel or any otherindustry. However, since one effect of chang-ing technology is a reduction in unit manpowerrequirements, changes in output per man-hourreflect technological as well as other changes.Over fairly long periods, the average rate ofchange in output per man-hour is a reasonablygood indirect indicator of the rate of techno-logical advance.

During the last 25 years, the average annualincrease in output per hour worked by all em-ployees in steel has been on the order of 2 per-cent (see table 1).2 As would be expected in anindustry characterized by wide cyclical varia-tions, short-term changes have departed sharply

TABLE 1. STEEL SHIPMENTS PER 1,000 MAN-HOURS(ALL EMPLOYEES), 1940-64

YearShipments per

thousand man-hours

1940 46.91941 52.91942 51.01943 49.51944 49.71945 48.31946 48.81947 54.01948 54.11949 54.11950 59.51951 58.71952 57.21953 59.61954 56.51955 65.91956 66.01957 65.81958 61.01959 69.21960 65.51961 65.81962 70.01963 78.81964 76.2

Source: Annual Statistical Report, AISI, 1964.

from that trend, but there is no evidence of apronounced, sustained change in the rate ofincrease. During the period 1940-47, the aver-age annual gain was 2.1 percent ; between 1947and 1957, it was just under 2 percent ; and from1957 to 1964, it was 2.2 percent. It is worthyof mention that the new Bureau of Labor Sta-tistics series based on weighted production andBLS man-hours shows a similar rate of gain(2.4 percent) during the period 1957-64.3 Itshould also be noted that in recent years, out-put measures have been affeeted by the growingtendency toward higher strength and lightersteels and more finishing operations on productsin the producing plant. That effect is especiallyimportant to unweighted measures, such as

1Inaugural message reported in Steel Labor, June 1965, p. 6.2 BLS had a continuous series applying to production woricers

only for the period 1939-57. Its present series using modern productweights and man-hours of all employees engaged in the manufactureand sale of steel mill producth begins with 1957. For long-termcomparisons, therefore, it is necessary to use AISI net shipmentsand man-hours worked data.

3"Indexes of Output per Man-Hour--Steel Industry, 1957-68,"BLS, Nov. 1964, and subsequent releases.

15


ingot production and shipments, but it hi pres-ent also in the BLS weighted output series sincethat depends on fixed man-hour weights whichremain unchanged for considerable periods.

In passing, it should be noted that the av er-age rates shown by AISI and BLS data for thelast 7 years are considerably below the rateestimated by the Council of Economic Advisers"after correction for variations in operatingrates," to be "about 3 percent per year" 4 Adiscussion of the questionable validity, of theCouncil's "corrections" and, therefore, the rateitself would not be germane to this report.5However, it is important to keep in mind thatthe Cnuncil's estimate does not cover a ay periodprior to 1957. Thus, it does not shed any lighton the claim that the rate of increase has ac-celerated in recent years. Available evidenceindicates the contrary.

2. Factors Limiting Acceleration of Techno-logical Change

Steel's comparatively low rate of increase inoutput per man-hour and the remarkable uni-formity of that rate over long periods are notwhat a reader of popular accounts of dramaticchanges in steel manufacturing processes wouldexpect. However, they are quite consistentwith the realities of introducing technologicalchanges into an industry like steel.

Capital investment is high in steel relative torevenues and employment. For example, interms of capital invested per production worker,steel ranked above all other major manufactur-ing industries, except tobacco, chemicals, and

TABLE 2. COMPARISON OF STEEL INDUSTRY RETURNON NET WORTH WITH AVERAGE RATE OF RETURN

FOR LEADING MANUFACTURING INDUSTRIES

Year

Steelindustry(percent)

Leadingmanufacturing

industries(percent)

Steelindustry

rank

Number ofmanufacturing

industries

1940 8.5 10.3 82 461941 9.6 12.4 40 441942 6.5 10.1 46 451943 5.6 9.9 48 441944 6.2 9.8 44 451946 5.0 9.1 44 451946 7.5 12.1 41 451947 11.3 17.0 42 451948 14.0 18.9 88 461949 11.5 13.8 24 451950 16.8 17.1 28 451951 12.8 14.4 25 461952 8.8 12.3 86 461958 11.6 12.5 21 461954 9.4, 12.4 32 461955 16.2 15.0 14 411956 18.9 18.9 17 411957 13.2 12.8 17 411968 8.2 9.8 27 411959 8.4 11.7 35 411960 7.8 10.6 29 411961 6.4 9.9 88 411962 5.4 10.9 41 411963 7.3 11.6 37 411964 9.2 12.7 86 41

Source: Monthly Letters. First National City Bank. Any. issues.

petroleum, in 1960.° Major changes in tech-nology, therefore, require very large amountsof capital funds, but steel's return on invest-ment has been below that of all but a few othermanufacturing industries for many years (seetable 2) ? Heavy capital requirements andcomparatively low rates of capital generationhaye limitad tha ropiaity with whiPh nAw toich-nology can be developed and applied to steeloperations.

Another factor which has exerted a dampen-ing influence on steel's ability to adopt newtechnioues is the failure of steel demand togrow a = fast as the economy as a whole. Rela-tive to teal GNP, P7.varent steel consumption(in ',.,..rms of ingot equivalent) in the 1960-64period was about 5 percent below the level of1945-49 and about : percent below the levelattained in the periu.i 1955-59 which includedthe capital goods boom. Per capita consump-tion shows a somewhat better picture, the aver-age for 1960-64 being about 20 percent abovethat of 1945-49. However, average per capitaconsumption has not changed over the last

TABLE 3a. COMPARISON OF STEEL INGOT PRODUCTION,POPULATION AND GROSS NATIONAL PRODUCT

(CONSTANT DOLLARS)

YearIngot production

(net tons)

Popuiation (includingArmed Forces abroad)

(thousands)

GNP in constantdollars (billions

1968 dollars)

1940 66,982,686 132,694 227.21941 82,839,269 183,894 268.71942 86,031,931 135,861 297.81943 88,836,612 131,260 387.21944 89,641,600 138,916 36181946 79,701,648 140,468 865.41946 66,602,724 141,936 812.61947 84,894,071 144,698 809.91948 83,640,470 147,208 323.71949 77,978,176 149,767 824.11960 96,836,076 152,271 865.81951 105,199.848 154,878 888.41962 93,168,089 157,568 896.11963 111,609,719 160,184 412.81964 88,311,652 168,026 407.01956 117,036,085 166,931 438.01966 115,216,149 168,908 446.11957 112,714,996 171,984 452.51968 86,264,886 174,882 447.81969 93,446,132 177,830 475.91960 99,281,601 180,684 487.81961 98,014,492 183,756 497.81962 98,327,786 186,656 580.01963 109,260,949 189,417 560.01964 127,075,767 192,119 577.6

Source: Ingot productibn: Annual Statistical Report, AISI, 1964;Population: Statistical Abstract USA, 1965, U.S. Dept. of Com-merce; and GNP: Survey of Current Business, U.S. Dept. of Com-merce, Aug. 1966, table 2.

I4 Report to the President on Steel Prices, Apr. 1965, PP. 44-46.5 An analysis of that report and particularly the Council's esti-

mates of increases in output per man-bour is found in JulesBackman's Steel Prices, the Steel Industm and the National Econ.only issued by Republic Steel Corporation in July 1965. See espe-cially pp. 49-66.

41 The Economic Almanac, 1964, Conference Board, p. 273; AnnualStatistical Report, AISI, 1960, pp. 18-14. The average for allmanufacturing was $18,227 and for steel, $26,780. Since capitalequipment in steel is comparatively long-lived, the book value ofsteel assets represents a smaller proportion of current value thanis the cafe in manufacturing industries generally.

7 Steel equaled the average for manufacturing in 1966 und ex-ceeded it in 1965 and 1957 by fraction!' of percentage pointa. Ithas been below the average in all others of the last 25 years.

AMERICAN IRON AND STEEL INSTITUTE 17

TABLE 3b. Ar. RAGE ESTIMATED STEEL CONSUMPTIONIN INGOT TON'S PER MILLION DOLLARS OF REAL GNP

AND IN POUNDS PER CAPITA

lApparent consumption relative to

Year Real GNP Population

1945-491950-54 11955-591960-64

2,1782,4782,2622,069

9761,2261,1901,178

1 Affeci ad by the Korean war.Sources: Real GNP : Survey cf Current Business, Aug. 1965;

population : Statistical Abstract USA, 1965; and steel consumption:computed from Annual Statistical Report, AISI, 1964.

decade (see tables 3a and 3b). Thus steel usehas been growing less rapidly than the economyas a whole and about as fast as the population.Those recent consumption figures are, of course,adversely affected by the growing tendencytoward higher strength and lighter weight steelproducts. Domestic steel production has doneless well over the last 5 years than those com-parisons indicate because of the rise in imports.Over the period 1960-64, imports accounted for6 percent of domestic consumption, rising from4.7 percent in 1960 to 7.3 percent in 1964 andnearly 10 percent in the first half of this year.

Within the period 1960-64, there was amarked increase in steel consumption. If pres-ent economic conditions continue, demand forsteel products may be expected to rise at leastas fast as the population, although probably notas rapidly as real GNP.

Perhaps the most important deterrent towidespread adoption of new techniques arosefrom events in the first postwar decade. Theincrease in steel demand relative to GNP andto the population during the first decade afterWorld War II led to large capital expendituresdesigned primarily to increase capacity. Thesubsequent decline in steel output and publicconcern over excess steelmaking facilities havetended to make people forget the pressuresboth public and privateupon the industry toincrease output during the late 1940's and early1950's. Response to those pressures and to theevidence of a rapid rise in the economy's steelrequirements resulted in the retention and im-provement of facilities which ordinarily wouldhave been abandoned and the large-scale con-struction of facilities embodying well-testedtechnology. lt should be recalled that at thistime, the technological developments which areso proyMnent nownotably ore pelletizing, thebasic oxygen furnace, and continuous castingwere in very early stages of development andhad not come into commercial use anywhere.The atmosphere was such as to discourage theadoption of untried techniques which wouldhave made rapid increases in capacity less cer-tain. In consequence, the abrupt dropoff indemand for steel which occurred after the mid-

dle 1950's found the industry with enormouscapacity, much of it recently built and verylittle of it embodying new technology. Thatoverhang affected the rate of technologicalchange in the next decade. Money was scarce;demand, although generally lower, was ex-tremely irregular with very high peaks in early1959, 1960, 1962, and 1963 ; and the futuretrend of steel demand was uncertain.

Under even the best economic conditions,however, large, secular increases in the overallrate of technological advance and, therefore,the rate of increase in output per man-hour, areunlikely. Most steel production takes place onan enormous scale and involves a very highdegree of integration among processes. Theintroduction of a new technique requires notonly that the process must be tested sufficientlyto ensure its success in large-scale operationbut also that it fit in properly with existingfacilities. Developing even the most promisingideas to that stage is slow and expensive.

The adaptation of the oxygen steelmakingprocess to conditions existing in this country isan instructive example. Developed in Europeafter World Wez II under highly special condi .tionsthe need to replace worn-out or devas-tated equipment, small-scale operations, and theuse of high-phosphorous iron oresit was agreat success. Adapting it to conditions in theUnited States, however, involved formidableproblems. In fact, the Europeans who firstused it commercially predicted that furnaceslarger than about 70 tons could not be builtsuccessfully. A unit of that size could not beused economically by a major steel producer inthe United States as a substitute for efficientand only partially depreciated open hearths.Even in this country it was believed by somereputable scientists outside the steel industrythat the rate of oxygen flow required in a vesselroughly 4 times the size of those operatingsuccessfully in Europe was impossible ofachievement. In fact, the management ofJones and Laughlin was so advised on the eveof the startup of its first 230-ton units.8 Thissort of experience is not unusual. What workswell in a laboratory or in small operations maynot.work at all or may work only after the mostpainstaking and painful research and develop-ment effort in operations on the scale requiredby the larger steel companies.

Another limiting factor frequently overlookedis the ability of engineering organizations andthe makers of large equipment to supply theplans and equipment for newly developed facili-ties. There are never at any one time very

Transcript of testimony of William J. Stephens, president, beforethe Trade Information Committee, Feb. 19, 1964, vol. 40; pages notnumbered.


many engineering organizations or builders ofequipment capable of handling large-scaleprojects. Thus, if capital were readily avail-able and all steel producers wanted to replaceall their open hearths with oxygen furnaces atonce, they would find that the designers andmakers of such equipment could not possiblysatisfy the demand.

Much new technology is directed not to in-creased capacity and lower manpower require-ments in steel producing plants but to steelsof lighter weight, greater strength, superiorfinish, and closer tolerances. This is increas-ingly true as steel users adopt more high-speedfabricating equipment. While such techniquesas vacuum degassing of steel and automaticgage controls on steel rolling mils reduce wasteand improve yield in the producing plants, theirprincipal benefits appear in the customers* oper-ations. Thus, important capital investments insteel plants may have little or no measurableeffect on output per man-hour in the steelindustry but may contribute to important im-provements in consuming industries.

Finally, each major technological advanceaffects only one part of the integrated operationin a steel producing plant. The dramatic basicoxygen furnace affects directly only the steel-making process and not even all of that. Itmay actually increase total manpower require-ments in the coke ovens and blast furnacedepartments since it requires at present ahigher proportion of pig iron than the openhearth. It has little or no effect on the processof pouring ingots and rolling them into semi-finished and finished products. In fact, its onlyimportant manpower effects are on the forcesdirectly concerned with furnace operation-afraction of the total force involved in steel-making alone. This is true of most other newor improved processes. Furthermore, becauseof the variety of steel products, the inherentlimitations of some new processes require theretention of older equipment. Significant econ-omies are achieved from many of the newprocesses only if they are in proper balancewith the processes which precede and followthem in the overall production line. This re-quires that they operate at a fairly constantrate. But there is nothing constant about thedemand for steel.

The various factors described above helpexplain the absence of dramatic changes in thesecular r kte of increase in output per man-hour.They 4t5o indicate that although output perman-hour may increase at a higher rate in thefuture, dramatic changes are unlikely. Thebook value of assets in the steel industry isslightly under $20 billion-far less than thereplacement costs of those assets. Expendi-

tures for new and improved facilities are cur-rently running at the very high rate of about$2 billion a year. It is quite obvious, there-fore, that radical changes in the overall effi-ciency of the industry are not to be expected.

3. Factors Affecting Changes in SteelEmployment

The largest single factor in determining thelevel of total employment in steel is, of course,the demand for steel products. This can beillustrated by a simple example. Steel ship-ments were almost identical in 1955 and 1964(84.7 versus 84.9 million tons) . Monthly aver-age employment in 1955 was just under 625,000.Since output per man-hour has increased at anaverage annual rate of 2.2 percent, averageemployment in 1964 could be expected to havebeen about 516,000. Actually, it was nearly554,000 (see table 4). The difference is ac-

TABLE 4. STEEL EMPLOYMENT AND PRODUCTION, 1947-64

Monthly average totalemployment Ingot prod uction

Year (thousands)

Year to yearchange

(percent) (millions)

Year to yearchange

(percent)

1947 573.7 - 84.91948 591.5 +3.1 88.6 +4.41949 580.8 -1.8 78.0 -12.01950 592.3 +2.0 96.8 +24.11951 638.3 +7.8 105.2 +8.61952 621.9 -2.6 93.2 -11.41953 650.2 +4.6 111.6 +19.71954 581.5 -10.5 88.3 -20.91955 624.8 +7.4 117.0 +32.51956 620.7 -0.7 115.2 -1.51957 623.8 +0.5 112.7 -2.21958 523.5 -16.1 85.3 -24.31959 515.1 -1.6 93.4 +9.51960 571.6 +11.0 99.3 +6.31961 523.3 -8.4 98.0 -1.31962 520.5 -0.5 98.3 +0.81963 520.3 - 109.3 +11.21964 553.6 +6.4 127.1 +16.3

Source: Annual Statistical Report, AISI, 1964, tables 1 and 6.

counted for largely by the increase in paid timeoff (principally in the form of vacations) overthe intervening period, with a resulting reduc-tion in the average number of hours workedper employee.

An examination of year-to-year changes dur-ing the postwar period shows that, with threeexceptions, ingot production and total employ-ment mov-,9: In the same direction, althoughchanges i , production were usually muchgreater a n those in employment. Two of theexceptions involved 1956 and 1959 in whichaverage monthly employment figures were dis-torted by strikes. The other was in the year1961-62 when changes in both employment andproduction were very small.

Attrition is, of course, an important factoraffecting the impact of technological change onemployment. Year in and year out employees

AMERICAN IRON AND STEEL INSTITUTE

die, retire, or leave the industry voluntarily,creating job opportunities for others. Datapublished by BLS show that since 1957, separa-tions other than layoffs in the steel industry

TABLE 5. SEPARATIONS OTHER THAN LAYOFFS IN STEEL,1952-63

YearAverage annual separation rate

per 100 employees

1952 25.21953 21.61954 8.41955 15.61956 14.41957 12.01958 7.21959 12.01960 9 61961 10.81962 10.81963 13.2

Source: Employment and Earnings, BLS.

have been at a rate of more than 10 percent peryear (see table 5).9 That rate far exceeds theaverage annual increase in output per man-hourin the same period.

A major factor affecting total employment,particularly in plants having their principalmarkets near the Atlantic, Pacific, and Gulfcoasts, has been the substantial rise in importsand the decline in exports of steel mill products.In 1957, imports totaled 1.2 million tons andaccounted for about 1.5 percent of domesticsteel consumption. By 1964, imports had risen

TABLE 6. STEEL IMPORTS AND EXPORTSIN THOUSANDS OF NET TONS

Year ImportsPercent of

market ExportsPercent ofshipments

lat half 1965 4,939 9.0 1,158 2.31947 32 0.1 5,919 9.41948 148 0.2 3,950 6.01949 291 0.5 4.344 7.51950 1,014 1.4 2,639 3.71951 2,177 2.8 3,137 4.01952 1,201 1.8 4,005 5.91953 1,703 2.2 2,991 3.71954 771 1.8 2,792 4.41955 978 1.2 4,061 4.81956 1,341 1.7 4,348 5.21957 1,155 1.5 5,848 6.71958 1,707 2.9 2,823 4.71959 4,396 6.1 1.677 2.41960 3,359 4.7 2,977 4.21961 3,163 4.7 1.990 8.01962 4,100 5.6 2,018 2.91963 5,446 6.9 2,224 2.91964 6,440 7.8 8,435 4.0

Source: Foreign Trade Trends, AISI; data for 1950 and Prior notfully comparable with late data.

to 6.4 million tons and supplied 7.3 percent ofour total steel requirements (see table 6).Efforts of steel customers to build up inven-tories against a possible strike this year haveaccelerated the trend, and it is thought thatfor the year 1965, imports will have accounted

for 10 percent of steel consumption. Mean-while, exports have declined from 5.3 milliontons, or 6.7 percent of total shipments, in 1957,to 3.4 million tons, or 4.0 percent of shipments,in 1964. The total adverse "swing" in that7-year period has been about 7 million tons ofshipments per year. Shipments by the domes-tic industry in 1964 were 85 million tons. Ifthe 1957 relationships between imports andexports had obtained, shipments would havebeen about 92 million tons and there would havebeen the equivalent of more th an 50,000 addi-tional jobs.

Steel operations and, therefore, total employ-ment are strongly affected by changes in domes-tic markets. Because of transportation costs,the market for a particular steel plant is limitedgeographical? y ; changes in the location of con-suming industries, either because of physicalmoves or declines of demand for their productsin some areas and increases in others, greatlyaffect the operations at the steel plants whichsupply them. The rise or decline of an impor-tant consuming industry obviously affects thedemand for particular steel products. Much ofthe equipment in steel plants is capable of pro-ducing only a limited type of product and canbe adapted to other products only at greatexpense, if at all. Technological and productchanges affecting operations of steel consumersalso affect the demand for steel products.

Market .changes have been very much inevidence during the postwar period. For ex-ample, the Pittsburgh and Youngstown districtshave declined sharply in relative importance,while Cleveland, Detroit, Cincinnati, St. Louis,

TABLE 7. STEEL PRODUCTION BY GEOGRAPHICAL DISTRICT(INGOTS AND STEEL FOR CASTINGS),

IN PERCENT OF TOTAL

District 1964 1957 1947

Northeast Coast 14.0 14.6 12.2Buffalo 4.8 5.7 4.9Pittsburgh ,20.0 22.0 26.8Youngstown 8.6 9.4 18.2Cleveland 5.7 8.1 4.7Detroit 7.4 5.5 8.7Chicago 20.6 19.8 20.3Cincinnati 4.4 8.6 8.2St. Louis 2.7 2.8 1.7Southern 5.7 5.9 4.7Western 6.1 6.2 5.1

Source: American Iron and Steel Institute.

the Southwest, and the Far West have in-creased (see table 7). The Buffalo and Chi-cago districts accounted in 1964 for about thesame shares of total steel production as in1947. The Northeast's share increased in thefirst postwar decade but has not changed sub-

9 Although military separations are included in the separationsfigure, such separations were of minor importance during theyears 1958-63.

20 STATEMENTS : IMPACT OF TECHNOLOGICAL CHANGE

stantially since then. As to distribution of steelproducts among consuming industries, there hasbeen a marked decline in the proportion of ship-ments to the transportation industry ; a mod-erate rise in the importance of consumerdurables (largely automobiles) ; and substantialincreases in the shares going to plant and

TABLE 8. STEEL SHIPMENTS BY MARKET CLASSIFICATIONAS PERCENTAGES OF TOTAL SHIPMENTS

Clusification 1957 1964

Converting and processing 4.8 8.2Forging, 1.8 1.8Bolts, nuts, rivets, and screws 1.4 1.4Steel service centers 18.2 18.8Construction 15.7 12.9Contractors' products 4.8 5.6Automotive 17.8 21.6Rail transportation 5.2 4.1Shipbuilding 1.6 0.9Aircraft 0.1 0.1Oil and gss drilling 0.9 0.6Mining, quarrying, and lumbering 0.4 0.4Agricultural 1.4 1.6Machinery, industrial equipment, and tools 5.6 6.3Electrical machineri 2.6 8.1Appliances, utensils, and cutlery 1.9 2.6Other equipment 2.3 2.4Containers 7.8 7.7Ordnance 0.5 0.3Export 5.7 8.2Unclassified 1.0 2.6

Sovrce: Annus/ Statistical Report, AISI, 1957 and 1964.

equipment, containers, and energy producingindustries (see table 8). Exports have, ofcourse, declined. Among products, there havebeen marked declines in the importance of rails,rods, wire and wire products, and semifinishedproducts and bars. The share of total ship-ments represented by shapes and plates hasbeen relatively static but there had been a verylarge increase in sheets, strip, and tin millproducts.

While we do not have any direct iridence ofthe effects on employment of changes in therelative importance of . steel consuming indus-tries and in the demand for categories of steelproducts, data are available as to employment

TABLE 9. EMPLOYMENT IN THE STEEL INDUSTRYBY STATES

Employees1953

Employees1957

Employees1958

Employees1963

State 1000'3) (%) (1000's) (%) (1000's) (%) (1000's) (%)

Alabama 29.3 4.0 29.1 4.0 24.8 4.1 23.4 4.0Illinois 48.2 6.6 :9.3 6.8 44.0 7.8 47.2 8.0Indiana 62.0 8.5 64.2 8.9 57.5 9.6 59.7 10.1Maryland I 28.9 4.0 32.3 4.5 29.8 5.0 29.2 5.0New Yorki n.s. - n.a. - 84.7 5.8 88.5 5.7Ohio I 131.2 18.0 123.2 17.1 97.9 16.8 92.6 15.7Penna. I 240.2 83.1 227.7 81.6 190.6 81.7 174.2 29.5All U.S. 726.1 719.9 601.1 589.4

Source: Bull. Nos. 1812-2 and 1370-2, BLS.

in the steel industry (SIC-331) in variousStates (see table 9) . rhose data show thatbetween 1953 and 1963, employment, as a per-

centage of total employment in the industry,remained unchanged in Alabama, rose sub-stantially in Illinois and Indiana and moder-ately in Maryland, and declined in Ohio andPennsyl iania.

During the last decade, a very important fac-tor affecting steel demand and total employ-ment has been the practice on the pa-..4- ofcustomers to build up inventories or seek othersources of supply in anticipation of strikes.Uncertainty about the continuity of steel sup-plies has encouraged some customers to buyimported steel and others to engineer steel outof their products either by using other mate-rials or by reducing the amount of material inthe product. It is difficult to recover thosemarket losses so long as there are periodicstrike threats.

4. Adjustments to Technological Change

Although the general level of total steelemployment has been affected much less bytechnological change than by fluctuations in thedemand for steel, it is certainly true that aparticular change at the time of its introduc-tion may have a ptonounced local effect onemployment. The order of magnitude of thateffect from the introduction of even quite large,new units is far less than the local effect of awide swing in the volume of orders. Forexample, the introduction of a BOF shop at aplant employing about 16,000 people affectedthe jobs of about 150 employees. However, thechange occurred during a period of rising ordersand, as a result, all those affected who wantedjobs were placed elsewhere in the plant. Nev-ertheless, it is cold comfort to a man facedwith the prospect of displacement from a famil-iar job because of technological change to betold that change is economically desirable andthat it has little effect on steel employmentgenerally. Technological change does not occuras an average or general phenomenon but as aparticular event affecting individual employees,and its effects must be dealt with in thatfashion.

The steel companie,,_, by agreement withUnited Steelworkers of America or unilaterallyhave established certain institutional deviceswhich assist employees in making adjustmentsto technological change. The genesis of many,but not all, of those devices has been cyclicalunemployment rather than displacement be-cause of technological change or the reorgani-zation of operations. However, they are usefulin adjusting to changes of the latter type.First, there are the arrangements for determin-ing who will have the jobs available after thechange, including jobs elsewhere in the plant or

AMERICAN IRON AND STEEL INSTITUTE 21

in other plants of the company. Second, thereare arrangements for training employees whosejobs are altered as a result of the change.Third, there are provisions for retiring on pen-sion older employees who are adversely affected.Fourth, there is a program which supplementspublic unemployment benefits for those who aretemporarily laid off. Finally, severance pay-ments are provided for those ineligible forother jobs or retirement on pension and whoseprospects for a return to work with the com-pany are remote."

While there are variations in practice fol-lowed -e of differences in size and locationof plar'. Ids of operations, and number ofemployet,_ 1.,vo1ved, by and large the followingprocedures are applied by most steel companieswhen a change is imrnding.

When plans to abalAdon, discontinue, or re-place certain facilities are developed, as farin advance of the actual shutdown as possible,an analysis is made to determine the numberof employees affected. Their service, age,seniority status, and ability to perform otherwork in the plant are determined. Their statuswith respect to pension, severance, and unem-ployment compensation benefits is also deter-mined. The job opportunities on replacementfacilities, where involved, are taken intoconsideration.

At this point, the scope of the problem isknown and the next step is to determine whatplans can be made to absorb these employees.The prospects of placement at the plant con-cerned are appraised as are those fit sisterplants in the area or elsewhere, and those withoutside employers in the area. Estimates aremade of which individuals, if any, are likely toexercise their pension, severance, supplementalunemployment benefits, or seniority rights. Adetermination is made of what is the most rea-sonable way to alleviate the resultant displace-ment by such measures as utilizing turnoverto absorb such employees and limiting thehiring of new employees where feasible, trans-ferring employees to other jobst, retraining em-ployees either for new jobs on the replacementunit or providing on-the-job training wherenecessary in cases of transfer to other jobs inthe plant, circulating rosters of available em-ployees and their skills to other plants in thecompany if prospects of placement exist, and,similarly, contacting other employers in thevicinity or the State Employmont Office in thearea. Improvements in the orderly dissemina-tion of information on job openings would in-crease the effectiveness of this activity.

General announcements and notices are madeat the appropriate time to international, dis-trict, or local union representatives, to the incl.,-

vidual employees either personally or by letter,and co the general public.

At the proper time interviews are conductedwith the employees invo!ved to discuss theirindividual status both as to other employmentprospects ane what rights they have to pen-sions, vacatic.is, insurance coverage, severancepay, SUB, other jobs, and so_on. The employ-ees decide which of Ile avaiiable options theychoose to select.

To the maximum extent practicable the ar-rangements decided upon are put into effectfollowing the announcement and appropriateunion representatives are kept informed as towhat is being done and the progress being made.

The degree of success realized through theseprocedures, of course, varies in relation to thecircumstances surrounding each specific case oftechnological improvement. The range is fromcases completely successful in alleviating thechange, to those where there simply is no waywithin our control to obviate the impact uponsome of the employees involved.

The cyclical nature of steel demand compli-cates the process of adjustment. Most impor-tant technological changes in steel involve fairlylong lead times and, consequently, at the timea change is authorized, there is no way of deter-mining what the level of operations will bewhen it actually occurs. That greatly reducesthe possibility of giving any sort of meaningfulnotice of the consequences of the change wellin advance of its occurrence.

5. Expectations for the Future

The principal limitations on the rate of tech-nological change in steelavailability of capitaland growth of demand at a rate lower than thatof the economy as a wholeare not likely tobe removed in the near future. While somedevelopments such as the basic oxygen furnaceand continuous casting are expected to reducethe capital required per ton of output, othersaffecting finishing operations may not reduceand may actually increase capital requirements.It is, of course, impossible to predict the neteffect of all the changes now underway oranticipated on the industry's capital require-ments, but it is certain that steel will continueto require large amounts of capital relative tooutput. Thus, irrespective of the ingenuity ofresearch and development scientists and engi-neers, there is no reason to expect a substantialsecular change in the rate of productivity in-crease, or in the general level of steel industryemployment.

Similarly, steel demand is expected to con-10 Mention should also be made of the limited employment and

earnings guarantees provided under the plans for sharing cost sav-ings adopted by Kaiser and Alan Wood.

_


tinue to show cyclical patterns, although asustained high rate of economic activity wouldreduce the amplitude of expansions and con-tractions. It is possibleand much to behopedthat a way can be found to reduce thethreat of labor disputes and their contributionto irregularity of demand. It is also possiblethat changes in the factors affecting world steeltrade may make the balance between importsand exports more favorable to the United States.But even if all those improvements occur, steelwill continue to be used primarily in productsthe demand for which is strongly influenced by

the level of private investment and consumerdurable goods purchases. We can continue toexpect, therefore, that total steel employmentwill fluctuate with short-term changes in de-mand and that over the years, increasing steeloutput per man-hour will be balanced by con-tinuing growth in the overall market for steelproducts. While the introduction of new facili-ties will involve some displacement and reloca-tion of employees ct particular places, adjust-ments are eased by normal turnover andexisting arrangements for training and transferto other jobs.

STATEMENT


American Society of Tool and Manufacturing EngineersDearborn, Michigan

Statement by the American Society of Tool andManufacturing Engineers

There seems to be little doubt but thatadvances in technology and the advent of auto-mation and economic progress in general havehad profound effects on the economic life of ourcountry. However, whether the individualeffects have been mainly beneficial or harmfulis far from clear. Certainly, the standard ofliving in this country seems to have had acontinued upward trend.

New technology and automation, no matterwhat definitions you use for them, have, whenconsidered as separate independent phenomena,resulted in the elimination of some individualjobs. However, in this complex world it is notpossible to consider any phenomenon as inde-pendent. Each phenomenon must be consid-ered as a part of the immensely complicatedindustrial and social environment within whichwe live. Therefore, the determination of theeffects of any technological advance of automa-tion, or of recent economic changes, approachesthe impossible.

Our members are manufacturing engineers,not social scientists or economists, and, there-fore, are inadequately equipped to answer socio-economic questions. Certainly the man who isdispiaced by a machine or for any other causebeyond his control deserves our sympathy, con-sideration, and help in preparing himself forand in locating other employment. However,manufacturing engineers are dedicated to in-creasing productive efficiency in manufacturing,to the end that more goods might be producedfor more people. It follows that we welcomemechanization, automatic controls, and all ad-vanced forms of technology which reduce thecost of dny given product.

Progress means change ; purposeful directedchange. It means introducing new devices andnew machines to replace the old, and it meansthat new skills are needed to operate the newmachines, to control them, to repair them.

True, if we assume that the total number ofunits of a given product is going to remainsubstantially the same, the introduction of newtechnologies would tend to create a growinggroup of permanently displaced workers. Butthis assumption that progress in production isnot accompanied by progress in consumption is

patently false. The American development isevidence that increasing the productivity of theindividual results in developing a more abun-dant life for all. As old needs are satisfied,new ones arise to be satisfied in their turn.

True also, the balance between increased pro-ductivity and increased needs is an unstableone, shifting now in one direction, now inanother. But over the last 20 years at least,there has always been a lag between industry'sneed for new skills and the ability of the labormarket to satisfy them. Thus, while on theone side there are workers displaced by newmachines, on the other side there are newmachines looking for workers. The problembecomes accentuated in localities and in indus-tries in which business groups, trade unions,and other forces put a temporary artificialbrake on the natural evolutionary process.

In our experience, the problem is primarilyone of maintaining the labor forcemanagers,engineers, technicians, operatorsabreast ofdevelopments as they occur. All elements inthe manufacturing operation must be moti-vated to learn, and they must be given theopportunity to learn the new developments,techniques, and skills that progress bringsforth. The problem is primarily one of motiva-tion and of education.

We note, for instance, that the problem oftechnological unemployment is least acuteamong engineers and other professional groups ;that indeed, there are not enough engineers tofill the urgent needs of American industry.We believe this to be caused by the fact that theengineer and the professional in general is edu-cated enough to know that his education isnever completed, and he keeps up with newscientific and technical developments that arelikely to affect him by continuing his educationthrough academic channels and through hisparticipation in the educational activities of theprofessional society in his field.

At the same time we are made painfullyaware of the fact that the learning process isleast developed among those who need it most ;that the closer a worker comes to being puremuscle, tha less apt he is to pursue the questfor more knowledge and new skills.

25

1


Being specialists in the exact and engineer-ingrather than the socialsciences, we donot presume to make recommendations on ht,wto motivate the unlearned to learn. Knowingthe present needs, and being able to make ageneral forecast of the future needs of thzmanufacturing engineering industry, we offerthe suggestion that great emphasis be placedon education, especially scientific and technicaleducation, at all levels. Already the illiterateis practically unemployable in our industrialsociety. The number of opportunities open tothe semiliterate diminishes daily. Even to thelitezate and the skilled, continued learning isnecessary to maintain their relative positions inthe industrial process, to say nothing of per-sonal development, growth, and advancement.

This increased concern with education couldtake a number of forms, including:

1. Facilitating, expanding, and broadeningthe activities of presently existing edu-cational institutions, both public andprivate, at all levels.

2. Creating new learning centers, mak-ing them available to those who aremotivated, regardless of where theymight be.

3. Encouraging the pursuit of learning,as, for instance, by making all educa-tional expenses deductible for incometax purposes.

4. Promoting the establishment and facil-itating the functioning of scientific,engineering, and technical societieswhose main function is to provide con-

tinuing information and education totheir members and to the industry theyserve.

There is, as is undoubtedly known, a consider-able amount of literature on the subject underconsideration by the Commission. George Ter-borgh's relatively new book, The AutomationHysteria, presents a well-documented story ofautomation and includes bibliographic refer-ences to many other writings on the subject.Charles E. Silberman's series of articles start-ing in the January 1965 issue of Fortune isanother excellent discussion of the subject.Probably the best known, and possibly the mostcontroversial of the many writings on ne socio-economic aspects of the situation is The Afflu-ent Society by John Galbraith.

The magnitude and complexity of the prob-lem is shown by the size of the grant givenHarvard University by IBM$5 million tofinance a 10-year study of "automation, itseffect on employment and its role in our dy-namic economic system."

Evaluating the writings, the evidence, andthe data presented for bias will, at times, bemost difficult. The human emotions involvedare going to make the job doubly difficult.

ASTME recognizes the immensity and theimportance of the task assigned the Conunis-sion. While we do not feel that we are quali-fied to discuss the overall socioeconomicquestions, we would, however, be very happyto study any specific questions or problemsthat are within our education or experiencebackground.

_

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STATEMENT


Association of American Railroads

Washington, D.C.

Statement by the Association of American RailroadsThe railroad industry appreciates this oppor-

tunity to express its views for the Commis-sion's consideration, especially with respect tothe fundamental importance of encouragingtechnological innovations and organizationalimprovements, such as mergers and operationalchanges, without which there could be no appre-ciable economic growth, increasing productivity,and rising living standards. This is an ancienttruth which has been demonstrated over andover again in our economic development.

The railroad industry has been a leader incoming to grips with the associated problemsof imperative technological change and its im-pact on railroad employees. As an industrythat laid down its roots in the early days ofthe industrial revolution and whose major con-tours were shaped more than 50 years ago, wehave been faced as few others with the questionof whether we could indeed make the vast tech-nological and structural changes needed to re-tailor railroading to the demands of thisdynamically expanding and highly competitivemodern era and, at the same time, solve thecomplex human, governmental, and financialproblems associated with this great endeavor.

Despite restricted earnings and limited accessto capital, the American railroads have man-aged to devote some $21 billion since the endof World War II to this reconstruction andimprovement program, and we intend to doeverything in our power to continue this vitalnational transportation program. The widelypublicized work-rules-modernization movementis an outgrowth of this effort and, particularly,in the settlements worked out under the Arbi-tration Board decisions pursuant to Public Law88-108.

Nevertheless, it must be recognized thatthere remain those who in their own immediateself-interest seek to maintain the status quo byresisting technological improvements and bypreserving jobs that have been outmoded by themarch of progress. While the reasons for suchattitudes are understandable in terms of narrowand immediate self-interest, they cannot beallowed to prevail.

For your consideration in this regard, wecommend as precisely to the point the following

statements contained in the January 1964 re-port of the President's Council of EconomicAdvisers :

Even if we wished to, we could not eliminate per-vasive and continuous technological and economicchange without remakingon a much inferiorbasisthe whole fabric of our social and economicinstitutions. And we would not wish to. Its benefitsare essential for continued economic growth, higherstandards of living, and the elimination of poverty.Our objective should be to foster and encourage it.(p. 85)

Further, in summation of this issue, thatreport points out:

Fears of technological advance are understand-able on the part of those who feel its threat totheir livelihoods. In the absence of wise and effec-tive private and public action such fears are justi-fied. But any comprehensive appraisal can lead onlyto the conclusion that the benefits of technicalchangein the future as in the pastare such thatpublic policy should foster rather than shun it. . . .(p. 111)

The essentiality and the widespread benefitsof technological change are nowhere betterdemonstrated, we believe, than in the railroadindustry, where there are so many opportuni-ties for improved techniques and mechanizedoperations. Surely it can be said, for example,that the railroads now would be in disastrouscircumstances, if indeed they could have sur-vived at all in the competitive struggle fortraffic, without the transition from steam todiesel engines with their superior performanceand economy. It is no less obvious, and easilyseen in retrospect, that railroad workers aswell as the public generally would have beenthe heaviest losers had not such changes beenmade.

What may not be so readily appreciated bysome is that the way must be kept open forsuch changes in the future if our economy is tocontinue to grow and become more productive.In the railroad industry, even now vast tech-nological advances are taking place, to cite afew examples, in the adaptation of machinemethods for the maintenance of railroad rights-of-way, in the mechanization and consolidationof shop work, in advanced communication andsignaling systems, in the construction andoperation of electronic "push-button" yards for

29


handling freight cars more economically andexpeditiously, and in the application of auto-mated methods of data processing to cope withthe mountainous volumes of paperwork involvedin operating a modern railroad efficiently andin handling arrangements and records amongrailroads with respect to their interlinebusiness.

Some of these technological improvementsare still in their comparative infancy and they,along with other breakthroughs not yet real-ized, must go forward in order that the resur-gent railroad industry may be able to handleefficiently the increasing traffic loads of a grow-ing and more productive national economy.

We would point out, however, that there isa less sanguine aspect of this matter. All toooften some labor organizations, in the railroadindustry and elsewhere, still bend their effortsto the retention of existing forces and jobs thathave been outmoded by technological change orby greatly diminished demands for service, asin the case of some railroad passenger-trainoperations. In the legislative sphere, the rail-roads have to contend with a particularly objec-tionable example of such job-preservationpolicies in those States that still keep on thestatute books provisions requiring so-called"full crews" which in their actual effect requireexcessive crew consists. On the encouragingside, it may be noted that certain of the Stateshave recently repealed such ant.dent statutes,and in some others they have been upset inthe courts.

Through collective bargaining agreements,also, some progress has been made in the revi-sion of outmoded and wasteful work rules, butthere is much that remains to be done and canbe done by means of enlightened collective bar-gaining procedures. However, such progresshas come slowly; witness the protracted strug-gle over the "fireman" issue in road freight andyard service which was dealt with after Con-gress acted under threat of strike, by the termsof Arbitration Award No. 282. Certain otherlong-existing "crew consist" issues were settled

in subsequent negotiations, but only after Presi-dent Johnson intervened.

We invite the Commission's attention to theinherent contradiction involved when union de-mands for everincrea sing wages and wage sup-plements, such as greater retirement benefits,are accompanied by unrelenting opposition tothe elimination of redundant positions whichcan no longer make any significant contributionto efficient production and may, indeed, sub-tract from it. In the railroad industry, as inthe economy generally, increases in real incomeand in living standards can in the final analysiscome only from improvements in productivity.

This is not to say, of course, that workerswho are displaced by economic change shouldnot receive reasonable transitional assistanceby such means as retraining programs or sever-ance allowances. But here the vital distinctionmust be made between the uneconomic perpetu-ation of jobs and the reasonable protection ofworkers and their families against hardshipsresulting from technological and economicchanges. In the railroad industry, long-estab-lished protective provisions stemming from theWashington Agreement of 1936 make what arewidely acknowledged to be generous allowancesto employees displaced by coordinations, aban-donments, mergers, and other changes whichrender certain jobs obsolete. The terms ofArbitration Award No. 282, noted above, alsomade very liberal provisions for the protectionof firemen whose services were found to be nolonger necessary.

In dealing with such matters, we believe it isimportant that protective provisions should notrely excessively on the slow processes of nat-ural attrition, especially where a large part ofthe working lives of the persons involved is stillahead of them. In addition to the heavy coststhat would be imposed upon industry, extremereliance upon the attritional principle as aseemingly easy escape from the problem wouldentail a serious loss of human dignity and awaste of human resources that could not bejustified on economic, social, or moral grounds.

STATEMENT


Automobile Manufacturers AssociationDetroit, Michigan

Statement hy theAutomobile Manufacturers Association

a

Technological Change and Employment in the Automotive Industry

. General StatementPerhaps nowhere in America are people more

accustomed to change than in the automotiveindustry. This is a natural consequence of be-ing a part of a dynamic industry which producesnew models of a wide variety of cars and truckseach year. In order to serve the public andsntisfy its appetite for quality products at at-tractive prices, the indristry spends millions ofdollars annually in tooling up for the newmodels. During each calendar year those inthe industry experience the close of 1 modelyPar, the annual changeover to new model pro-duction, and the commencement of a new modelyear. Tooling programs, equipment changes,conveyor line rearrangements, the introductionof new machinery, changes in methods andprocessesthese and many other activities takeplace during the annual model changeover orare scheduled to be completed at the time newmodel production begins.

Model changeover, of course, is not the onlytime innovations and technological change takeplace in the automotive industry. Changes ofall types, including engineering changes in theproduct, changes in production methods, andchanges in the equipment being used, are aneveryday occurrence throughout the entiremodel year. As a consequence, everyone in theindustry is accustomed to change as a natural,expected, and inescapable way of automotivelife.

It should be apparent to anyone familiar withthe industry that, over the years, the technolog-ical change in the automotive industry has beenan evolutionary, not a revolutionary, process.It has been gradual and steady since the indus-try began. It has been an essential part of thebusiness. It has been both a cause and a resultof the impressive growth of the automotiveindustry.

In the automotive industry technologicalchanges have been accompanied by expanding,not declining, employment. Since the start ofthe current economic expansion in 1961, for ex-ample, employment in the automotive Industry

has increased by almost 300,000. The demandfor motor vehicles has increased tremendouslysince the industry began. Cars and truckshave been improved both by the addition of newfeatures, such as power steering, power brakes,and air conditioning, and by changes in basicfeatures, such as improved engines, suspensionsystems, and automatic transmission, requiringadditional man-hours of labor. During the re-cent 8year period of price stability in theeconomy, the industry has been able to offer thecustomer an improved car each year at virtuallythe same price.

Technological change has been a manageableproeess that has not displaced nor renderedobsolete overnight the skills of large groups ofemployees. At the present time, there is noevidence that a substantial change in the paceor the nature of technological change will occurin the automotive industry.

Past experience probably provides the bestguide to the effect of technological change onfuture automotive industry employment levelsand skill requirements. From that viewpoint,technological change has historically caused nodrastic or rapid shift in the nature of employeeskills required by the industry. The educationand skills of the automotive industry's workforce have improved gradually, and this may beexpected to continue because such improvementis taking place generally across the entirecountry.

For the foreseeable future, as in the past, alarge proportion of the blue-collar job assign-ments in the automotive industry will be onesthat can be learned quickly. In any event, asin the past, any changes in skill requirementswhich do occur will no doubt be met primarilyby training industry employees for the new jobsas they appear.

Employee Wages, Benefits, and Working Condi-tions

The improvment in the Nation's productivity,33


to which the automotive industry has contrib-uted, has resulted in higher standards of livingfor automotive industry employees. Duringthe period 1947-64, real hourly wages in theindustry increased 57 percent, In addition,employees have been provided a part of theincrease in their standard of living in the formof supplementary benefits, such as sickness andaccident benefits, hospital and surgical expensecoverage, life insurance, pensions, unemploy-ment benefits, and longer paid vacations andmore paid holidays. Moreover, technologicalprogress has resulted in improved working con-ditions as automotive jobs have become sub-stantially safer and more attractive over theyears.

Technological Change and Employment Secu-rity

Management and union leaders as well in theautomotive industry have recognized the de-sirability of technological change. Collectivebargaining in the automotive industry has notbeen characterized by conflict over feather-bedding, issues that have retarded technologicaladvance and assumed major importance incollective bargaining in other industries.

For the past 15 years, automotive industryunion contracts have contained the followingparagraph which is indicative of the attitude ofmanagement and the unions toward technolog-ical progress:

The annual improvement factor provided hereinrecognizes that a continuing improvement in thestandard of living of employees depends upon tech-nological progress, better tools, methods, processesand equipment, and a cooperative attitude on thepart of all parties in such progress. It furtherrecognizes the principle that to produce more withthe same amount of human effort is a sound eco-nomic and social objective. . . .

In its labor agreements, automotive manage-ment has retained the right to introducechanges Li products, tools, methods, and proc-

esses at any time. The industry ha , thus beenfree to introduce technological char ,s as rap-idly as they become technically and economicallyfeasible.

Changes in methods and in products are aneveryday occurrence in automotive plants.This has been the nature of the hminass sincethe beginning of the industry. As a conse-quence of changes, jobs and groups of jobshave been eliminated and at the same timeother jobs have been created. For over 25years the companies and the unions have hadan established, orderly, and fair way of handlingsuch situations associated with both the elim-ination and the creation of jobs. This favor-able environment has made possible gradual,evolutionary changes without sudden, majoremployment dislocations or shifts.

Any employment shifts attributable to tech-nological cnanges which have occurred have notaffected the security of large numbers of em-ployees. The policies and procedures of theautomotive industry have minimized the impacton employees of such dislocations as are fromtime to time caused by technological change.

Many of these policies worked out throughcollective bargaining have been incorporated inindustry-labor agreements for many years.They have helped the industry and its em-ployees adjust to technological change effi-ciently and with a minimum of human hardship.They help answer such questions as what wagerates are paid for new jobs and what happenswhen an employee's job is eliminated by a newprocess or machine or when a major operationis transferred to a new location or, as in rarecases, when a plant is permanently shut down.

These policies have successfully met theproblems associated with technological changein the automotive industry for more than aquarter of a century. For that reason, a dis-cussion of some of the main features of theindustry's job and income security programs asthey relate to technological change might provehelpful to the Commission.

Automotive Industry Programs, Policies, and Proceduresas They Relate to Technological Change

The companies in the automotive industryhave many programs, policies, and procedureswhich relate to technological change. As tothose technological changes which affect em-ployees and their rights, labor contract provi-sions have been worked out through collectivebargaining with unions representing these em-ployees. Some of these provisions have beennegotiated to apply specifically to situatiol's inwhich technological changes affect emp)osree

rights and job security. Others, though in-tended to apply in broader areas, are applicableas well when technological change occurs.

Dealing with Job Displacements

Displacements of employees which occur inthe automotive industry as a direct result oftechnological change ordinarily affect relativelyfew employees at any one time. Although

AUTOMOBILE MANUFACTURERS ASSOCIATION 35

individual company seniority provisions differsomewhat in detail, they have all been char-acterized by a broadening of the base or thearea in which employees may exercise seniorityand thereby increase their job security.

Employees displaced are transferred in ac-cordance with their seniority to jobs in theplant which they are capable of performing.These jobs are comparable in pay to theirformer jobs. In the automotive plants thereare a wide variety of job assignments on whicha great many employees are interchangeable.Accordingly, it is not difficult to locate a jobto which an employee exercising his senioritycan be assigned. This is particularly true inthe case of longer service employees who haveworked on numerous job assignments in pastyears. Therefore, it is a rare occasion indeedwhen a long service employee is unable to ex-ercise his seniority and remain at work on a jobhe can do.

In cases where layoffs do occur in the auto-motive industry, whether as a result of tech-nological change or any other reason, a numberof procedures are available for the e, lp.oyee'sprotection. One of these is area hiring pref-erence.

Under the area hiring procedure, employeeslaid off from one plant are given preferenceover new job applicants for employment atwhatever other plants the employer may havein the area. The effect is to pool each com-pany's work force in a given labor market areato enable employees to flow smoothly frowplants where employment may be declining toplants where jobs are available as a result ofincreases in output or for other reasons. InFlint, Michigan, one General Motors multiplantcommunity, employees may shift between 12AC Spark Plug, Chevrolet, Buick, Ternstedt,and Fisher Body plants and warehouses. Inthe Detroit area, Ford employees may shiftbetween 26 plants and Chrysler employees be-tween 27 plants. Since 1951, over 30,000 Fordemployees have been placed under the pref-erential hiring agreement covering the Detroitarea. Laid-off automotive industry employeesare also given preferential hiring treatment innew plants established by their employer.

Negotiating Wage Rates for New Jobs

Wage rates for job classifications have beennegotiated between employers and unions inthe automotive industry for over 25 years.This orderly method of establishing wage rateshas been applied whenever job classificationswere needed in a plant for which a wage ratehad not already been agreed to by the parties.Thus, this method has been used whenever

technological changes resulted in a new jobclassification being created. The process hasbecome routine, with the management andunion representatives having responsibility forestablishing negotiated wage rates.

To set rates for new jobs placed into produc-tion which cannot properly be placed into anexisting classification, management establishesa temporary job classification and rate. Assoon as possible thereafter, management andthe union negotiate a permanent rate for theclassification. If management and the uniondisagree whether a new classification and rateshould be negotiated, the dispute may be sub-mitted to an impartial umpire for determina-tion. The umpire may rule that the jobproperly fits into an existing classification orthat it is a new job which fits no existing clas-sification. In the latter event, the parties havethe responsibility to negotiate a new classifica-tion and rate. The new rate and classificationthen become a part of the existing wageagreement.

Plant Closings and Transfers of Major Opera-tions

The closing of a plant or the transfer of amajor operation to another location is the bestexample of the full range of programs availableto protect employees.

Whenever management decides to close aplant or to transfer major operations, the unionis informed in advance and a memorandum isnegotiated regarding the rights of employeesaffucted. The protective programs can be andare as varied as the needs of the employeesinvolved.

Employees who wish to continue their careerswith the company and accept transfer to thenew location retain full seniority and full rightsunder all benefit plans. To further encourageemployee mobility, the transferred employeesmay be eligible for a moving allowance of up to$580.

Many employees may understandably wish toremain in their Oresent home communities. Ifthe employer has 3ther plants in the area, em-ployees will be given preferences over newapplicants for jobs available in these plantsunder the area hiring procedure already dis-cussed. While awaiting placement under thisprogram or seeking work with another em-ployer, employees can receive up to 52 weeksof supplemental unemployment benefits which,in conjunction with State unemployment bene-fits and earnings, if any, will provide approx-imately 62 percent of weekly earnings for a40-hour week plus $1.50 a week for each de-pendent up to four. In addition, such an em-

i


ployee would be protected by fully paid hospital,medical, and surgical insurance coverage for upto 1 year.

If the opportunity for employment at anothercompany facility in the area is unlikely, theemployer assists the employees in finding jobswith other firms in the community.

Older employees can take advantage of theearly retirement program. Under the flexibleretirement age provisions of industry pensionagreements, the normal retirement age is 65,the automatic retirement age is 68, and theearly retirement age may be as low as 55. Inthe case of plant closing or transfers of majoroperations, special early retirement provisionsare applied. These permit employees who areat least age 55 with 10 years of credited serviceto retire with unreduced life income benefits of$4.25 per month for each year of credited serv-ice. Such employees receive an additional$5.20 per month per year of service, up to amaximum of $130, until they reach age 65 orbecome eligible for unreduced Social Securitybenefits. After September 1, 1965, employeeswho retire prior to age 65 may also be eligiblefor a new supplemental allowance which canraise total monthly retirement income from thecompany up to $400 until they reach age 65.

Employees who do not transfer to the newlocation or who are not placed under the areapreferential hiring procedure, and who are noteligible for retirement benefit, may be paid aseparation allowance equal to as much as afull y ear's pay.

They will become eligible as early as age 60for a deferred vested benefit under the retire-ment plan, if they had at least 10 years ofcredited service.

Thus, with transfer rights and moving allow-ances, area preferential hiring and supplementalunemployment benefits, early retirement, andseparation pr;yments and vested pension bene-fits, employees and their families are well pro-tected when a plant closing or a transfer of amajor operation is necessary for any reason,including technological change.

Training and Retraining

Just as technological change is an everydayoccurrence in the automotive industry, so arethe training and retraining activities which arecarried on as a routine, normal part of doingbusiness. The frequent changing of automo-tive industry job assignments means that theindustry's retraining task never ends.

As jobs are changed aril new jobs created,new employees must be trained and employeesmust be retrained in order to fill them. Inmost cases, the training required by individual

employees is accomplished by brief periods ofon-the-job training. The actual experience of anassembly plant going from a one-shift to atwo-shift operation provides an excellent ex-ample. Over a period of 4 to 6 months, a totalof 1,057 new hourly rate employees were hired.This group received 67,280 hours of on-the-jobtraining or approximately 64 hours per em-ployee. In addition, 73 hourly employees whowere promoted to foremen as a result of theaddition of the second shift received 19,050hours of presupervisory classroom training.For the majority of these employees this rep-resented between 6 to 8 weeks of intensiveclassroom training, plus 1 to 3day assign-ments in the various departments.

On some occasions equipment changes are ofsuch magnitude that more formal training isrequired, particularly for skilled employees.Such training may involve longer periods oftime, classroom work, and instruction by equip-ment manufacturers.

During 1964, Ford had about 23,000 enroll-ments in various retraining programs. Ofthese, 13,100, or 57 percent, were by hourlyemployees. The hourly retraining activitiesincluded over 2,000 enrollments in various sub-jects pertaining to the production of steel bythe basic oxygen furnace method, over 7,000 inthe maintenance and operation of arc weldingequipment and ultrasonic weld testing, and over200 in the maintenance of a new pivoting pillarbody buck. Also, in 1964, a 19-week electronicspmgram in the maintenance of new automatedfozging equipment was established.

In GM, also, formal training courses in addi-tion to on-the-job training are provided forhourly employees. In one GM plant with 2,400employees, 22,981 hours of specialized trainingwere given 838 employees in 1 year. Thetraining ranged from 1-hour classes and safetylectures to teaching operators how to handletape-controlled machines in courses that ex-tended over several months.

The need for such highly skilled journeymenas electricians, tool and die makers, machinerepairmen, and pipefitters is a never-endingone, and close attention is paid to apprentice-ship programs and keeping them up to datewith manpower requirements. The four majorautomotive employers have approximately15,000 employees enrolled in apprenticeshipand on-the-job training programs leading tojourneymen status. Through cooperation withtechnical high schools and community colleges,apprentices receive advanced course work re-lated to their apprenticeship programs in suchfields as electronics, mathematics, physics,chemistry, drafting, tool and die design, metal-

AUTOMOBILE MANUFACTURERS ASSOCIATION 37

lurgy, hydraulics, combustion, operating engi-neering, and similar technical subjects.

Apprentices are paid for the hours of trainingin the plant and for the time spent in requiredclassroom training. Their rates are increasedin eight increments from a minimum of $2.70per hour plus cost of living allowance to theregular journeyman rate for their trade as theysatisfactorily complete the 4-year apprentice-ship period. Tuition and registration fees forclassroom training are paid by the companies,and a special payment is made toward the pur-chase of tools for the apprentice.

In addition to apprentice programs, severalcompanies also use the upgrading method todevelop skilled tradesmen. Qualified em-ployees are given on-the-job training in skilledjob classifications through the Employee-in-Training or E.I.T. Program. It provides theopportunity to attain journeyman status foremployees who were unable to serve a formalapprenticeship but who have acquired the skilland ability cf trained mechanics. Such em-ployees are eligible to be reclassified as journey-men by agreement with the union after theyhave served in a particular skilled classificationfor 10 years.

As an incentive for voluntary education im-provement, the automotive companies offertheir employees tuition refund plans. Underthese plans employees who satisfactorily com-plete college or other specially approved coursework in their spare time receive a full refundof their tuition expenses up to a maximum of$250 a year. By participating in this program,employees may further their formal education.

Since the tuition refund plan was extended tohourly employees for the first time in the fallof 1964, no data are available on utilization.However, these plans have been available tomost salaried employees for a number of years.In the major automobile companies in 1964,over 20,000 salaried employees completed col-lege, postgraduate, or other specially approvedcourses under the plans. In some cases, em-ployees who wish to leave work to continuetheir education full time may be granted leavesof absence for up to 12 months, with seniorityaccumulating during the leaves. Such leavesmay to, renewed for additional periods.

Summary and Conclusions

The automotive industry and its employeeshave shared in the benefits of sustained tech-nological advance. This has been possible forfour reasons:

1. Acceptance of changes as normal, con-tinuing, and essential in the automotive

industry with programs, policies, andprocedures effectively protecting the in-terests of all concerned;

2. An orderly collective bargaining rela-tionship with definite policies to protectemployee interests and security ;

3. Investment in better tools, machinery,and equipment, and by better organiza-"ion and better management methods ;

4. An expanding output which has creatednew jobs faster than old jobs have beeneliminated.

New methods and new machinery have al-ways been characteristic of the automotiveindustry. Because technological advance hasbeen a continuing process rather than an inter-mittent, disruutive one, it has been accom-plished with resulting benefit to the existinglabor force and not at its expense. Since changesin the methods of production have been ad-justed to as each was introduced, the individualadjustments required have been small.

Years of gradual improvement in work skillsthrough on-the-job training and other programshave done more to enrich employee capabilitythan any one program of massive retrainingcould have accomplished. Thus, the procedureof adjustment by employees has not been per-mitted to lag behind the pace of technologicalchange.

Both management and the unions have rec-ognized the need for technological change andhave cooperated to develop policies and pro-cedures to ease employee adjustment. Anorderly procedure to establish new jobs aridjob rates has allowed employees to fill the newjobs without costly friction. Where greateradjustments have been needed, they have beenaccomplished within the framework of a fami)yof policies designed to protect employees whenjobs were threatened for any reasonseasonalfluctuations, business recessions, changes inconsumer taste, or technological innovation.Plantwide seniority protects the displaced em-ployee in his plant.

Preferential area hiring widens employmentopportunities. Transfers and moving allow-ances encourage employee mobility. Supple-mental unemployment benefits, separation pay,vested pension benefits, and placement assis-tance help employees find work with other firmswith minimal financial sacrifice. Flexible re-tirement age provisions allow older workers toleave the work force and still maintain an ade-quate standard of living.

Expanding demand for the industry's prod-ucts has been the greatest source of employ-ment security in the automotive industry.Growth in output has enabled the industry to


provide new job opportunities and to avoid lay-offs which might otherwise have occurred be-cause of technological change. In a vital sensegrowing output and improving technology havefed upon each other: Technological advance hasallowed the industry to produce improved vehi-cles which have attracted customers and re-sulted in higher sales, while higher sales andoutput have enabled producers to introduce newequipment and processes and thus to improve

their products. In turn, both growing outputand advancing technology have made possiblegreater protection of employees from hardshipthat might otherwise have been the outgrowthof change.

Improvement in the standard of living, theexpansion of employment opportunities, andcontinued economic progress in the country canbe assured only so long as there is continuedtechnological progress.

STATEMENT


Bell Telephone Laboratories, Inc.

Murray Hill, New Jersey

Statement by Bell Telephone Laboratories, Inc.Effect of Technological Change

In the past, the effect of technological changehas been to enable fewer people to produce therequired food, shelter, and other necessities oflife, thus freeing labor and skills for the produc-tion of new things which we come to want orrequire. Everything indicates that the rateof technological change can become greater, andit is becoming greater in some areas. Some-times, however, technological change is inhib-ited for various reasons. For instance, in NewYork City, union regulations inhibit the adop-tion of many practices in newspaper productionwhich are effectively used elsewhere in thecountry. Sometimes restrictive governmentallegislation inhibits change. For instance, thecreation of a new entity for the provision ofsatellite communication divorced that art fromthe financial and technological support it mightotherwise have received from existing commu-nication companies, and so delayed satellitecommunication and will make it more expensive.

Worker Displacement

The area of worker displacement and relatedmatters is outside of the writer's competence.It does seem clear, however, that new industrieswill grow up in areas where it is pleasant oreconomical to live and where it is economical tooperate industries. Improved communicationand transportation, together with our wellbeing, have made our population more mobile,and advances in communication and transporta-tion have also allowed a greater option in thelocation of industries. As people are freedfrom existing industries through automationthey will and should move to other parts of thecovntry in finding jobs in new industries.

Recent Technological Developments

Our technological developments in recentyears have been of two types. One is techno-logical developments in the civilian industrieswhich produce wealth which both maintainsour people and makes possible our expendituresfor defense and space. The other area of tech-nology is that in which a substantial part ofour wealth is spent on defense and space. There

is, of course, some interaction between theseproducing and consuming areas of technology,but they have really become quite separate.Thus, even when industries strong in the pro-ductive civilian economy do Government de-fense and space work, they usually do itthrough special divisions which are isolatedphysically and organizationally from the rest ofthe enterprise. Sometimes a company strongin the productive field (such as the Ford MotorCompany) will set up a subsidiary enterprise(Aeronautronics in the case of Ford) whichhas as its sole objective Government contractwork, and which has no relation to the technicalproblems of the parent company.

This division of our economy into two verydifferent segments with very different require-ments has been little understood. It has hadprofound consequences in the two technologies.In the technology of space and defense, prompt-ness and performance are the prime requisites,and cost must conform to these. In the pro-ductive civilian economy, the primary require-ment is that the product must be worth what itcosts in the open market ; otherwise it will notbe produced. Thus, both management methodsand technological practices in the space and de-fense segment of industry are inconsistent withthe needs of the civilian segment of industry,and are largely nontransferable.

There is, of course, a large transfer in theopposite direction. Military and space technol-ogy owe the transistor, the solar cell, the digitalcomputer, and a host of other things to thecivilian side of the economy.

It is largely the Government which financesgraduate engineering and scientific education,and this has pushed the universities in the di-rection of the spending rather than the produc-ing side of our economytoward the militaryand space. One of the most urgent problems isto direct the attention of scientists and engi-neers to the production of wealth.

Human and Community Needs

The local, State and national governmentsmust meet some large-scale human and com-munity needs, including defense, the provisionof water and sewers, the provision of a highwaysystem, and above all, education. Many human

41


needs, however, and most new human needs aremet through private investment. This invest-ment can produce results only through new sci-

ence and technology which meet human needseconomically. Here the most effective waysthe Government can help to achieve new tech-nologies consistent with the civilian economyand human needs are to provide adequate edu-cation aimed at this end, and to tax and regu-late in such a way as to allow an adequatereturn on innovation. A tax credit for indus-trial contributions in support of research inuniversities would help to direct educationalinstitutions toward the productive side of theeconomy. I believe that it is apparent thatrecent tax cuts have stimulated productivity andhave helped to lay a groundwork for innovation.

Preparing for the Future

Both management and labor have been back-ward in preparing for the future. Manage-ment, perhaps because of the economic and taxsituation, has been unwilling to invest properlyand wisely in research and innovation. Labor,instead of trying to find new jobs, has tried tohang on to old and unnecessary jobs. Govern-ment, both Federal, State and local, also some-times stands in the way of progress rather thansupporting it. Specific things which the Fed-eral Government could do are:

I. Consolidate in both the Executive and leg-islative branches its various activities in old

and fragmented fields of human endeavor.Thus, railroads, buses, and airplanes are alltransportation. We won't make sense of trans-portation unless we are able to regulate, tax, orsubsidize, and to legislate concerning trans-portation as a whole. We need to bring areasof science and technology closer together, notto cut them up in pieces. Unfortunately, Con-gress tends to hack science into small and, theythink, manageable bits. For example, atomicenergy has been set aside from the rest of sci-

ence and technology through the creation of theAtomic Energy Commission. The writer be-

lieves that setting aside satellite communicationfrom all other communication was another such

harmful step. Traditionally, Congress hastried to protect us from bigness. What weneed now is protection from inefficiency anddisorganization.

2. As mentioned earlier, mobility is a requi-site in adjusting to new possibilities and needs.Further, many of our social disasters comefrom lack of mobility, as in Appalachia and inthe slums of many large cities. Sometimes theGovernment acts to fix people where they arethrough alleviating their most pressing difficul-

ties, rather 'Ilan trying to solve the problem bygetting unneeded people someplace else, wherejobs are. The writer does not know what spe-cific legislation would help. This is a matterone has to treat case by case. This writer feels,however, that the subsidization of uneconomicliving in uneconomic areas is a potential sourceof human and economic disaster.

3. It is obvious that the future will requirebetter education. If this is to be effective itmust be aimed at educating people who arecapable of being educated to the degree towhich they can be educated. For instance, itis a waste of time and money, and a process ofhuman agony, if we try to educate for a de-manding job a worker who has been displacedfrom a demanding job by someone more compe-tent. Yet a lot of retraining effort has beenspent on the out-of-work who have been re-placed by the more competent. It would be farmore fruitful to give further training to peoplewho already have demanding jobs, but jobswhich are beneath their ultimate capabilities.If people who are productively employed be-

neath their capacities were trained for betterjobs, they would take better jobs, which always

exist. There is always a demand for able andhighly educated people. Then their formerjobs would be open for the less capable menwho should occupy them.

STATEMENT

Prepared for the Commissionby

Walter BuckinghamDrexel Institute of Technology

Philadephia, Pennsylvania

Statement by Walter Buckingham, Drexel Instituteof Technology

The Poverty and Unemployment Crisis

Facts About People Forced to Compete withMachines

Automation and technological change areamong the causes of our excessive unemploy-ment and poverty. In its broadest sense, auto-mation is not new. French physicist and phi-losopher Blaise Pascal developed several "arith-metic machines" in 1642 and Denis Papin in-vented the automatic pressure valve in 1680.Automatic steering machines for ships were inuse in the early 18th century and Oliver Evansinvented an automatic, water-powered gristmill in 1784. James Watt's "fiyball governors"were automatically controlling steam enginespeed in 1788 exactly as they are controlling in-dustrial diesel and gasoline engines today. Anautomatic loom, operated entirely from irstruc-tions fed to it on punched cards, was demon-strated by Joseph Jacquard in 1801. CharlesBabbage demonstrated an "analytical engine"the first practical automatic calculating ma-chineusing feedback principles, in 1840.

Thanks largely to technology, our nationaleconomy is now annually producing at a rate ofover $700 billion worth of goods and services.With this, our almost 200 million people shouldbe the most prosperous in world history. Infact they are. But, at the same time, we havecontinued for over 10 years with abnormallyhigh levels of poverty and unemployment.

Although poverty and unemployment are dif-ferent things, the two are usually inseparable,breeding on each other. Some poor people arepartly or fully employed at near-starvationwages. Also, some unemployed people havesavings or other sources of income. But thepoor and the unemployed overlap enormouslyand tend to be afflicted with the same problems.Their problems, whether we like it or not, havebecome the most crucial social and economicproblems of our times. Poverty and unemploy-ment, in large part, foster economic, social, andpolitical irresponsibility, indifference, immoral-ity, and even revolutionary extremism. Theseinclude juvenile deliquency, child desertion,

robberies, assaults, prostitution, illicit liquoroperation, alcoholism, mental illness, murder,racial violences, and rioting in general.

Poverty and unemployment are not onlycostly to the poor and unemployed but to all ofsociety. Unemployed or poverty-stricken peo-ple are handicapped people. Yet, since fairlydecent clothes can be man-produced rathercheaply in this country most of these poor orunemployed people are invisible in the streets.But though fairly decently dressed, they arenot decently fed, housed, educated, or medicallytreated.

Effects on Clerical and Industrial Workers. In1955 there were only a few dozen electroniccomputers in the United States. There arenow over 10,000 being produced every year.The effect that this revolutionary technologicalchange has on people is the important thing toknow, if we are to prevent the disadvantageswithout curtailing the advantages. The Bu-reau of Labor Statistics estimates that theaverage computer abolishes about 35 clericaljobs altogether. This is roughly 25 percent. Italso changes the kind of work for about 100other white-collar workers. This is most ofthe rest. Assuming 10,000 computers manu-factured every year, this multiplies out to 350,-000 clerical jobs abolished annually, with over amillion more jobs requiring retraining. Thisestimate is probably conservative, since thecomputer manufacturers themselves predictthat computer output will soon double.

We now have some computers that can re-place people with a high school diploma. Somehave speeds up to 3 million operations persecond. In three-tenths of a millionth of a sec-ond, some computers work a mathematicalequation or tell another computer exactly whatto do. A famous mathematician was asked howthis could be explained. He replied that if anaverage person stood on the equator and tookone step every time he was told to do so by thecomputer he would (theoretically, of course)walk around the world in less than one-tenth

45

I


of a second. This is faster than the speed oflight, which is 186,000 miles per second.

Some legal firms are now using computers tosummarize laws and court decisions and seekout precedents and previous rulings. Beforeautomation this required vast amounts of prep-aration in every case. A computer demon-strated at an American Bar Association meet-performed, within 10 minutes, more than 7man-hours of research, analyzed 400 tax lawsfrom 50 states, developed complete case cita-tions, and began typing out a full text of allthe thaterial. A New York law firm has acomputer which can search 120,000 cases in 1minute at a cost to customers of $100 per yearplus $20 per inquiry.

There will soon be law libraries around thecountry using computers to store and digestinformation. It is predicted that lawyers willsoon be able to get all the information on lawsand court decisions they need merely by dialingfor it, much as we can now dial a certain tele-phone number for the correct recorded time ofday.

The banking industry once employed a largenumber of inexperienced high school graduatesas machine bookkeepers. The Magnetic InkCharacter Recognition machine has now madethis unnecessary. A large New York bank thatput in a computer reported that in 1 year ithired 144 machine bookkeepers, 115 the nextyear, and in the following year, when the newequipment was fully installed, it hired none.

In a similar case in California the greatesteffect was also felt by- the "employables" seek-ing employment rather than the employees.Before computers were installed, one largefinancial firm hired over 100 experienced clerksannually. After automation, no one was firedbut only 10 new people were hired each year,although the volume of business had increasedenormously.

Increasing needs for clerical workers in busi-ness and government .have so far more thanoffset clerical unemployment due to automation.The result has been that clerical job opportun-ities have continued to increase. But theeffects of automation are still clear. A Bureauof Labor Statistics study shows that the in-crease in employment of clerical workers incompanies using data processing equipment isless than half the rate of increase in companieswhere such systems have not been installed-7percent against 15 percent, in fact.

Mushrooming technological changes have hada much more serious effect on factory jobs thanoffice jobs. While automation has increasedfactory output enormously, the total number ofproduction workers has actually declined. Thenumber of workers in factory production in the

United States decreased from 40 percent to 30percent of the labor force in a recent decade,while overall production was increasing about45 percent and the population increasing 20percent.

In the manufacture of electrical appliances,employment declined 50 percent in 8 yearswhile production was increasing 53 percent.In the chemical industry, employment rose alittle over 1 percent in the same period in whichproduction was increasing.

There has been a general opinion that anydecline in factory jobs in automating industrieswould always be offset by increasing opportun-ities in the industries that make the machines.Yet, even in the manufacture of automationequipmentthe "instrument production" indus-tryemployment declined 15 percent (over35,000) in 7 years. In the last 50 years, em-ployment producing metalworking machinesincreased by only about 10,000 workers.

Even employment in the production of non-consumer machinery, which rose at about12,000 a year from 1900 to 1930 and 80,000 ayear from 1939 to 1947, remained about con-stant until 1958 (while investment in machin-ery hit new records) and has fallen steadilyever since.

Effects on Specific Groups. There are manyreasons why the general public has not yet rec-ognized the seriousness of this problem.

First, the official rates of unemployment areundoubtedly on the conservative side. For onething, part-time employment, underemploymentof people working in skills below their abilities,and those who have given up seeking jobs arenot fully considered. The part-time employedincluded an estimated 1.3 million people whoare not counted as unemployed if they work asmuch as 1 hour per week.

Expert studies show that we are measuringonly the part of the iceberg that is above water.Many people have been out of work for solong that they have given up hope and are nolonger looking for work of any kind. Conse-quently, they have lost all motivation for abetter life. These people are not officiallycounted as unemployed, although most of themwould gladly accept work if it were available.Including these, Dr. Charles Killingsworth, anational authority in this area, has estimatedthat total unemployment has been about 8 per-cent for many years. The famous Swedisheconomist Gunnar Myrdal, in his book Chal-lenge to Affluence, estimates American unem-ployment at 9 percent for more than 10 years.The United Automobile Workers estimates trueunemployment at 9.7 percent for the last decade.

The evidence of "invisible unemployment" is

POVERTY AND UNEMPLOYMENT 47

very clear. W hen jobs are available, or whenemployers are willing to train unskilled work-ers, or if they are less demanding about suchthings as age, race, or national origin, most ofthe unemployed or part-time employed have re-sponded favorably to the opportunity to work.The conservative Federal Reserve Board hasestimated that over 2 million people not nowseeking work, and, hence, not counted as unem-ployed, would be at work or seeking jobs ifoverall unemployment were reduced to 3 per-cent. In Europe the number who seek workhas grown enormously with low unemploymentrates.

Second, the underemployed are estimated tobe as muc:i. as 25 percent of the labor force.These include several million people workingat jobs beneath their abilities, about 5 millionwomen who would like jobs, 2 million part-timeworkers, and over a million farm workers whostay on the farm because there is no work otherthan this for them. Furthermore, many poorfamilies are headed by retired people ormothers with young children. These are clas-sified as "outside the labor force" and, hence,not considered unemployed. Nor are, say, coalminers who do no bother looking for anotherjob when they are laid off, as they know noother jobs are available within travelingdistance.

Third, there is labor displacement. A lead-ing business executive estimates that the rateof disemployment, or "silent firing," is 40,000persons per week, or over 2 million per year.Silent firing refers to those who are never hiredbecause their potential jobs were eliminated bytechnology. It is true that the demand for pro-fessional people, such as scientists, engineers,and teachers, has exceeped the supply, but allof the professional people put together are onlyabout 11 percent of the labor force.

The rate of labor displacement has increased.From 1947 to 1957 the total number of nonfarmemployees, both clerical and factory, increasedat the rate of 2 percent per year. But, since1957 this growth rate has been more than cutin half, to less than 1 percent per year, or onlyabout half the rate of population increase.

Unfortunately, displacement of labor in in-dustry tends to reduce wages in the servicetrades, as the displaced industry workers movetoward service jobs, vastly increasing the sup-ply of labor without any corresponding increasein the demand for services. To make mattersworse, there is ample evidence that automationis affecting some service trades almost as muchas the mass production industries, so thereappears little hope of creating any largenumber of jobs here to offset the decline inmanufacturing.

Fourth, over 8 million factory workers areworking overtime while almost this many areunemployed, underemployed, or only part-timeemployed. Unfortunately, it is often cheaperto pay overtime than to hire new workers.This is especially true in industries with sea-sonal demand. So, we have an economy ofparadoxes. With record high levels of employ-ment, production, profits, and gradually risingprices, we simultaneously have high and grow-ing levels of unemployment and poverty.

Fifth, long-range unemployment has in-creased. The aged, the sick, the migrants, theminorities, the children, and the students arebecoming an increasing burden on society. Asmedicine improves, more people are kept alive,even though often in conditions of chronic ill-ness and economic dependency. Furthermore,continuing high birthrates are giving us a largeproportion of children, and, hence, an unusu-ally large student generation. Schools, uni-versities, mental hospitals, nursing homes, oldpeoples' homes, and other refuges for the eco-nomically dependent will soon be impossiblyovercrowded, and their expansion and mainte-nance will be a real burden on the society unlesspositive action is taken to prevent it.

Sixth, economic growth has not kept up. AUnited States Labor Department study of 36 ofour major industries, employing nearly 30 mil-lion workers, shows that employment was ex-pected to continue to decline in 15 of theseindustries. The ratio of employment was un-certain for 7 major industries, and the employ-ment outlook was favorable in only 14 of the 36.Those expected to decline drastically includeaerospace (of all things), bakery products, soft-coal, crude oil production and refining, naturalgas, dairy products, shoes, foundries, all kindsof wood products, meat, liquor, railroads, tele-phone communications, textiles, and others.

Seventh, we have not even kept up withtheory. Full employment was defined by SirWilliam Beveridge in his classic book FullEmployment in a Free Society as

having always more vacant jobs than the unem-nloyed, not slightly fewer jobs. It means that thejobs are at fair wages, of such a kind, and solocated that the unemployed can reasonably be ex-pected to take them; it means, by consequence,that the normal lag between losing one job andfinding another will be very short.

According to this denition, we have been farfrom full employment for a long time.

Who is Most Vitally Hurt? Mixed with theso-called "affluent society" and the "economy ofopportunity" in which we live is an enormouseconomy of frustration for millions of Ameri-cans. We in the United States, with only 6


percent of the world's population, have almostnalf of its wealth. Yet these figures overlookhow the enormous resources are distributed.Mixed with our obvious abundance and increas-ing production and profits is a widespread anddeep-seated cancer of poverty and unemploy-ment.

For many years, about one-fifth of all Ameri-can families (with an average of almost threechildren) have been unemployed or earnedunder $3,000 per year. Another fifth have livedon the verge of poverty, with only a slightlyhigher income and almost no economic security.These add up to nearly 80 million Americansliving in, or on the edge of, poverty. Of these,over 121,4 million Americans, or about 7 per-cent of the population, live in what is defined as"utter destitution," meaning they are in thelower half of the income bracket of thosealready in poverty.

Specific cases are more dramatic. One-halfof all of our young men in the prime of life arebeing rejected by the draft for physical, emo-tional, or educational defects. These handi-caps are often traced to their poverty-strickenbackgrounds. About two-thirds of all hiredfarmworkers earn under $1,000 a year. Four-fifths of the elderly who live alone also receive$1,000 a year or less, while two-thirds of theelderly families receive under $3,000 a year.

The President's Council of Economic Advis-ers reports that those people classified as livingin poverty include almost half of all nonwhitefamilies, half of the families headed by peopleover age 65, or headed by women, and half ofall farm families. Nonwhites are 10 percentof all families but make up 22 percent of thepoor. Southerners, in general, are 30 percentof all families but make up 47 percent of thepoor. Seven percent of our families live onfarms but they make up 16 percent of the poor.A tenth of all families are headed by womenbut 25 percent of them are poor. Over a thirdof all families are headed by someone with lessthan an eighth-grade education but they makeup 60 percent of the poor. These percentagesadd up to more than 100 percent because thegroups overlap.

According to the National Policy Committeeon Pockets of Poverty, the formula for povertyand deprivation is to be any one of these :

Be nonwhite.Belong to a family with no earners.Belong to a family whose head is a female.Be a male aged 14 to 25, or over 65.Have less than eight years education.Live in a rural farm area.Belong to a family with more than six chil-

dren under 18.Live in the South.

Most of the poor tend to stay at the bottom.Born in slums and having poor diets, they arephysically in bad health. They are the lasthired and the first fired from most jobs. Undersuch conditions, these millions of Americanscan look forward to getting little return fromlife. This cycle breeds on itself, leading toeverincreasing unemployment and poverty.Over $4 billion is paid in relief to these peopleevery year, for which no work is received inreturn. This is in addition to the unemploy-ment compaisation paid to others. New YorkCity alone spends half as much money on wel-fare and correction for leople under the age of25 as it spends on all education. The urbanslum problem is far worse than the farm prob-lem. The movement to the suburbs has createda new form of segregation based on levels ofincome, since most unemployed workers live inslum apartments in the central city.

Studies made by the U.S. Department ofHealth, Education, and Welfare go far towardexplaining the impact of the majority of thepopulation in the world's richest nation gettingricher while a very large minority does notshare in this. For example, the principle casefor the trend toward more public health insur-ance is in the penalties suffered by the poor andunemployed through inadequate medical care,poor diet, inadequate housing and bad healthhabits. A lack of adequate prenatal care haslong been one of the major causes of mentalretardation, and a recently estimated increase ofa million mentally retarded children in 10 yearsis based almost entirely on preventable poverty.

There has also long been a much higher prev-alence of chronic illnesses among the poor.Of those people coming from families withincomes under $2,000 per year, over one-fourthhave chronic illnesses whereas only 1 out of 13in the $7,000 per year and up income groups areso afflicted. Those people who earn less than$2,000 per year have 6 times as much menthldisease and visual impairment, 5 times as mucharthritis and rheumatism, 4 times as muchhigh blood pressure, and 3 times as much heartdisease as those in the $7,000 and up incomebracket.

The reason for these inequalities is that whenmedical or surgical treatment is required, con-sideration is normally given to the patient'seconomic condition. People coming from fam-ilies earning over $4,000 per year have a 40percent gi eater likelihood of having an appen-dix operation than a person from a lower incomegroup. Many cases have been found where thedecision of a physician to operate was basedon the patient's ability to pay or whether hehad health insurance. Three-fourths of ourentire population have partial health insurance,

POVERTY AND UNEMPLOYMENT 49

but only one-third of those with incomes under$2,000 have any coverage.

Low-income groups cannot afford preventivemedical care. One-third of the children inhigher income brackets are seen by a pediatri-cian once or more every year, as compared withone-tenth of the childen from poor families.Furthermore, children from higher income fam-ilies see their dentist 5 times more often thanchildren from poor families.

Results of Poverty and Unemployment

A society with our value system cannot ex-pect to build the truly great economic and socialsystem now possible. Although we are theworld's richest nation, we have not divided ourwealth and opportunities democratically. Forexample, since 1920 expenditures on technicalresearch and development have risen 20,000percent, or 200 times, while educational expend-itures rose only 12 times. No wonder oureconomy is out of balance.

In the 1960's over 26 million additional youngpeople must have jobs. This is more than a 40percent increase over the previous decade. Ifthis trend continues, over a million-and-a-halfteenagers will be on the streets by 1970morethan the present population of Boston, SanFrancisco, or St. Louis. Many parents havegiven up hope of a better life for their children,as evidenced by the fact that the rate of promo-tion from grade-to-grade among school childrenof families on relief is far below the nationalaverage. Of those who have completed highschool in some States, it is actually easier formost of them to get into college than to get ajob, except that they cannot afford college.

Edward Denison of the Brookings Institutionhas summarized four major domestic disad-vantages which result from excessive unemploy-ment. First, it discourages investment andresearch into new technology, which are two ofthe most important causes of our much neededeconomic growth. Second, it discourages work-ers from moving out of depressed areas and offfarms, where they are either unemployed orunderemployed, and seeking better j obs in newindustries. Third, it increases union resistanceto management's attempts to reduce wasifullabor practices, which increases opposition tomore efficient production methods, includinglaborsaving machinery. Fourth, the high ratesof unemployment lead to demands for highertariffs to protect both industry and laboragainst goods produced more efficiently in for-eign countries, therefore tending to hold upprice levels at home.

In this country we spend nearly 10 times asmuch on liquor as we spend on books. We

spend 3 times as much on chewing gum ($350million per year) as on educatior al scholar-ships. The American public needs to knowhow many dollars are being spent in the countryon such luxury items, as contrasted with thesmall fraction of this amount spent on retrain-ing, social welfare, and other programs whichcould help the poor and aged. Smug moralismsfrom the few who Are fortunAte Actually domuch to prevent breaking this cycle.

We must train people to work for themselvesor we will have to support them out of profitsand taxes. The only economically sound thingto do is to think in terms of capital investmentin people.

Y oung People. The problem is more seriouswhen it is examined by individual groups. Forexample, the unemployment of teenagers ingeneral has long been over 15 percent ; Negroteenagers, 30 percent ; and residents of so-calleddepressed areas, from 50 percent upward.Over a million young Americans between 16and 21, although they should be going to school,working in factories, or serving in the armedforces, are doing none of these. As schooldropouts, between 5 and 10 million Americanyoung people now face a future for which theyare not prepared. There is no constructiveplace for them anywhere. No wonder they areour "angry young men." Since they are both outof school and out of work, they are especiallybitter as they look for jobs that do not exist.They are often refused a job due to lack ofexperience, while at the same time they cannotget experience without a job.

Yet, the demand is there. In one major city,over 2,000 youths in 1 week registered fortraining, retraining, or any other way of win-ning a new lease on life. Many more are ex-pected. Not one of the 2,000 knew what hewanted to do. He just needed help. The U.S.Secretary of Labor says we have an "outlawpack" of over 3142 million of these young peoplewho cannot find jobs. The cost of this to theNation is over $1,000 per person every year inwelfare and unemployment benefits alone, notcounting the production lost by their unem-ployment or the cost of their possible crimeand destructiveness. (Seventy percent of therecent crime increase has been in the 15-22 agegroup.) For an investment of $1,000 to $3,000each for these outcasts, we could pull every girlor boy back from poverty, unemployment, andignorance. The total cost to the nation of 1year's unemployment for one person exceedsthe total cost of 12 years of education. Wespend more per person on prison inmates thanon retraining our unemployed.

More than twice as many underprivileged


children drop out of high school as those other-wise classified. Over 40 percent of all farmfamilies in the United States are poor by na-tional standards and half of them live in theSouth. There are an estimated 16 million chil-dren of the poor who, when reaching age 16, are3 times more likely to quit elementary or highschool as those whose rarents earn over $5,000per year. A sample group of these dropouts,half of whom had "been forced to quit school tosupport their families, showed almost half ofthose who failed to pass the busic intelligencetest came from families of six or more children.

These unfortunates cat, expect, at best, part-time or insecure employment in low-level, low-wage jobs for their entire lifetime unlessprompt, positive, and major action is taken tosave them. If such action is not taken, theycan look forward to a life of poverty for them-selves and their families. As said earlier, wemight expect it if these "rejects" eventuallyresort to lives of crime. There is no doubt thatthis unemployment is a major cause of raceriots, as unskilled whites and Negroes competefor jobs that are rapidly disappearing. Dr.James Conant calls this problem "socialdynamite."

The children of our poverty-stricken peoplemay be able to work in the many new indus-tries, which are being created so rapidly, if werise to the challenge of educating or trainingthem. A serious problem is that most of theparents of these children also need help of apositive nature. Although private industry

r has done a good job in this area, this is notnearly enough. The Federal, State. and localgovernments will have to provide more helpwhere private industry or labor unions are notplanning to reeducate or retrain.

Older Folks.Second, at the other extreme, arethe millions of unemployed or part-time em-ployed in the so-called "older groups," whichoften means over 40 years of age. This leaveswell over half the adult lives of millions of pea-p3e to probable unemployment or poverty.There is a tragic loss through the waste of theabilities of these millions of people. We do lessthan any other industrialized nation in the freeworld to give our youngest and our oldest citi-zens a chance for dignity or even minimumeconomic security.

There are about 10 million aged people inthe United States who are unable to find workto enable them to afford the minimum standardsof living. When the Murray Body Companyclosed down, putting 5,000 people out of work,the so-called older workers (over the age of 45)were ent. of work an average of 6 months (com-pared with 3 months for all workers) and 82

percent used up all their unemployment com-pensation before finding other, often lower pay-ing jobs. Most of those over 60 years of agenever found another job and had to retire intodependency on others or social security.

There are now over 7 million Americans over75 years of age. vet, many firms will not hireemployees over 40 as this age is considered "tooold to work." But Einstein, Churchill, andmany other great leaders made their historiccontributions so late in life that they wouldhave long since been retired if they had beenin private business. Government statisticiansestimate that there will be 9 million people over75 by 1980 and if present conditions continue,most of them will be in the worst imaginablepoverty. These millions are not only unem-ployed and poorthey are tormented by isola-tion and loneliness; they deserve jobs, if theyare able to perform them and want them, andthe best of medical care and human friendship.

Many suggestions have been made concerningwhat to do with our increasing millions of olderpeople. These include programs for such thingsas better housing, changing .our philosophyabout our aged, who are very oiten maintainedat minimum survival levels, medical care forthe elderly, and abolishing compulsory earlyretirement for qualified workers, many ofwhom find no incentive to live after retirement.

Negroes. Third is the growth of our Negropopulation, in total, as well as relative towhites. More important is the Negro's recog-nition of his economic, as well as political,rights as an American citizen. As a result, thejob hunt has increased more rapidly for Ne-groes than for whites. Although most Ameri-cans have known that Negroes are not fullysharing with whites in economic life and oppor-tunities, the U.S. Labor Department has re-vealed that a startling gap in both quantity andquality exists and that it is widening in everyfield. It is true that a few Negroes hold sig-nificant jobs but this is not the overall picture.The expansion of Negroes into higher jobs hasnot kept up with their overall populationgrowth or even with their education. In 1951the average male Negro worker earned 62 per-cent as much as his white equivalent. Now ithas fallen to ab mit 50 percent. Unemploymentfor nonwhite teenagers has increased 60 per-cent since 1955double the 30 percent increasefor white teenagers.

In most industries Negroes are still the lasthired and the first fired. This has caused manyof them to be discouraged and drop out of thelabor market altogether. Amohg white collegegraduates, 21 percent end up as managers,while only one-third, 7 percent, of all Negro

POVERTY AND UNEMPLOYMENT

college graduates ever get into management.So say Labor Department studies.

Furthermore, while a white high school grad-uate can look forward to becoming a skilledcraftsman or white-collar worker, most Negrohigh school graduates end up as janitors, red-caps, or in other unskilled jobs. This, nodoubt, is the reason so many of them drop outof school to take any job they can get. Racialdiscrimination in employment, education, andtraining is an unnecessary waste of our mostimportant natural resource. We ca- not expectto solve our nationwide civil rie :F'S' withthe percentage of unemplovme7 n wertythat exists at this time. Most, it : Ali, of thr,disturbances involving Negroes ...e based asmuch on their excessive unemployment andpoverty as on any denial of their civil rights.What can be said of Negroes is also true forother minority groups. Well over half of allAmerican Indian families and over one-third ofall Puerto Rican and Mexican-American fam-ilies earn under $3,000 per year.

Depressed Area Residents. Fourth, we haveliterally hundreds of bleak areas with almostcomplete unemployment or excessive poverty.Many of these are within blocks of the capitolbuildings in nearly every State and the Dis-trict of Columbia. They are just out of sightof most of our nationwide expressways. Thepeople in these areas, representing a large ner-centage of the Nation's population, are, foi thetime being, politically weak. These unskilledand unschooled unemployed people ate not onlyamong those most in need of help but they areleast likely to get it. For one thing, they tendto resist help and resent being called residentsof "depressed areas." Yet, their problems aremost crucial. Less than half of the West- Vir-ginians, who have spent their lives until re-cently mining coal, have found new work andalmost all of the new jobs have been at lowerskills, and, hence, lower wages.

Most of these people do not vote or belong tolabor unions. Much of the labor and welfal elegislation designed to help them has primarilybenefited the middle third of our population.Even social security insurance is not availablefor many of these unfortunates. For at leasta fourth of our Nation, the situati3n is gettingworse, not better. Nearly a third of these wereunemployed 4 months or longer. These mil-lions of poor or unemployed may seem invisibleor unorganized but they exist and could con-ceivably take the law into their own hands.

Other Unfortunate Groups. Many others aresuffering from unnecessary unemployment andpoverty. One group is women. The number

51

and percentage of women entering the laborforce is increasing rapidly. Over :ialf thewomen in the 45-54 age group are working orseeking work. This percentage has been ris-ing rapidly and steadily for many years. Wellover half are now married. The most expertpredictions are that there will be an increaseof about 48 percent in women workers in adecade, compared with an expected 15 percentincrease for men. Millions of people are em-ployed in dead-end jobs that are fast disappear-ing. These include such people as migrantfarm laborers, subsistence farmers, meter read-ers, bookkeepers, messenger boys, and elevatoroperators. Many more Americans are employedin status quo type jobs, mostly in manufac-turing, where the demand for the products isstill increasing so ao to require about thesame number of employees despite continuingautomation.

People in these groups, such as migrantlaborers, subsistence farmers, and unskilleddomestic servants, are in poverty even thoughthey may be working full-time. The fact isthat ody about one-tenth of migrant workershave full-time employment. While we have arecord employment level of over 70 million peo-ple, over 15 million of these are out of workpart of the time every year through no fault oftheir own.

Finally, there are many areas where thereare labor shortages, but most of them are in theservice industries, such as medical, legal, educa-tional, and research jobs. All of this means wewill have to prepare ourselves to live in a soci-ety in which practically alr jobs will be in theservices.

Explosion in Technology

Machi..es that once did away with horses nowdo away with people. It took two-thirds of acentury to develop the electric motor. Follow-ing this, one-third of a century elapsed whilevacuum tubes were being developed. Then ittook 5 years to produce the solar battery andonly 3 more years to produce the transistor.This rapid technological growth destroyed mil-lions of jobs but, fortunately, during most ofthis period, new jobs were being created asfast as old ones disappeared.

Times have now changed. A leading manu-facturer of automated machinery recently saidautomation "is definitely going to kill morejobs than it makes" and added, "What we needto do, therefore, is work out methods for usingconstructively the human labor we are E.ttingfree." Unemployment and poverty have manydifferent causes which must be treated sepa-rately. Furthermore, care must be taken that

!

k


the treatments are consistent with each otherone must not tend to work against another.

Recent large employment decreases have beenfound by the U.S. Labor Department to haveoccurred in industries with small productivitygains as well as those with large gains. In thefirst case, the rpsii lt wns A decline in both em-ployment and output. In the second case, theimmediate effect was a decline in employmentand an increase in output. This would seemto indicate that excessive unemployment can-not be blamed entirely on automation, whichincreases productivity, since equally great in-cl. eases in unemployment occurred in the non-automated industries which, consequently, hadsmall produLtivity gains.

Manpower policy is concerned mainly withthe equalitative problem. But at present, withdemand so far short of the capacity of theeconomy, it is impossible to determine the sizeand nature of the qualitative problem. Thisaccounts for the debate now going on amongeconomists. Some argue that present unem-ployment is largely "structural"resultingfrom the inability of workers to fill jobs thatare available because they lack the necessaryeducation or skills or because they live in thewrong places.

In this era of rapid change, any industry candecline almost overnight if it fails to keep up-to-date, or even ahead of the times. If any area ofthe Nation, or the total Nation itself, can hopeto compete successfully with the rest of theworld, there is certainly no longer any doubtthat technical skills of our people and basicaptitude for training and constant retrainingare crucial.

More important than technology itself is theastronomical rate of technological change.Many of us think in obsolete concepts in ap-praisir g the recent accelerated changes of tech-nology. For example, the Queen Mary cantransport 1,500 people each way between theUnited States and Europe in 15 days, but 1jet plane can carry the same load in the same1:eriod, making 15 round trips, carrying 100passengers each way.

One generation now sees more technoTiogicalchange than occurred in all previous h: story.People moving West only four generations agoused the same transportation as the Children ofIsrael used to leave Egypt. Now it is possibleto fly around the world commercially in the timeit took our pioneers to go 80 miles. Ninety-fivepercent of all the scientists who ever lived arenow alive and active. As one worker put it,"The future is closing in on us faster than everbefore."

Economic Costs. The unemployment of ma-

chines and natural resources represents only atemporary loss of production to the economy,since they can be used later. But the unem-ployment of persons is the greatest loss inmany ways. First, depreciation of humanbeings is primarily a function of time, not use.The loss of Production through idle human timecan never be recovered by extending the life ofthe unemployed person, as is the case withmany machines. When people are out of workthe loss to the Nation is far greater than whenonly machines are idle. Many machines havea certain possible total production, whetherthey are employed all the time or on and off.This is not true of people. Many people diesooner when they are forced to retire or arelargely unemployed and have no hope withoutthe stimulation of something constructive todo. Furthermore, skills and talent deterio-rate during unemployment, requiring extensiveretraining to restore them, if it is at all possible.

The Labor Department estimates that $600billion worth of good and services have beenlost to us through involuntary unemploymentin the last 10 years. What could we have doneif we had used our labor resources fully?First, we could have doubled payments to the15 million Americans now on social security.Second, we could have wiped out many slumareas by the construction of about 9 millionhomes in the $15,000 class. Third, we couldhave built about 1,000 badly needed hospitalswith approximately 900 beds each. Fourth,we could have doubled the construction of watersystems, sewage plants, parks, and highways.Fifth, we could have added about 400,000 badlyneeded classrooms for schools. Si , we couldhave increased the salaries of Americanteachers by an average of $1 )er year.Seventh, we could have given scholar-shi7)s to 3 million college stude need offinancial help. Eighth, we could 1._ve doubledthe necessary aid to our foreign allies withe atincreasing the national debt. Finally, longperiods of full employment cause people to leavesafe, but unproductive, low-wage jobs and takejobs where they can contribute more output andreceive more money for it.

Recently, the Secretary of Labor revealedthat in 1 year we wasted more man-hoursthrough involuntarily unemployment than werelost throukh strikes in the last 36 years. Inthe last decade alone, we lost forever, by unnec-essary unemployment, 25 million man-years ofproduction. This cost, in badly needed prod-ucts and services, as noted previously, was atleast $600 billion. In addition, there is no wayto calculate the loss to the Nation through thenumber of people who, of necessity, had toaccept employment at below the level of their

POVERTY AND UNEMPLOYMENT

abilities. Many others were forced into part-time employment or early retirement and theguods and services these people might haveproduced have been lost forever.

We have been more concerned about pricestability than full employment because priceincreases affect everyone, whereas unemploy-ment affects only a minority, although in thiscase a very large minority. The fact that unem-ployment has been accompanied by small priceincreases suggests that we may no longer havea choice between the two.

Psychological Effects. In addition to economiccosts, the psychological effects of unemploymentlead to low morale, despondency, and often ashorter, less productive life because of enforcedidleness. For example, the number of Ameri-cans who lose all of their teeth is in direct pro-portion to their poverty. Also, the number ofsick or ailing people who keep the corridors ofour charity hospitals full is related directly tothe levels of unemployment and poverty.

The greatest irony is that today it costs moreto be unemployed or poor. School is compul-sory so children must have clothes. We havelittle decent public transportation so a familymust have a ca .. Rents are higher per personin slums than aimost anywhere else. The poortend to pay the highest prices and get the lowestquality of everything. Forced, for the mostpart, to live in crowded city slums, they aremore lonely and depressed than ever.

Formerly, in poor countries, most peoplewere accustomed to hunger, illness, poverty,and an early death. They accepted this miseryas inevitable. Today the opposite is true. Inthe same countries, now called "developing"rather than "underdeveloped" or "poor" asbefore, there are demands for almost instantimprovement based on knowledge of high livingstandards in the advanced countries, but igno-rance as to what is necessary to achieve thesestandards and how long it must necessarilytake.

In countries such as the United States andthose of Western Europe, where the majorityof the people live well above minimum livingstandards, there is no good excuse for thedenial of opportunities to the poor and unem-ployed. Consequently, these conditions tendnot to create apathy and irresponsibility, butfrustration, anger, and sometimes violence.These are often the wily forms of escape fromreality that these unfortunate people know howto pursue,

inheritance of Poverty. About two genera-tions ago society looked on poverty and unem-ployment as crimes. The poor or unemployedwere considered morally unfit and defective in

53

character. They were suppressed if not actu-ally punished. Those physically or mentallydisabled were put out of sight as possessed ofthe devil. A few people still hold to thesearchaic ideas.

A few years ago, a group of miners wereentombed in one of the Kimberly diamondmines in South Africa, Surrounded by unlim-ited riches, they slowly died, starving for food,thirsting for water, in need of medical assis-tance, and deprived of spiritual comfort. Thediamonds were worthless to them.

Too many of our people still believe that theunemployed or poor have, unfortunately, chosento be born into the wrong families, or races, orlive in the wrong areas. There is also a small,but highly financed and highly vocal, minorityin this country preaching that unemploymentand poverty are due to unwillingness to work.For example, they oppose all help to the dis-tressed unemployed or poverty-stricken mil-lions. This minority is led, in large part, bypeople who have never had to pay a doctor'sbill or been required to take the risks involvedin getting and keeping a job in our highly com-petitive market. Many of them inherited greatwealth and cannot seem to understand whyeverybody has not had the same advantage.This kind of thinking leads to the incorrect,illogical theory that unnecessary suffering forthese people is their own fault.

There is no proof that the conditions of exces-sive unemployment or poverty are due to lowintelligence, lack of ambitionor God's judg-mentas some would have us believe. Thepoor are as intelligent as the rich and, if givenequal education opportunities, will lead a pro-ductive life. Nor is lack of initiative an excusefor unemployment or poverty. How can weexplain the plight of 11 million children whoare victims of depressed areas or automationlayoffs, and obviously have no control over theirfate? We cannot blame it on God's judgment.If we did, His punishment would seem to fallon those who have sinned the least. Officialunemployment has been about 5 percent, orover, for more than 10 years, whereas unem-ployment for those in age group 21-24 has been19 percent, and for those 16-21 it has been 15percent.

Continuing unemployment leads to a perpetu-ation of inherited poverty with all its necessarilyattendant welfare expense. These intangiblecosts are difficult to measure, but a country thatprides itself on the great values of individual-ism is certainly not healthy when it has millionsof citizens who do not share in its opportu.iities.If we do not consider human values, we mustrealize that not only our world leadership butour Nation itself is at stake.

,

,

STATEMENT


Building Service Employees' International Union

Washington, D.C.

Rtntement hy the, ilding verlice, FInplOyet9,eInternational Union

The Building Service Employees' Interna-tional Unionan organization composed ofapproximately 335,000 men and women workingin service industries and in service occupa-tionshas been intensely concerned with jobloss resulting from automation in the entireperiod following the end of World War II.

While our organization recognize, the needfor progress and the benefits to the entire Na-tion that accrue from many kinds of progress,it has been greatly concerned with the fate ofindividual workers who have lost their jobsthrough automation, with the possible effects ofautomation upon wage levels of members andsimilar workers, and with the effect of job lossupon the economy as a whole.

Automatic Elevators

The most dramatic example of job lossthrough automation in the setvice occupationsis that of the elevator operator.

In 1940, the U.S. Census Bureau found 76,860persons employed as elevator operators in theUnited States. Ten years later, in 1950, theCensus Bureau data showed that the number ofelevator operators had increased by about 16percent, rising to 89,185. Ten years after that,however, the number of elevator operators haddropped by about 19 percent to 71,882. Thus,there were approximately 5,000 fewer elevatoroperators in the United States in 1960 than in1940.

The job loss shown so graphically by thesestatistics was due entirely to the improvementand widespread use of automatic elevators inthe post-World War II era. While automaticelevators were found in many apartment housesbefore 1940, they were relatively rare in officebuildings, hotels and other large structureswhere efficient vertical transportation was anhourly necessity.

Construction of high-rise buildings continuedat an accelerated pace after World War II, andthe need for elevators accelerated greatly. Ithas been estimated that in 1946 and 1947 mostof the elevators installed had to be operatedmanually. In 1950 Architectural Forum esti-mated that only 12 percent of the new!y in-

stalled elevators were automatic. However,that figure climbed to almost 60 percent in1952 and reached 80 percent in 1953. Since1958 practically all elevators installed in newapartment houses, office buildings, hotels, andsimilar structures have been automatic.

At the same time, many of the office buildingsand some of the hotels which were constructedin prewar years have replaced their manual ele-vators with automatic elevators.

In some cases where automatics replacedmanual elevators, attendants were kept to in-sure the safety or convenience of passengers,but in most cases the jobs were eliminated. Innew construction only a few of the structureshave used operators on the cars.

The occupation of elevator operator is gradu-ally becoming obsolete. The 1970 census willundoubtedly show a more dramatic drop in thnumber of elevator operators than was recordedin the 1940-60 period.

How Automation Affeets Jobs

The case, it seems to us, is typical of whathappens when automation affects the serviceindustries. Often jobs are not lost immedi-ately. Through effective action by the laborunion, for example, men may be retained ontheir jobs despite automation. However, insuch cases the jobs are usually not filled afterthe present job holders depart; thus they arelost through attrition, or what has been called"silent firings." Perhaps the more importantlong-run effect is that no new jobs are createdthrough automation.

It could perhaps be Lrgued that the pr.,ssesof constructing the automatic elevator and pos-sibly the work required to maintain it do addsome small increment of work beyond thatrequired for the construction and maintenanceof the old manual elevator. It could perhapsalso be argued that the greater profits of thebuilding owner who installs an automatic mayresult in greater spending on his part whichcould add some small increment to the totalamount of work being done by the entire econ-omy. However, it could hardly be argued thatthese two small increments of work could in

57


any way replace the amount of work that iscontributed to the economy by the elevatoroperator under the manual system.

The incidence of job loss through automationis rarely illustrated as dramatically as in thecase of the elevator operator. It is more usualin the service industries for job loss to be moregradual and to depend upon the constructionof new buildings rather than upon the altera-tion of old ones.

The Hotel Industry

In the case of hotels, for example, not onlyhas there been a clear loss of jobs through theintroduction of automatic elevators but alsothrough the use of floor polishing machines andother equipment used to maintain the hotel.These losses have been rather small. It may,however, be anticipatedand the motels haveset the examplethat job loss in the hotel in-dustry will be much greater in the future asnew structures replace those now in use. Thisis evident from some recent construction andis also being predicted by hotel industryauthorities.

For example, the Cornell University Schoolof Hotel Administration sponsored a report(completed in 1961 by Fair, Isaacs, and Com-pany, Inc.) on automation for hotels. The re-port concluded by mentioning the possibilityin the future of ". . . a self-service hotel inwhich a guest operates an electronic room rackfor himself, registers by use of a credit card,prepares his breakfast in his room using a self-service meal dispenser and high speed cooker,and checks out of the hotel, again using hiscredit card, without ever having come in con-tact with any of the personnel of the hotel."

Some of the Hilton hotels built in recentyears in New York, Toronto, and San Franciscounderscore the possibility of a completely auto-mated hotel. The San Francisco Hilton fea-tures drive-in self-service parking, baggagehandling, and registration (even to checkoutand bill payment).

Hospitals

What is true in hotels is also true in hos-pitals. There have been some moves towardautomation in hospitalsin the introduction ofcomputers for record handling, in automaticmonitoring systems using television, in devicesfor handling foods and records, and in cleaningoperations. In general, however, it will be inthe hospitals of the future that job loss will bemost pronounced as these various devices which

have been introduced in recent years and othernewer devices are put together to produce ahospital which is largely automated.

In a recent issue of Hospitals, Dr. John R.McGibony, chief of intramural research, divi-sion of hospital and medical facilities of theU.S. Public Health Service, speculates on whatthe hospital of the future will contain. He seesfuture facilities with complex medical centers,regional, community, and satellite units, and dayand night hospitals. Miniaturization will pro-duce automated bedside techniques for instantdiagnosis, he believes, and instant consultationwill be achieved through microcircuit television.

Dr. McGibony foresees present kitchens beingreplaced by microwave cooking-within-floorvending machines, dishes being edible or dis-posable, and garbage and solid wastes disposedof through disintegration. Dust and dirt willbe removed by electronic maintenance andlaundries may not be needed because linen willbe replaced by disposable sheets.

Hospitals are the fifth largest industry in theUnited States and the effect of automation onthis service industry in the future will have aconsiderable effect on the total number ofemployees in the service industries.

Gas Utilities

Another industry our union has been con-nected with is the gas utility industry. Thisindustry gives us an example of the effect ofautomation upon public utilities and other pub-lic service industries. Data released by theAmerican Gas Association indicate that thenumber of employees in the gas industry in-creased slightly year by year in the postwarperiod until 1960, when there were 206,400.By 1964 the number had declined to 204,800.

Since 1950 productivity ot the industry hasbeen increasing. In 1950 the number of cus-tomers served per employee was 136.1 , by 1960this number had risen to 160.1 , and it standsat 178.0 for the year 1964. Thus in this 15-year period there has been an increase of about31 percent in the number of customers servedper employee.

The total of gas sales per employee has alsorisen. It was $3,100 in 1950, $4,600 in 1960,and $5,000 in 1965. This represents a muchlarger percentage increase for the 15 yearsabout 61 percentand only a small portion ofthis increase can be attributed to the change inthe value of the dollar.

In its most recent statement the AmericanGas Association has attributed the increasedproductivity and the decline of the number of

BUILDING SERVICE EMPLOYEES

employees to automation in both the field andthe plant, to more efficient use of facilities, andto the increased use of natural gas. However,in reports sent out in 1962 and 1963 the changeswere attributed to automation only. Whateverthe circumstances it is clear that automationhas caused job loss in the gas utility industry.

Bowling Alleys

One industry served by our union which hasboomed greatly in the postwar period is thebowling alley industry. The 1948 Census ofBusiness indicated that there were 4,505 bowl-ing alley establishments in the United Statesemploying 66,777 people. Fifteen years later,in 1963, the number of bowling alleys hadalmost doubled to 8,858 while the number ofbowling alley employees rose only to 88,073.Thus in 1948 there were almost 15 employeesper bowling alley, while in 1963 there were only

10. If the proportion of employees to bowlingalleys had remained the same as it had been in1948, there would have been about 43,000 moreemployees in bowling alleys in 1963. While itis undoubtedly true that the number of jobsprobably would not have increased in directproportion to the number of alleys as largeralleys were built, it is also undoubtedly truethat a very high proportion of the potential jobloss was due to the installation of automaticpin setters in the new bowling establishments.

The extent of automation in the bowling in-dustry can be seen from the following statis-tics: In 1955 there were about 60,000 alleybeds in U.S. bowling alleys, with only about11,000 of them operated by automatic pin set-ting machines. Ten years later in 1964, therewere almost 3 times as many alley beds-172,000 ; but of these, 160,000 were equippedwith machines. Therefore, the number ofbowling alley beds serviced by live tenders de-clined from approximately 49,000 in 1955 to10,000 in 1964. Thus even in a relatively boom-ing industry the effects of automation in caus-ing, job loss are visible, even where the totalnumber of jobs has increased substantially.

Other Recreation Industries

at is anticipated that with the growth ofleisure time the American citizen will spendmore time in recreation; some of this will un-doubtedly be commercial recreation. Bowlingalleys offer the most dramatic example of theeffect of automation upon jobs in commercialrecreation. But it should be noted that auto-mation is taking place and will continue to takeplace in many other areas. The motion picturetheaters offer examples of people being replaced

59

through the introduction of automatic vendingmachines for soft drinks, candies, and evensandwiches, and through simplification of struc-ture which allows the ticket seller also to per-mit customers to enter into the theater withouthaving to pass a ticket taker.

In the race tracks, computers are now beingused to do calculations which were formerlydone by humans; and machines have been in-vented, although not yet perfected, which willpermit the customer to both place bets andcollect on them without the presence of mutuelclerks.

Importance of the Service Industries

It has been suggested that the basic natureof our economy is changing since the majorityof the people in the labor force are now en-gaged in industries and occupations which aredevoted to rendering a service rather than toproducing a commodity. Wherever we look inthis service area, whether it be in medicalservices, the traditional service industries, therecreational industries, or even State or localgovernment, we see everywhere the introduc-tion of automatic devices both simple and com-plex which tend to displace personnel in thelong run if they do not do it immediately. Thefull effect of the introduction of these devicescannot be evident immediately since for themost part they require capital investmentwhich delays the introduction of the device.Consequently, in some areas, such as hotels andhospitals, the full effect of automation will notbe evident until many of the present buildingshave been replaced by newer structures inwhich automation has been introduced as anintegral part. However, while the effect ofautomation on job loss may thus be delayedfor one or more decades, it should not be takenas a guarantee that this will, in fact, be thecase, since the introduction of competing struc-tures or the inroads of competing industriesmay also enter the picture to c3ntribute to jobloss. This is the kind of situation that existswhere old hotels must compete with motels,which empliv fewer personnel per customer,through the elimination of services w9ch hotelscommonly render.

It is true that in the entire service industrythere is and has been job loss through automa-tion and the continuation and accentuation ofjob loss can be expected in the future. Thatthis will have an influence in reducing prices tocustomers and clients is to be doubted sincethe cost of services tend to rise under anycircumstances.

There is unemployment throughout the serv-ice industries todaygreater iri some areas and


smaller in others, but present nonetheless. Thecontinual introduction of automation in thepresence of unemployment constitutes, we be-lieve, a threat to the future prosperity of acountry where the service industries now playsuch an important rote in the economy. It isalso a threat to millions of persons now em-ployed in the service industries and to otherswho will necessarily have to seek employmentthere in the future.

This threat to people takes on added im-portance in the service industries since manyservice workers are relatively mature ; if theyloae their jobs they find reemployment moredifficult to secure because of the continuingprejudice against hiring older workers. Some-times, because of their age, retraining is espe-cially difficult, even where retraining programsare available.

Accordingly, it is the view of the Building

Service Employees' International Union thatthe Federal, State, and local governments mustall do whatever is possible to combat unemploy-ment and to educate and retrain working menand women so that the most deleterious effectsof this development will be minimized. More-over, it is our view that no significant progresswill be made in combating the harmful effectsof automation until the standard workweek isreduced to 35 or fewer hours. The Federal andState governments can play an important rolein the reduction of the workweek by amendingthe Fair Labor Standards Act and similar legis-lation to provide for a 35-hour week.

Our many years of experience with automa-tion have convinced us that whatever its bene-ficial effects, it does have harmful effects onindividuals and their families. We also be-lieve that automation can threaten our entireeconomic system.

MP

..

i

STATEMENT


Burroughs CorporationDetroit, Michigan

Statement by the Burroughs CorporationAs we continue to add length and strength to

an unprecedented period of economic growth,the writer believes we are in a good position tolook realistically at the total subject of automa-tion. There is abundant evidence that a grow-ing maturity is developing in our countryregarding f. e-shnological progress. More posi-tive voices are now being raised to question thenegative assumption that automation and re-lated technology will soon force us into becominga nation of "kept citizens."

We cannot minimize the fact that even in thisperiod of general prosperity we have 96 per-cent of our labor force at work instead of 100percent. We can ill afford to be complacentabout this. But it is certainly a better averagethan the 93 percent employment figure of 1958,and the lesser percent has been attained with amuch larger labor force. This substantial im-provement has taken place in a period whenautomation was supposed to have wiped out thejobs of millions of citizens.

The real danger facing our economy today isnot automation. Rather, it is the possibilitythat we might fail to take .omplete advantageof every opportunity for technological progresswhich is economically feasible.

In the United States approximately 800,000scientists and engineers are working to advanceour technological position on all fronts. Thisdoes not consider the many thousands of tech-nicians and support personnel also involved inthese efforts. We cannot afford to reject, outof hand, the accomplishments of these skilledpeople. Nor can we act as though the $100billion spent sir ce 1955 on research and devel-opment, currently at an annual rate of $20billion, has been a waste of money.

To do this would be equivalent to saying,"We've progressed as far as we want to go.We're afraid to go down the road any farther,because what lies around the bend might startleus too severely, challenge us too boldly, andthreaten the cocoon of security which we'vemade our primary goal." The writer doesn'tbelieve for a minute that the American peopleintend to accept such a philosophy.

There are those who say that automation isso completely different from any kind of pasttechnological progress that it will force us intoa complete revolution in terms of our society

and economy. Others say that automation isreally nothing different from any of the pastmajor technological advances. As is usual indebates of this kind, there is some truth on bothsides and probably the real truth lies somewherein between.

To the extent that automation as we know ittoday is an extension of man's power anddominion over the world around him, it isnothing totally or radically new. It shares thissame characteristic with the earliest and mostprimitive tools of man. Obviously, moderndevelopments in electronics have helped us movequickly into more sophisticated kinds of auto-mation than was possible 20 years ago, and tothat extent automation is "new." Some sayautomation is dangerous because it extends thepower of the central nervous system ratherthan mere muscle power. We could argueabout that and point out that the first addingmachine built in 1886 was an extension ofman's mental powersor for that matter, wecould go back to the abacus.

Instead of debating the precise definition ofautomationwhether it is new or oldweshould take a positive approach. We shouldconsider the creative power which automationputs at our disposal as a means to provide amore fruitful and abundant life for all of ourpeople. And we ought to be moving toward abetter education for all of our citizens so thatthey can reap these benefits.

Before the climate necessary to do thesethings effectively can be created, we must dispelsome of the popular fictions which surround thesubject of automation. Let's examine a fewof them.

Fiction number one i Automation is destroy-ing anywhere from 2,0')0 to 40,000 jobs perweek in this country. Which number youchoose depends on how pessimistic you wantto be.

The fact is that no reliable evidence existsfor the Nation as a whole concerning the netnumber of jobs being eliminated by automation.There is littk likelihood of our getting such in-formation in the near future because jobs areseldom eliminated or created because of any onefactor.

Job displacement or creation can be and oftenis the result of mergers and consolidations,

63


changes in plant locations, or shifts in productdemand. This last pointchanging productdemandis one of the most characteristic fea-tures of our economy. Look, for example, atthe changing demand for fuel over the last twodecades. Production of anthracite coal hasdeclined from 56 million tons in 1951 to 17million tons in 1961. During the same period,production of natural gas doubled and therewas a substantial increase in production ofcrude petroleum. The same can be said forelectric power capacity. Automation in thecoal industry was certainly not responsible forthe change in consumer demand.

Not only do these widely circulated fictionsconcerning job displacement fail to take intoaccount the whole network of factors affectingjobs, they also create an unwarranted climateof fear. In many cases this fear of job lossdue to automation, rather than of automationitself, has generated bitter labor-managementdisputes. The harmful economic effects ofsuch disputes can often be more damaging tojob security than the automation feared bylabor.

An example of how automation creates jobsby providing better products and services atlower prices has occurred in the communica-tions industry. In 1924, AT&T's Bell Systememployed 160,000 operators for 11 millionphones ; today there are 175,000 operators for71 million phones, and overall, the Bell Systememploys over twice as many workerssome760,000as it did in 1924. While our totalpopulation grew by 70 percent, employment inthis highly automated industry grew by over150 percent.

A second fiction worth noting is the commonbelief that automation is a single, once-and-fol -all kind of thing. But when we discover thatliterally hundreds of definitions are used todescribe automation, we realize that it is not asingle entity. Automation might be the appli-cation of a computer to an inventory controlproblem. It might be the use of very complexmachine tools which perform dozens of sepatateoperations automatically. It might be a multi-million dollar process control system which per-mits economical production of synthetic fiber.It is not one technique or one piece of gear.Automation will never be "here" in the sensethat, no further progress in technology of pro-duction, control, or computation is possible.

A great deal has been written implying thatmany industrial plants throughout the countryare now great, empty caverns. Empty, that is,of human beingsfilled only with the whirringand buzzing of automatic machinery, controlkdelectronically, monitored by a few white-coatedscientists. The truth is that virtually no major

industrial complexes in this country have beencompletely automated. Even though, in a fewinstances, such automation may be technolog-ically possible, it is not economically feasible.In the final analysis, it will be the economics ofeach particular situation that will determinehow far and how fast automati^n will proceed.

Job creation has been gre lest among thoselargel companiesthe top 500 in _1.astrial cor-porations in the countrywho ,ertainly canafford to use and develop automation equipmentto the maximum extent. Between the years1956 and 1963 their total employment increased11 percent.

Those who worry about progress in automa-tion coming too quickly should remember thatthere is a point of diminishing return in auto-mating any given activity. In many basic in-dustries in this country, significant strides havebeen made to automate some productive activ-ities. However, each new step in that directionbecomes increasingly difficult and a great dealmore expensive. So if automation has pro-ceeded more slowly than predicted, it has doneso because the dynamic economy in which welive, with its variety of interaction and inter-play of forces, has dictated that it move slowly.

The urgent reason for automating any givenactivity in business or industry goes beyondany desire to reduce labor overhead. The com-petitive forces at work both at home and abroaddemand the continuous creation of new and bet-ter products and servicesat prices people canafford to pay. In many instances computersand other automation devices are not perform-ing tasks which had previously been done bymen ; they are performing tasks which hadn'tbeen done at all. The extra checks in a systemof quality control or the up-to-the-minute re-ports on inventory status facilitated Ly com-puters are activities which simply could nothave been handled economically in the past.

The alternative to automation and otherforms of scientific and technological progressis a downgrading of our industry, our economy,and our society in general. It would beplanned obsolescence on a grand and tragicscale.

If we shrink from the challenge of automa-tion, it will only be a matter of time before ourposition of leadership in world tre.: is whittledaway. Other progressive nations are movingahead with automation as quickly as their econ-omies permit. We cannot strengthai or evenhold our position in existing world markets, letalone penetrate the markets created by the de-veloping nations, unless we commit ourselvesto the productive power which automation andrelated technology make possible.

In the face of our growing desire to provide

BURROUGHS CORPORATION65

the fullest ch. tunity for all citizens, and inthe light of ii.ounting strong competition inworld markets, it is time that we adopt a posi-tive national policy on the subject of automa-tion. Some steps have been taken in thisdirection. But we must do more, and thefollowing actions are suggested:

1. Leaders of business, labor, and gov-ernment should be courageous in makingknown to our Nation their unqualified sup-port of productive technological changeand automation. There should be nothinghidden or evasive about our pursuit of thisgoal.

2. We should continue to seek prudenttax revisions which encourage industry tospend for modernization of plants andequipment. We should press for realisticdepreciation guidelines which recognize theincreasing speed that equipment will be-come obsolete.

3. Instead of making automatio.i thescapegoat of our unemployment problems,we should seek, through a large-scale andunified research effort, the real causes ofthe various types of unemployment.

4. We should stop talking about changesin educational procedures and start doingsomething about it. Fifty-one percent ofour adult population do not even possessa high school education. And many whohave a solid educational background havenot yet realized the necessity of continu-ally updating that education. Educationaltechniques and policies are needed whichshape human resources to fill the needs ofour times.

5. We need to develop a policy of closer

cooperation among business, labor. educa-tional, and governmental leadership tomake the most of the opportunities ofeducation. Just as the benefits of automa-tion will accrue to all, so the responsibilityfor dealing with its problems must beshared by all.

6. Today the tools of automation, prop-erly applied, could furnish the capacity tomatch job seekers with job opportunitieson a national scale, and this should be ourobjective. The cost in dollars and humandignity to train and assist a man and hisfamilyif they wishedto move to a pro-ductive job in another location would beless than to keep him living at a subsistencelevel where no job is available.

It should be borne in mind that the socialproblems which many people attribute to auto-mation will be quickly compounded if we donot maintain an acceptable productivity andcompetitive posture. There is no way that wecan avoid all social problems. The question iswhether we minimize these problems by main-taining :he maximum competiti-- effectivenessin the world market, or suffer the even greatersocial negatives whieh would a?.crue fromcompetitive failure.

A national policy which endorses and pro-motes increased productivity and utilization ofthe more efficient tools and methods stemmingfrom technological progress is absemtelyes sent ial.

There is no acceptable alternative becausefailure to achieve the necessary success in pro-ductivity could, over a period of time, relegatethe United States to the position of a second-class economic power.

e

STATEMENT

-.11.

Prepared for the Commission'ay

Clyde E. DankertDartmouth College

Hanover, New Hampshire

Statement by Clyde E. Dankert, Dartmouth Collegeethnological ChanwePast and Present

It may well be that history proves nothing,but ii, can at least suggest much. In view ofthis fact a useful purpose might be served ifwe consider the current problem of techno-logical change against the background of opin-ions and deveopments of the past. For 10years now we have been keenly interested in,and legitimately concerned about, the impact oftechnological progress, particularly as it hasbeen manifesting itself in the form of automa-tion. But this is not the frst time that suchan interest and such a concern have appearedin this countryand in other industrializednations. Nor is it the first time, one might add,that governmental and other agencies haveprobed into the problem. What, then, can his-tory suggest to us as we analyze the issue in itspresent-day form ? 1

Section 1.

The establishment of the National Commis-sion on Technology, Automation, and EconomicProgress is clear evidence of the fact that we inthe United States are concerned about the pres-ent and future effects of technological progressand that we are not satisfied with our currentknowledge about these effects. In earlier yearsa similar situation existed in Great Britain(just as it exists to some extent today) , wherethe industrial revolution had its start and wherethe impact of technological change was firstseriously felt. The same situation was alsofound later on in this country.

Well over a century ago an English writer,William Ellis, stated : "There is perhaps noquestion within the whole range of the scienceof political economy which has been left in amore vague and unsatisfactory state than thatof the consequences which flow from the em-ployment of Machinery." 2 While immenseprogress has been made in both theoretical andapplied economics since 1826, there is still muchto be learned, not only by economists but bysociologists, psychologists, and others, concern-ing "the consequences which flow from theemployment of Machinery." The extensivemandate given to the Commission certainlysuggests that this is the case.

That the next 15 years after Mr. Ellis madehis observation did not witness much advance-ment in the analysis of the mechanization prob-lem is indicated by a statement made in 1844by another English writer, Travers Twiss :

There are few questions in the present day whichhave given rise to so much difference of opinion, asthe probable effects which successive improvementsin machinery are calculated to produce in the con-dition of the labourer. Whilst some contend thatinventions to save labour are the greatest scourgeof modern society, others maintain that they areamongst the chief blessings which civilintion hasbrought with it in its train.3

During the course of the 19th century theproblem of The Machine received attention inthis country, as it had somewhat earlier in Eng-land, and here too opinion was divided. Sucheconomists as Daniel Raymond, Arthur L.Perry, and Simon Newcomb discussed the issue,and other writers also took up the question.But for the most part the discussions werebrief and general in nature.

Near the end of the century the Federal Gov-ernment began to show a keen interest in thequestion of industrial mechanization and au-thorized the Commissioner of Labor, Carroll D.Wright, to make a study of the matter. Theresults of the study were presented in the 13thAnnual Report of the Commissioner (1898) ,under the simple but suggestive title "Hand andMachine Labor." Shortly thereafter the ex-tensive Report of the Industrial Commissionappeared, and two volumes of the report (VIIand XIV, published in 1901) contain informa-tion on technological change. Though the ma-terial presented in these reports is rathermeager compared with the studies in the areamade in recent years by the Office of Manpower,

1 In writing this paper the author has made some use of materialsfrom his following earlier articles: "Automation and Unemployment,"in Studies in Unemployment, prepared for the Special Comm. onUnemployment Problems, U.S. Senate, 86th Cong., pp. 225-250:"Technological Change and Unemployment," Labor Law Journal,June 1959, pp. 393404; and "Labor Immobi3ity and TechnologicalUnemployment," Social Forces, Mar. 1941, Pp. 426-434.

3 The Westminster Review, Jan. 1826, p. 101. The controversyover the effects of machinery had been going on for quite sometime before Ellis wrote his article. A useful treatment of earlierdiscussions will be found in Arthur Young's Political Essays Con-cerning the Present State of the British Empire, London: W. Stra-han and T. Cadell, 1772, pp 209-219. "It appears clearly to me,"said Young, "that the writers for machines have greatly the ad-vantage of the argument." Ibid., p. 215.

3 Travers Twigs, Two Lectures on Machinery, Oxford, 1844, p. 5.

69


Automation, and Training of the Department ofLabor, it is nevertheless of interest. Mor: Arer,its presentation to the public represented gov-ernmental awareness of a problem that existedthen and continues to exist now. But no set ofpolicies for coping with the adverse effects ofmechanization were adopted as a result of theinvestigations made at that time.

In the latter part of the 1920's and the early1930's there was a sharp return of interest inthis country in the question of technologicalchange, especially in its relationship to employ-ment and unemployment. People now began todiscuss the issues of "technological unemploy-ment." This was a new term, coined by Pro-fessor Sumner Slichter in 1928,4 but thephenomenon to which it was applied had longexistede ;en before the industrial revolution"formally" started during the latter part of the18th century. The widespread interest in tech-nologica unemployment during the early thir-ties promoted (after a long lapse) renewedgovernmental interest in the question of tech-nological change and resulted in a number ofgovernmental inquiries.

In 1931 there was published (in the hearingson unemployment insurance before a selectSenate committee) a study with the title, "Re-port of the Committee on Technological Unem-ployment to the Secretary of Labor." Laterin the 1930's and in the early 1940's came thewide-ranging and highly informative studies ofthe National Research Project of the WorksProgress Administration. The latter studiesadded greatly to our knowledge of technologicalchange. They brought together an immenseamount of material from an extensive varietyof sources. In the early 1940's the TemporaryNational Economic Committee in its "Investiga-tion of Concentration of Economic Power," alsoprobed into the topic of technological change^nd unemployment, and added to the literatureon the subject. But with World War II uponus, and with industrial activity and employmentrapidly expanding, the interests of the countrywere directed into other channels and the stud-ies of these groups were largely forgotten.

During the latter part of the 1940's and theearly years of the 1950's our attention was onceagain directed to the question of technologicalchangl. This time it was not ordinary tech-nological change but "automation." The newterm, which covered a partly old and partly newphenomenon, captured the public fancy, and theability to use the word intelligently, and withsome degree of frequency, became one of themarks of enlightened citizenship.

There was serious concern during the 1950'sconcerning the impact, particularly the employ-ment impact, of automation. This concern, as

everyone knows, is still with us, though theeconomic recovery of the last 2 or 3 years seemsto have diminished it to some degree. Not onlyhas the public at larr: been concerned with thequestion but so has the Federal 3overnment.And this conrern of the Government has (dur-ing the last 10 years) manifested itself invarious forms, including the appointment of theCommission.

If history is any guide, the Commission willadd to our knowledge of the facts concerningtechnological change and its effects on societyin general and on the workers in particular.Though history is not too reassuring on thepoint, it is to be hoped that the material gath-ered by the Commission will lead to the adop-tion and continued promotion of sound policies,both public and private, for coping with theadverse effects of technological change. Andat the same time it is to be hoped that thematerial will lead to the rejection of unwisepoliciesand over the years a considerablenumber of such policies have been suggested.

Section 2.

History can suggest to usindeed it can inthis case definitely showthat there have longbeen differences of opinion concerning theeffects of technological change and also thatvarious efforts have been made in the past toobtain more of the facts concerning such effects.But what else can history suggest ?

A general point it suggests is that in ap-proaching the problem of technological changewe should strive for a balanced view. Becauseof the lack of adequate information on some ofthe important aspects of technological progress,it is easy to be either excessively pessimistic orexcessively optimistic on the matter. An ex-ample or two will illustrate this point.

A few years ago one writer stated, in wordsof Malthusian gloom, that in the opinion of ex-perts when automation "really gets under waylabor displacement will proceed at a geometricalratio instead of an arithmetical ratio as in thepast." 5 But to another observer, automationis the "key with which we can leave this dimvault and walk out onto the upland pasturesthe Elysian fields." 6

Sentiments of a similar nature have been ex-pressed in the past. Though (in light of theKeynesian "revolution") it may seem a bit riskyto speak of J. B. Say, it is interesting to note astatement that Say made in a letter he wrote tohis friend Thomas R. Malthus back in 1821.

4 The term first appeared in print in an article by ProfessorSlichter in The New Republic, Feb. 8, 1928, p. 317.

5 The Socialist Call, Apr. 1955, p. 9.a Quoted by Robert H. Macmillan in his book, Automation, Cam-

bridge at the University Press, 1956, p. 60.

TECHNOLOGICAL CHANGE-PAST AND PRESENT 71

"We who scribble paper in search of truth," heobserved, "must be on our guard : if our writ-ings should go down to our grandchildren, theterror with which we contemplate improve-ments which they will have excelled, mayprobably appear to them somewhat laughable."And then Say adds, perhaps with undue opti-mism, "I have always found, practically, thatnew machines produce more alarm than in-jury." 7 That people a century and a half agowere worried about mechanization and in somecases exaggerated its harmful effectsjust asthey do todayis evident from these state-ments.

Shifti.1g to the United States, and to a la terdecade, we find a writer at the end of the eco-nomically depressed 1870's stating that "every-where we meet with the same stat df facts.The laborsaving machine is entering every field,and its entrance is to the workman an irrestiblecommand to go." Referring to the workers,this writer asks two questions that have a veryup-to-date ring: "Where is the field in whichthe supply is not greater than the demand?Who can show any reasonable hope that thiswill be reversed ?" 8 It is wel' to point out thatthese questions (which imply a belief in a per-manent scarcity of jobs) were asked in an erathat was without the automobile, the airplane,the radio, television, movies, refrigerators, andinnumerable other items that are now enjoyedby American consumers.

Coming down to the present century, to theearly 1930's, we find another writer declaringthat "our machines and our science of manage-ment have made us so efficient that there is nolonger enough work to go around." 9 Thisstatement was made during the period whenthe previous great wave of interest in techno-logical change was sweeping over the country.The term "automation" had not yet been in-vented, and there were not any Eniacs, Univacs,or Ermas. But there was "technocracy," andthis phenomenon was accompanied by gravefears concerning the labor-displacing effects ofmechanization.

It is of significance to note that the statementabout there being "no longer enough work to goaround" was also made at a time when ourreal GNP was roughly about one-third of whatit is today, and when our employed civilianlabor force was over 30 million smaller than itis today. (For 1932 the figure was 38,940,000,compared with well over 70 million today.) Itmight be added, incidentally, that even HenryWallace's glowing prospect of jobs in the Amer-ican economy was over 10 million below thecurrent employed labor force.

If the preceding quotations suggest anything,they tell us that we should be cautious about

making remarks that (because of automationand other technological changes) "the supply oflabor is greater than the demand," that "thereis no longer enough work to go around." Yetif these statements are not being made today,the general view they represent seems to bewidely accepted. There appears to be a com-mon belief that we have reached, or are closelyapproaching, some sort of expansion limit ; thatour "work pool" is full, or nearly full, and henceavailable jobs will become more and more scarcejustifying, interestingly enough, Marx's viewabout an increasingly large "industrial reservearmy." If this view is not widely held it isdifficult to explain the confidence that so manypeople Ave in the job-creating e: ectiveness ofsuch policies as early retirements, longer vaca-tions, more paid holidays, shorter hours, andlimitations on outskle earniags under our SocialSecurity Act. These policies, of course, can bedefended on other grounds, but one of the mostpopular justifications for them is the one thatrelates to more jobsnot merely more jobstemporarily but presumably permanently aswell. But more on this point later.

Section 3.

Some of the opinions expressed in formeryears on the question of technological changeand unemployment suggest the desirability ofprice .flexibility as a means for reducing theunemployment impact of technological innova-tions. At least the vieN, was commonly held bythe older economists that the volume of unem-ployment resulting fror, mechanization wouldbe reduced due to the fact that prices would fallas a consequence of the use of new machines.Indeed, one of the earliest economists to discussthis matter assumed that the result of the pricedrop would be more employment than beforerather than less. "What is the Consequence ofthis Abridgement of Labour, both regarding thePrice of the Goods, and the Number of Personsemployed ?" asked Josiah Tucker back in 1758."The answer," said Tucker, "is very short andfull, viz. That the Price of the Goods isthereby prodigiously lowered from what other-wise it must have been; and that a muchgreater Number of Hands are employed."Mr. Tucker is here assuming a very large re-sponse (a very elastic demand, one would say

7 Letters to Mr. Malthus (letter IV), London, printed for Sher-wood, Neely, & Jones, 1821, pp. 70-71. Say's statement precedingthe last sentence reads: "When machines are thus slowly introduced,all the inconvenience of such inventions are avoided. In short, 'A

have always foumi .. ."8 Atlantic Monthly, Aug. 1879. pp. 187, 142."Harper's, Nov. 1932, "Personal and Otherwise" section.

10R. L. Schuyler, Josiah Tucker, A Selection from His Economicand Political Writings, New York: Columbia University Press, 1981,p. 241. Tucker pointed out (p. 242) that the increase in employ-ment of "Hands" was mit immediate, but "in the End." Tucker'sremarks are from his Instructions for Travellers, published in 1758.

'

i


today) by the consumers to the lower price.Other economists expressed similar views

concerning price flexibility. Thus in the nextcentury Nassau Senior said, a bit more cau-tiously : "The usual effect of an increase in thefacility of producing a commodity is so to in-crease its corwimption as to occasion the em-ployment of more, not less, labour thanbefore." " Again it is assumed that the de-mand for the commodity is highly elastic.And to cite one more economist, this time anAmerican, we find Professor Arthur L. Perrystating that laborsaving appliances "alwaystend to cheapen the products which they help tocreate." " Underlying the belief that priceswould decline, at least ultimately, was the as-sumption that competition prevailcd.

There can be no doubt that the employmentimpact of a cost-reducing technological changeis lessened if the price of the good involved fallsas a consequence of the lower cost. (Theremay still be serious short-run displacement,however.) Can we assume today, as many ofthe older economists did, that mechanizationwill lead to lower prices?

Certainly there are numerous cases in whichdecreases in cost consequent upon the use ofimproved machinery are passed on to the con-sumer in the form of lower prices. But itwould be rash for one to say that this alwayshappens. And it would also seem rash to saythat where prices are reduced they are alwayslowered to the extent that they "should be."

The issue involved here relates to the waythe monetary gains resulting from technologicalinnovations are distributed. There are threemajor groups of possible recipients : the owners(employers), the employees, and the consumers.Arguments can be advanced in behalf of eachgroup, and as a practical and ethical proposi-tion it is desirable that all three share. In thecase of the employers it should probably beonly temporarily, thus stimulating them to in-troduce, before their competitors, still furtherinnovations. But to what extent should eachof the groups share? That, indeed, is the ques-tion. Some years ago Senator Ralph Flandersproposed an equal division of the "newly bakedpie. 13 Senator Flanders' plan wouid have thegreat merit of administrative simplicity, but itmight be argued that it would often involveone of the two types of injustice that Aristotlemany centuries ago had in mind : the equaltreatment of unequals.

But more cannot be said in the present dis-cussion on this complex issue. However, it isdesirable to point out that in general not enoughof the monetary gains of technological changehave been going to the consumers, with theresult that the volume of technological unem-

ployment has been larger than it otherwisewould be. Strong unions are in a position tosiphon more than their fair share of thesegains. Similarly, strong employerspossess-ing some degree of monopolistic controlareable to get an excessively generous piece of theenla-ged pie, particularly in the absence ofunions.

It is true, of course, that the higher wagesand the higher profits accruing to the workersand the employers will ordinarily be put to use,thus creating, at least after a time, additionalemployment opportunities. But the point isthat the new jobs may be hundreds if not thou-sands of miles away from t!_e point at whichthe technological innovations were introducedand where the displaced workers are leftstranded. Moreover, the new jobs are likelyto be in industries different from those in whichthe technological changes were made.

It should be added that if prices are to bereduced the initiative can come only from theemployer group, not from the workers or theconsumers. If companies reaping especiallylarge gains from technological innovations willnot pass on some of these gains to the con-sumer, one cannot blame unions for exertingstrong wage pressure so that they too can sharein the extra gains.

It would be naive to suggest that the Com-mission should advocate the breaking up ofmonopolistic business and labor organizations,to the end that the volume of technological un-employment be reduced. But one can properlysuggest that the Commission express its opinionon the desirability of having prices fall, at leastto some degree, when cost-reducing improve-ments are introduced into industry. Taking aposition on this pointverbally coming to theaid of the consumer, so often the "forgottenman in such matterswill not do any harm.It may do a little good.

Section 4.

If we can benefit from knowing what manyof the older economists said about price flexi-bility, we cannot benefit to quite the samedegree from what they said about labor mobil-ity, which is one of the most crucial aspectsof the present problem concerning technologicalinnovations. The fact is, there was consider-able difference of opinion on the issue ofmobilityof occupational mobility, that is.

11 N. Senior, Political Economy, lid. ed., London and Glasgow:Richard Griffin & Co., 1854. P. 166.

12 Elements of Political Economy, New York: Scribner, Armstrong,and Co., 1877, p. 229.

13 Automation and Recent Trends, Hearings before the Subcomm.on Economic Stabilization of the Joint Economic Comm., 85th Cong.,1st Sess., Pp. 20-21. In 1958 Walter Reuther proposed a plan fora tripartite sharing of productivity gains in the automobile industry.

TECHNOLOGICAL CHANCE-PAST AND PRESENT 73

John Davidson, author of a minor classic onthe subject of wages, declared, "The early econ-omists spoke lightly of trade mobility, as ifthere were no real hindrances, or if, in a word,workmen took up, or at any rate could take up,a new trade every week." 14 Davidson's state-ment seems a bit extreme, though one can findevidence to support it. J. R. M'Culloch, forexample, "spoke lightly of trade mobility," andhis remarks were made specifically in connec-tion with technologically displaced workers.Referring to the alterations in employment pat-terns sometimes resulting from improved ma-chinery, M'Culloch declared that "In themajority of businesses, this is not perhaps sogreat a hardship as might a first be supposed.[For businesses have] for the most part manythings in common [and] an individual who hasattained any considerable proficiency in one, hasseldom much difficulty in employing himself inanother." 15

But there were other economists and writerswho did not go along with M'Culloch's view.Charles Babbage (whose "Calculating Engine"represented Ln early attempt to construct agiant brain) pointed out that workers who aredriven from their old jobs as a result of mech-anization are not always fitted for new jobsthat are open to them.18 Professor Senior,writing in more general terms, declared, "Thedifficulty with which labor is transferred fromone occupation to another is the principal evilof a high state of civilization." 17 J. B. Cairnes,Francis Walker, and John Davidson, to namethree more economists, also pointed to thedifficulti3s involved in changing occupations.

Whatever the degree of occupational mobilitythat existed in previous centuries, we know thattoday there are often very formidable obstaclesin the way of an easy transference of workersfrom one job to another. Recognition of thisfact is clearly given in the public and privatepolicies we have adopted for reequipping dis-placed workers for new types of employment.To some degree it is also evidenced by our in-creased efforts in the field of vocational miningand vocational guidanceefforts dire i;ed to-wards the aid of persons whose capabiEties arestill in "disposable form," to use Cairnes'expression.18

Efforts directed towards training, retraining,and vocational guidance have great merit andshould be expanded. There is no need to amassadditional factual information to prove thepoint. In a highly dynamic economy it is ofthe utmost importance that the labor force bemade as occupationally flexible and adjustableas possible. If this is done, not only will thevolume of technological unemployment be re-duced but the size of the GNP increased. Such

a flexibility and a djustability is importantwhether existing unemployment is predomi-nantly structural or nonstructural in nature,though it is especially important in the formercase.

Professor J. B. Clark in his 60-year-old dis-cussion of technological unemployment sug-gestively pointed out that "Every device that'saves labors calls for a rearrangement of laborin the system of organized industry." 19 In ourhighly dynamic economy the process of laborrearrangement is constantly going on. If therearrangement is to be achieved quickly andefficiently our manpower policies must be di-rected towards the task. Fortunately we arenow moving in the rtht direction, but muchremains to be achieved in the way of makingthe best use of our manpower resources.Though we do not need additional facts tojustify further action in this area, we do needa lot of facts 1,3 enable us to move in the right(occupational) directions.

Another type of mobility that is involved inthe problem of technological unemployment isgeographical or spatial in nature. On thismatter the early economists did not have muchto say, but some of the later ones did give seri-ous thought to the matter. Adam Smith longago observed that man is "of all sorts of lug-gage the most difficult to be transported." 20Despite the vast changes in the means of trans-portation since 1776, Smith's statement is stilltrue, a fact-that greatly increases the serious-ness of labor displacement. More than a cen-tury later William Smart, another Scottisheconomist, declared that "physiCally, labour isnot mobile ; historically, it has never been mo-bile ; and, ethically, it should not be mobile." 21Whatever historical truth Smart's statementmay possess, his view that labor is physicallyimmobile cannot be accepted as an accuratedescription of conditions today, certainly not ofconditions in the United States.

The question of geographical mobility wasdiscussed at some length by both FrancisWalker and John Davidson. A statement by

14 The Bergin Theory of Wages New York: J. P. Putnam's Sons,1898. p. 182.

15 The Principles of Politica.. Economy, 4th ed., Edinburgh:Black, 1849, p. 210.

le C. Babbage, On the Economy of Machinery and Manufactures.London: Charles Knight, 1832, p. 229.

17 Senior, op. cit.,-,p. 217.J . B. Cairngs, Tome Leading Principles of Political Economy.

New York: Harper & Bros., 1874, p. 64.19 Essentials of Economic Theory, New York: The Macmillan Co.,

19071 p. 249. Some years earlier George Gunton also spoke of labor-saving machinery as bringing about a "rearrangement" of labor.See Trusts and the Public, New York: D. Appleton & Co., 1899,p. 163.

go An Inquiry into the Nature and Causes of the Wealth of Na-tions, Cannan ed., Modern Library, New York: Random House, Inc.,19371 D. 76.

21 Studies in Economics, London: Macmillan and Co., 1896, p. 131.The last part of Smart's statement must be interpreted in the lightof the explanatory remarks he makes.

22 The Wages Question, New York: Henry Holt and Co., 1876, p.180.


the former is especially worthy of note. As tothe degree of mobility required, Walker affirmedthat it is not necessary "that the whole bodyof laborers should be organized like a Tartartribe, packed and saddled ready for flight." 22

The degree of geographical labor mobility inthis country is quite large. Indeed, it is oftentoo large, leading to fruitless wanderings forunavailable jobs. Very often, however, it isnot large enough. This is true, for example,when displaced workers are unable or reluctantto move to, new communities where jobs areavailable. Both excessive mobility and inade-quate mobility are individually and sociallywasteful and should be avoided.

The Commission will undoubtedly considerways of improving labor mobilityor laborfluidity, as Sir William Beveridge described itin his outstanding work on unemployment.The goal we should strive for is what Beveridgeaccurately described as "the organized fluidityof labor."

If this is to be achieved on an adequate scaleit will be necessary to increase the work of ourpublic employment offices and to improve thedegree of coordination between the individualoffices in the system. Moreover, we shouldseriously consider the advisability of hLving theFederal Government pay, in li+ole or in part,transportation expenses of unemployed work-ers who are willing to shift to jobs in newlocations, a policy that a number of nationsfollow.

Both occupationally and geographically thereis need, therefore, for a higher degree of "or-ganized fluidity" in our labor force. The at-tainment of this objective will represent anotable contribution to the handling of the prob-lem of technological unemployment and yieldother economic and social benefits.

Section 5.

The general attitude among the older econ-omists .:3oncerning the employment impact oftechnological change was optimistic. (DavidRicardo, with his famous chapter, "On Ma-chinery," may be cited as a striking exception.)The common view was that in the long run thedisplaced workers would be absorbed into in-dustry. But some recognition was given to thetemporary dislocations caused by mechaniza-tion, and a number of economists pointed to theneed for remedial action.

John Stuart Mill, for example, in referringto the victims of improvements in industrialmethods, stated in 1848 that "there cannot bea more legitimate object of the legislator's carethan the interests of those who are thus sacri-ficed to the gains of their fellow-citizens and of

posterity." 23 Some years earlier, in 1832,Thomas Chalmers, in speaking of the "tempo-rary evils" associated with the employmentchanges caused by mechanization, referred tothe "strong claim" that these evils make on "theaid and tenderness of the benevolent, whenfamilies, in large masses, are, for a period,thrown out of employment." But then ourtheologian-economist goes on to add that whatis still more "healthful," the evils "form astrong call on the manufacturing class of la-bourers more particularly, to cultivate thoseprovidential habits by which, in virtue of theiraccumulations, they might be enabled toweather the seasons of suspense and change, towhich every people of mechanic and highly arti-ficial industry are so peculiarly exposed." 24Save up for a rainy day, is Chalmer's sugges-tionwithin limits not bad advice. To cite onemore example, we find Cairnes a few decadeslater stating that changes in industrial methodsand systems almost always involve "more orless temporary inconvenience, and sometimeseven . . . considerable suffering" for those whohave lost their jobs. And "this is good rea-son," Caiines adds, "for society doing all in itspower to alleviate and repair these inevitablebut transitory evils." 25

During the 19th century, and even earlier,there was recognition among economists of theadverse temporary effects of technologicalchange, and some economists pointed to theneed for corrective or ameliorative action. Itis interesting to note a number of the policysuggestions that received attention from econ-omists and othen during this period.

Implied in some of the earlier statementsabout mechanization is a feeling that new ma-chines should be introduced gradually ratherthan rapidly and spasmodically. As far backas 1767 Sir James Steuart stated, "The Intro-duction of machines can, I think, i no wayprove hurtful by making people idle, than bythe suddenness of it . . . ." 26 This statementwas made almost 10 years before the publica-tion of Adam Smith's great classic, The Wealthof Natims, which rather strangely neglectsthe problem of technological unemployment.Steuart's statement was also made in the earlystages of the industrial revolution.

The general view expressed by Steuart wasmore vividly and quaintly stated by a laterwriter, Perronet Thompson, in these words :"Machinery then, like the rain of heaven, is apresent blessing to all concerned, provided it

23 Principles of Political Economy, Ashley ed., London: Longraans,Green & Co., 1926. p. 99.

24 On Political Economy. New York: Daniel Appleton, 1882, p. 889.NI Cairnes, op. cit., p. 267.9* An Inquiry into the Principles of Political Economy, vol. 1,

London. printed for A. Millar and T. Cadell, 1767, P. 120.27 The Westminster Review, Jan. 1881, p. 194.

TECHNOLOGIC' 4T CHANGE--PAST AND PRESENT 75

comes down by drops, and not oy JAMS

together." 27Karl Marx introduced P very discordant note

when he affirmed, "When machinery invades afield of production by slow degrees, it produceschronic poverty among the workers that have tocompete with the machines. When the transi-tion is a rapid one, the effect of machinery ismassive and acute." 28 Most of the older &ion-omists would not have agreed with the firstpart of Marx's statement ; and today, in anindustrial and social environment very differentfrom, that of the mid-19th century, few wouldendorse it. This does not mean, however, thatwhen machinery is introduced gradually itnever produces any misery, either temporary orpermanent.

That the gradual introduction of machinerycan lessen the amount of labor displacement isdefinitely the case. Our experience with thechangeover to the dial telephone is an outstand-ing case in point. The difficulties in the wayof adopting such a policy are formidable, how-ever, particularly in industries that are highlycompetitive. But the policy is much more prac-tical than the proposal made in this country inthe 1930's to the effect that there should be an"inventors' holiday." The policy of graduallyintroducing technological innovations decreasesthe amount of catching-up that is necessary,and it should be seriously considered by employ-ers. The possible economic loss associated withsuch a policy might be overbalanced by gainsof a different sort, both economic and non-economic. Under any circumstances, the grad-ual introduction of technological innovationsneed not, and should not, mean any decrease inthe long-run rate of technological progress.

Among a number of very Modest suggestionsmade by Charles Babbage is the proposal of "adiversity of employments among the membersof one family." Such an arrangement, Bab-bage said, "will tend, in some measure, tomitigate the privations which arise from fluctu-ation in the value of labour." 29 This implies,of course, the existence of more than one bread-winner in the family. Such a policy of diversi-fication is infinitely more difficult in the laborfield than it is in the investment field where itis very easy to use a number of baskets. Atbest the suggestion strikes us today as a ratherhopeless one.

Another old proposal relates to the lr vyingof a tax on machinery. Early in the last cen-tury a tax of this character was suggested inEngland. Its purpose was to even up the com-petition between man and machines : man wascompelled to pay taxes on the things he con-sumed but the same rule did not apply tomachines." The tax proposal has also been

made in more recent years. In fact in 1939 abill was introduced both in the House of Repre-sentatives (House Joint Resolution No. 65) andin the Senate (Senate Joint Resolution No. 3),whose purpose was to have the Secretary of theTreasury make an investigation into the ques-tion. !ipparently no such investigation wasmade. Congressman John J. Cochrane andSenator Bennett C. Clark sponsored the bills.

The proposal for taxing Inv Phines, attractivethough it may appear at first glance, would beadministratively difficult if not impossible, andin addition it would probably be economicallyunwise.

J. B. Say, whose rather optimistic statementsconcerning technological unemployment wehave already noted, suggested the use of publicworks as a means for aiding temporarily unem-ployed workersa policy we are by no meansunfamiliar withand he also suggested thegeographical shifting o workers. In a foot-note statement Say declared that

a benevolent administration can make provision forthe employment of supplanted or inactive labor inthe construction of works of public utility at thepublic expense, as of canals, roads, churches, or thelike; in extended colonization ; in the transferenceof population from one spot to another. Employ-ment is the more readily found for the handsthrown out of work by machinery because they arecommonly inured to labor.31

Providing care is exercised in the planning andadministration of the policy, the "constructionof works of public utility" still has much tocommend it as a temporary aid to displaced andother types of unemployed workers. So has thepolicy of hifting workers to new job locations.

Section 6.

The older economists do not appear to haveseriously considered the policy of reducinghours as a means for coping with technologicalunemployment. But such a proposal is bymeans new, certainly not in the United Stat.,.The best known statement of the suggestion isthat made by Samuel Gompers back in 1887, inhis annual report to the AFL. "The displace-ment of labor by machinery in the past fewyears," said Mr. Gompers, "has exceeded thatof any like period in our history." After re-ferring to various illustrations of mechaniza-tion, the AFL leader went on to say, "The

2. Capitol, vol. I, ed. by Ernest Rhys, Everyman's Library, Lon-don: J. M. Dent & Sons., Ltd., 1982, p. 461.

Babbage, op. cit., p. 230.3° See William Smart, Second Thoughts of an Economist, London:

Macmillan and Co., 1916, p. 59 Early discussions of the tax pro-posal will be found in The Quarterly Review, Oct. 1828, p. 410, andMay 1830, pp. 256, 261. See. also Travers Twiss, op. cit. DD. 61-62.

a A Treatise on Political.Econemy, New American ed., Philadel-phia: Lippincott, Grambo & Co., 1.58, p. 87.


answer to all opponents to the reduction of thehours of labor could well be given in thesewords : 'That so long as there is one man whoseeks employment and cannot obtain it, thehours of labor are too long.' " 32

During the last 10 years the policy of re-ducing hours as a means for dealing withtechnological and other types of structural un-employment has been widely supported. Manyhave felt that automation has not only made areduction in hours possible but necessarynecessary if we are to bring down the amountof unemployment to a reasonable level. It willnot be possible in the present analysis to enterupon a detailed discussion of this proposal buta few observation can be made.

1. The unemployment argument for shorterhours is based essentially on a belief in a moreor less fixed work-fund, a -oelief in the notionthat there is just so much work to be done. Ifsuch a belief is correct, then, in view of thecontinuous increase in technological innovationsand the rapid growth in the size of our laborforce, it follows that hours will have to bereduced if all able and willing workers are tohave jobs.

A knowledge of history should make us cau-tious on this matter. Have we, one should ask,reached a point of near satiation in our ma-terial wants? While Thoreau may have feltthat "a man is rich in proportion to the num-ber of things which he can let alone," the greatmass of Americans do not share this view.There is a vast reservoir of latent and untappedwants in this country, not only in Appalachiabut throughout the Nation. The satisfactionof these wants will be realized when those whopossess them obtain more purchasing power.

This purchasing power is not likely to beobtained by enforced reductions in hours withtake-home pay remaining the same ; that is,real purchasing power, in contrast to moneypurchasing power, is not likely to be gained.The real purchasing power of an economy de-pends on its physical outputand it is difficultto see how shorter hours could lead eitherdirectly or indirectly to such a result. If it isargued that output will actually be greater withthe shorter hours than it was before, then thebasis of the unemployment argument forshorter hours (i.e., a fixed amount of work tobe done) is destroyed.

It is possible, of course, for specific groupsof workers to increase, or at least maintain,both their monetary purchasing power andtheir real purchasing power at the same timethat they win shorter hours through theirpower in the labor market. But the fact thatone group can achieve such a combination ofobjectives is no proof whatever that all groups

together can win these objectives. On thismatter, as on many otners, one cannot jumpfrom the "particular" to the "general" withoutcommitting a serious logical error.

Another point concerning the purchasing-power notion must be made. Under certainconditions it is possible that an increase in thevolume of monetary purchasing power in aneconomy can act as a stimulant to business ingeneral, thus leading to greater industrial out-put and to an expansion of real purchasingpower in the Nation as a whole. But in thepresent situation, there is little reason for be-lieving that efforts to force down the hours ofwork while maintaining wage rates wouldachieve such a goal. This is true whether theefforts are made by individual unions in theirnegotiations with employers or by the Govern-ment through amendments to the Fair LaborStandards Act.

(One could argue that a more equitable shar-ing of jobsbrought about, say, by double Julefor overtimewould be desirable even at thecost of some reduction in aggregate real incomeor purchasing power. This is a slant that isusually not emphasized by supporters of theshorter-hour policy. The limitations and dan-gers of such a policy make it unnecessary todiscuss it further at this point. Crucial con-siderations in connectjon with the policy wouldbe the point at which the heavy overtime ratestarted and the amount of production loss thatshould be permitted.)

If it is felt that the economy should be stimu-lated via the method of increased monetarypurchasing power, it would be better to havethe task done through governmental fiscal andmonetary action. We have good evidence ofthe effectiveness (and possible dangers) of suchaction. We have little evidence of the generalstimulating effects of reducing hours and main-taining wages.

2. A case can be made out for temporarilyreducing hours but at the same hourly wages,which means a decrease in take-home pay.This policy involves sharing work and wages.Over brief periods the amount of work to bedone in the economy is largely fixed, and hencewhen the total amount of such work is notadequate for full employment there is somemerit in sharing it. This policy, as a matterof fact, is sometimes used, and its more exten-sive employment now would seem desirable.But at the same time more vigorous use shouldbe made of policies designed to stimulate theeconomy.

3. It is not to be inferred from the preced-ing paragraphs that in no instames are per-

niabor and the Employer (comp. and ed. by Hayes Robbins),New York: E. P. Dutton & Co , 1920, pp. 81-83.

TECHNOLOGICAL CHANGE-PAST AND PRESENT 77

manent reductions in hours desirable at thepresent time. It may well be that for someworkers the "work-leisure ratio," as one mightcall it, is not satisfactory; and that too muchemphasis is placed on work (and wages) andtoo little on leisure. As the productivity ofindustry increases and real wages go up, in-creased leisure becomes more significant tomany persons. This, indeed, has been a basicfactor in the long-term trend towards shorterhours in the past, and it will continue to be abasic factor in the future. The more "goods"we have the more willing we ordinarily becometo sacrifice a certain amount of additional goodsfor additional leisure.

Barring unforeseen emergencies, hours ofwork in the future should continue their down-ward trend. In terms of worker welfare it isdesirable that this happen." 13efore manyyears go by the 3E-hour week, which someworkers already have, will be widely in opera-tion; and by the 1980's we should be makingsome progress toward the 30-hour week, astandard already achieved by Local 3 of theElectrical Workers in New York (a 25-hourweek, indeed, but with 5 hours of guaranteedovertime at time-and-a-half ). Hour standardswhich were at one time looked upon as utopian,such as the 6-hour day that Sir Thomas Moreestablished in his imaginary society, are withinour grasp. The attainment of such standardscan give us a certain amount of justifiablepride, at the same time however that they giveus a considerable amount of worry. "Thethreat of leisure" (the title of a book writtenby President Cutten of Colgate back in the1920's) is not an empty threat.

But returning to the more immediate situa-tion concerning shorter hours, a few additionalobservations on the central question before usshould be made.

(a) Hours should not be reduced too fast.In other words, we should not sacrifice produc-tion unduly (by lessening its rate of growthif not its actual amount) in the interest ofmore leisure. At a time when we are engagedin a "production battle" with the Soviet Unionwe must proceed carefully in cutting hours.And in light of our obligations and commit-ments to other nations the same conclusionholds. Certainly these nations are more likelyto be helped and encouraged and impressed byincreases in the volume of our industrial outputth.in by increases in the amount of our leisuretime.

(b) The achievement of shorter hours willnot "solve" the unemployment problem. Wecan have as much unemployment with a regular

25-hour week as we can with a 40-hour week.The root causes of unemploymentwhetherseasonal, structural, cyclical, or "miscellaneous"--are not removed by a shortening of hours.The experience of the last century in this coun-try, while it does not prove that this is thecase, at least suggests that it is.

It is possible that temporarily more jobs maybe provided by shortening hours, but this is byno means a certainty. It depends on such fac-tors as the extent to which labor costs areincreased (by the enforced maintenance of thesame amount of take-home pay), the numberof workers covered by the shorter-hour ar-rangement, and the steps employers take whenconfronted with enforced wage-rate increases.

(c) The current rate of growth in man-hourproductivity would seem to justi4'7 for someworkers, and on the basis of welfare considera-tions, modest reductions in hours at the presenttime. But this is on condition that the normalannual increases in wages are lowered some-what. A drop in hours from 40 to 39 a week,with weekly pay remaining the same, means anincrease in hourly wage rates of approximately2.6 percent. If there was superimposed on thisa normal wage increase of, say, 3.5 percent, ourwage guidelines would indeed be shattered andserious economic consequences would likelyfollow.

A highly significant consideration is thatfoday higher wages and shorter hours areusually alternative forms in .ihich the fruitsof increased productivity may be taken or con-sumed. We are faced with the constant prob-lem of trying to strike a proper balance betweenthe two forms.

The Commission will undoubtedly hear pleasfor shorter hours as a means for coping withtelhnological and other types of structural un-employment. It is the contention of the writerthat such a policy would do little, if anything,to achieve its avowed goal. If I believed thatthere was some immutable law which decreedthat the material wants of the American peoplewere no longer expansthle, then I would favorpermanently shorter hours (but without thesame take-home pay) as a desirable means forsharing the available work. But such a lawdoes not exist. Nor is there any law that de-crees th# we are unable to satisfyto devisemeans te fulfillthe immense volume of actualand potential wants that we possess.

The advocacy of a shorter workweek, oflonger vacations, and of earlier retirements as

= For a more detailed discussion of the "welfare" - pect, seeDankert, "Shorter Floursin Theory and Practice," Industrial andLabor Relations Review, Apr. 1962, especially pp. 812-316.

_

STATEMENTS ' IMPACT OF TECHNOLOGICAL CHANGE

means for spreading employment, understand-able though it may be, will not lead us into anyfruitful paths in our quest for solutions to theunemployment problem. Instead of directingour thinking to the implementation of such

proposals we should be giving thought to otherpolicies, particularly to policies which offerpromise of increasing the growth rate of theeconomy and to improving the occupational andgeographical mobility of its labor force.

STATEMENT


Edison Electric InstituteNew York, New York

C114"firtArtVsii an Ii. 1 ta II 111 IL Arb L-1 in irigt i ca1 g v. sea Eli artsm i 4ra iri" ca,444-xI ar-%kIMMIIIVItlf, Uy utv 1.2t440WG 1.2tel, I 14.; Alta &G&IZIGG

Edison Electric Institute is the principaltrade association for the investor-owned elec-tric light and power companies, which provideelectric utility service to about 80 percent ofthe American people. The balance of the in-dustry is made up of various Federal, State,and local governmental operations and ruralelectric cooperatives financed by the RuralElectrification Administration in the U.S. De-partment of Agriculture. The chief differ-ences between the investor-owned companiesand Government-owned and/or financed opera-tions are in the cost of money and tax liabilitiesof the investor-owned companies from whichthe Government operations are largely excused.Our comments will, in the main, concern theinvestor-owned segment of the industry.

Technological change has been continuous inthe electric utility industry from its inception.Edison's Pearl Street generating station, witha total capacity of 720 kilowatts, began opera-tion in 1882 with 59 customers. In the rela-tively short space of a little over 80 years, theindustry has developed a generating capabilityof 222.4 million kilowatts serving over 64 mil-lion customers. Edison's power plant consistedof six 120-kilowatt generators. Now singleunits of I. million kilowatts are in operation.As of April 1, 1965, 35 thermal units totaling21.6 million kilowatts that were scheduled to gointo operation within the next few years are insizes of 500,000 kilowatts and larger. Thisconstitutes 42.4 percent of the total presentlyscheduled thermal capacity.

Whereas the Pearl Street station required 10pounds of coal to generate a kilowatt-hour, apresent-day high temperature, high pressuresteam turbine generator requires only 6/10 ofa pound of coal to generate a kilowatt-hour.

Distribution of electric energy generated atPearl Street was confined to a very limited areain New York City. Today there are over400,000 miles of transmission lines comprisinga network covering the entire United States.Higher and higher voltages have made it pos-sible to strengther. and extend this network tothe end that nearly all major power systems inthe United States, providing some 97 percentof the Nation's electric energy requirements,are members of one of several major inter-connected operating groups extending across

the Nation. Power pools among companieshave been formed which make possible therealization of the economies of scale regardlessof the size of an individual company.

Improved design, tools, and methods for con-struction and operation of transmission anddistribution systems have enabled companies tohold the line on costs in performing these func-tions, better the reliability of service, andimprove the appearance of their overheadstructures. Progress is being made in placingunderground distribution lines and in furtherimprovement in the aesthetics of utilityinstallations.

Automation is nothing new to the electricutility industry ; however, the electronic com-puter has broadened and accelerated its appli-cation. Coupled with the installation of largerand larger units, power plants can be mannedby relatively fewer personnel. Indeed, someplants are fully automated to the end that theymay be remotely controlled. Computers per-mit the scheduling of production so that themost economical plants are fully utilized.Power pool operation is facilitated by the useof computers, not only in the economical sched-uling of plants in the pool, but also in equitablydistributing the benefits of such operations toall the members of the pool.

Computers have also reduced the man-hoursrequired in solving complicated engineeringproblems, and in the accounting phase of thebusiness ; and, among other things, they pro-vide management with up-to-the-minute factson which better decisions can be made.

When Edison's Pearl Street station beganoperating, lighting was the only load to beserved. Today, there are at least 166 differentelectric appliances for use in the home, rangingfrom shoe polishers and toothbrushes to ranges,freezers, water heaters, and complete climatecontrol. Over 2 million homes in the UnitedStates are now heated with electricity. It ispredicted that by 1980 some 19 million homeswill be heated with electricity.

Industry is now practically 100 percent elec-trified with direct drive electric motors havingreplaced the gang shaft and pulley belts.Higher intensity lighting and complete climatecontrol have made industrial plants morepleasant and healthful places in which to work.

81


The development of the fractional horse-power motor and electronic control deviceshave made possible the automation of industrialprocesses.

The progress in technological change in theelectric utility industry has by no meansreached a plateau.

In 1964; expenditures for research and de-velopment by 148 electric power companies, 14leading equipment manufacturers, and EdisonElectric Institute amounted to $152.7 million.The Edison Electric Institute research programhas been substantially expanded. Currently itis sponsoring or supporting 35 active projectswith an overall cost of about $12.1 million.The Institute has recently signed an agreementto sponsor studies at General Electric Com-pany's Pittsfield, Massachusetts, extra-high-voltage transmission research facilities. Thesestudies will fill gaps in existing knowledge ofextra-high-voltage transmission and will probeadvanced areas of insulation, radio noise,corona, meteorology, and other matters relatedto EHV transmission.

Edison Electric Institute has also begun con-struction of . a $1.5 million research facility atthe University of Pennsylvania as part of the$2.2 million EEI research program on directcurrent, extra-high-voltage transmission.

In the field of atomic energy, 130 electriccompanies in cooperation with the Atomic En-ergy Commission and equipment manufacturersare participating in 1 or more of 28 projectsaimed at making atomic energy a practical,economic source of electric power. Researchis also being carried on in the more exoticmethods of producing electric energy, such asnagnetohydrodynamics.

Technological change in the electric utilityindustry has been quite considerable, as can beseen. This progress in the art will continuefor many years at an accelerating pace.

The effect of past progress is apparent fromthe performance of the industry. The overallresult has been a constant holding down of theaverage cost per kilowatt-hour of electricity tothe consumer, which, coupled with continuingincrease in use stimulated by sales efforts, hasmade America the largest user of electric en-ergy in the world, and among the highest inelectric energy used per capita. It has beendemonstrated by studies made of practically allcountries that the increase in electric energyuse per capita and income per capita go handin hand. As income per capita increases, elec-tric energy use per capita increases, which, inturn, causes income per capita to increasefurther.

It has been well established that although theUnited States is among the leaders in electric

energy use per capita, we are still in the earlyphase of our growth. Our studies indicate thatelectric energy use per capita will about quad-ruple by the year 2000. If this growth con-tinues to follow the pattern, we will not reachthe leveling off point for another 2 centuries.This would be at a point of about 100,000kilowatt-hours per capita.

To achieve this there must be a continuingemphasis on research and development, notonly in the techniques of production, transmis-sion, and distribution of electric energy but inthe development of new applications. Entingof homes with electricity and year-round cli-mate conditioning offer great possibilities.Another field of opportunity lies in transporta-tionboth mass transportation and the privateautomobile.

What does this mean to our economicprogress ?

It means a higher and higher standard ofliving, more comfort, more laborsaving devices,and increased productivity.

As to administrative and legislative stepsthat should be taken that would aid us inachieving this progress, we believe that an endshould be put to the so-called pluralistic char-acteristic of the industry. We believe the jobcan be done better in the private sector of oureconomy than it can be done in the public sec-tor. The criteria used by Government agenciesin justifying their entry into the electric powerbusiness are unrealistic and result in an ineffi-cient allocation of the Nation's resources. Webelieve that in order to achieve maximum eco-nomic progress with the most equitable dis-tribution of the fruits therefrom, steps shouldbe taken immediately to remove the Govern-ment from proprietary enterprises. We be-lieve, for example, when the Government buildsa dam for flood control, navigation, or con-servation, if electric power generation is feasi-ble, the electric power generation should be leftto the investor-owned companies, with their fi-nancing the generathlg equipment in the freemarket and buying falling water from the Gov-ernment. The benefits then would redound toall our people rather than the few who now havepreference in the purchase of electric energygenerated at Government projects. As it now is,these projects are financed with tax monies onwhich only token interest is paid, and theymake little or no contribution to the support ofGovernment. They pay no Federal incometaxes and, other than TVA and the HooverDam project, they make no contributions toState and local governments.

The Federal Government finances so-calledrural electric cooperatives with loans throughthe Rural Electrification Administration at an

EDISON ELECTRIC INSTITUTE 83

interest rate of 2 percentless than half ofwhat it currently costs the Government toborrow money. These cooperatives pay noFederal income taxes. This program was putinto effect during the depression of the 1930's,first as a relief measure, then as a continuingmeans of getting electric service to our farmsmore rapidly than could then be done by thecompanies. Ninety-eight percent of our farmsare now electrified and most of the new cus-tomers being served by these cooperatives arenonfarm customers. The cooperatives are as-suming a utility responsibility and competingvigorously with the investor-owned companieswhich must pay the full market cost of moneyand which pay their full measure of Federal,State, and local taxes.

Better than one-half of the funds now beingloaned by the Rural Electrification Adminis-tration are for the construction of electric gen-erating plants, even though energy can be pur-chased by the cooperatives from the investor-owned companies at less than it costs the coop-eratives to generate it.

These Government programs require an un-necessary expenditure of Government funds ;they result in an inefficient allocation ofthe Nation's resources ; and they discriminateamong the American people. We believe that

it would be in the public interest and the in-terest of economic progress of the Nation thatthey either be discontinued or the discrimina-tory features be removed.

The investor-owned electric utility companiesare not opposed to regulation by Governmentauthority. We believe that sound regulationhas furthered our ability to make the progresswe have. We also believe there are areaswhere regulation by the Federal Governmentis necessary to supplement regulation by Stateauthorities. However, recently there has beena growing tendency for the Federal Power Com-mission to encroach on matters of State juris-diction. A recent decision of the U.S. Su-preme Court interpreted the Federal PowerAct as giving FPC the jurisdiction it has as-sumed, although it results in a duplication inthe regulatory process. We believe such dupli-cation is unnecessary and a hindrance to theprogress of the industry. In iight of the Su-preme Court's decision, we believe the FederalPower Act should be amended so as to leavethe States those matters which are of a localnature and over which they have ample author-ity to exercise jurisdiction, and to limit theFederal Power Commission's jurisdiction tothose matters over which the States cannot ex-ercise jurisdiction under the Commerce Clause.

STATEMENT


FMC CorporationCanning Machinery Division

San Jose, California

Statement by F MC Corporation,Canning Machinery Division

Canning Machinery Division of FMC Cor-poration was one of the initial companies whichformed the basis of FMC Corporation in 1928,then known as Anderson Barngrover Company.It developed the first continuous can cookersand food preparation machinery for the Cali-fornia canning industry. In developing thesemachines another portion of FMC Corporationwas then known as the Sprague-Sells Company,which manufactured a line of automatic equip-ment for processing peas and corn for the Mid-western canning industry. We are proud tosay that this division was pioneering in auto-mation long before the term was coined. Can-ning Machinery Division has steadily, since1928, spent large sums of money on researchand development to improve the product linesmentioned and to develop new ones which havegone a long way to keep canned fruits and vege-tables the bargain they are today in spite ofcanned food production costs, which havesteadily risen during this period. Had not thecontinuing effort and development taken placecanned food would certainly be in the luxuryclass today. To be sure there was some techno-logical displacement of workers who were en-gaged in preparation of products, manuallycarrying out the cooking and sterilization proc-ess, but so far the economy has been able toabsorb the displaced workers. Because thiseffort has benefitted so many people our socialconscience remains inviolate.

It is our intention to continue our develop-ment of labor and cost saving devices for thefood processing industry, which will cause moretechnological displacement at a rate we cannotforecast. However, automation is so common-place in the food industry at this time we wouldnot think the technological displacement wouldbe a significant factor in the overall economyof the United States.

There has been much cannery displacementhere in California in the last 5 years. Forinstance, we and our competitors have devel-oped completely automatic peach-pitting ma-chinery, which has displaced hundreds of womenwho used to hand feed these machines. Hundredsof these automatic machines are in operation inthe peach canning industry.

We are currently in process of making obso-lete our own older pear preparation machines,which were also hand-fed. Newer machines arefed from bins and peel and core pears at 400per minute, replacing older hand-fed machineswhich operated at 50 per minute ; thus sevenwomen were immediately displaced as each ofthese machines went into operation. It is antici-pated in the next few years that these machineswill be operating at 600 pears per minute.

Within the next 10 years a similar kind ofdisplacement of workers will occur in the appleproduction industry, where automation has notreached a very high level. When and if thisoccurs, we would estimate that approximately3,000 or 4,000 seasonal workers would be dis-placed. However, these workers are not in gen-eral dependent on income from this type ofwork for a livelihood. Most of them are women,and some of them, of course, in the Midwest andEast will present more of a burden to unem-ployment and relief rolls in the State wherethey work.

New methods are being developed for proc-essing types of canned food which have notbeen previously subject to continuous produc-tion. New can processing machines are enter-ing the market, each of .which will displace 10to 15 people engaged in cookroom labor. Thesenew container processing machines will prob-ably displace about 3,000 or 4,000 workers. Itis possible within the next 10 years that majorbasic canned food plants will consolidate andautomate to the extent that the petroleum andchemical industries have, through the use ofhigher speed, more automatic equipment andthe use of digital and analog process controltechniques.

We would estimate within the next 10 yearsthat continuing automation requirements of ourcustomers for additional cost reduction to main-tain reasonable prices for their products willcause the displacement of approximately 10,000to 15,000 people. As was mentioned, the pri-mary effect of this displacement will be on therelief, welfare, and unemployment rolls of thecommunities where the displacement occurs.

The Canning Machinery Division also en-gages in the manufacture of harvesting equip-

87


ment, and over the past 15 years has completelyautomated the picking of sweet corn for can-ning purposes. These machines were developedshortly after World War II when harvestinglabor was not available and the principal har-vesting was done by hand, using Bahaman,Jamaican, and Puerto Rican labor. Large num-bers of displaced Puerto Rican labor wound upin New York City after the machines took overthe harvest. The machines are capable of har-vesting 24 hours a day and probably havedisplaced approximately 5,000 field hands.

A similar picture is emerging in Californiaat the present time, and we and our competitorsare developing harvesters to replace the bra-ceros who are no longer permitted as harvestlabor in the West to any reasonable degree.

c,

,

-

ill!..........,

In general, the class of labor that has beenreplaced by our development effort is in thesemiskilled or unskilled class. These displace-ments will occur in California, the PacificNorthwest, Illinois, Pennsylvania, Michigan,New York, and New Jersey, for the most part.

You have a3ked for definition of areas of un-mapped community and human needs as newapplications of new technology might effectivelybe directed. To our way of thinking, the biggestsocial problem today is in water, hard and softwaste disposal, and pollution of air and water.In this area a whole new industry supportedequally by Government and industry couldemerge in the next 10 to 15 years. This industrycould be of the size of the General Electric Com-pany, for instance and would require more thana $100 million to develop.

-

.

STATEMENT


General Electric CompanyNew York, New York

Statement by the General Electric CompanuAutomation: Its Impact on Employment and Unemployment

Automation is bitterly condemned as society'scurse in some quarters ; enthusiastically hailedas the key to solving all of society's ills in otherquarters ; and rarely defined or understood byeither side.

Those who are ccncerned with public policytoward automotion are confronted with a pro-liferation of competing and sometimes conflict-ing demands as to what should be done. Themain questions of concern and controversy swirlaround automation's impact on employment andunemployment and what should be done aboutit. It is even seriously proposed that the impactof automation is so revolutionary that ". . . thetraditional link between jobs and income isbeing broken . . ." and society must therefore"provide every individual and every familywith an adequate income as a matter of right."1

The question of automation's impact on so-ciety deserves careful study and. evaluation.Wise and humane public policy can only comefrom a realistic understanding of just whatautomation is and especially how it relates toemployment and unemployment.

Definition of Automation

What is automation ? As is often the casein widely discussed and controversial subjects,this word has taken on a variety of meaningsand emotional overtones. The definitions ofautomation 'range from the very simple to thehighly technical and sophisticated.

In popular understanding, automation hastended to emphasize the most recent aspects oftechnological change, which are describable butnot necessarily distinguishable from earliertechnological advances in any fundamentalway. A backward look at technological changeindicates that progress frequently comes in theform of new sources of power and degrees ofself-regulation or automaticity, in addition tosuch other developments as better materials,designs, and methods in building machinery.

Man's sources of power have evolved throughsuch stages as human strength, the use of ani-mals, wind, waterfalls, and fire and steam fromfuels such as wood, coal, oil, and gas. Whenman harnessed electric power, he opened up

whole new capabilities. And now man looks toatomic fission and ultimately to thermonuclearfusion for additional sources of power. Andmodern electronics may be regarded as a grow-ing body of highly advanced and specializedapplications of the physics principles whichgave us electricity.

A similar type of evolution has taken placein the self-regulatory or automatic devices usedwith machinery. Indeed, control mechanismshave generally appeared along with the typesof power used to drive the equipment. In thesame "automatic" way that the safety valveand fly wheel governor are used on steam drivenequipment, the variety of electrical and elec-tronic controls and switching devices are gen-erally used with equipment run by electricpower.

More technical definitions of automation tendto place the primary stress on new kinds ofautomatic processes which can be performedthrough the use of electronic circuitry. Thus,automation is sometimes described in terms ofintegrated arrays of complex electronic devices,including computers.

There are two disadvantages in describingautomation largely in terms of the most recentforms of technological progress. First, it cre-ates the mistaken impression that we are deal-ing with an entirely new phenomenon that haslittle or no connection wig' the earlier scientificand technological advances which made auto-mation possible ; in varying degrees, techno-logical change is a blend of the old and the new.Second, the arbitrary divorce between thenewer and the established production methodstends to prejudge the question of whether themodern advances will be as beneficial as pasttechnological progress in increasing employmentoutput and standards of living.

Whether you use such terms as servomecha-nism, closed loop, or feedback device, thefamiliar heating thermostat has been aroundthe house for a long time. However definedcall it automation, and say feedback, or call ittechnological improvement and say thermostatthe important thing is that whatever it is

1 Statement on "Triple Revolution: Cybernation, Weaponry. Hu-man Rights," by an ad hoc committee of 82, first published inLiberation, Apr. 1964.

91


called its purpose is to increase productivityproduce more and/or better goods and/orservices with fewer productive resources.

While not very much can be gained in argu-ments over the definition of automation, it isimportant to spell out its relationship to pro-ductivity. Automation and productivity are notidentical in that automation represents only onemethodalbeit a highly effective methodofraising productivity. The output or productionof goods that can be obtained from the use orinput of human and nonhuman resources canbe strongly affected by factors other than auto-mation, especially in the short run. Eventhough no changes take place in the kinds ofmachinery and equipment being used, produc-tivity may rise because of, for example, changesin the organization and methods of productionand increases in human effort. Also, it is gen-erally recognized that year-to-year changes inthe volume of production may substantiallyaffect the productivity gains from period toperiod. While recognizing the distinction justmade, we place a high value on automationprimarily because of its important contributionsto productivity improvements.2

Automation, Employment, and Unemployment

On the other hand, automation has causedmuch apprehension, even alarm, over the ques-tion of how it relates to employment and unem-ployment. Two kinds of assertions are oftenmade.

First, it is stated that automation will leadto a progressive decline in job opportunitiesrelative to labor force growth. We are told thatautomation has been causing the disappearanceof more than 2 million jobs per year. Further,it is said that automation not only takes peopleoff jobs but prevents others from being hiredbecause automation supposedly results in fewerjob opportunities than there otherwise mightbe. One chilling expression that has been usedis "silent firings." Finally, there is reasoningthat automation cannot significantly create netnew jobs in the running, building, and mainte-nance of machines because it would not makeeconomic sense to automate if more workerswere needed than before.

The second type of statement about automa-tion deals with the ability or inability of thework force to make the necessary adaptationsto move from jobs which are becoming obso-lete to new jobs in the expanding occupationswhich may involve increasing amounts of skill,experience, education, and training. The con-cern here is that even if the number of newjobs equaled or exceeded the number of old anddisappearing jobs, the displaced employees can-

not be rapidly retrained and easily placed innew and better jobs. Instances of retrainingprogram failures are cited. Another problempurportedly created by automation is that peo-ple who are disemployed in one part of thecountry will not be reemployed elsewhere be-cause, for a variety of reasons, people areunwilling and/or unable to move to where jobscan be found.

Because of the serious personal and nationalproblems which unemployment can represent,assertions and speculative judgments about therole of automation as a cause of unemploymentmerit the fullest and most careful analysis.Muc1i of our ability to devise and follow con-structive public policies affecting automationdepends on a correct diagnosis of its effects.

Automation's Effect on Employment Levels

The relationships among automation, employ-ment, and unemployment come into the clearestfocus when we look at these relationships intwo ways: partially and totally.

The partial view of the production processlets us see that one major purpose of automa-tion or technological change is to reduce theamount of labor and/or other things requiredto turn out a specific amount of product of agiven quality. Given a hypothetical situationwhere (1) the total amount to be producedremains the same, (2) product quality doesnot change, and (3) nothing else changes exceptthat there is a technological improvement, theresult is that less labor and/or other productivefactors are needed to produce a given output.In this sense automation serves to increaseproductivity so that fewer man-hours of labor,etc., are required to produce a stated amountof product.

This partial view is an intentional oversim-plification for the purpose of helping us sepa-rate out the effects of only one of the manyforces (automation) at play in highly complexproduction situations. The conclusion is that,other things remaining the same, automationwill reduce labor and/or other requisites ofproduction.

But the real world is not that simple. Auto-

2 Leon Greenberg, assistant commissioner of the Bureau of LaborStatistics, U.S. Department of Labor, has described the significanceand sources of productivity gain.; as follows: "Gains in productivityprovide the means for increasing standards of living and leisuretime. They also provide the means for lowering costs of produc-tion which can bring expansion, lower prices, higher wages, or in-creased profits, singly or in combination. The achievement ef thesegains is not automatic; it depends on high levels of employmentand continued economic growth. Productivity is affected not onlyby levels of employment and personal consumption, but by the rateof application of new technology, improvements in plant layout,work methods, work fiow, material-handling procedures, and otherapplications of management techniques: changes in volume of pro-duction; the development of new products or materials: and theskill, effort, and incentive of the work force." "Output per Man-Hour in Manufacturing, 1939-47 and 1947-53," Monthly LaborReview, Jan. 1956.

GENERAL ELECTRIC COMPANY 93

mation is only one of the many things whichdetermine how much employment, labor dis-placement (going off one job but, very likely,obtaining another jol,% , and unemploymentoccur. A more total vie c is necessary to under-stand the role of automation in firms, industries,our national economy, and the internationalarena.

The total view is a dynamic pictur .. Realityis made up of a continuing variety ot changesin the quality and quantity of new productswhich are demanded and produced, changes inpay rates, other production costs and sellingprices, various types of productive facilitiesand the introduction of new methods and skills,new materials, and new plant and equipmentneeded to launch innovations. These and otherchanges must also be considered to obtain a rea-sonably full understanding of how automationaffects jobs.

In the discussion of the partial view, it wasassumed that production and sales thesame. It is more realistic to expect sales torise at times and decline at others. Eventhough automation may reduce labor and otherrequirements to make a unit of product, em-ployment will actually rise if sales and outputincrease somewhat faster for reasons such as ashift in customer tastes toward the particularproduct, lower price, etc. Conversely, a dropin sales and output can lead to layoffs whetheror not automation has been introduced. Thus,the ups and downs in sales and production gen-erally have a greater effect on employmentthan automation, at least in the short run andfrequently in the long run as well.

Based on their own particular experience,some people have argued that the major advan-tage and primary purpose of automation isquality improvement. That is, an automatedoperation can make products of greater uni-formity and closeness to higher specificationsor tolerances but still require as much or morelabor to do so. To the extent that automationimproves the quality-price combination andsales grow more rapidly, jobs are created.

The innovative aspects of automation areperhaps the most important protectors of exist-ing jobs and creators of new jobs. Innovations,or changes in the combinations of labor withother productive resources, generally requirenew capital investment outlays and lead to ex-panded uses and applications of existing prod-ucts and services, new products, and, sometimes,whole new industries.

When we unite the partial and total viewsof how automation affects jobs, we see (1) thattechnological advance reduces the labor and/orother productive factors needed per unit ofproduct (the partial view) ; but (2) that this

labor, etc., displacement can be, and often ismore than offset by other forces (the totalview) which increases sales, production, andemployment. The combination of research anddevelopment, capital investment programs, auto-mation, and the appropriate work skills, includ-ing salesmanship, leads output and employmentgrowth in two broad but related ways :

quality-price improvements in estab-lished products and services encouragetheir greater use in current applications,make them now acceptable substitutes forother products, and may even pave theway for entirely new products and newindustries ;new products and new industries providenet additions to national income, employ-ment, and a greater variety of goods andservices for use and enjoyment.

What has been said thus far about the rela-tionship of automation, employment, and unem-ployment may be summarized this way : first,there is the displacement effect where indi-viduals may be taken off particular jobs (thepartial view) but do not necessarily join theranks of the unemployed because, secondly,automation, supported by both adequate cus-tomer demand and appropriate labor supply,generates the growth effect or the increases inoutput which preserve and increase the numberof jobs. Thus, at any period of time, changesin employment and unemployment depend onthe comparative strength of the growth anddisplacements effects.'

"Two Million Jobs Lost Yearly"

At least since the days that French workersthrew shoes into machinery to stop the intrk,-duction of laborsaving devices,4 industrial Lo-ciety has seen many instances of anxiety andsometimes antagonism toward technologicalimprovement. The current pessimists have noquarrel with the facts that past long-term tech-nological change has raised our standard ofliving through rapid rises in output and em-ployment. They express concern, rather, thatautomation represents an entirely "new indus-trial revolution." It is argued that the "old"industrial revolution created new jobs and in-dustries but that the "new" industrial revolu-tion is creating two types of problems :

job opportunities as a whole are ex-pected to shrink relative to the number ofjob seekers, and

3 See appendix.4A practice which contributed a word to the English language:

sabotage (sabotshoe).G A well-publicized version of this estimate was that of John I.

Snyder of U.S. Industries, in testimony before a Subcommittee ofthe Committee on Labor and Public Welfare, U.S. Senate, Oct. 3,1968.


the appearance of new jobs which theexisting work force will be incapable offilling for such reasons as deficiencies inskills, education, training, mobility, etc.

One oft-repeated assertion of the pessimistsis that 2 million jobs are being eliminated eachyear by automation.8 What does this mean ?

An examination of employment and unem-ployment trends for the past several years indi-cates that except for 1958 with its industrialproduction drop and 1961 with its relativelysmall increase, civilian employment rose moreor less steadily from 65 million in 1957 to about70.4 million during 1964. (see figure 1) .

71.4r.

Figure 1.Total Civilian Employment 1957-64.

Source: U.S. Department of Labor.

Over the sam a period the number of unem-poyed has tended to remain at around 4 millionexcept for the poor business years of 1958 and1961 (see figure 2) .

Figure 2.Unemployment, 1957-64.

Source: U.S. Department of Labor.

During this period the unemployment ratetended to stay stuck at about 5.5 percent during

the recovery periods following the economicturndowns.

These facts make two points unmistakablyclear. The statement that over 2 million jobshave been lost annually cannot mean that em-ployment declined by 2 million annually, norcan it mean that 2 million more persons havebeen added to the ranks of the unemployed eachyear.

What does this "2 million jobs lost yearly"contention mean then? We can begin to placeit in proper perspective when we see how sucha number was obtained. Using round numbersrather loosely, an assumed 3 percent annualgain in output per man-hour (which is actuallymuch too high for the national economy) isapplied to an employed work force of about 70million.° The arithmetic (.03 X 70 million)suggests that some 2 million jobs have becomeunnecessary.

To progress from this type of argumentativearithmetic to sound economic analysis, thefollowing observations are in order.

First, the 2 million job loss figure is specula-tive in that it represents only one of severalsteps required to estimate how many new jobswould have to be created to prevent a rise inunemployment if the economy did not grow(produced the same output) while output perman-hour increased 3 percent.7 It is highly un-likely that a 3 percent productivity gain can beattained without the same high (plant capacity)operating rates and the new capital expendi-tures that are required to increase productivity,production, and employment levels. The factthat employment grew while unemployment didnot rise over the past few years demonstratesthat output gains outpaced the combination pfproductivity plus labor force increases.8

The familar postwar trend rate of 8 percent annual gains inoutput per man-hour prepared by the Jepartment of Labor appliesonly to the private sector of the economy, excluding government.The difficulties in measuring productivity changes in service activ-ities are monumental. However, it is generally held that serviceproductivity gains have not been as large as those in tangible goodsproduction. The latest available comparison of productivity gainsin the gcods and services sectors of the national economy revealsthat ". . . real output per man in the goods sector grew at the rateof 2.4 percent per annum between 1929 and 1961 [while] the cor-responding figure for the service sector was .7 Percent." Victor R.Fuchs, Productivity Trends in the Goods and Service Sector, Na-tional Bureau of Economic Research, Occasional Paper No. 89, pp.1 ff. The author devotes a large part of the study to trYing toaccount for the 1.7 percent sector differential. A comparison ofproductivity changes by major industry group (table 5, p. 15) leadsto the statement that "The range of productivity gains acrossindustries is very large, with communications and public utilitiestypically leading and general government typically showing theslowest growth." (p. 16)

7 As a bare minhnum, at the aggregate level of analysis, it isako necessary to include such variables as output compared to out-put per man-hour, average hours of work, and net labor forcechanges in trying to estimate employment and unemployment levelfluctuations.

*Productivity gains tend to be high when output is growing morerapidly, and vice versa. Indeed, there is evidence that outputgrowth tends to outpace productivity incraases as higher growthrates are attainedsee Leon Greenberg, "Technological Change,Productivity, and Employment in the United States," Report No. 2,OECD North American Conference on the Manpower Implicationsof Automation, Washington, D.C., Dec. 8-10, 1964, pp. 14 ff.

As a result of this tendency, periods of relatively big productivityincreases tend to be associated with periods *of rising employment

GENERAL ELECTRIC COMPANY

Indeed, in the absence of rising productivity,growth in production would necessarily beless and product per capita lowereconomicprogress would be essentially frustrated.9

Secondly, the 2 million may refer to displace-ment or disemployznent situations where indi-viduals were taken off particular jobsand,most often move to other jobs. But no onereally knows how many displacements actuallytake place each year. Nor is there any clearimpression about the relative importance of theeconomic, technological, organizational, andother causes of employee displacements. While2 million seems like a large number of displace-ments for purely technological reasons (and asmaller number would, very probably, be moreaccurate) it should not be too surprising whenwe consider both (1) our very large labor forceand (2) the dynamic, progressive nature of theAmerican economy. The key point is that dis-placements are an integral part of the processesby which economic change and progress occur.The day that displacements cease to occur be-cause of improved methods of productionthatday will mark the start of a failing economicsystem which no longer permits a rising stand-ard of living and the power to compete success-fully with other economic and political systems.Also, on the day that technological displace-ments do not occur or jobs do not "disappear"we will no longer have sufficient labor to shiftfrom declining products to growth products, ashas taken place in the past. Thus, while dis-placements take place because of changing jobrequirements, the critical thing is that displacedworkers as well as new labor force entrants(and reentrants) find other jobs. Job openingsappear when replacements are needed for peoplewho stop working (resignations, retirements,leaves of absence, etc.) and because new jobsare being created more or less constantly.

Thirdly, the point that automation or tech-nological change should not be equated withproductivity is also relevant here. Mechaniza-tion and automation equipment are desired forwhat they can contribute to productivity gainsover the years. Yet, part of any productivityincreasebe it 3 percent or another figuremay result from nontechnological factors, (e.g.

not declines. In the abstract, all other things being equal, the effectof increased productivity is to require less employment for a givenoutput. But in practice, experience shows that the employment-increasing effect of output growth more than offsets the employment-reducing effect of higher productivity.

*General Electric's chairman of the board Gerald L Phlllipperecently told an audience:

"Without constantly improving machines, I submit that:"1. Jobs would be plentiful perhapsbut arduous, boring, and ex-tremely low-paying:"2. Industry could not possibly produce what U.S. customers re-quirenot in quantity, not in quality, and not at a price thatpeople will Par"3. Competitively, America would disappear from the world scene.

"The only real security any of us can haveas a comPanY, as anindustry, as an economic societyis to achieve competitive coats,worldwide, through improved productivity."

95

high versus low output periods) especially overa relatively short span of years. Just as auto-mation cannot be given full credit for al! short-term productivity gains, displacements and un-employment have a variety of causes other thantechnological change.

When these qualifications are considered, thestatement that we are loging 2 millinn As* acmeother number of jobs annually ceases to befrightening. The distinction between displ 'e-ments and net increases in unemployme7well as the difference between assuming no out-put growth and observing how much growth isactually occurring are critical to our under-standing of employment and unemploymenttrends.

Automation as a Cause of Unemployment

The main charge made against automationseems to be that it creates problems of laborforce adjustment far greater than any we havecome through in the past. The critics concedethat past technological change has meant eco-nomic progress, and that the economy has ab-sorbed displaced labor through growth. But,it is said, automation proceeds so rapidly andradically that labor force adjustment cannotkeep pace. As a result, it is charged, automationcreates a pileup of the unemployed.

If true, this serious charge would suggestthat certain distinct trends could be identifiedin available statistics on unemploymentamcng the unskilled blue-collar workers, thosein manufacturing, those in depressed areas, andthose out of work for extended periods. Thus,these assertions may be tested by examiningthe statistics."

10 The discussion which follows is based on the anal"tield tech-niques and statistics (updated where poesible) developed by B. A.Gordon, University of California, in "Has Structural UnemploymentWorsened?" Industrial Relations, May 1964, pp. 63 ff.: see also theFeb. 1965 issue, PP. 111 ff. The Bureau of Labor Statistics. U.S.Department of Labor, regularly publishes data dealing with thepercentages of total unemployment accounted for by particular occu-pations, industries, age/sex groups, etc. However, one of ProfessorGordon's contributions is to provide the analytical rationale for usingthese (fraction of total unemploy.nent) statistics as indicators oflabor iorce adjustment. With U representing a total unemployment,the labor force, and the subscript s referring to a specific labor forcegroup designations such as manufacturing, white collar workers,etc., Professor Gordon's identity is:

Ui U Li Ui=Li L

XL

If i represent (say) blue-collar workers, the statement is that thefraction of total unemployment represented by blue-collar workers,Ui, is equal to the ratio of the blue-collar unemployment rate Ui to

Lithe overall unemployment rate U. weighted by the blue collar repre-

sentation in the total labor force Li. Thus, comparisons of the

Percentages of total unemployment represented by the several laborforce groups over selected years reflect (1) how a group's unem-ployment rate compares with the national rate and (2) the changingimportance of the group within the labor force.

By themselves sharp rine or declines in particular group wham-ployment rata* tell us little about how a particular group has beetiaffected by such phenomena as automation of how effective the labor


Figures 3-6 show the fraction of total unem-ployment represented by specified work forcegroups during selected years." These yearshave been chosen so as to exclude years of eco-nomic recession when the predominant causeof unemployment was a slowdown in businessactivity generally. Since we want to under-stand the impact of automation, not of reces-sion, only years of hieh business activity havebeen selected.

Blue Collar and White Collar Unemployment

For example, consider the assertion thatautomation is creating jobs which can be filledby skilled workers while the less skilled remainunemployed. If this were true, we should ex-pect to find that unskilled blue collar workersaccount for growing percentages of the un-employed, while white collar and serviceoccupations represent progressively smallerpercentages.

Figure 3 shows the occupational groupingsof the unemployed based on the last job held.

WHITECOLLAR

BLUECOLLAR

21. 6 21. 4

Ak*In

20. 5

.1 19.3

17. 5

SS. 8

0041...52.6

41( 411-10 41. 352.0 N6. 8

44.4

15. 014. 7

'A.- 14. 4. 1

SERVICE13. 8

D. 6 13.4

1448 s*3 51 54 6i14

Fractions of Total Unemploymentfor Other Occupational Groups (1964)

- No previous work experienve 16. 0- Farm 3. 7

Figure 3.-Percentage of total unemployment accountedfor by sak major occupational group (selected years).

Source: Figures S4 based on Bureau of Labor Statistics data.

force adaptation to the phenomenon has been. A rise in a specifiedgroup's rate when compared with the overall unemployment ratemay show that the group's "relative unemployment rate" (Gordon'sterm) has not risen so that the prevailing structure of unemploy-ment rate differentials remain unaffected. Further, even if agroup's relative unemploment rate climbs upward, it need notspell a "structural unempbyment" problem If (1) the group repre-sents a declining proportion of the total labor force, (2) other laborforce groups can absorb most of the displaced workers, and (2)labor force participation rates do not decline significantly as a resultof Prolonged unemployment.

11All of these charts have been plotted on a uniform ratio (semi-logarithmic) scale.

It is interesting to note that over the last fewyears the blue-collar share of total unemploy-ment is noticeably lower than in previousyears dince 1953 it has declined steadily andsignificantly.

While white-collar unemployment rates haveremained relatively low and their employmenthas been generally growing throughout thepostwar period, we see that the fraction of un-employment represented by white-collar workershas been rising since 1956.

Although throughout the whole postwar pe-riod the unemployment rates of service workershave been generally falling relative to the over-all unemployinent rate, their more or less stableshare of total unemployment, around 14 percent,is ascribable to their growing importance in thelabor force.

SKILLED(Craftsmen.foremen. etc.)

If0

28. 5

Z6.S.SEMI-SKILLED . 5

..... ap(Operatives. etc. ) 24. 3

26. 0 11111)24. 1

.23. 3

UNSKILLED(Laborers, excluding

farm & mine)

14. 814. 0

A'-IL 1 1. 8

I I I

1948 '53 '56 '59 '62'I 0

Figure 4.-Percentage of total unemployment accountedfor by blue collar workers according to relative degreeof skill (selected years).

Now note the blue-collar group in more de-tail. Sometimes it is alleged that unemploy-ment has been growing increasingly severeamong the unskilled blue-collar workers, andperhaps the semiskilled-in fact, most casualobservers of the economic scene almost assumethat this is true. It is true that unskilled la-borers have unemployment rates which arealmost twice as high as the national average;to repeat an obvious and familiar fact, highlyqualified workers have always had an easiertime finding and holding jobs than those withless to offer. Yet the proportion of unemplo-ment accounted for by unskilled and semiskilledblue collar workers has been declining persist-ently in recent years (see figure 4).

GENERAL ELECTRIC COMPANY97

Thus, the statistical record shows exactly theopposite of what we would expect to find ifautomation were causing the adjustment prob-lems for blue-collar workers that some haveattributed to it. The point is that while theblue-collar unemployment rate has maintainedits comparatively higher relationship to theoverall unemployment rate, the percentage ofblue-collar workers in the labor force has beendeclining fairly steadily so that they representa declining fraction of total employment. Thissuggests that, the pessimists to the contrary,labor force adjustment is still both viable andvigorous with the displaced finding jobselsewhere.

Goods and Service Industries

If automation hits goods industries far morethan those which render services, as some haveasserted, we should expect to note severe workforce adaptation problems in manufacturing.

The manufacturing panel on figure 5 showsthat manufacturing's share of total ununploy-ment has been dropping continuously since

Trans, andpub. Inas.

Mining.forestry.itshertes

6.6

114.........3. 3 5. 0

V .... 4. 4

4.5 111111i:.!

29.025. 0 Ai.-....ef ..f7 5

6.2Manufacturing

27.0 25.6

24.4

12.9 iii,

,10.7 11.1 W11.4

410. S

Construction

4.6

4.2 ..41-41k. 4 . 2

l'i I It p 4. 2

i 41 3. 9Agriculture

1

U3.3

1911 53 56 59 62 44

Figure 5. Percentage of total unemployment accountedfor by primarily "goods" producing industries.

1956. During years of high level economic ac-tivity, the unemployment rate in mannfacturingis only slightly above the overall unemploymentrate. Manufacturing's decreasing share of totalunemployment is partly explainable by the factthat it now accounts for a smaller fraction ofthe labor force than it did about .15 years ago.

The important point for our purposes, how-ever, is that once again, automation seems ab-solved of creating the labor force adjustmentproblems which lead to massive unemployment.

In contrast, faced with rapid growth in de-mand, the service industries appear to be facili-

tating work force adjustments by absorbingworkers, as the long-term trends suggest theyshould. The growing proportion of the laborforce made up of service workers with theirbelow average unemployment rates stronglysuggests that the service industries have beendrawing labor from other parts of the economyas well as from additions to the labor force.Thus, it is not too surprising that a relativelysmall increase has occurred in the fraction oftotal unemployment assignable to basic serviceindustries and trade (see figure 6).

Serviceindustries

15. 3 0 16. 0

14.2 ...Ili14.3 15.217l!r40"41

lb. 6

O.., 17.9Wholesale and .. 16. 6 17. 116.9retail trade A111".1!..341111.6.

Finance, ins.,real estate

Publicadministration

2.7

It:1:

%.. 2.2 2. 2

II°..i

1.9

1946 53 56 59 62 64

Figure 6.-Percentage of total unemployment accountedfor by primarily "service" industries.

The agriculture and mining, etc., data infigure 5 merely remind of the fact that therehas been a dramatic long-term progressive slidein both employment and unemployment in in-dustries which draw their products from theearth, so that the extractive industries accountfor a very small fraction of unemploymenttoday.12

121n examining the ease against automation, we have tested theusual assumption that the impact of automation is to be found inmanufacturing. Actually, as a recent study by the Machintry andAllied Products Institutes (George Terborgh, "The AutomationHysteria") points out, the most important applications of auto.


Depressed Areas

It is sometimes argued that as a result ofautomation, some particular areas have becomedepressed, with increasingly concentrated un-employment over the years.

Total U.S.Usemployment

(add 000)

Percentage ofTotal inLabor Market

Areas

4, 691 3. 513 3. 931 4,007

El

llEl

5.

1959 a)I 1159 1160 1962 1961

4, 166 3, 376

96.5%

a) Figures available for oaly 147 areas.b) Figures available for only 149c) Preliminary (11 month) is

1964 c)

Figure 7.Percentage of national unemployment foundin 150 major labor market areas.

Source: Figures 7-9 are based on pp. 119-21 0 Otto Eckstein'sarticle "Aggregate Demand and the Current Unemployment Prob-lem," in UnemPlownent and the American Economy, Arthur M.Ross, ed. John Wiley & Sons, 1964, and the Manpower Report ofthe President, 1065, pp. 248-245. Professor Eckstein of HarvardUniversity is now serving as a member of the Council of EconomicAdvisers.

From examination of a number of years ofdata dealing with the 150 major labor marketareas, we are in a position to judge whethersuch areas represent greater, stable, or decliningfractions of national unemployment.

Figure 7 shows that year after year, the 150labor markets contain smaller fractions of theunemployed. It appears that the unemployment

UnmploymantRata Catsiory

1216 to ovals

6 to 11. 9%

Under 6%

150

1959NationalUnimployinant 5. 5%Rate

7150

4

1960

150

1962

S. 6% S. 6%

1963 1964

S. 7% 5. 2%

Figure 8.Number of major labor market area* accord-ing to unemployment rate category.

mation may have taken placer in Zeta processing, information storageand retrkval, aceounting, and related functionsthat is, more inodice-typo work than in factories. Applications of automation tostraight production, while kolate4 examples can ba dramatic, havenot Nay taken hold very widely.

is becoming more widely dispersed across theNation rather than building up in a relativelyfew areas.

In addition, unemployment is becoming lesssevere within the 150 labor market areas.Figure 8 shows the 4 most recent full yearswhen the unemployment rate stayed within thenarrow range of 5.5 to 53 percent. While theoverall rate was relatively stable, out of the150 labor market areas, the number with lessthan 6 percent or higher rates rose more or lesssteadily. The number with 6 percent or morediminishedfrom 58 to 41 in 1963. Of course,the greatest improvement occurred during 1964when the national unemployment rate droppedto 5.2 percent ; the number of areas with 6percent or more fell to 30.

Finally, within the 150 labor market areas,the percentage of the unemployed with lowerthan 6 percent unemployment rates rose fromabout 62 percent in 1959 to about 70 percent in1963 (see figure 9). The fraction of total un-employment with 6 percent or higher ratesdeclined accordingly.

UNINPLOY10312RAT! CAGDGORY

12% to over...4.

6 to 11.9%

Under 6%

1959

Nat ionalUnemployment 5.5%

itate

3.1%

1960

2.2% 1.3S 0.4%

67.1%

1962

5.6% 5.6%

1963 1964

5.7% 5.2%

0.4%

Figure 9.Percentage of total unemployment in 150major labor market areas according to unemploymentrate category.

All in all, the occupational and industrialdistributions of unemployment show that work-ers in the jobs and industries which are supposedto come to be most susceptible to automationgenerally represent a declining rather than arising fraction of the unemployed. The mean-ing of this decreasing share of unemploymentis that workers who have been temporarily orpermanently displaced from specific jobs withindividual firms have generally become reem-ployed. They have either gone back to theirold jobs because of improving business condi-tions and growth or have found new jobs, as istypical within the ongoing process of laborforce adaptation. Consequently, there is littleevidence_for the assertion that automation has


been causing a buildup of the unemployed.This generalization applied to occupations, in-dustries, and the older major labor marketareas.

Long-Term Unemployment

Look more specifically at the long-term un-employed. To believe the theory that automa-tion has created insoluble adjustment problems,we should expect to find white-collar and serviceworkers representing a smaller portion of thelong-term unemployed while blue-collar work-ers represent a larger share. Figure 10 showsthat the opposite is true. From 1957 to 1964the white-collar share of long-term unemploy:-ment rose from about 17 to over 23 percent,while the blue-collar fraction declined fromabout 58 to under 47 percent. The share oflong-term unemployment represented by serviceworkers have varied slightly around the 14percent mark.

WHITECOLLAR

BLUECOLLAR

SERVICEWORKERS

23. 311

20.9 I20.5 je

6.19.2I417. 1

58.3

Olk56. 8. 51.9at 51. 1

46.8

14.6

13.4pa 14.5

; 1r0. 1 13.4ii12.3

. . ...1957 159 162 '64

2.7

2.4

11.6 0

IL 88.4 400

19571511 162.164

FARMWORKERS

NO PREVIOUSWORK EXPERIENCE

Figure 10.-Percentage of total long-term unemploy-ment (15 or more weeks) accounted for by each occu-pational group.

Source: Bureau of Labor Statistics data.

The most dramatic change in the compositionof those who have been unemployed for morethan 15 weeks appears among those withoutprevious work experience.

Turning to a comparison of long-term unem-ployment by industry (figure 11) , we find thatgoods-producing industries, such as construc-tion and manufacturing, represent generallydeclining portions of the long-term unemployed,

while the trade and service industries weregenerally on the rise.

Judging by the occupational and industrialcharacteristics of the long-term unemployed,then, it is abundantly plain that long-term un-employment has not increased among thosegroups of workers that were purportedly mostaffected by automation since 1957. Once again,we have strong indications t;hat; the labor forceadjustments required to move workers fromindustries and jobs susceptible to employmentdeclines into areas of employment growth hasbeen occurring in a significant way.

Construction (a)

Manufacturing (a)

Other (b)

t6 9.2

0.11

36.9

0.4%32.2

ak% 29.9

4141/2S' 6

16.5

s. 15.7

15.41k

IP14.4

. . . .1957 59 62 64

17.8

0I 10116.7 WRehotaleil eTalre ilade (a)

15.1 I A0 15.6

117

16.115.11 Service. Finance.I Ins.. Real Estate tar

i4

(a) Wage and salary workers only.(b) Includes agriculture, self-employed and unpaid family workers. and wage

and salary workers in forestry, fisheries. and mining; transportation andpublic utilities; and public administration.

Figure 11.-Percentage of total long-tcrm unemploy-ment (15 or more weeks) accounted for by each indus-trial group.

Source: Bureau of Labor Statistics dMa.

Clearly the available evidence indicates thatautomation has not been creating problems oflabor force adjustment and unemployment as theautomation pessimists would have us believe.While there is always room for improvement,the labor force adaptation process continues tobe as persistent and widespread as the otherforms of sweeping change throughout our econ-omy (e.g., population growth, amounts and pat-terns of total spending, technological advance,foreign competition, tastes, values, and judg-ments about our personal and national goals)which necessitate job changing. Both the sta-tistical evidence and the urgency of automationmake it inappropriate and futile to scourge auto-mation as the impediment to a fully employedand rapidly growing economy.


Causes of Unemployment: Some PromisingAreas for Study

Unemployment is a serious problem, even ifwe cannot cast automation as the villain of thepiece. Excessive unemploymentpersistentlyover 4 percent of the labor force despite anuninterrupted boomcan represent a searinghuman problem to the individual man out ofwork and a major national concern to a freeeconomy committed to economic growth andprogress.

This paper cannot begin to cover the complexquestion of the causes of unemployment. How-ever it may be appropriate at this point toidentify a few areas where further study couldbe productively directed in efforts to understandthe causes of unemployment.

1. One important factor affecting employ-ment and unemployment is the rate of growthin the volume of output and sales. With anexpanding labor force, a period of relativelyslower growth normally will generate a higherunemployment rate. Thus, for example, in theperiod 1947-57 the rate of growth in output 13was 3.7 percent per year ; in 1957-64, the annualrate of growth slackened to 3.0 percent. Notsurprisingly, unemployment increased from 4.2percent in the former period to 5.7 percent inthe latter."

2. Another factor at work in this same periodis the rate of growth in the labor force. In aperiod of rapidly growing labor force, the econ-omy must either grow faster or experience arising level of unemployment. Thus one fur-ther reason why unemployment averaged higherin 1957-64 than in 1947-57 was that the civilianlabor force expanded at a somewhat faster rate(1.4 percent versus 1.1 percent yearly) .

This factor of labor force growth is an ex-tremely important factor right now and for theinunediate future. The big surge in numbersof babies born right after World War II is justnow hitting the labor force as these peoplereach the ages of 18-21. One of the criticalproblems facing the country in the next fewyears will be to expand job opportunities fastenough to absorb unusually large numbers ofyoung people entering the labor force.

3. An additional factor affecting employmentand unemployment is the changing compositionof total demand. The well-known trend towardgreater proportional demand for services com-pared to goods (especially food and clothing)carries with it greater needs for service work-ers and a lesser demand for those in farm andfactory occupations." Similarly, both the mag-nitudes and types of defense spending go a longway in accounting for the higher employmentlevels in the white-collar and skilled occupa-

tions, while the lower-skilled and blue-collar jobslag behind or even decline in some instances.

A Bureau of Labor Statistics study, "Employ-ment Impact of Changing Defense Programs,"(Monthly Labor Review, May 1964) has pointedout how new types of ...ailitary spending haveaffected job opportunities for workers in defenseinangtries:

In the five major defense related industries, pro-duction workers fell between 1958 and 1963 from64 to 57 percent of all workers . . . compared to adrop of onbr 1 percent (from 75 to 74) for all U.S.manufactm. g. Another evidence of changing oc-cupstional ttterns in defense work comes froma recent survey covering ieveral hundred thou-sand en-p;oyees in plants making aircraft, missiles,and space vehicles. Between 1955 and 1961, hourlyemployees fell from 75 to 14 1 ercent of the totalnumber of workers survey 2 I while engineers, sci-entists, and technicians ir.zreased from 14 to 22percent.

4. Any analysis of employment and unem-ployment trends must include a discussion ofthe "price." More specifically, the differingcompensation costs of employing different laborskills in various industries obviously will havesome effect on hiring patterns. Just as prevail-ing prices influence the quantities of goods andservices both that purchasers demand and thatsellers supply, in the same way, pay and bene-fits affect both (1) the numbers and kinds ofemployees that firms hire and (2) the supplyof labor (the labor force) . Thus, for example,higher pay and benefits levels tend to discour-age the demand for labor while at the sametime increasing the number of job seekers.

The point that fast wage increases may ad-versely affect job opportunities invariably raisescontroversy and emotional responses. Never-theless, logic and evidence alike would suggestthat any careful inquiry into the causes of un-employment must include an examination ofthis point.

13 As measured by gross national product in constant dollars.These rates were obtained by using the equation

log yt = a + bxt -I- czt,where xt = 1, 2 ... 11 from 1947-57 and had the constant valueof 11 from 1958-64 and xt = 0 from 1947-57 and 1,2 ... 7 from1958-64.

u Arithmetic average of annual unemployment rates over the twoperiodQ.

no Former Bureau of Labor Statistics Commissioner Ewan Claguestated: "A very large part of the increase in professional workershas been due to population growth. For example, a greater numberof teachers are needed to serve the rising number of school-agechildren; and the large increase in medical personnel is resultingfrom our growing population with its changing age distributionand increasing willingness and ability to pay for medical services.... The different rates of unemployment growth among industries havebeen the most important single factor determining the occupationaldistribution of employment has resulted from greater-than-averagegrowth in industries employing large numbers of these workers: forexample, State and local government; finance, insurance, and realestate; trade; and business and professional services: coupled withthe much slower growth in industries in which smaller numbers ofwhite-collar workers are employedmining, manufacturing, andtransportation." "Effects of Technological Change on OccupationalEmployment Patterns in the 'United States," Report No. 5, OECDNorth American Conference on the Manpower Implications ofAutomation. Washington, Dec. 8-10, 1964, pp. 8-4.


The Positive Value of Automation

It is extremely important that clearer per-spective be gained on the relationship of auto-mation, employment, and unemployment. Lackof understanding on this point could lead toformal or informal restraints on the pace ofautomation. Such restraints could seriouslyjeopardize the needed positive values of auto-mation. Such positive values relate to a risingstandard of living, intensified competition, andthe national defense.

Rising standard of living. Comparisons ofthe economic well-being of different nations aresometimes expressed in terms of how manyhours of work, on the average, are required tobuy a given product or service. It is a sourceof pride and satisfaction that the average hourof work will command more goods and servicesin America than in just about any other nationbecause we currently produce more in an hour.Facing the future, it is an inescapable fact thatif we want an hour of work to buy still moregoods, we must be capable of obtaining thatadditional output from an hour of work.

Stated more fully, a rising standard of livingdepends on continuing gains in efficiency orproductivity. Each hour of work, each pieceof capital equipment, each unit of raw material,each foot of floor or land space must be madeto yield progressively greater output. Over thedecades, productivity increases have primarilycome from the combination of advancing tech-nology and upgraded human skills. Our eco-nomic future depends on rapid gains in thequantity and quality of both types of produc-tive resources.

Solutions to our poverty problems hinge onmaking it possible for more people to contributeto, and thus share in, a larger output of thenecessities and luxuries of life. The expandeduse of modern technologyand much-malignedautomationgives us an effective tool for cop-ing with urban slums and congestion, inadequateeducational facilities, and other social problems.Without improving productivity, we cannotdeal with these problems successfully.

Intensified competition. As long as we be-lieve (justifiably) that a free enterprise systemprovides the most e Tective means of producingand distributing the goods and services whichmake up our level of living, businessmenand,indeed, nationswill compete to make and sellmore and better goods at lowest prices. Auto-mation is introduced and furthered in an effortto secure a winning edge over competitors.Slowness in updating production facilities andpenetrating new markets can mean the differ-ence between business success and business

collapse. The loss of jobs and income becausea business fails to compete successfully repre-sents a very significant form of technologicalunemployment. Using the closing of the Stude-baker plant to illustrate the complexity ofcauses of unemployment, Dr. Ewan Clague,former commissioner of the Bureau of LaborStatistics, stated :

It [the Studebaker plant] was an old plant whichdid not rank high in automated equipment. Animportant cause of the shutdown was a lack ofsales, over which neither management nor laborin the iolant itself have much control. In fact, itmight be argued that automation as such had littleor nothing to do with that closing. Yet in anothersense, it could be considered a cause because it mayhave been teclmological advances elsewhere in theindustry which reduced the South Bend plant tononprofitability. 16

Today the march of technological advance isworldwide. The adoption of automation bymore countries means that both the sources ofproduction and the markets for many goodsare now on an international rather than just anational scale. Time was when certain areasof the United States were recognized as theleading worldwide suppliers of particular prod-ucts. How quickly things can change is sug-gested by the drop in America's share of major(nonmilitary) manufactured goods sold by theprincipal industrial nations in world marketsfrom over one-fourth to just under one-fifth injust the last'10 years.

Today the race is to the swiftand thestakes in the domestic and international auto-mation competition are high : to the leadingfirms, industries, and nations will go the fastestrises in income, jobs, and general economicprosperity.

National defense. The worldwide acclaim thatgreeted the Russian launching of SputnikI on October 4, 1957, provided dramatic evi-dence that science and technology are instru-ments in the cold war battle for the minds ofmen that is raging between democratic capital-ism and dictatorial communism. Perhaps morethan ever in the past, the respect granted anation depends on its demonstrated ability toraise living standards and defend itself ifnecessary. Sputnik symbolized the fact thenation or gropp of nations with the highestcapabilities in science, technology, and auto-mation stood the best chance of enriching andprotecting the lives of citizens.

Automation makes very significant contribu-tions to national defense in two ways. First,for example, computers are extremely valuablein the design, construction, and operational use

0 Ewan Clague, "What Employment Statistics Show" Automa-tion, Apr. 1964, p. 66.


of the many modern weapons ranging fromradar to rockets. Computers outpace humansin making the very large numbers of high speedand precise calculations that are required inall phases of modern weaponry. Secondly,automation may help in partially overcomingthe labor shortages that occur during defenseemergencies so that the civilian standard ofliving can be maintained. Automation is neces-sary to have both "guns and butter." Withmodern wars involving the whole populace,modern production methods are the order ofthe day.

If Khrushchev's successors "bury" us undera flood of goods or a string of bombs, it may,very possibly, be because they can prove thattheir kind of economic system encourages andachieves higher rates of technological progressthan "the decadent capitalistic order."

In the light of (1) our desire for a rapidlyrising standard of living, (2) the realities ofdomestic and foreign competition, and (3)peace on earth and in space, the real "problem"of automation may very well be, "Is automationoccurring rapidly enough?"

Public Policy on Automation

Public policy with respect to automation isa matter of obvious interest in view of themany proposals advanced from time to timewhich attempt to deal with the effects ofautomation. These include :

proposals which proceed from the as-surnption that automation is a major factorin creating the current unemploymentproblem;proposals which promote education andtraining in order to equip the labor forcewith new skills needed for an age ofadvancing automation;proposals which encourage industrialexpansion and national economic growth in.general or business investment in particu-lar, including investment in modernizingautomation equipment.

Some Mistaken Approaches

There is widespread concern that the unem-ployment rate of recent years has been need-lessly high. If wise policies can be instituted,most economists believe, our economy shouldbe able tc.., reduce this rate significantly and, indoing :o, help alleviate both the drain on U.S.productive capability and the personal hardshipon individuals which unemployment represents.

In understandable concern about unemploy-ment, however, some, of the critics of automa-tion seem to imply that the cure for unemploy-

ment must be found in slowing down or at leastregulating the further introduction of automa-tion. Actually few serious proposals are ad-vanced at the policy level to impose specificconstraints on the introduction of technology.Nevertheless the stare images invoked of auto-mation as a job-destroyer and "curse" onsociety have the practical effect of stimulatingpublic and employee anxiety about and evenopposition to the spread of new technology.

But, as we have seen, the evidence suggeststhat excessive unemployment cannot be attrib-uted to automation. Thus measures to discour-age automation would seem a most unpromisingapproach to the reduction of unemployment, and,in view of the positive benefits of automation,a potentially damaging path to follow.

Another brace of "solutions" to unemploy-ment is built, like the 2-million-jobs-lost-per-year arithmetic discussed above, on still an-other new version of "political arithmetick." 17

To balance the 2 million jobs per year whichare purportedly "lost" through automation,some of the same political arithmeticians havecome up with- two new pieces of arithmeticwhich are supposed to show how large numbersof jobs are to be "created" through such meas-ures as the shorter workweek, the shorter workyear and higher pay premiums for overtimework. The stated objective of such measuresis to "spread" the work by making it preferablefor employers to hire new employees ratherthan offer longer hours to those alreadyemployed.18

Thus, we are now given numerical calcula-tions which purport to show how many newjobs would be "created" by reducing the work-week by a specific number of hours (or a chang-ing number of hours which varies with theseverity of unemployment over the businesscyclethe so-called "flexible" workweek pro-posals). The number of man-hours "opened

17 Students of the historical development of economic doctrinesregard the English economist Sir William Petty (1623-87) as oneof the most important contributors to the development of moderneconomics. One of Petty's contributions is described by Eric Rollin this way: "In his Political Arithtsetick, written probably in 1672and published in 1690, Petfy states explicitly a new approach toeconomic inquiry which he knows to be still unusual. 'Instead,' hesays, 'of using only comparative and superlative Words, and intel-lectual Arguments, I have taken the course . . . to express myselfin Terms of Number, Weight, or Measure; to use only Arguments ofSense, and to consider only such Causes, as have visible Founda-tions in Nature.' Iy truly adhered to this manifesto of empir-icism: and his to fame is generally conceived to rest on thepart he playeet e the foundation of a science of statistics. Therecan be no doub: :hat Petty is rightly regarded IPA the first 'to developthis sister disc ne of political economy." Eric Roll, A History ofEconomic That...At, 8d ed., Prentice-Hall, Inc., 1956.

By contrast the modern version of "political arithtnetick" dis-cussed above involves the use of over-simplified arithmetic calcula-tions as a substitute for rigorous economic analysis which drawsheavily on the relevant facts. It is "political arithmetick" in thasense that seemingly scientific analyses are used in an effort togenerate widespread appeal for a proposal without fully discussingthe fatal defects inherent in the proposal.

18 The relevance of this discussion to the question of automationmay be seen from the fact that the President's 1965 message toCongress on labor legislation, in explicitly rejecting aborter work-week proposals, referred the whole question of "work periods" tothe Commission.


up" by the workweek reduction is divided bythe new basic or reduced workweek and theresult is supposed to represent the number ofnew jobs "created" or the amount by whichunemployment might be decreased. The sameprocess of adding and dividing of man-hoursis also used to justify the higher pay premiumswhich are supposed to provide the penalties ordisincentives required to sharply reduce over-time work : all the overtime hours worked inplants across the Nation are added up and thendivided by 40 hours to arrive at an estimateof the number of jobs that are supposed toappear because of "elimination" of overtime.

Unfortunately, however, the labor force doesnot consist of homogeneous units which can befreely substituted for each other. When anemployer in San Francisco needs some extrahours of highly skilled labor, he cannot hirean equivalent number of unskilled West Vir-ginians who happen to be unemployed. Fur-thermore, if the need for extra hours of workis temporary, it may be highly unworkable tocall in new people as against offering overtimeto present employees.

To be more specific, the jobs computed underthis political arithmetick will "add up" only ifenough unemployed people with the requiredskills are available, willing, and able to workat those jobs where longer hours are currentlybeing worked. In other words, we must takeanother look at the additional available laborsupply which the unemployed comprise.

During May 1965 almost one-half of the un-employed were under 25 years of age and almostone-fourth of the unemployed had no previousjob experience and were in search of their firstjob. With the largest single group of theunemployed consisting of young, inexperienced,and untrained persons, it is indeed questionablewhether they are suitable candidates for thejobs that would be theoretically created by ashorter workweek or a major reduction in over-time work. In fact, one of the most frequentreasons for overtime is that many plants arecurrently experiencihg great difficulties inobtaining qualified workers.19

Another look at the unemployment statisticssheds more light on the growing tightness oflabor markets. Against the seasonally adjustedaverage national unemployment rate of 4.7 per-cent during June 1965 must be compared tothe 3.2 percent unemployment rate for all men20 and over and the 2.4 percent unemploymentrate for married men. For women 20 yearsand over the 4.8 percent rate was virtually thesame as the 4.7 percent national average. Bysharp contrast the teenage unemployment ratewas over 14 percent. Considering the fact thatthe labor force contains almost twice as many

men as women, the 3.2 percent and 4.8 percentunemployment rates just cited point to the factthat the overall average unemployment ratesfor adults is somewhat below the 4 percentinterim full employment rate target enunciatedby the Council of Economic Advisers.20

More than ever it is very clear that our un-employment difficulties center around the grow-ing numbers of young, unskilled, inexperienced,and untrained persons. This being the fact,it is virtually impossible to understand howbasic workweek and overtime hour reductionscan create anything substantial in the way ofadditional hirings.

The various spread-the-work proposals con-tain an ever more fundamental error, of course,in their basic economics. Such proposals at-tempt to expand the demand for labor by rais-ing its price. It is difficult to understand whyanyone should expect that more labor will beemployed when the employment costs of mak-ing a unit of product go up. No matter howwell-intentioned, proposals which seek to helpthe unemployed by raising the cost of beingemployed will not achieve their objective.

The primary danger inherent in a shortworkweek, the flexible workweek 21. or sharppenalties on overtime, if actually brought about,is that of halting the current 50-plus montheconomic expansion by unstabilizing the laborcost structure of our economy. Any currentreduction in the workweek or increase in over-time penalty rates must raise unit labor sharplyin out or both of two ways. First, with thegrowing shortage of adequately skilled hourlyemployees, a shorter workweek means thatmany more hours would have to be worked. atovertime premiums in order to maintain cur-rent levels of production. Secondly, even withan excessive increase in overtime, employersmight be forced to hire unqualified or less-qualified workers so that the prevailing payrates given for less-than-adequate productivity

10 See General Electric statement to congressional committeesconsidering double overtime legislation: "Why Double Time forOvertime Would Hurt Employees, Economy."

20 This statistical computation which excludes youngsters is merelyintended as an analytical device to show where unemployment ismost highly concentratedamong youngstersrather than to mini-mize the severity of this unemployment probleni. Another danger inlooking only at national statistics is that a 4 percent overall ratetends to mask such serious problems as (say) an 8 percent unem-ployment rate among nonwhites.

s The flexible workweek provides a particularly °vivid illustrationof perverse economics. Under this proposal, when sales and outputdecline, the workweek would be reduced but weekly pay maintained(so as to maintain purchasing power). The purchasing powermaintenance argument is understandable and correct up to a point.However, it is axiomatic that constant income to employees for adeclining amount of work amounts to higher costs to employersand, inevitably, higher prices to consumers which they may or maynot choose to pay. And the more sales and output decline, thegreater the upward pressure on costs and pricesthe more businesssales slacken the mire costs are raised. The hoped-for maintenanceof purchasing power fails to materialize because of offsetting reduc-tions in employment. What good is a plan to guarantee weeklytake-home pay when the effect of the plan is to take people offpayrolls? It is difficult to envision a device which runs more effec-tively counler to what is needed: It is like trying to stop a car thathas begun to roll down hill by hitting the accelerator (price rises)instead of the brake.


would in effect amount to an increase in payrates and unit labor costs. Such labor-costinflationary pressures are not unprecedentedand can persist as long as customers are willingto pay higher prices for products. Our postwarhistory shows that in the absence of sustainedwartime demand, inflationary surges lead torecessions and much more severe unemploy-ment than we are currently experiencing.

To make matters worse, an increase in theovertime premium from 11/2 times to doublethe basic pay rate would further magnify thelabor cost pressures of trying to provide moreman-hours during an already serious laborshortage. It seems hardly sensible to try toreduce our overall unemployment rate by 1percent by taking a course of action whichcould probably lead to another recession andthereby much higher unemployment rates.

It should be clearly understood that a reduc-tion in working hours brought about by work-week and overtime cuts are not opposed onmoral, ideological, or emotional grounds. Rather,the tests of suitability at a given time are essen-tially those dealing with whether the decreasesin hours worked help us attain full employmentand the affluence stemming from a higher eco-nomic growth rate or whether the proposedchanges actually work to defeat these employ-ment and income objectives.

Further, it is also not argued that we willnever be able to reduce the average number ofhours worked in our society. Quite the con-trary, the historical decline in hours worked perweek and per year provide grounds for opti-mism and encouragement that we may earneven more leisure in the future. The criticalword is earn because we must further increaseproductivity and output to the point where wecan have both more goods and services andmore free time to enjoy them as well .3 otherpursuits. When, then, may or can workinghours be reduced without endangering oureconomy and our national security? The an-swer essentially depends on the following threeconsiderations :

(1) We will work fewer hours when wemake the conscious decision to take a largerportion of our rising incomes in the formof more leisure ;(2) Shorter hours become increasinglyrealistic when we can demonstrate that weare capable of sustaining an economicgrowth rate which is high enough to attainboth our domestic and international objec-tives of affluence and peace ; and(3) Shorter hours are earned and properlypaid for (i.e., they do not disrupt cost-pricerelationships) when the added costs ofshorter hours plus other desired compen-

sation increases are within the limits ofproductivity gains so that sudden andexcessive rises in unit labor costs do nottake place.

Positive Policies Toward Automation

Measures to deal with unemployment canhope for more success and more general sup-port if they are based on a recognition of thepositive values of automation. In fact, posithepublic policies toward automation can wellmake a significant contribution toward thealleviation of unemployment problems. Suchpositive policies would have as their aim :

a high and sustained rate of economicgrowth, andan acceleration of education and training.

The fundamental condition for expanding jobopportunities is a flourishing economy. A highrate of economic growth depends on a contin-uing rise in the demand for goods and servicesby consumers, industry, and government. Ina risk-taking, profit-oriented enterprise econ-omy, business investment for plant and equip-mentincluding automated plant and equip-mentconstitutes the most critical form ofspending. This is so because business outlaysare initiating forces in the production processeswhich create the jobs that yield the wages, sal-aries, and other forms of income used to pur-chase a standard of living. In addition, businessoutlays which enhance the productivity of indus-trial facilities, as automation attempts to do,contribute to a faster rate of growth. Thus, atthe core of any effort to encourage growth, in-crease employment, and reduce unemploymentmust lie a widespread determination to encour-age the expansion of industrial activity.

Much can be learned from the more or lessuninterrupted upward movement of our econ-omy over about the last 50 plus monthsone ofthe longest peacetime expansions in our history.On the average, costs and prices have remainedreasonably stable, at least until recently ; em-ployment has grown and unemployment is onthe way down. Thus far, the inflationary boomand bust and major industry strike situationswhich were associated with the four postwarrecessions have not occurred. Perhaps the cur-rent smooth upward economic advance can betaken as evidence of greater public, labor, andmanagement understanding of the folly of pay-plus-benefits increases which create excessivepressures on the cost-price structure.

It is well to note one obvious fact about ourcurrent unemployment problem : the fact thatthe unemployment rate has been moving in theright direction. From a rate of 6.7 percent in1961 to 5.7 percent 2 years later to 5.2 percent


in 1964 and in 1965 to below 5 percent. Thissometimes seems frustratingly slow progressbut it is progress, not retrogression. In ourzeal to accelerate progress, we must take carethat any new steps do not jeopardize continuedprogress. We want to continue doing thosethings which have been helping to bring unem-ployment down. The problem is not so acuteor discouraging that we should risk the jobs ofmany of the 70 million people in an uncertaineffort to provide another 1 million jobs.

Yet still, though we have been moving in theright direction, there is general agreement thatthe employment picture has not been goodenough 1-- lmployment is still too high. Whatelse fr . lone?

One highly important development can be thefurther upgrading of the Nation's educationand training processE Here truly is the keyto upgrading the personal skills and perform-ance which the labor force needs in an age ofadvancing automation.

There is the strong possibility that historianswho look back at the 1960's will describe thedecade as having a rebirth of education andtraining. There has probably never been an-other era when the value of up-to-date knowledgewas so widely recognized. Many factors areinvolved : changing job requirements broughton by automation and other advances ; the re-sponsibilities of citizenship in a world tied moreclosely together by science and technology ; andabout half a nation under 25 years old. Trulyeducation has become one of our most vitalneeds. There are daily announcements oftraining programs being started by communitygroups, business firms, and local, State andFederal governmental agencies. Despite cer-tain problems, all of these efforts are desirableand essential to a rapidly growing economyheaded toward full employment.

More and more business firms especially arerecognizing the stake which every company hasin encouraging its present employees to improvetheir job skills. The socially responsible em-ployer toda:- gives every encouragement to hisemployees to upgrade their skills continually.This may be seen especially among producersof automation equipment. At General Electric,for example, one of every eight employees onthe average is taking some kind of training orretraining course ; employees engaged in trainingrar ge literally from sweepers to scientists.

With the everincreasing complexity of indus-trial processes, our first line a defense againstunemployment must lie in the continuing up-grading of skills throughout the labor force.

Also fundamental is the importance of edu-cation to the rising generationmaking surethat those now entering high school have the

incentive and the opportunity to equip them-selves for fruitful employment in the comingyears. Here we need to encourage efforts todevelop within the school systems an under-standing of the contribution of technology andthe real significance of automation, as well asa sense of e importance of education andtraining. Helping to discourage dropouts is anespecially important aspect of this problem, andindustry has been trying to make a contributionhere.

We must remember, of course, that educationand job training is only, the first stepunlessjobs are created, through business growth,training goes for naught.

These twin steps of promoting sustainedgrowth and accelerating education and trainingare mutually reinforcing goals. The most effec-tive training and upgrading of employee skillsoccur during periods of rapid economic growth.The questions of "training in which skills" and"will jobs be available" then can be well an-swered by employers who will be providing thej obs.

The combination of economic growth and ad-vancing work force skills are the essential stepstoward a fuller realization of the positive valuesof automation.

Importance of Sustaining and StrengtheningU.S. Economic Performance

PerhapS it might be well to close this discus-sion with a note on the critical importance ofachieving a balanced understanding of automa-tion and positive public policies towards it.

Earlier we discussed some of the contribu-tions toward economic progress which automa-tion promotes. Here we should further pointout that a lot more is riding on U.S. economichealth now thar just the material well-beingof the American people. The stability and secu-rity of the whole non-Communist world rest onseveral important pillars, but clearly one is theeconomic strength of-this country.

In our nuclear age, all-out war has become anightmare no rational power can risk invoking;so ideological conflict must seek other meansinfiltration, propaganda, sometimes limitedwar, economic aid and trade, even the rivalryof the space race. In such a long-term lower-level conflict, economic performance plays a farmore important role than in any hot war. Thishas been true since the Truman Doctrine wasenunciated. President Johnson's offer of large-scale economic aid to North Vietnam was astriking indication. In the past we sought to"make the world safe for democracy" throughbrute military power; in the era of the coldwarand for the foreseeable futurewe relyprimarily on America's industrial power.


In such a world, our ability to achieve con-structive results from advancing technologyand to promote sustained economic growthtakes on broad significance. If we should makethe wrong moves and weaken the economy, theconsequences would be serious indeed.

Another aspect of today's world is the resur-gence of industrial strength in other nations,notably the Common Market and Japan.

Jobs in American industry are more vulner-able than ever before to international competi-tion from these sources. As a reflection of thebenefits of expanding world trade, this is, onbalance, a great benefit to the U.S. economy.But it does necessitate vigilant awareness of thecompetitive imperatives which internationalmarkets now impose. For example, proposalsto raise costs as an approach to solving unem-ployment become completely self-defeating.

The overall challenge which economic prog-ress poses to Americaand the spirit in whichpositive policies must be foundwas summedup in the following terms in a February 1965speech by General Electric vice president VirgilB. Day:

We in America are on the verge of a new eco-nomic and social era. Our government has de-

dared war on poverty and unemployment. .. . Weare seeking ways to absorb a new wave of young-sters into the work force and they are arriving onthe economic scene faster than new jobs are beingcreated. .. . We are worried about avoiding infla-tion, improving our gold flow position in interna-tional markets. . .. And we are all keenly awarethat a new era of international competition ismaking the world smaller and harder to survivein if you are inefficient. . . . We are trying tosolve our civil rights and equal employment prob-lems, not only by ending discrimination but byfinding new jobs for those previously deprived.

The agenda is almost endless, but I suspect thatyeu will agree that most of the solutions dependheavily on the ability of the whole economy togrow, to prosper, and thereby to provide good andnumerous jobs.

Unemployment can represent one of the mintsearing human problems people face in modern life.Solving this problem of those who face the futurewithout a job demands not only the humane con-cern, but also the clearest thinking of all of usemployers, unions, government, academic studentsof the problem, people of good will everywhere. Inthis area, let us remember there is no necessaryconflict between hard-headedness in promoting jobopportunities and soft-heartedness in concern forour fellow man. We must achieve results, in termsof more and better jobs, on a firm basis. In theend, the man whose compassion counts most is theone who produces meaningful results.


APPENDIX

Job Displacement in America's Industrial History: A Brief Perspective

Concern over the ability of the economy toabsorb labor displaced by technological changeis understandable ; but it may be instructive(and reassuring) to look at what has takenplace in the past.

U.S. history reveals bow important and nec-essary. both the growth and displacement effectswere in making this the world's wealthiestnation. At the birth of this country, about 90percent of the gainfully employed were in agri-culture and all of their efforts were necessaryto feed and clothe the Nation. Today, less than3 percent of the work forceand a work forcewith fewer childrenare on farms, and wehave the agricultural surplus problem. To besure, there were displacements and "silent fir-ings" (of people who may have hoped for farmjobs) . It is clear, however, that if there wereno displacement effect to make labor and otherresources available for the growth of otherindustries, we would today be a poor, backwardnationif we survived at all.

Thus, displacement, associated with growth,is a source of economic progress, not ofunemployment.

The fundamental differences between the ad-vanced, high standard of living nations and theunderdeveloped, emerging countries centeraround the conditions that make it possible fortechnological change and automation to delivertheir benefits. Advance beyond the state ofbare subsistence requires that labor, capital,and other resources be available for reallocationto new industries. If agriculture or the severalmajor types of manufacturing or transporta-tion, or any of the other basic industries neverexperienced the quality and productivity im-provements that automation makes possible, itwould be impossible to have the new productsand new industries that give us our broadlybased standard of living and variety of jobs.For example, it has been stated that it wouldrequire all, if not more than all, of the femalemembers of the population to handle the cur-rent volume of telephone calls if automatictelephone equipment did not exist.

The industrial diversification and job shiftswhich have occurred in the dynamic Americaneconomy from 1870 to 1960 are shown in figure12. Over this period the work force increasedmore than fivefold, from 12.8 million to 68.9million. Along with this tremendous employ-ment growth, very dramatic changes in thekinds of work occurred. After the Civil Warover half of the employment was in industries

which extract their products from the earth.Today the combination of agriculture, mining,forestry, and fishing account for slightly lessthan 10 percent of the jobs. While the fabri-cating industries (manufacturing and con-struction) have expanded steadily, the speciali-zation aiding, personal service, and life enrich-ing industries have grown proportionately morerapidly. The three last categories include suchindustries as radio, television, public utilities,transportation, communication, beauty shops,medical and health services, education, enter-tainment, and travel. To have an evergrowingdiversity of new products and services, con-tinuous change must occur in work forceoccupations and skills.

12.6

1670 - 1960

(millions)

21.7m

1 400

66.9

47.3a

1930 1960

DISTRIMUTION OF SORE FORCE IN TEE UNITED STATES

(100% blWv)

3%!!!!!!! 4SWRIM10S*W.4,X weal

.Z.17SE

1670

2S%

1900

ET"A13%

127S=

AsR4"

r.21%

1930

VPS

=SA E:432%g

1960

LUZ =RIMINGEducationOther ProfessionsAmusement

PrItSONAL SIIVICIM INDUSTRY=Domestic ServicePersonal ServiceGovernments

SPECIALIZATION AIDINGTradeFinance. Insurance, Real EstateTranspo ttttt on. Public Utilities

FABRICATING INDUSTRIESIlanufacturins

Construction

EXTRACTIVE INDUSTRIESAgricultureMartin

Forestry 6 Fisheries

Not elsewhere classified.

Figure 12.Growth of work force in the United States.

Source: Yale Brozen, "Automation: The Impact of TechnologicalChange," American Enterprise Institute for Public Policy Research,p. 28 table II, revised:

Our history shows that job displacement anda labor force swelled by large-scale immigrationand a generally high birth rate have been

_

4...


matched by the growth of jobs throughout ourhistory. Indeed, economic historians havenoted that except during severe recessions ordepressions, we have always had some shortageof at least one type of skilled labor or another.

Thus. America's industrial trends reflect howautomation or technological change has broughttwo broad types of benefits to our populace.As consumers, we have enjoyed an everwideningvariety and choice of goods and services. As

-

producers or workers, most jobs have trans-formed from menial, backbreaking, and dan-gerous chores to more interesting, higherskilled, and higher paying activities.

Job displacement does indeed take place as aresult of technological changebut in combina-tion with economic growth, such displacementbecomes not a curse, but an indispensible meansto progress for the entire economy and for thecreation of more jobs.

STATEMENT


General Foods CorporationWhite Plains, New York

Statement by the General Foods CorporationIn 1960 the company attempted to analyze

job displacements that might result because ofautomation and technological changes antici-pated in the succeeding 5 years. Technical,engineering, and plant management peoplewere involved in the study. The job displace-ment forecasts, as a result of the study, justhave not occurred. For example:

At the company's largest coffee opera-tion, there were 1,020 regular hourly em-ployees aS of October 31, 1959. Analysisat that time indicated that the work forcewould be reduced over the 5 succeedingyears by 210 people. During those 5 years,extensive automated changes were in-stalled. However, employment, as ofJanuary 1965, at that unit was 1,063, oran increase of 43 people over October 1959.

At the company's largest cereal plant,employment for the year ending January3, 1960, was 1,622. Judgment at that timeindicated that during the next 5 years asmany as 200 jobs would be eliminated.However, as of January 1965, there were1,683 regular employees working, or an in-crease of 61 people. In this particularinstance, technical changes were intro-duced in the manufacturing process ; butat the same time technological applicationin product development resulted in newproducts which created additional jobs,offsetting loss of others as a result of auto-mated process changes.

These are only two examples, but they arequite typical of employee experiences at ourother manufacturihg facilities. Like mostother large food coMpanies, we have been ap-plying technical know-how in the areas of auto-mation, product development, and other areasof the business for many years. Its effect onemployees within our company has tended toincrease rather than diminish the total numberof job opportunities. In looking ahead to thenext 5 or 10 years, we would expect that theapplication of technology in the development ofnew and improved products which in turn pro-vide new job opportunities will more than off-

set the loss of job opportunities due to theapplication of automated processes.

We believe we have a very definite responsi-bility to the Nation's economy, to our employ-ees, stockholders, and consumers in our appli-cation of technology, automation, and changingmethods. One example of this recognition ofresponsibility can be illustrated in the followingexperience. Three years ago it was decided toclose four outmoded manufacturing operationstwo in Massachusetts, one in New Jersey,and one in New Yorkand to consolidate themanufacturing operations into a single, new,modern facility in Delaware. In the interest ofprotecting the employees at these locations,everyone was given the opportunity to move tothe new location at the company's expense.The company provided every employee and hisfamily the opportunity to visit the new locationbefore making a final decision. It, in effect,was meeting its responsibilities to facilitateoccupational adjustment and geographical mo-bility of employees that were affected. Thecompany worked closely with the unions whowere involved at the four plants in working outthe orderly transition to the new location.

As of today, the total employment at thisnew large facility is approximately 1,700.Fifty employees are still working at one of thelocations yet to be completely closed and 40 atanother, giving a total of 1,790 as against atotal employment of about 1,890 at the fourlocations that were or are being closed. Outof that total, 440 elected to transfer to the newlocation. Termination pay was granted to thosewho elected not to move as well as aiding theemployees in finding new employment. Theoriginal estimate was for about 1,200 employeesat the new facility, but the application of tech-nology in product development created new jobs.Thus it is expected the total employment at thenew location will ultimately exceed that of theoriginal four locations.

This experience has contributedand shouldin the future contributeto the national econ-omy, provide better products for consumers,and result in greater efficiency and productivitywhich will benefit our stockholders.

To sum upthe application of automationwould by itself result in reductions in man-

111


power requirements. However, in our com-pany, the development of new products,processes, and other technical innovations havemore than offset these manpower reductions.

We believe that this would be true for a verywide spectrum of industry where business goalsare to provide new and better products andservices to the public.

STATEMENT


General Telephone and Electronics Corporation

New York, New York

Statement by the General Telephone andElectronks Corporation

The Impact of Automation upon theCommunications and Electronics Industry

U.S. Economy Has Undergone Large-ScaleRevolution

During the past 20 years, the American f.lcon-omy has gone through a remarkable revolution.This has been characterized by enormous ex-pansion, the steady rise in our standard ofliving, the unprecedented growth of existingindustries and the development of entirely newones, major changes in our markets, greatlyincreased emphasis on research, and the devel-opment of new products and servicesall ofthese having been, in effect, a large-scale revo-lution because of their magnitude, their impactupon all of us, and the speed with which theyoccurred. Paralleling this economic revolutionin the United States, we have witnessedandhave played a major role inthe economic re-birth of countries devastated by the war. Thiseconomic rebirth has brought the emergence ofan entirely new phenomenon in world historya world market with every potential that termimplies.

We are starting a new decade in which all ofthis country's businessmen will be faced withmore opportunities and more challenges thanever before in our history. We have the choiceof participating in the growth and developmentof the new and broader markets opening upthroughout the free world, and continuing to bethe leading factor in the world economy, or wecan miss this opportunity and gradually be out-distanced by our competitors. This not only isa new situation for American businessmenitis also a new situation for all Americansbe-cause the great advances in communications, inthe ability of the people of the world to main-tain effective contact with one another, havecombined to reduce remarkably the obstacles oftime and distance which in years past haveinhibited the expansion of world trade. Thetrade horizons of every country have greatlybroadened, and businessmen throughout theworld are seeing opportunities for increasedtrade that they never saw before.

Moreover, this economic revolution through-out the world is far more than a trend whichneed concern only large industries. It is pro-foundly affecting every industry and everybusiness. In its relative way, the small busi-ness in a small town is just as deeply involvedas the country's major corporations.

Every business enterprise, large or small, isfaced with a whole new set of opportunitiesand challenges.

Opportunities and Challenges

Let us examine four major opportunities andchallenges.

1. We must place greatly increased emphasison innovation and invention. Aside from con-stantly improving our existing goods and serv-ices and producing them at competitive costs,we have the even greater challenge of develop-ing entirely new products and services, newways of making them, and new ways of gettingthem to customers here in the United Statesand throughout the free world.

2. We must assure further automation andmechanization of both our manufacturing andour administrative processes so that we canattain the higher volume, lower costs, greaterflexibility, and higher efficiencies which we willneed to compete in the marketplaces of thefree world.

3. We must be more effective managers anddevelop new managerial skills. We must do abetter job of organizing, of instilling in ourmanagement people that dynamic point of viewthat makes things happen, that encouragesteamwork, that encourages the delegation andacceptance of responsibility.

4. We must adapt our entire distributiveprocess more effectively to our existing andpotential markets. Worldwide markets requirea worldwide viewpoint, and that will meanchanging some ideas and practices we havehad for years.

All four of these challenges really add up to315


one overriding challengeand that is the neces-sity for devoting greatly increased attention tofinding entirely new and better ways of doingthings. This is symbolized so effectively bythe need for further automation and mechaniza-tion as a means of meeting the steadily in-creasing demand for new and improved productsand services.

Automation and Industrial Growth andDevelopment

In approaching mechanization or automationfrom the standpoint of its influences on thegrowth and development of specific major in-dustries, let us consider the communicationsand electronics industries.

Growth of Communications Industry. Thegrowth and development of the communicationsindustrywith estimated revenues this year of$13 billion, or more than double the total of 10years agois one of the most impressive ex-amples of automation in the history of thiscountry. I am referring, of course, to theautomation of the nation's telephone systems.This has been a large-scale revolution, andwithout it, this country could never have at-tained the quality, quantity, and breadth oftelephone service all of us enjoy today. Morespecifically, there are not enough women andgirls of working age in the entire country todo the job of manually switching telephonecalls.

Enormous Amounts of Capital Required. Need-less to say, automation in the telephone industryhas required enormous amounts of capital.The General System today serves nearly 7 mil-lion telephones (of which 6,300,000 are in theUnited States, constituting the Nation's largestindependent telephone system) , and nearly 99percent of these telephones are dial-operated.Attaining this degree of automation has re-quired the investment of enormous amountsof capital. In the past 5 years alone, we in-vested more than $1.6 billion in new plant andequipment. This year we are investing a newrecord total of more than $450 million, andover the next 5 years an estimated $2 billionwill be invested in new facilities. Another wayof describing the investment required in thetelephone business is to point out that ouraverage investment per telephone is about $460.In 1955, the comparable figure was $267, whichreflects a 70 percent increase in 10 years.However, an average figure does not tell thecomplete story because the investment repre-sented by each new telephone today is fargreater due to steadily rising costs.

The steady expansion of automation of tele-phone service in our operating areas has beenaccompanied by increased, instead of reduced,employment opportunities. In General Tele-phone of California, for example, there weresome 716,000 telephones and 7,200 employees in1955. Today, there are more than 1,600,000telephones and nearly 15,000 employees. InGeneral Telephone of Florida, the number oftelephones has increased from about 260,000 in1955 to more than 550,000 today, and employ-ment has grown from 2,500 to nearly 5,000.On a systemwide basis (which includes tele-phone operations in portions of 33 States aswell as British Columbia and the DominicanRepublic) , the 7 million telephones we servetoday are in contrast to about 3 million in1955. Employment in these telephone opera-tions exceeds 59,000, against 32,000 5 years ago,although the percentage of dial (i.e., automatic)telephones increased during the same periodfrom about 80 percent of the 3 million tele-phones in 1955 to nearly 99 percent of the 7million in the General System today.

Taking the General System as a whole (in-cluding the manufacturing as well as the tele-phone operating companies), employment hasincreased from 71,000 in 1955 to more than117,000 today. Wages, salaries, and benefitsincreased from $270 million paid in 1955 tomore than $600 million in 1964an increase ofmore than 120 percent. This reflected not onlya greater total number of jobs but broaderemployment opportunities and higher pay.Without large-scale automation, growth of thismagnitude throughout our operations could nothave occurred, because automation was the keyto providing new and improved services andproducts to meet the growing needs of ourcustomers.

Rapid Expansion of Electronics Industry. Thisyear, total sales of the electronics industryshould exceed $17 billion, or double the totalof only 5 years ago. The growth and develop-ment of this relatively new major industry isclosely allied with automation and mechaniza-tion. Consider these facts :

1. Without the large-scale use of automaticand semiautomatic equipment, the electronicsindustry, as we know it today, would not exist.

2. Without extensive mechanization, the elec-tronics industry could not even remotely pro-duce the vast volume and variety of goodsneeded and demanded today by the public,commerce and industry, and the Armed Forces.Mechanization has been the key to greater pro-duction volume, lower costs, higher productquality, greater uniformity, and improved prod-uct performance. In effect, mechanization has

GENERAL TELEPHONE AND ELECTRONICS

actually met what would otherwise have beena long-term labor shortage.

3. The increased demand for, and availabilityof, the products of the electronics industry hasbrought a great expansion of the basic ma-terials industries which furnish raw materialsand certain components, such as metals, glass,chemicals, and plastics.

4. Thousands upon thousands of small busi-nesses have been formed over the past fewyears, especially the postwar years, to providecomponents, materials, supplies, and servicesfor electronics manufacturers.

5. Hundreds of communities have gained neweconomic strength, either through the expan-sion of an existing facility or the constructionof a new plant or laboratory facility.

6. An enormous new business has sprung up,completely outside the electronics manufactur-ing business. This is the electronics distribu-tion and service industrydistributors, jobbees,dealers, servicemena business that did notexist a few years ago and which has multipliedmanyfold since the war.

These are the ramifications of mechanization.It is not a case of putting a machine to work inone plant, or two plants. It is a case of creatingan entire set of industries, hundreds of thou-sands of jobs that did not exist, millions ofdollars of personal income, of buying power,and new lifeblood for the entire economy.

Administrative AutomationEleetronie DataProcessing. Aside from the automation andmechanization of manufacturing processes, ad-ministrative automationelectronic data pro-cessingis opening up new concepts in businessmanagement.

The parents of electronic data processing arecomplexity and competition. Every aspect ofbusiness is far more complex than it was 10or 15 years ago, and this is true of our entireeconomy. Much of this is due, of course, to

117

the unprecedented growth and development oftechnology, particularly in the past 10 years.Today, science has so many facet that it isextremely difficult to measure the j ytentials ina few of the major fields, let alone grasp theoverall picture.

In addition to the increasing complexitybrought by the expansion of technology, theemphasis is on speed and more speed. To stayin the competitive race, operating informationmust be made available at a speed and in avariety that has never been available before.The problem of compiling, transmitting, andprocessing operating datasuch as payrolls,production volume, costs, inventories, ship-ments, and so onhas become increasinglydifficult and increasingly costly. There is lessand less time between events in this dynamiceconomy of 1965, and because managementmust base its decisions on those events, all levelsof management require more complete andessential information faster than ever before.But, even more importantly, new types of in-formation, new tools for management, arerequired.

More than ever before, and particularly intoday's intensely competitive economy, manage-ment needs information in time to do somethingabout it. Where we were yesterday is signifi-cant up to a point, but the real payoff comes inknowing what is happening right now, so thatyou can better control what will happentomorrow.

As our economy keeps on growing, there willbe an everincreasing premium on putting ma-chines to work throughout the office to meetthe growing demands of the entire economy.Man and present-day machines and methodscould never begin to do all the administrativework that will be required of him in the yearsahead. Greatly increased use of machines isthe only way we will be able to develop pro-cedures to handle the administrative loan ofthe future.

STATEMENT


Honeywell, Inc.

Minneapolis, Minnec-da

-

Statement by Honeywell, Inc.Honeywell makes a highly technical product

line. One in five of every employee on our pay-rolls is engaged in technical activities, and aboutone in eight of all of our employees is a pro-fessional engineer or scientist. Without tech-nological change, there would be no Honeywell.Over the past 75 years, we have continued inbusiness and have enjoyed a very rapid growthfor one reason and one alonethe developmentof automatic means of doing what previouslyeither had been done by hand or was not capableof being performed at all. We have, therefore,lived and prospered under conditions of continu-ing and accelerating change. Our more than50,000 employees have jobs as a direct resultof automation. We believe our future to be anattractive one. Through expected future changeand technological advance, we anticipate evengreater opportunities than any we have had inthe past. We therefore welcome, and try tomake our very best contribution to, technology,automation, and economic progress.

Over the years, we have steadily experiencedthe impact of technological and economic changeon our production and our employment. Thevery nature of our businessoriginally auto-matic control devices, and more recently auto-matic electronic systems--has regularly crowdedthe technical state of the art. Each year, weseek to employ outstanding individuals from thegraduating classes in science and engineering,and the proportion of scientific and engineeringpersonnel in our organization has steadily in-creased. 3ecause we create, live with, andmake a successful business of change, the pros-pect of shifting job requirements holds no fearsfor us. We accept too the continuing need forhigher and higher levels of education in our em-ployee group and that we must adapt to the in-creasing magnitude of economic ups and downs,as the size of the projects we are capable ofmanaging increases. We believe neverthelessthat our stability of employment and the long-run career opportunities we shall be able tooffer may be better than the average. In fact,it is our observation that job security, rate ofpay increases, and promotional opportunitiesare poorest in those industries and those com-panies which have not rude full advantage ofthe increasing pace of technological change normade adequate forecasts or adjustments to the

ups and downs of economic activity. The sameis true of individual employees. Those who seeopportunity in change and who regularly makethe effort to keep themselves up-to-date enjoythe steadiest employment, make the steadiesteconomic progress, and are most often selectedfor promotional opportunity. It is the employeewho resists change, who tries to stretch out or"share" work, or who when confronted withloss of work as a result of an economic down-turn sits and waits, preferring unemploymentcompensation or welfare to retraining or relo-cation, who tends to drift first into the hard coreof the unemployed, and finally, into the ranksof the unemployable.

It is our opinion that wage and salary rateswill continue to rise, that the economies of othercountries will continue to strengthen, and thattechnical progress will continue to accelerate.The net effect of these three will be, first, tomake economically feasible and desirable asteady transfer of more physical and moreroutine mentai tasks from people to machines.Second, other countries will become increas-ingly competitive with us on the less sophisti-cated product lines. Third, our opportunity for:ontinued economic growth and a rising stand-

ard of living will be more and more limited toour successful accomplishment of the mostadvanced and difficult products and services.If we accept this challenge and organize to meetit, there is no reason why we should not be ableto stay out front competitively with the rest ofthe world. If we resist it, however, by delib-erately failing to take full advantage of tech-nology and automation, the price of doing sowill be acceptance of -slower economic progressand a static or falling standard of living. Inother words, we either afford ourselves a suc-cessful result by concentrating on that shareof the world's activities at which we are clearlymost advantaged or we reduce ourselves to com-peting with the rest of the world on productsand at an economic level where they now havethe advantage over us.

Specifically, one of our most challenging tasksis educational. The public needs to know, forexample, that an economically successful educa-tion, whether professional or vocational, is notlikely in this country in the future to be obtain-able in the prework years alone. No longer will

121

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people be likely to learn a trade that will lastunaltered for a full worklife. Our formal edu-cational requirement, whether professional orvocational, will be to learn how to study andhow to learn. The formal education will simplybe the foundation on which to build the con-tinued learning that will be necessary to be anactive and successful participant in our futureeconomy. It is likely that in the future, multi-ple jobs rather than a single job will be the lotof most of us. Even within a given job title,whether it is toolmaker, electronic technician,design engineer, or business manager, the jobwill undoubtedly change so fast and so dras-tically over the period of a single worklife thatrepeated and almost continual learning will berequired for a person to stay successful in thatone job. The reason for this is easy to see. Ifour chance to continue our economic growth andto increase our standard of living requires stay-ing ahead of the rest of the world, we must havea more flexible, more mobile, more up-to-datework force than our competitors are able tomaintain.

The impact on employment of the changes wesee will be to steadily reduce the number ofpeople actually required in the production of agiven quantity of goods but to increase greatlythe number required in the production of serv-ices. For example, if some economically andsocially acceptable way of providing personalservice could be found, it might be of great help.There is now probably a great unfilled demandfor all sorts of such services. The demand re-mains unfilled, however, because the way suchwork has been organized in the past has resultedin making the performance of it unattractiveand socially unacceptable. If the key to meet-

ing this need can be found, we should be on thethreshold of a dramatic employment expansion.

Another example is the need to improveunderstanding of the effect of increasing inter-national competition. If labor costs rise as fastor faster than productivity, our fixed or risingprice level will tend to reduce our growth rateand threaten our standard of living by makingforeign goods better able to compete with ours,not only in other markets but in the U.S. mar-ket. Only as labor and other costs fall, so thatprices fall, shall we be able to grow and assurea steadily rising standard of living. This hasan important impact on pay levels, too. If paylevels rise too fast relative to productivity, theonly way to keep labor costs from rising toofast is to accelerate automation. This resultsin more employment displacement than wouldotherwise be necessary. By keeping pay levelincreases moving at a reasonable rate, automa-tion progresses in more orderly fashion and dis-placed personnel can be more readily retrainedand relocated, minimizing unemployment.

From a careful consideration and evaluationof our experience and of the economic and socialtrends we see, it is our opinion that the bestway for the U.S. Government to assure futuregrowth and success is to encourage our privatecapital, free enterprise economy by (1) with-drawing from direct competition with privatebusiness, (2) reestablishing a fair, impartialapplication of the laws applicable to business,especially as applied by the departments andthe administrative agencies, and (3) makinggreater use of competition and less use of de-tailed government regulation, to encourage eco-nomic growth.

STATEMENT


Inland Steel CompanyChicago, Illinois

Statement NI Inland Steel CompanuSome months ago the chairman of the board

of our company, Mr. Joseph L. Block, who is amember of the President's Advisory Committeeon Labor Management Policy, submitted a state-ment on technology and automation to the Sec-retary of Commerce calling attention to thecommittee's paper, "The Benefits and ProblemsIncident to Automation and Other Techonologi-co' Advances" which was submitted to the Pres-iuent on January 11, 1962.

We believe that the Commission's attentionshould be called to two key statements in thisreport. The first is :

We emphasize the imperative need for desirabilityof automation and technological change. Indeed,increased productivity and fuller utilization of re-sources are urgently needed to improve our rateof economic growth. They are likewise needed toimprove our competitive position in world markets.Failure to advance technologically and to otherwiseincrease the productivity of our economy wouldbring on much more serious unemployment andrelated social problems than any we now face.

While this might seem clear to knowledgeableindividuals, we believe there are many peoplein the country, some of them in high positionsin the academic world or in labor, who do notbelieve this is a true statement of fact. It seemsto me that the Commission could serve a veryimportant function by documenting pertinentinformation and giving it wide publicity so thatall responsible leadership in the country will befully convinced of the importance and necessityof fostering technological progress. There is noquestion about the fact that much of the out-

standing industrial progress made in the UnitedStates has been due to the fact that our peoplehave had complete freedom to develop their ownideas without governmental intervention andrestriction.

The second statement from the report that wewish to call to the Commission's attention is :

The achievement of maximum technological devel-opment with adequate safeguards against economicinjury to individuals depends upon a combinationof private and governmental action, consonant withthe principles of the free society.

This, in our opinion, is the greatest challengethe Commission faces. Indeed an invaluablecontribution to the welfare of the country wouldbe made if the following recommendations weredeveloped :

(1) Techniques for estimating futureskills needed in the economy by megoryand on a quantitative and time basis.

(2) Methods for providing schools andcolleges with this information so that theircurriculums can provide training for theseskills.

(3) The development of public programsto provide training for such skills for dis-placed persons who cannot be given ade-quate training by their former employers.(The first responsibility for such trainingshould, of course, be bk the employers, butfor a variety of reasons -there are and willcontinue to be many cases where this can-not be done. Such a void can only be filledby some such type of training program.)

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STATEMENT


International Brotherhood of Pulp, Sulphite, and Paper Mill WorkersWashington, D.C.

Statement hy thp International Brotherhood ofPulp, Sulphite, and Paper Mill Workers

This international union has been extremelyinterested in the impact of technology and auto-mation on the national economy and on theeconomy of the pulp and paper industry. Suchinterest, basically of course, derives from theunion's position as a composite designed to pro-tect the interests of its members. The interest,particularly, also derives from the Interna-tional's recognition that the interrelated andindependent areas of automation and economicspresents a new and highly complex aspect tocollective bargainingan aspect which did notexist 15 years ago ; an aspect with no precedentfor solutions ; and, consequently, an aspect re-quiring considerable original thought.

The union's overall concern is with the impactof automation and technological change on thesocioeconomic structure of the United States.Automation, in one sense, is an adjunct to andoperates in conjunction with other forces whichhave acted to alter substantially the basicmethod by which goods and services are pro-duced and distributed in this country. Newdemands for new products have resulted in thecreation of industries and processes which didnot exist 15 to 25 years ago. Some of these newprocesses were revolutionary, while some wererefinements of existing methods. The use ofautomatic electronic computers in scientific re-search, on the other hand, represented workwhich was previously impossible. The use ofprinted circuits and miniaturization in elec-tronic components amounted to a substitutionof existing methods.

These advances were unique and beneficial inthemselves ; they also produced unique changesin the socioeconomic structure of the UnitedStates. As new industries developed aroundthe new processes and products, the industriesthemselves began to be located in new areas ofthe country. The population shift to the WestCoast and particularly Southern California dur-ing and after World War II attests to the labormobility of the work force of the United States.It evidences the adaptability of people and in-dustry to relocate in different areas of thecountry. It also implies the subtle relationshipbetween new technology and a changed struc-tural relationship in this country. As previ-

ously nonexistent industries developed aroundnew technologies in new areas, the labor forceadapte.1 in a like manner.

In the pulp and paper industry one form oftechnological change was represented by theability of the sulphate or kraft process in themanuNcture of wood pulp. This process wasdeveloped in the early part of the 20th centuryand made possible the use of southern soft-woods. This technological innovation led notonly to a geographical shift in the productionof wood pulp, but also created a new industryin an area where one previously did not exist.

In onservance of these phenomena, this inter-national union, as a participant in the social andeconomic development of the United States, isand has been concerned with the impact of auto-mation and technological change. This holdswhether the change took place some years ago,and consequently caused results which existtoday, or whether the innovations which arepermeating the economic structure of the coun-try now will create permutations in the future.

Technical and Economic Aspects in Relation toPulp and Paper Industry

This International's concern with the impactof automation and technological change derives,essentially, from its existence as a trade unionfunctioning as a force in perpetuation of theinterests of its membership. In light of theimpact of automation on the working force ofthis country, and especially of the impact uponthe members of this union and the members ofthe AFL-CIO, interest and concern is vital andimportant.

While the relation between the introduction ofautomation and technological change and de-clining production worker jobs is difficult todetermine, the relationship is nonetheless omi-present and is to be seriously considered.

In one sense the status of production workeremployment in the pulp and paper industry isfortunate in that the total number has risenover the past decade. Production worker em-ployment in the pulp and paper industry roseon the whole, for example, between 1953 and1963 by about 10 percent : the number of similar

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employees in all manufacturing industries dur-ing the same period actually declined by morethan 10 percent.

This comparison, when taken by itself, wouldappear to be a favorable indicator. During aperiod of public and professional concern withthe impact of automation on production workeremployment, the pulp and paper industry re-flected increases while all manufacturing indus-tries showed a decline. When other significantfactors are considered, though, the resultingopinion tends to be somewhat different. Or, thebasic outlook of the union tends to require pre-scidnt thinking on the topic.

Initially, output of paper and allied productshas been increasing, and at a faster rate thanfor all manufacturing industries. Between 1953and 1963 the Federal Reserve Index of .Indus-trial Production for paper and allied productsrose to 125.1 from 81.1 ; the index for produc-tion turned out by all manufacturing industriesincreased by about 10 points less, to 124.9 from92.7.

The relation between the two above-mentionedincreases, output per production worker man-hour, concurrently has maintained approxi-mately the same upward trend. Between 1953and 1962, the latest year available (Bureau ofLabor Statistics), productivity in pulp mills andpaper and paperboard plants increased by 40.4points, to 121.7 from 81.3.

The basic concern with the impact of auto-mation in the pulp and paper industry, however,is to be found in its potential liability. Althoughproduction worker employment has been in-creasing and productivity increases have not,at least yet, caused any declines, the possibilityof detrimental effects within the near-termfuture are distinct. This is based on observa-tion of certain pertinent trends within the in-dustry and which have a direct bearing on thesituation. A combination of certain interde-pendent occurrences which produce a cumulativeeffect on employmentsome directly concernedwith automation and technological change andsome indirectlyare, all of them, detrimental.

The extent to which automation produces animpact on production workers in a given indus-try depends, in the first place, on the currentmanufacturing process in the industry and therate and type of technological innovation. If,for example, the manufacturing process requireslarge amounts of labor the introduction of oneor a series of labor-displacing automated equip-ment will produce a heavy impact on the em-ployment of workers in that industry. On theother hand, if the manufacturing process cur-rently involves more equipment than labor, therapid introduction of automated equipment willnot produce an immediate and heavy impact.

The oil refining industry since its beginning,for example, has involved the use of a flow-process of production which does not requirelarge amounts of labor relative to some otherindustries. The value added to oil, in otherwords, during its processing from crude torefined represents relatively more use of thecracking process than labor costs.

The metalworking industries represent anexample at the other end of the scale. Untilvery recently, the value added by manufactureof a finished metal product largely representedthe skill of the machinist in using a lathe, drillpress, and so on in the conversion of the origi-nal piece of metal into the finished product.

In the first instance, oil refining, the introduc-tion of automated equipment would tend to pro-duce relatively less drastic manpower effectsthan in the metalwork:ng industries. The basicmethod of refining crude oil could be altered bythe introduction of more refined control instru-ments in the cracking process. This would nottend to produce relatively drastic manpowerrequirement reductions. The introduction ofnumerically controlled machine tools (thosewhich operate almost automatically) would tendto replace the human function in metal opera-tions. Thus, the basic result of the technologi-cal innovation first has to be viewed in relationto the manufacturing process and manpowerrequirements which it will produce.

Mass production of pulp and paper, almostsince inception, has fallen somewhat in betweenthe above-mentioned extremes. To a certainextent, the manufacture of pulp and paper isa flow process, where a flow process generallyrequires relatively less labor output. In anothersense pulp and paper manufacture requires acertain amount of labor input at various partsof the manufacturing process.

A brief description of the basic pulp and paperproduction process with the attendant labor re-quirements will exemplify this. After the logshave been forested, they must be barked andchipped. Sawyers are required to cut the logs ;barkers operated barking machines; and, chip-pers operate chipping machines. Thus, althoughthere is a flow process similar to that used in oilrefining, an equipment operator is necessary ateach of the three junctions.

The chips are then put into a digester vat,cooking liquors are added, and the chips aredigested or transformed into a pulp state. Thenecessary pulp fibers are then moved to thepaper machine. The digesting part of the proc-ess requires a digester cook, assistants, andother employees to separate the pulp fibers fromthe unnecessary lignin.

As the pulp is moved onto the paper machinein a highly liquid form, large amounts of the

PULP, SULPHITE, AND PAPER MILL WORKERS

water are removed by a draining method. Asthe cellulosic fibers are drained the paper beginsto form. A paper machine operator and helpeisoperate the machine. The end of this continu-ous process occurs when the dried paper is takenfrom the rollers and put on rolls or are furtherprocessed.

The basic method has been in use since thebeginning of mass production of paper. Obvi-ously some degree of or combination of mech-anization and labor requirements has beenmaintained at a relatively constant pace. This,in effect, would obviate any drastic or suddenmanpower requirement changes such as couldoccur in the metalworking industries. Norwould it, on the other extreme, be as subject toa complete flow process as the oil refining indus-try. However though pulp and paper manufac-ture may lie in the middle ground of liabilityto sudden technological innovations, the possi-bility of gradual intrusion remains. It is largelyto this possibility that the concern of the Inter-national towards its members is directed. Or,automation and technological change does not,contrary to the popular view, have to occur inone fell to create manpower difficulties.

In the pulp and paper industry the rate oftechnological innovation has been increasingsteadily since the end of World War II and hasoccurred as changes in existing methods ratherthan complete alterations. As a Labor Depart-ment study of the industry relates, "A signifi-cant postwar trend has been the linking togetherof separate production steps and elimination oflabor involved in direct production. This trendis particularly important in wood handling,pulping, and shipping operations."

This same report, continuing a description ofmechanization of wood handling operationswhich "require extensive manual effort," said,"Some pulp mills have developed unique side-dumping rail cars and other mobile deviceswhich either rake or shove pulpwood off carsand into conveyors of flumes. These changesgreatly reduce the need for manual labor."

Other types of technological innovation beingintroduced into the productive method of thepulp and paper industry take the form of moreintense levels of instrumentation. The mag-netic flowmeter, first introduced in 1S55, is usedto measure and control the flow of pulp throughrefining equipment. Radioisotope gages areused on paper machines to measure and controlthe basic weight of paper and paperboard, andthickness of coated, laminated, and impregnatedpaper products.

A significant technological change within theindustry is the adoption of continuous digesters.Historically pulp has been made, or digested,by batch methods in a cooking or digesting unit.

131

This requires specific inputs of materials, cook-ing controlled by a digester cook, and releaseof the cooked pulp, one batch after another.

A continuous digester performs this operationas a continuous stream, producing a flow ofpulp, thus eliminating a step-by-step procedure.And further, the new continuous digesters areequipped with automatic sensing devices whicheliminate much of the need for human observa-tion. Obviously, these innovations have man-power effectsnegatively. Too, they are slow,almost imperceptible, and devastating.

Social Impact

The social effects of the impact of automationthroughout the country are many and diverseand have been discussed many times before.The social effect of the impact of automation inthe pulp and paper industry take form, in atleast one respect, as a result nf the geographicallocation of the industry.

It has been true in the past, and holds truenow, that the basic pulp and paper industry hasbeen located in relatively small- or medium-sizecommunities. In many instances a pulp milland adjacent paper plant have been the domi-nant employers in the community. Taking intoaccount the fact that the pulp and paper indus-try has had one of the lowest labor turnoverrates of any manufacturing industry, the effecton the community, and consequently the socialaspect of the community, of a permanent reduc-tion (for permanent reductions are most com-mon results of automation) in a local work forceas the result of automation would be one ofsignificant disruption.

Future Impact on the Pulp and Paper Industry

The economic effects of automation in thepulp and paper industry can be evaluated onwhat has occurred in the past and what can beexpected in the future. These results are viewednot narrowly from the perspective of automa-tion itself, but from a number of other factorswhich bear on the subject, with automation andtechnological innovation as the focal point.

Above all, the union does not view automationas a maleficent force tending always to destroyjobs. In some instances this may be the case ;in others, a technological innovation may tendto create new jobs through the manufacture ofnew products.

One such job-creating, technological innova-tion occurred recently in the pulp and paperindustry. In the conversion of wood to pulp,two major byproducts result. One of these isthe pulp used in the manufacture of paper. Theother is a substance called lignin. Lignin has


been mostly a waste byproduct and consequentlyhas been a major source of mill effluent.

Research directed toward useful developmentof lignin produced a new substance known asDMSO, dimethyl sulfoxide. DMSO has beenused as solvent and as a reaction medium inindustrial processes. Lately it has receivedattention as a possible "wonder drug" for thetreatment of bursitis and other arthritic con-ditions. Medical studies, more recently, indicateDMSO's other medicinal properties, includingthe ability to penetrate the human skin, anunusual ability.

At least one large pulp and paper companycurrently is producing DMSO from the byprod-ucts of its pulp manufacturing process. Clearly,the immediate employment effect of such a plantwould be to create additional job opportunities.

I.B.P.S.&P.M.V. Activity

The economic effects of automation upon em-ployment result from the technological changes,part of which have been discussed previously.The loss, permanent or temporary, of jobs rep-resents the most significant economic impactof automation. This impact, this Internationalstrongly feels, has not and will not occur in onesignificant time or place. Instead, the declineswill take the form of a steady but perceptibledeterioration. One of the strongest forms ofjob protection from this type of encroachmentis the inclusion into the contract itself of lan-guage which, if not mitigating, prohibits layoffsto the greatest possible extent.

The International's activity in this area hasbeen based on a broad dissemination of knowl-edge of automation. Basically, the union predi-cates this approach on the idea that, of thegreat morass of information which has beencollected, processed, and published on the topicof automation, most of the output has beendirected towards the academic and professionallevels and some general but brief output forthe lay public. Very little of this informationhas reached the people who are affected themost by industrial automationthe productionworkers themselvesand these are the samepeople who negotiate and sign the collectivebargaining agreements under which they work.This lack, the union feels, can prove to be agreat pitfall to the local union members. Forwithout knowledge of that which they are deal-ing, the end resultthe signed agreementisnot very effective.

The union's efforts, consequently, have beendirected towards informing the membership ofthe potential liability of automation and sug-gesting remedies which can be applied beforeany detrimental effects take place.

The International's initial effort in this direc-tion came at the 1963 meeting of the executiveboard. At that meeting the department of re-search and education was directed to preparean extensive report dealing with automationand collective bargaining.

The first edition of Automation: EconomicImplications and Impact Upon Collective Bar-gaining was published in early 1964. A sec-ond, revised edition was published later in thesame year. This 450-page work encompassedvirtually the entire field of automation, bothtechnically and economically, and especiallybore on the relations between the economicimplications of automation and the state, bothpresent and future, of collective bargaining.The book, in keeping with the basic objectiveof the union, was distributed to the interna-tional staff and to each local union.

This study, in essence, provided the keystonefor the union's basic position regarding auto-mation; both in the socioeconomic sense asautomation affects the United States and asautomation affects the membership now and inthe future. This report also provided the basefrom which was to follow more positive anddirect action on the part of local union collectivebargaining.

Suggestions

The publication of this book and the suc-ceeding dissemination of information also pro-vides the link between the union's efforts in thefield and section (e) of the Commission's man-date, which is most specifically related to thechasm which exists in contemporary collectivebargaining.

The problem is not one of simple and precisedefinition, but rather is complex and tangentialto many other issues. For example, more thancommonly held is the fear of mass displacementby one, all-consuming machine. Automation byitself may be a slow, eroding process. Or, tech-nological change may result in decreased de-mand for one type of input, the results of whichwill affect workers in the initial industry. Theproblems of automation and technologicalchange, though, also relate to the changingintrastructure of the American economy. It iscommon, for example, for unions to bargainnationally with large corporations which havemany plants widely spread throughout thecountry. It would not be an uncommon occur-ence for a company to want to close one of itsolder plants and build a replacement. The re-sults of this on the work force of the plantinvolved would depend then on many of thecompany's decisions, such as new machinery,location, and so on. Obviously a new r: .t

PULP, SULPHITE, AND PAPER MILL WORKERS

would logically be designed to accommodate thenewest, most technically refined productionequipment available. The extent to which theoperation of such equipment varies from theexisting skills required for the replaced equip-ment would be in almost direct proportion tothe skills which exist in the work force. A lessdirect but as meaningful problem would developif the company decided to build the replacementfacility in a completely new geographic location.This would create many disrupting problemsfor the work force in question.

The problems outlined above are just someof the more obvious situations which arise whenautomation is considered; there are any numberof other problems which also arise. Until nowthe common ground for settling these problemshas been the collective bargaining process, andthe collective bargaining agreement. Manage-ment has relied heavily on its prerogatives toconduct the business as efficiently as possible.Labor has relied on its inherent objective ofjob protection. Both sides of course are right.Most of the attempted immediate solutions,such as consultation, retraining, and so on, haveappeared as relatively short paragraphs in thecollective bargaining agreement. (This ex-cludes some outstanding attempts, such as theKaiser Plan.) Other innovations have also ap-peared, such as supplemental unemploymentbenefit plans and early retirement, which arereally solutions after the fact of disruption ordisplacement.

Thus, the two most common methods of ap-proach have been short, specific paragraphs inagreements and ex post facto grants to elimi-nated workers. These approaches are well-intentioned and have helpedthey are fetal-stage approaches to a widespread and complexsituation. The solution of grants-in-aid toeliminated workers should be continued. Themethod of coping with automation-inducedproblems though, deserves deeper inspectionand considered reform. Or, automation and itsattendant problems create a situation withwhich the present apparatus is not really ableto cope.

The basic conflict then arises between theneed for simplicity of the agreement itself andthe need for dealing with a highly complexproblem. Labor-management contracts his-torically have been kept relatively short and

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uncomplicated for a number of highly desirablereasons. If the agreement is written in highlylegal terms it becomes unintelligible to themembership. If the agreement tries to covertoo many topics in too much detail it becomesan inflexible vehicle for carrying out its pur-pose of maintaining stable relations.

The atmosphere in which the necessarychange must take place will have to come pri-marily from the two principle parties involved,labor and management. Up to now both groupshave approached the problem as reactions toinfringements on their historically vestedrights and prerogatives. Automation hasmostly been treated, in other words, as a simpleproblem with a simple solution. The real solu-tions will come when both sides convince them-selves that each has to take positions whichallow for a great deal more latitude in workingtowards and congealing the many solutions.

This broadened approach will have to encom-pass the idea that disruptions in the labor forcecaused by automation are not academic prob-lems to be mulled over by theoreticians but arecaus,es of social and economic problems bothlocalif -arid nationally. People out of work haveless income and consequently do not have abilityto create demand for goods. Production andthe gross national product consequently suffer.

What is needed is for labor and managementto approach problems associated with automa-tion much more freely. Labor would tend toaccept considerably more responsibility towardsthe situation in self interest. Were manage-ment, for example, to make known its plans tointroduce technological changes well before-hand, unions would be in a much more flexibleand agreeable position. Too often most suchchanges are announced immediately prior toinstallation and unions must react immediatelyin self-interest. A two-way approach of estab-lishing some type of communication for aperiod of 6 to 18 months prior to installationwould alleviate many potential and unnecessarytension before they occur.

A new, more flexible attitude towards auto-mation and technological change is certainlyneeded if for nothing else than to prevent thesocial and economic disruptions which oftenoccur as the result of their introduction. Bycomparison, what is gained through rigidstands appears very weak to what could and canbe gained by enlightenment.

STATEMENT


International Chemical Workers UnionAkron, Ohio

Statement by the international ChemicalWorkers Union

The Federal Government, in cooperation withthe various State governments, can provideservices to our society over a broad spectrum.The use of massive training and retrainingprograms will help workers increase skills ; theproper use of the U.S. Employment Service indescribing areas and types of job vacancies willaid both management and worker ; while Fed-eral laws providing decent standards of unem-ployment compensation, subsistence allowancesfor persons while being trained or retrained,and financial assistance to those who are willingto relocate will aid ali segments of society tosurmount the unusual problems brought aboutby an automated society. The basic problemsare of such a nature that they require the co-operation of labor, management, and govern-ment if they are to be solved. In this respectwe can learn much from one of our allies,Sweden, which has done a creditable job inalleviating the suffering brought about by jobshifts attributable to technological change. Weare hopeful the Commission will not overlookefforts made by other countries, as well. Aboveall, we hope your recommendations will be suchthat they may be instituted in this period ofhigh economic growththat they will be antici-patory in nature rather than defensive and em-ployed only in times of depression or recession.

In this period of rising demand, the chemicalindustry seems to be in between very highlyautomated industries which have suffered siza-ble reductions in employment and industrieswhich are just beginning to automate and havenot suffered significant employment reduction.The chemical industry is growing, howeverslowly, in total employment. Intraindustryshifts, however, present many problems. Thosemost affected are production workers whoserelative position is worsening at a time whenproduction is at its highest.

Since 1947 blue-collar employment increasedonly 8 percent in the chemical industry whilewhite-collar employment increased 117 percent.In 1947 there were three production workersfor each nonproduction worker, while in 1964

there were about one and one-half productionworkers for each nonproduction worker. Thetotal employment increase for the industry was35 percent, but production increased by 284percent over the same period.

To further supplement the argument of acomparatively highly automated industry witha changing work force, the National IndustrialConference Board data on investment revealthat the chemical industry in 1962 invested$43,700 per production worker as opposed to$21,800 for all manufacturing. Only two in-dustries have higher figurespetroleum andtobacco. The petroleum industry, with its$110,700 per production worker investment,actually reduced production worker employ-ment by 32 percent since 1947. Over the sameperiod the number of production workers intobacco was reduced by 31 percent. The rawfigures in both cases show the reduction in thenumber of production workers was greater thanthe reduction in total industry employmentin petroleum 54,000 versus 34,000, and intobacco 34,000 versus 30,000.

We are fearful that the future of the chemicalindustry will be synonymous with what hashappened to petroleum and tobacco. Chemicalprocesses lend themselves to automation andcomputerization. The industry is planningtremendous capital investment in the next fewyears, but we wonder about the impact of thisincreased investment on employment. We be-lieve we should make positive moves now in-stead of waiting for the awful truth to makecrash programs necessary.

The position paper on automation, which fol-lows, was prepared by our research and educa-tion department for submission to our FirstCollective Bargaining Conference, held in Wash-ington, D.C., November 29December 2, 1965.The paper discussed the broad problems as wellas the specific problems which automation hasbrought to the chemical industry and offerssome suggestions for collective bargaining whichwould help alleviate the impact of technologicalchange on the workers.

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Introduction

Automation: a Position Paper

Au.; Imationblessing or a curse : Automationup to this point has not been the blessing thatwe believe it can be. At the 1963 convention ofthe AFL-CIO, President George Meany declaredthat up to that point he would have to declarethat automation had been a curse.

Today, even with the highest production ratein the history of our countries [United Statesand Canada], unemployment still remains toohigh, and in the United States it has not yetbeen reduced to the "interim goal" of 4 percentwhich was the goal finally unofficially acceptedby government planners. In Canada, 3.6 per-cent of the workers remained unemployed inSeptember.

The problems of unemployment cannot be en-tirely overcome through collective bargaining.Many of the problems can be overcome onlythrough action of all of the people through edu-

cation and elimination of all forms of job dis-crimination, and in an adequate unemploymentbenefits system for as long as a person is unem-ployed. We must, however, use our collectivebargaining processes to alleviate the problemscreated by technological change insofar as it ispossible to do so.

A shorter workweek seems the obvious an-swer to the problems of unemployment, and thechemical industry basically is able to afford a35-hour week and a substantial increase in theweekly pay as well. However, we must be real-istic enough to accept the fact that we canaccomplish the goal of a shorter workweek onlyalong with the rest of the labor movement, un-doubtedly accompanied by Government action.Even with the shorter workweek, however,which does not appear possible in the short run,there will still be technological change due toproduct and process changes, plant closings dueto obsolescence and merger, changes in theavailability of basic materials and power, andfor other reasons.

While accepting automation, with the prom-ise of long-term benefits, we believe that theindustry and he company which benefits imme-diately from the fruits of automation shouldhelp pay for the hmilan cost involved.

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Automation in the United States and CanadianEconomy

In the discussion which follows, the terms"automation" and "productivity increase" areused synonymously because there are simply nodata available in either country fo.: measuringthe effect of automation as such on the totaleconomy. The justification for this synonymoususage is that automation has greatly increasedproductivity (output per man-hour), and therehave been definite effects from this increase.It is hopeful that in the very near future boththe United States and Canada will be able toprovide statistics that will enable us to deter-mine the direct effect on employment in theeconomy and in the chemical industry.

How has technological change affected em-ployment? There are two opposing views as toexactly what the effects of automation are.1

One view, expressed by the Subcommittee onEconomic Stabilization to the Joint Committeeon Economic Report in 1955 relatively early inthe onslaught of automation,2 holds that thisnew technology or automation will cause wholenew industries to arise, producing goods andservices we never had before, and this will createa demand for more jobs. Consequently (in thisview), everyone would benefit. Workers wouldhave jobs and the consumer would enjoy theadditional goods and services. In defense oftheir belief, this group points to the history oftechnological change in the United States. His-torically, technology has created more jobs andgoods and services and, as a result, today theUnited States enjoys a very high standard ofliving in comparison with most of the othercountries of the world. The assemblyline tech-nique greatly increased Ford's productivity in1913 direct labor requirements were cut by 90percent. But sales in-Teased so rapidly that itwas necessary for Ford to hire more workers tokeep pace with the demand. This historicalpattern, as illustrated by the example, is thebasis for the argument that machines makejobs.

The opposing view is that automation will

For a discussion of these two views see: Charles C. Killingsworth,"Automation, Jobs, and Manpower." Statement for Subcomm. onEmployment and Manpower, U.S. Senate, Sept. 20, 1963.

I Automation and Technological Change, Report of the Subcomm.on Economic Stabilization to the Joint Comm. on Economic Report,84th Cong., Is' Sess., 1955.

CHEMICAL WORKERS UNION 139

take the place of men in the factories withoutcreating demand for their labor, the result beingunemployment and economic hardship for theworker. This group argues that we can nolonger expect the historical pattern to continue.They say first that the economic environmenthas changedthat most goods-producing indus-tries have the market for consumer goodsrelatively saturated. Almost everyone has arefrigerator, a television set, wash4 ce machine,automobile. The market for '1 ic con-sumer goods is more saturate-.1 0, and30 years ago. The result is th:, wrnaticnnow enables the goods-producing dijustries tosatisfy consumer demand while employing fewerworkers. Evidence of this in the United Statesis discernible in the shift in emphasis fromthe production of goods to the production ofservices (banking, health care, education, andgovernment services).

TABLE 1. EMPLOYMENT IN MAJOR INDUSTRY GROUPS

Industm(in thousands)

Amount ofchange1957

1st Q19641st Q

Agriculture 5,187 3,980 1,207Mining 821 612 209Contract construction 2,612 2,690 + 78Manufacturing 17,281 16,989 292Transportation, public utilities 4,209 3,879 330

Wnolesale and retail trade 10,671 11,893 +1,222Finance, insurance and real estate 2,431 2,885 + 464Service and miscellaneous 6,566 8,363 +1,791Government 7, 552 9 ,802 +2,250

Source: U. S. Bureau of Labor Statistics.

As can be seen from the table 1, the onlygoods-producing industry which gained in totalemployees was contract construction, while em-ployment in all the other goods-producing in-dustries actually declined. In contrast, employ-ment increased in every service industry o-erthe same period. While some would say thatthose who became unemployed have apparentlyfound jobs in the service industries, this is notaltogether true. This argument leads us to thenext defense of those who say automation iscausing unemployment. They argue that todayour unemployment rate is high and has beencreeping upward since the early fifties. In1951-53, the average unemployment rate wasabout 3 percent.3 Fr-lr o. the first quarter of1961 to the first quarter of 1964, the rate ofunemployment never fell below 51/11 percent.4 Itis interesting to note that after each major re-cession since the 1950's, the unemployment rateremained above the rate prior to each recession.While the unemployment rate today is 4.3 per-cent (October 1965), this rate is somewhat in-

fiuenced by the additional demand for militarygoods in the Vietnam war.

For Canada, increasing productivity and alagging growth have also had a great impact onemployment. From 1947 to 1956 the averageunemployment rate in Canada was 3.3 percent,while the average for the period from 1957 to1964 was 6 percent.6

To summarize, those who argue that automa-tion has had and will have ad-erse effects on theeconomy's employment point to the shift in em-phasis from the goods to the service industriesand point to the high rate of unemployment.

These and other facts seem to support theopinion that automation will have adverse effectsif corrective measures are not taken.

Because automation increases productivity(output per man-hour) , the rate at which auto-mation is progressing can be seen from a studyof the increase in productivity in the economyof the United States.

TABLE 2. ANNUAL PRODUCTIVITY INCREASE

PeriodAverage annualpercent increase

1909-631947-631957-631960-63

Table 26 indicates the percentage increase inproductivity in the past few years. The differ-ence between 3.1 and 3.6 percent may not seemlarge, but this represents a 16 percent increase.

How does this increase in productivity affectthe n.--Y,her of jobs available in the economy?If the total production of the economy did notincrease (i.e., the total value of all the goodsand services produced by the economy, morecommonly referred to as gross national productGNP) , fewer workers would be needed be-cause the productivity of each worker is in-creasing. In 1964, there were approximately60 million persons in the private labor force(i.e., excluding government). Using a 3 per-cent productivity figure, we find that 1.8 millionfewer jobs (3 percent X 60 million workers)would be needed if GNP did not increase. Saidin another way, just to keep pace with the in-crease in productivity GNP must increase 3percent in order to keep the present wcrk forceemployed. During the postwar de?.ae.e, GNP

3 Killingsworth, op. cit.Canadian SUaistica1 Review, Dominion Bureau of Labour

Statistics.Ewan Clague, "Employment., Automation, and Economic Growth

in the United States," Paper for the 13th International Conferenceof Gottlieb Duttweiler Institute for Economic and Social Studies,Zurich, Switzerland, July 6-9, 1964.

Ibid.


for the private economy (i.e., excluding govern-ment) has increased about 3.5 percent annually.7In the recent past, from the first quarter of1961 to the first quarter of 1964, GNP has in-creased about 4 percent.8 While this demon-strates that GNP has grown enough to providefor the number of jobs eliminated by produc-tivity, it has not grown enough to accommodateall of the workers coming into the labor force.The result has been the high unemploymentrate referred to earlier.

The 1964 Manpower Report stated that whenproductivity and net additions to the labor forceare considered, "growth in output (GNP) equiv-alent to a minimum of 25 or 26 million jobs,about 33/4 million a year, will be required duringthe next 7 years if we are to attain and main-tain full employment." 9 This means privateGNP would have to grow more than 41/2 pereenta year.

In Canada, the annual growth rate in GNPaveraged 4.1 percent between 1950 and 1963and 7.2 percent since 1960.10 As a result of theincrease in productivity in Canada, it has beenstated that "to maintain current levels of un-employment we would have to achieve an annualrate of growth of real GNP . . . of from 6.0 to6.5 percent." 11 The Economic Council of Can-ada has emphasized that if the Canadian econ-omy is to achieve goals anticipated by 1970, itmust find a million-and-a-half new jobs.12 Aconservative estimate would show that GNPmust increase annually at 8.5 percent if thesegoals are to be achieved.

Automation, then, which has caused the in-crease in productivity, has also been a contrib-uting factor to our high unemployment, and itwill cohtinue in the future to be a contributingfactor if corrective measures are not taken.

Other Implications of Automation

So far this has been a discussion of the quan-titative effects of technology and autom Itiun.However, there have also been other very im-portant effects of automation.

Shifts in Industry Groups. Previously weshowed the shift in employment from the goodsto the service industries. Because automationhas affected the goods industry first and becauseof the shift in demand for more services, em-ployees were forced to find work in the serviceindustries. It should be noted that there was anet loss in employment in the goods industries.Many specific goods industries gained employeeswhile the other specific industries lost employees.Losses occurred where automation enabled theindustry to meet demand for their product withfewer workers or where demand for the product

actually fell off. Because many of these work-ers previously did "production type" work theyhad to be retrained for their new jobs.

Occupational Shifts. Also as a result of auto-mation there has been a large shift in the com-position of the work force. Automation hasresulted in a sharp increase in white-collar jobsover blue-collar jobs. In the United Statesfrom 1947 to 1964 the number of blue-collarworkers in all manufacturing actually decreased1.4 percent while-collar employment increasedby 75.9 percent." While in Canada for thesame period there was no actual decrease inblue-collar jobs, proportionally there was a muchlarger increase in white-collar jobs. For theblue-collar sector in all manufacturing employ-ment increased only 13.1 percent while white-collar employment increased 44.1 percent.14

In general, the shift from goods to serviceshas created more white-collar jobs. Not onlywere proportionally more white-collar workershired, employees also changed job collars.Again this shift in proportion varied from in-dustry to industry but the net effect was pro-portionally more white-collar workers. In themanufacturing industries many of these white-collar workers are engineers, technicians, orscientists. Because the new automated machin-ery requires more technical skills, the demandfor these workers has increased greatly.

Effect on Skills. Automation is h ig a verydefinite effect on job skills. We : indicatedthat automation causes 'het 1 loyment.More specifically. however, wha of jobsare eliminated? Studies indicak it is thejoh of the unskilled worker which has beenaffected. These studies point to the unemple,--ment rate which has increased for unskilledworkers while this rate for the more skilledworkers has remained the same or increasedonly slightly.15 It is important to note alsothat it is the unskilled worker who, because ofhis general educational level, has had the mostdifficult time in finding other employment.

However, many skilled trades have also beeneliminated. The 1960 Census of Populationlists more than 80 occupationsmany of f,hem

7 Leon Greenberg, "The Relationship of Automation, Producdvity,and Employment. Current Developments In The United States,"Statement before the Interstate Conference on Labor Statistics,Miami, Fla., June 16-19, 1964.

9 Clague, op. Cit.9 Manpower Report of the President, Mar. 1964.19 J. P. Francis, Address to "North American Joint Conference

on Requirements of Automated Jobs," The Labour Gazette, Feb. 26,1966, and Business Review, Bank of Montreal, July 31, 1964.

11/bid.12 Claude Jodoin, "AutomatiGn and Retrainhig," Canadian Labour,

Mar. 1966.13 Employment and Earning., Bureau of Labor Statistics.14 Employment and Payrolls and Man-Hours and Hourly Earnings,

Dominion Bureau of Labour Statistics:19 The Diebold Group, Inc., Automation: Impact and Implications,

Focus on Developments In The Communications Industry, Apr. 1965,


skilledin which employment declined since1950. These included locomotive engineers,boilermakers, loom fixers, stonecutters, andsome highly skilled trades in the printingindustry.16

Of course new skills have also been created.Some of these are entirely new while others area result of combining old jobs which, therefore,require a combination of skills and are in thissense new.

In some cases existing skills are downgraded ;for example, an experienced and skilled crafts-man may operate a relatively simple mechanism.In other cases skills are upgraded a q a resultof adding the new machine to the job.

Frequently, the responsibility which a workerhas is greater after automation. While themachine may take over some of the duties ofhis old trade, he must correct errors that resultin the process or on the part of the machine.Where his responsibility has been increased hemust learn to react to this responsibility and inthis sense his skill is certainly upgraded. It isinteresting to note that the prevalent job evalu-ation plan in the steel industry gives moreemphasis to respcnsibility factors than to skillfactors.17

There is, however, a dispute as to the neteffect of automation on skills. Some say itreduces them while others hold to the contrary.The [former] commissioner of the Bureau ofLabor Statistics gathers this generalizationfrom the data. "The over-all patterns of em-ployment seem to demonstrate that technology,as such, even apart from other factors, is oper-ating to raise skill levels generally." 18

Education and Skills. Whether or not auto-mation upgrades skills, it is a fact that automa-tion demands that the educational level of thework force be increased. Automation has in-creased the tempo of industrial change whichrequires workers to work in varied occupationsduring their working years. The ability toadapt to this situation greatly depends on thebasic educational skills. As one writer hasstated, ". . . although both education and skillsare the determining factors in total unemploy-ment rates, it is better education which in-creases the convertibility of skills and, in arapidly changing econnmic environment, ap-pears to be of growing importance in terms ofemployment." 19 This great need for flexibilitymeans that workers must increase their basiceducational skills. Today, most of the majorchemical companies hire only high schoolgraduates.Working Conditions. Automation has createdan entirely new environment for the worker.This new environment imposes hardships great-

ly different from the speedups and the sweat-shop conditions. A worker may now findhimself isolated with his machine. This im-poses a self-discipline and "monotony variable"not previously experienced because he couldcommunicate with other workers. Generallyspeaking, -automation also tends to transfercontrol over the rate of production from theworker to the machine. This creates problemswhich will be discussed later.

Effect on Reemployment and Retraining. Whilewe have already discussed the problem thatautomation may cause unemployment in greatnumbers, automation also has an effect on theability of the worker to find new employment.As pointed out previously, frequently the workermust transfer from a goods to a service indus-try, which may be z different "type" of employ-ment experience to which he must adjust.

There is also the large area of retraining.Workers simply are not always willing to beretrained. Skills accumulated over a long pe-riod are not easily displaced or replaced. Theolder worker may also be psychologically unableto make an extensive job change, while theyounger worker has no bank of experience andskills from which to draw. The mental pace ofthe new technology, the requirement of constantattention to numerous gages, dials, and otherinstruments, and the assumption of new andgreater responsibilities may create mental blockswhich are insurmountable or, at best, requirelong periods of training. [Former] commis-sioner of the Bureau of Labor Statistics EwanClague has stated that, "The difference withtechnological unemployment is that it eliminatesskills and occupationsthe same old jobs do notopen up again, either next season or next year.Such an unemployed worker must not only finda new job, he must tackle a new occupationfor which he may lack both the skill and thetraining." 20

Automation Brings Social Responsibilities

In the discussion so far it has been shownthat automation has had and will continue tohave a dynamic impact on the economy and onthe society as represented by the worker. Wehave pointed out the problems created. These

"Ewan Ciague, "Effects of Technological Change on Occure-tional Employment ;.'atterns In The United States," Statement be-fore the Conference on the Manpower ImplicMions of Automation,Organization for Economic Cooperation and Development, Wash-ington, D. C., Dec. 8, 1964.

17Charles Killingsworth, "Industrial Relations and Automation,"Annal of The American Academy of Political and Social Science,Mot*. 1962.

14 Clague, op. cit., Dec. 8, 1964."Diebold Group, Inc., op. cit., p. 140.l'oEwan Clague, "The Impact of Technology Upon Manpower."

Summary of Remarks at the 16th Annual Conference of the GreaterChamber of Commerce, Philadelphia. Pa., Jan. 10, 1963.


problems will have a drastic effect if measuresare not taken to deal with them. The discussionthat follows points out what must be done toaccommodate the new technology.

Economic Growth & Employment. We havepointed out the effect of automation or produc-tivity on overall employment in the economy.We have shown that unemployment will con-tinue to plague us unless GNP increases suffi-ciently. More specifically, what is the effect ofhigh unemployment ? The answer, in short, isthat aggregate demand for goods and servicesdeclines when unemployment increases. Work-ers do not have full paychecks and they cannotmake their ordinary purchases. When demandfalls off business must lay off workers who, inturn, must curtail some of their purchases, andthe cycle continues. The ultimate affect is thatGNP, instead of increasing, may actually de-crease or, at any rate, does not grow in theproportion needed to compensate for the effectsof automation.

Every company, then, has the responsibilityof helping to maintain employment. If employ..ment is not maintained both the company andthe individual will be adversely affected in thelong run. In the chemical industry the effectof declining demand will be more immediatelyfelt than in other industries, for to produce $1of sales the chemical industry must purchase350 worth of product from other chemical pro-ducers.21 It has been stated that the chemicalindustry is its own best consumer. This intra-industry dependence means that if demand fallsoff in one area of the industry it will havean almost immediate effect on other chemicalproducers.

The chemical industry accounts for a largeshare of the total product produced by all manu-facturing industries. How the chemical indus-try treats its employment problems will affectnot only the chemical industry but will alsohave a sizable affect on the entire economy.

In essence, industry must find a place -cor theunemployed worker as well as the new workeror suffer the consequences. Because the econ-omy is so interrelated every company mustcontribute towards making full employmentpossible. One interesting feature about auto-mation stands out. It is that much of the pro-ductive capacity (our automatic machines) doesnot operate at near full capacity. This machin-ery is exceedingly expensive yet managementdoes not get full use from it Frequently it willbe eplaced with other equipment which hasgreater productivity powers simply to hedge onfuture demand. It is our suggestion that man-agement look more closely at its plant facilitiesto determine if it would be more economical in

some cases to add workers to machines whichare not working to near full capacity instead ofreplacing these machines.

In addition, management should plan its auto-mation at a time when unemployment is low sothat the increased productivity will not displacemore workers and worsen the unemploymentproblem. This practice has been encouraged bythe President's Advisory Committee on LaborManagement Policy.22

Skills, Training, and Transition. In our analy-sis we have shown that engineers, technicians,scientists, and skilled craftsmen will be neededin increasing number to operate the automatedplants. In addition the shift of demand to serv-ices will also mean more teachers and morenurses, for example.

To obtain these and the products from theautomated plant people will have to be trainedto do these jobs. Studies show that there isshort supply for some of these jobs. It mustbe remembered that if these people are neededand are not available this will affect the numberof other employees who will have work.

One theory is that the unemployment rate inthe recent past has been structural. By this ismeant that jobs are available but there simplyare not enough qualified people to do them.Some of our unemployment is structural and inorder to correct this, skills must be upgraded.

This does.not only mean we need college grad-uates ; it also means that companies must learnto upgrade (retrain) their present employeesto do some of these jobs. The fact is that thereis not enough of this kind of training by com-panies, chemical companies in particular. Theunskilled must be helped to qualify for anotherjob by a public agency or by the company whichhas terminated them. Surely the high unem-ployment rate is due in part to workers' in-ability to find jobs which suit them or for whichthey are suited.

Once trained, a placement service whichwould enable them tohave a better selectionwould surely facilitate their reemployment.

Educrt ion and Automation. As we have shown,the worker must possess basic educational skillsor he will not be "convertible" (employable) inthis automated age.

The fact is that today many of the youngworkers entering the lal,cr market for the firsttime are high school and junior high schooldropouts. These workers will experience an

21 "The Interindustry Structure of the United StatesA Reporton The 1958 Input Output," Survey of Current Business. Nov. 1964.22 The President's Advieory Committee on Labor-ManagementPolicy, Jan. 11, 1°62, "The Benefits and Problems Incident toAutomation and Other Technological Advances."


exceedingly hard work life in terms of jobsecurity.

For many of these persons, however, our pub-lic school curriculum is simply out of date. Theyghemlii he given a more extengivA nppnrtimityfor vocational education. This type d educa-tion would provide them with at least some skilland would undoubtedly hold their attentionsmuch better.

For the uneducated worker already in thework force, employers should provide part ofthe expense for night classes to encourage himto upgrade his basic educational skills.

Summary. These, then, are some of the socialresponsibilities which must be assuni,d if auto-mation is to be a blessing instead of a curse.Because automation has such diverse ramifica-tions the problems it creates cannot be solvedby labor and management or any other singlegroup in the economy. Each group must con-tribute its necessary part.

It is our belief that no one sector of the econ-omy should prosper and enjoy the benefits ofautomation while another group shoulders theburden of this new technology. We are in com-plete agreement with Assistant Commissionerof the Bureau of Labor Statistics Leon Green-berg when he said, "Thus, we see that improvingtechnology and productivity can bring and hasbrought benefits to a very large part of oursociety. At the same time, a small but impor-tant part of our society has borne the cost ofimprovement for the many. This group is madeup of the worker who becomes unemployed orloses his earning power because of technologicaland related changes. We do not think that theburden of technological change or any otherkind of involuntary unemployment should beborne by these few individuals." 23

Said another way, the fruits of automationmust be shared with those unfortunate workerswho either cannot adapt or who find it exceed-ingly difficult to do so.

Automation in the Chemical Industry

'In the post-World War II period the tech-nology of the chemical industry has become somodern that it has changed old relationships.This new technology, or automation as it hasbecome known, has caused changes in the con-tent of work still performed by man and changesin who does the remaining work. It has alsoaffected the existence of employment itself. Ananalysis of the effects of this new technologyon the chemical industry follows.

While our purpose is not to examine the dif-ferent definitions of automation that have beenoffered, some brief mention should be made

about the characteristics of automation machin-ery. This machinery does differ from previoustypes of machines. The distinguishing featureof the new machinery is that it is self-regulat-ing in some form or other and tn gnene degrpp.24In some cases instruments measuring tempera-ture, pressure, etc., are wired to computerswhich, in turn, regulate the instruments andthe production of the product. The basic prin-ciple of control in the new technology is verysimilar to your home thermostat. Of coursethe degree of self-regulation in automationvaries. Not all automated processes use com-puters, for example. And there are variationson the complexity of the measuring instruments.

Basically, however, these various combina-tions of machinery have been grouped to de-scribe several stages or degrees of automation25in the chemical industry.

1. Batch operation. Operator initiates theaction, controls the cycle based on instrumentreadings, observation, laboratory analyses, etc.

2. Semicontinuous operation or nonautomaticcontinuous operation. Both of these involve ahigher degree of instrumentation, but the oper-ator still runs the process.

3. Automatic continuous operation. Proces-is controlled by pneumatic or electronic means,each loop having an individual controller. In-struments make their own measurements, de-termine at each moment the amount by whichthe controlled variable is in error, and applythe necessary correction to the control valve orother final element. By the feedback principlethat "closes the loop," the instrument thenmeasures the effect of the change and, if needed.applies another correction. Operator is alertedif process goes out of control ; he may alsoinitiate action during startup, shutdown, orequipment failure.

4. Open-loop computerized operation. Thecomputer that is added to the conventional in-strumentation calculates and evaluates data butdoes not make instrument adjustments. It mayissue printout instru ,:ions to the op, tor.Control is on finite-interval (digital) ratherthan continuous basis.

5. Closed-loop computer control. In super-visory or optimizing type of control, a digitalcomputer calculates the optimum control settingfor the instruments (which are of conventionaltype) and corrects the settings automatically.In "direct digital control," which is on the vergeof becoming practical, instrumentation is sim-plified ; a single high-speed special-purpose com-

2s Leon Greenberg, "Productivity and Technological DevelopmentsIn The United States," Statement before 13th Annual Meeting ofthe National Council on The Aging, Edgewater Beach Hotel,Chicago, III., Feb. 11, 1964.

24 Hebert Poper, "CPI Manpower, The bynamic Trends and WhatThey Mean," Chemical Engineering, Oct. 12, 1964.

Ibid., p. 190.


puter is time shared among a large number ofcontrol loops. Under "dynamic optimization,"the process is controlled by the computer duringstartup, shutdown, and recovery from disturb-.ances, as IVP11 aa at normal conditions.

6. Closed-loop control with economic over-ride. In controlling the process, the computerintegrates economic factors, such as fluctuationsin the relative cost of raw materials, changesin byproduct or coproduct demand, and price-quality factors. Each process will run atoptimum conditions within the overall plantoperati on.

Production in the chemical industry lendsitself easily to the use of these automatic de-vices. Chemicals are liquids, solids in powderform, and gases which can be readily mixed andtransported by pumps or blowers through ripe-lines by power-operated equipment. These

TABLE 3. PRODUCTION IN CHEMICAL AND TWO OTHERINDUSTRIES AND ALL MANUFACTURING, UNITED STATES,

1947 AND 1964 (PRoDucTION INDEX, 1957-59 = 100)

Industry 1947 1964 Percentehange

CHEMICAL 41.5 159.4 +284Industrial chemical 34.8 178.0 +411Drugs N.A. N.A. -PRIMARY METALS 90.7 128.2 + 41.3Basic steel products 93.8 126.5 + 34.9TRANSPORTATIONEQUIPMENT 42.9 130.7 +204.7Motor vehicles and equipment 69 .4 150.1 +116.3ALL MANUFACTURING 66.4 132.9 +100

Source: Federal Reserve Board

processes, as a rule, are on a continuous basis-24 hours a day, 7 days a week.

How automated is the chemical industry incomparison with other manufacturing indus-tries? While we cannot make a comparison ofthe complexity of the machines themselves, wecan study what their effect is on the total pro-duction of the product. In addition, there areTABLE 4. BLUE-COLLAR EMPLOYMENT IN CHEMICAL AND

TWO OTHER INDUSTRIES AND ALL MANUFACTURING,UNITED STATES, 1947 AND 1964

IndustryBlue-collar employmentl

19472 1 964 Percentchange

CHEMICAL 488,000 528,700 8.3Industrial chemicalDrugs

(3)59,900

163,30059,500 - 0.7PRIMARY METALS 1,114,000 998,200 - 10.4Basic steel products 575,000 512,000 - 11.0TRANSPORTATION

EQUIPMENT 1,039,000 1,133,300 9.1Motor vehicles andequipment 626,000 593,200 - 5.2ALL MANUFACTURING 12,990,000 12,808,000 - 1.4

1 Production and maintenance workers.2 Denotes the beginning of the postwar period.3 Not available.Source: Bureau of Labor Statistics.

TABLE 5. WHITE-COLLAR EMPWYMENT IN CHEMICALAND TWO OTHER INDUSTRIES AND ALL MANUFACTURING,

UNITED STATES, 1947 AND 1964

IndustryWhite-sailor tinge:men:. 2

19471 1964 Percentchange

CHEMICAL 161,000 348,600 116.5Industrial chemical (3) 121,800Drugs 26,500 52,600 98.6PRIMARY METALS 165,000 228,300 38.4Basic steel producta 80,800 112,900 39.7TRANSPORTATIONEQUIPMENT 236,000 489,300 107.3Motor vehicles and

equipment 142,000 177,800' 25.2ALL MANUFACTURING 2,555,000 4,495,000 75.9

1 Supervisory personnel, office workers, salesmen, and professionalemployees.2 Denotes the beginning of the postwar period.2 Not available.Source: Bureau of Labor Statistics.

other measures which indicate how automatedan industry is.

Let us first consider production. With thesemachines the product itself can be made at afaster rate ; hence, productivity is increased andhence more total product can be made. Table3 compares production in the chemical indus-try in the United States with production in twoother leading industries and with all manufac-turing for 1947 and 1964.

As can be seen in table 3, the total productionin the chemical industry increased 284 percent.This was greater than the increase of the lead-ing industries and almost 3 times greater thanall manufacturing.

This information, coupled with the data intables 4 and 5, indicates the contribution of themachine and the contribution of productionand maintenance men to this total production.

While production in the chemical industryincreased 284 percent between 1947 and 1964,the number of production and maintenanceworkers increased by only 8.3 percent. At thesame time the number of white collar workersincreased by 116.5 percent. As a result of thislarge increase in growth of white-collar em-

TABLE 6. PRODUCTION IN CHEMICAL AND TWO OTHERINDUSTRIES AND ALL MANUFACTURING, CANADA,

1951 AND 1964 (PRoDucTioN INDEX, 1949 = 100)

Industry 1951 196 4Percentchange

CHEMICAL 120.0 279.0 132.5Industrial chemical (l) (3) -Drugs (I) (3) -PRIMARY METALS 115.9 195.7 68.9Basic steel products 129.0 244.9 89.8TRANSPORTATIONEQUIPMENT 131.3 198.5 45.1Motor vehicles and equipment 139.3 245.8 76.5ALL MANUFACTURING 115.0 188.2 63.7

1 Not available.Source: Dominion Bureau of Statistics.

CHEMICAL WORKERS UNION

TABLE 7. BLUE-COLLAR EMPLOYMENT IN CHEMICALAND TWO OTHER INDUSTRIES AND ALL MANUFACTURING,

CANADA, 1961 AND 1964

Industry

Blue-collar employment'

1951 1964 Percentchange

CHEMICAL 28,889 30,093 4.2Industrial chemical 5,508 6,696 21.6Drugs 3,845 3,020 - 21.5

PRIMARY METALS 87,631 92,647 5.7Basic steel products 31,159 35,117 12.7

TRANSPORTATIONEQUIPMENT 109,002 109,584 0.5

Motor vehicles and equipment 44,226 51,260 15.9ALL MANUFACTURING 824,483 932,087 13.1

1 Production and maintenance workers.Source: Dominion Bureau of Statistics.

ployees, the ratio of production workers to non-production workers has changed drastically.In 1947 there were more than three productionworkers for each nonproduction worker, whilein 1964 there were only little more than one andone-half production worker for each nonproduc-tion worker. These figures clearly demonstrate

TABLE 8. WHITE-COLLAR EMPLOYMENT IN CHEMICALAND TWO OTHER INDUSTRIES AND ALL MANUFACTURING,

CANADA, 1961 AND 1964

Industry

While-collar employment,

1951 1964Percentchange

CHEMICAL 20,407 28,707 40.7Induttrial chemical 1,323 3,627 174.1Drugs 4,221 5,324 26.1

PRIMARY METALS 20,222 28,799 42.4Basic steel products 4,294 7,736 80.2

TR.ANSPORTATION 23,411 32,611 39.3Motor vehicles and equipment 9,886 15,222 54.0

ALL MANUFACTURING 267,387 386,358 44.5

1 Supervisory personnel, office workers, salesmen, and professionalemployees.

Source: Dominion Bureau of Statistics.

the great increase in output per productionworker. Said in another way, these figuresdemonstrate how the machine has greatly re-duced the need for production and maintenanceworkers.

As can be seen in the tables 6, 7, and 8, pro-duction in the Canadian chemical industry from1951 (the first year for which data on the num-ber of production workers are available) to 1964increased 132.5 percent, more than double allmanufacturing, while production and mainte-nance workers increased only 4.2 percent andwhite-collar workers increased 4.7 percent. InCanada, the ratio of production workers to non-production workers changed from three produc-tion workers for every two nonproduction work-ers in 1947 to almost a one-to-one ratio in 1964.

How will the chemical industry gni AT in the

I

145

future ? In the United States in the last decadethe production of chemicals has increased at anannual rate of 7.5 percent. Production is ex-pected to grow by at least 6 to 7 percent a yearthrough 1970.28 During this same period totalemployment has increased about 1.75 percent ayear. The National Planning Association pre-dicts that the annual growth rate will be about2 percent between now and 1970.27 However,the increases are expected in white-collar jobswith very little increase and perhaps a declinein blue-collar workers.

How much more L.Aitomated will the industrybecome ? Statistical indicators point to a mod-erately automated chemical industry at present.It has been stated that, "Many well-knownplants in the CPI have already progressed to afairly high step . . . but they do not representa vast bulk of CPI output." 28 Another indica-tion of the extent of automation is the amountof capital investment per blue-cillar worker.In 1962 the petroleum industry, the most highlyautomated industry, had an investment of$110,700 per blue-collar worker while chemicalsfigured $43,700 and all manufacturing only$21,800.29 If this is an accurate measure of theextent of automation, chemicals-while stillahead.of other leading industries in comparison-has yet the bulk of its industry to automate.In 1963, the chemical industry spent $1,464million on new plant and equipment. McGraw-Hill's department of economics indicated in1963 that chemical process industries "willspend" $250 million on automatic process-con-trol equipment and instrumentation." Thiswould be approximately 17 percent of total ex-penditures on new equipment in that year. Thesource also indicated that expenditures on auto-matic equipment are "leaping 10-20 percentannually." Another indicator of the increaseof automation in the chemical industry is thenumber of computers used. In 1963 there were350 process control computers in operation. Alengthy study, however, indicated that the num-ber of these computers in the industry wouldgrow to 4,000 by 1970.31 These facts seem toindicate tl. at automation in the chemical indus-try in the United States will continue to main-tain its present growth rate to at least 1970.

While we do not have comparable informationfor the Canadian chemical industry, the follow-ing conclusions would seem to be applicable tothe chemical industry in both countries because

28 David Keefer, "The Chemical Industry, Special Report," Chemi-cal and Engineering News, Aug. 12, 1963.

27 Ibid., p. 81."Popper, op. cit., pp. 191-192.a "Capital and Employment In Manufacturing," National Indus-

trial Conference Board, July 15, 1965.111 "Crisis In Labor," Chemical Week, Feb. 23, 1963.a Summary of a study on automation by Corplan Amciates,

affiliate of IIT Research Institut*, Chemical Week, Aug. 1, 1964.


of the similar relationships of plant size, prod-uct, and corporate entity in the industry.

It seems automation in chemicals will con-tinue to occur mostly in the large chemicalplants as it has in the past. The small plantfaces the deterrent of cost (automntaa Pqnip-ment is expensive) and will probably not auto-mate as rapidly.32 (Small plants can afford notto automate because they can do well in specialproduct fields where competition is less severe.)However, it should be noted that in the UnitedStates small plants (50 employees or less) , whilethey represent approximately 82.7 percent of allplants in the industry, account for only 15.8percent of the total employment.33 In Canadathese small plants represent 80.6 percent of allestablishments in the industry and 20 percentof industry employment." Another fact to re-member is that the great percentage of thesesmall plants are single-unit companies. Fromthis we can assume most automation will takeplace in the large plants producing standardchemicals owned by the multiunit companies(the giants in the industry) until such time ascosts of automated equipment make its intro-duction feasible in the small plants.

Certainly, our union has little, if any, "breath-ing space" in which to prepare itself for thecompletely computerized society of the future.While high profits in existing plants mitigateagainst a complete conversion to computers, thefact is we are experiencing plant closings andrelocations at an increasing rate.

Collective Bargaining and Automation

Management RightsAdvance Notice. Whendecisions are made to automate or introducenew equipment into the plant, the company willusually discuss the changes with the union com-mittee. However, whether or not the union willreceive anything more than a perfunctory hear-ing will depend on the protections written intothe labor agreement.

Management may rely completely on the man-agement rights clause in the agreement as jus-tification for its contemplated moves. Only ifthe contract has adequate provisions whichguarantee "union rights" will the union be ableto handle the problem inteiligently and to thesatisfaction of the workers.

First, the contract should ensure that advancenotice of changes be given to the union so thatdiscussions may be held on the matter. Sec-ondly, the contract should provide that con-templated changes will be subject to mutualagreement or, at the very least, arbitration.Sometimes a joint committee can agree on theintroduction of new equipment while makingadequate provisions to insure that no worker

will be laid off or lose earnings as the resultof the changes.

New Or Changed Jobs. In almost every caseof technological change, the introduction of newProcesses or equipment will necessitate the cre-ation of new jobs or the merging of existingjobs. It is important that the union insist oncontract language which will protect the laborstandards of the contract.

Specific provisions must be written into thecontract concerning the handling of new orchanged jobs. The union must have the rightto grieve the new wage rate and job description.Arbitrators must have the power to set ratesand write job descriptions in accordance withthe present practices in the plant.

Employment Security. As previously pointedout, automation has in many instances displacedthe employee from his job or downgraded hisskill. Where the former effect is felt, the em-ployee is concerned with retaining some kind ofemployment. In such cases, seniority should bethe guide to placing the employee in another jobin the plant. However, because a "bumping"Procedure has the end result of displacing someemployees, attempts should be made to retainall employees. The union should try to nego-tiate a clause whereby no employee is put onlayoff but that any reduction of the work forcewill be by attrition only (quits, discharges forcause, deaths, retirements, etc.). Where theimmediately affected employee cannot be placedin another job, he should be permitted a reservestatus in a surplus pool. He should be trainedfor another job while in this reserve status andshould also receive protected pay during theperiod. In no event should any employee loseany benefits or wages as a result of techno-logical change.

In those plants employing women, the turn-over or quit rates are normally quite high. Itshould not, therefore, be a costly item for com-panies employing women (drugs, soaps, cos-metics, etc.) to guarantee that there will be nolayoffs because of technological change and thatany reduction of the labor force will occurthrough attrition. Each local union should de-termine from the company and union recordsthe amount of turnover in employment and usethis argument where applicable.

SeniorityRecall. It is impossible to predictthe complete effect of automation on the exist-ing work force beforehand. Although only afew jobs may be affected in one instance, in

32 "Automation," Chemkal Engineering, Jan. 18, 1966.33 Enterprise Statistics, 1958, U.S. Department of Commerce."General Review of The Manufacturing Industries Of Canada,

1961, Dominion Bureau of Statistics.

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another whole departments may be wiped out.Therefore, we should insist that job layoffs andtransfers must be made on the basis which willprotect the older, more experienced worker.In any event, our agreements should include aprovision that no person should ever be laid offfrom the plant unless he is the least seniorperson in the plant.

Following layoff, the employee should haverecall rights to any job openings which mayoccur before new workers are hired. This pe-riod of "retention of seniority for recall pur-poses" should not have a time limit imposedon it.

Retraining. It is a responsibility of manage-ment to retrain displaced employees for newjobs which may be created at the expense ofexisting jobs. The union should include in thelabor agreement necessary language to providefor this retraining. Any cost to the employercan easily be met by the savings in labor costand the increased productivity which is con-comitant with automation.

Transfer, Relocation, and Preferential Hiring.Because automation has created unemploymentand because the use of automated devices isbrought about by management decision, man-agement has the responsibility of stabilizingemployment for its workers who have faithfullyperformed their assigned duties and may nowbe faced with job loss. We have already sug-gested job protection by an attrition clause.There are also other means of assuring jobs todisplaced workers.

In multiplant companies employees may begiven the opportunity of transfer to anotherplant of the company where there may be jobopenings. The right to transfer should alsoinclude the right to move at company expense.This is sometimes called a relocation allowance,which sometimes includes payment for any losssuffered in the disposal of the employee's presenthome and any additional cost of a new home inthe new location. It is also necessary that theemployee receive his regular pay during theperiod of `the move.

Where job relocation is not an immediatepossibility, the company should agree to estab-lish a preferential hiring list from which itagrees to staff any other plants as openingsoccur.

Supplementary Unemployment BenefitsSever-ance Pay. Where the union is unable to secureagreement that no worker will be laid off due toautomation, it is possible to aid laid-off workersin other ways. One of these ways is by supple-mentary unemployment benefits which are paid

by the company and added to State unemploy-ment insurance benefits. SUB was first intro-duced in the 1950's and can be found today inauto and steel agreements. The theory behindSUB is that the low State unemployment com-pensation benefits neefl to be supplemented sothat the unemployed worker can maintain hisstandard of living while he searches for a newjob.

Another way to ease the plight of the unem-ployed worker is to provide him with a sever-ance, termination, or layoff pay. The termsare usually interchangeable and are only de-scriptive of plans whereby the unemployedworker receives payments, usually according tohis service, when he is laid off. These pay-ments may be made in a lump sum or paidweekly. The theory of income maintenance isalso part of the reasoning behind these plans.

Early Retirement. One way to ease the plightof displaced workers, and possibly create jobopenings at the saml time, is to make the earlyretirement provisions of retirement plans moreattractive. The recently negotiated UAW pen-sions, for instance, now provide that a workermay retire at age 60 and receive $400 permonth until he is 65 years of age and will re-ceive Social Security. As a result, many autoworkers have decided to retire, thus makingmore job . pportunities available and alsomaking layoffs unnecessary.

Paid Time Off. Every time we negotiate addi-tional holidays and extend vacations, we arehelping to create job opportunities or reducingthe necessity for layoff, assuming, of course,product demand is constant or rising. Thus,provisions which allow paid time off are appli-cable, in at least a small way, to an overall dis-cussion of automation and attempts to relieveits impact.

Considerable advances have been made in re-cent years in the amount of vacation time offnegotiated with employers. Three weeks ormore of vacation have been negotiated in amajority of ICWU contracts. Most recently,there has been a movement, stimulated by theSteelworkers, to provide workers 13 weeks' va-cation every 5th year, with the normal vacationapplicable to the other 4 years.

Paid sick leave plans and pay for jury dutyalso fall into the same category as holidays andvacations. They help provide some relief toworkers who might otherwise be laid off.

Subcontracting. In recent years some com-panies have contracted out certain work whichwas normally performed by the union members.This has had tremendous impact on some


unions and can be compared to the effects ofautomation. Thus, it is mentioned here.

Work which is subcontracted usually is in thecategory of work customarily performed by ourmembers, biit it may also incl.ide new work. Inthis regard, the union should include a clause inthe collective bargaining agreement so that allsituations will be covered.

Ov ertime. The pages of labor history are fullof references to the continuing fight to reducethe workweek so that the worker may have leis-ure time to spend with his family. In 1965, theposition of the AFLCIO and the CLC is a35-hour work eek. It is hoped that this willbe accomplished through legislation in the nearfuture. Until then, however, our local unionscan make an attempt to reduce the workweekcontractually, as did Local 7 when it recentlynegotiated a 371/2-hour workweek with theBurroughs-Wellcome Company.

In conjunction with a reduced workweek, onemust think of the tremendous number of over-time hours worked in industry. A recent studyby the Bureau of Labor Statistics (Employmentand Earnings, May 1964) showed all manufac-turing average weekly overtime hours were 3.4hours for production workers, the highest thefigure has been since January 1960. For thechemical industry this figure was 2.8 hours ofaverage weekly overtime. Many jobs could beprovided if our contracts prevented the work-ing of overtime hours or if they provided pay-ments for overtime which were really penaltypayments. Too many union members look uponthe overtime clause as a way to increased earn-ings, when the purpose is to make overtimework so expensive that employers will notschedule overtime work. To keep overtimerates a true penalty payment, the AFLCIO andthe ICWU position is that all overtime shouldbe paid at a minimum of double time.

Length of AgreementsMergersPlant Clos-ings. The trend toward longer-term agree-ments in the chemical industry indicates thatsome second thoughts should be taken about thisquestion in light of the possibilities for changebrought about by introduction of automation,the possibilities of merger or acquisition, andthe likelihood of department or plant closings.

The companies are interested in establishingstable labor costs for long periods of time, andunions are interested in securing the best pos-

sible economic package for their members.However, the highest wages and most liberalfringe benefits for active employees are smallconsolation to the worker who has been displacedfrnm hia joh.

Unless the labor agreement provides propersafeguards for workers and restrictions onmanagement decisions which will cover theabove situations, then the greatest protectionagainst job loss is a short-term agreement. If,however, the union has included in the contractthese clauses suggested above, then the lengthof agreement is not as important and may be thelever for additional monetary and fringe gains.

I CWU-Management Employment Referral Serv-ice. Automation causes workers to change jobsmany times during their worklife, frequently toentirely different types of employment and evenin different industries. The need to assist un-employed workers is urgent. They first needto acquire a new job but, secondly, they needassistance in securing employment in the indus-try which needs their special skills and wherethey can fully capitalize on the training alreadyreceived.

The ICWU and managements of chemicalcompanies can play vital roles in helping work-ers to relocate by establishing an employmentreferral service. We call upon the variouschemical companies to participate with us inproviding such a service to the industry. Theservice would serve two functionsaid to theworker and assistance to the industry.

In this mutual assistance effort, chemicalcompanies would report job vacancies and/orlists of surplus employees to the internationalunion which, in turn, would provide this infor-mation to unemployed members and other com-panies. Anticipated layoffs and projectedexpansions could also be reported and the infor-mation circulated throughout the industry.

We believe such a service is a proper functionof a responsible labor organization. We feel,too, that the managements of the industry rec-ognize that they have a redponsibility to unem-p'ayed chemical workers and will participatein this endeavor. Certainly, this exercise incooperation will fill a vacuum which now existsin the industry, and will not only help theunemployed but, in reducing training costs, mayeven be considered as having monetary valueto the companies.

STATEMENT


International Longshoreman's AssociationNew York, New York

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Statement by the International Lonashoreman'Association, AFL-CIO

AutomationThe Outlook for the Longshore WorkerChanges in the methods of cargo handling

were considered a serious threat to the jobs andincome of the longshore worker when the Inter-national Longshoreman's Association decidedto take action in the fall of 1958 against uncon-trolled introduction of such changes by employ-ers in the shipping and stevedoring ousiness.

On the eighth anniversary of that dramaticmass stoppage of longshoremen in the Port ofNew York it would give those of us who areresponsible for leading the ILA. great satisfac-tion to be able to report that we and the long-shore industry have taken long strides towardsolving the manpower problems that attend thecontinuing changes in cargo handling techniquesand cargo vessel construction. The objectivefacts, however, do not permit any such report.

We have not solved those of our problemswhich may be traced to technological change.Labor and management have tried, and we havemanaged, to produce certain contractual accom-modations. The results of our efforts are nomore than a stop-gap "solution." Th E. evidenceto support this conclusion can be read out ofthe statistics compiled by the U.S. Departmentof Labor in 1964 and 1965. Jobs have disap-peared at a phenomenal rate. In the contractyear 1951-52 there were 51,282 men employedunder longshore contracts in the Port of NewYork, the port area in which the most dramaticchanges in cargo-handling technology haveoccurred. In the contract year 1961-62, theUSDL reported only 27,134 men employedunder these contracts, a drop more than24,000 workers. The number has declined stillfurther in the period since the last contract yearcovered by the USDL survey.

In that 10-year period, total waterborne cargotonnage and general waterborne cargo tonnageincreased significantly. Total tonnage rose from139,395,000 short tons in 1953 to 154,476,000short tons in 1962. General cargo tonnagethat cargo which provides the principal sourceof longshore employmentrose from 12,061,000long tons to 13,902,000 long tons.

It is also significant that declining employ-ment and increasing cargo volume have been

accompanied by a decline in total longshorehours worked in the Port of New York. In thisport area there were 44,260,828 longshore hoursworked in the contract year 1951-52. In1962-63, the total had dropped off to 40,201,588hours.

Not all of this decline in employment wasadverse to the interests of the longshoremen.Some of it is traceable to jtrtifiable decasuali-zation of the longshore labOr J:,,rce. However,not all of the so-ealled "deeasualization" hasbeen accomplished in a manner designed tobenefit to the longshore workers who have hada right to expect employment and income fromwork in this industry. Buried in the effectsof the decasualization operations of tLe "tem-porary" bistate waterfront agency created byNew York and New Jersey are job opportunitylosses which are the consequence of unitizationof general cargo, container ship utilization, theadoption of bulk cargo-handling facilities andtechniques, and other significant equipmentchanges. Thus, while 47 percent, or 24,332 ofthe 51,282 men employed in 1951-52 worked700 or more hours, the 83 percent of the 27,134men employed in 1961-62 who worked 700 ormore hours amounted to only 22,506 men soemployed. In terms of total numbers, therewere 1,826 fewer longshore workers employed700 or more hours in 1961-62 than in 1951-52.

Clearly, the work force utilization percentagesreported by the USDL are capable of misleadingthe unwary. The decasualization process man-aged by the Waterfront Commission of NewYork Harbor trimmed away longshore laborforce which worked a minor part of the poten-tial work-year, but methods changes trimmedaway segments of the longshore labor forcewhich worked a major part of the work-yearas well as those who worked a minor part.

Longshore workers are earning less overtimeincome than ever before. In 1951-52 longshoreemployees' hours included 27.7 percent at over-time rates. In 1961-62 this proportion hadshrunk to 23.5 percent, according to the USDLstudy. The proportion is even lower today.

One other rather odd phenomenon arises in151


the past 10 years out of the policies of theWaterfront Commission. According to USDLdata, at the same time that between 757 and948 longshoremen left the industry's 10 or forceannually between 1958-59 and 1961-62 throughdeath or retirement, and another 2,065 to 4,655were being decasualized annually, the Water-front Commission was registering new entrantsinto the longshore labor force at the rate of1,990 to 2,854 per year.

The trends in these New York port area fig-ures point up the job problem posed for past,present, and potential labor force in the long-shore industry as a whole. The work of theindustry is increasing, and it is being done byfewer and fewer men. There is great pressurebeing exerted by government agencies, byequipment manufacturers, cargo vessel builders,trucking operators, insurance carriers, andothers to step up containerization and otherforms of cargo unitization, and to increase theuse of mechanized procedures for cargo loading.As the shipping lines and cargo handling firmsrespond more and more to these pressures, morelongshore jobs will be lost. It may be ;:rue thataverage earnings per longshoreman will con-tinue to rise under these conditions, but it isa foregone certainty that there will continueto be fewer longshormen around to enjoy theseincreased earnings.

The ILA began in 158 its efforts to persuadethe employers in the shipping industry to meetthe job problems posed by new cargo handlingtechnology decisively and before these problemscaused their most serious impacts on the long-shore employee. We used all of the techniquesavailable to labor unions in a free society. Thecatalog of our endeavors is long:

1. We conducted mass demonstrations.2. We retained an outstanding university

e,:onomist and expert on manpower problems.3. We insisted on the creation of an informal

joint labor and management committee to studyand discuss the problems surrounding automa-tion, to work within the term of our collectivebargaining contracts.

4. We took asnects of the problem to arbitra-tion for binding decision.

5. We made automation a major collectivebargaining issue in the industry's negotiationsin 1959, 1962, and 1964, and we conductedstrikes over the issue.

6. We presented urgent pleas to executiveagencies and legislative committees of Govern-ment to study automation in the shipping indus-try and in other industries across the Nation.

7. We surveyed cargo handling methods inforeign countries where different methods andconditions of employment prevailed for cluesto the handling of our own problems.

8. We studied the significance of each newkind of cargo handling equipment and each newidea for changing present methods of cargohandling, in an attempt to discover whether"progress" was likely to be the result of itsapplication to cargo movement.

9. We met with government, industry, uni-versity and labor union specialists to exchangeviews and information on the subject ofautomation.

10. We participated in international confer-ences on automation.

11. Principal officers of the ILA made count-less appearances before management groups inour own and other industries to stress the ad-verse job effects which can accompany thought-less and hasty adoption of new industrialtechniques. .

These activities of the ILA did have somebeneficial effects. We won protections of a sortfor the longshore worker, and where we did notget results we at least got sympathy. But Sym-pathy is only a preliminary condition for thesolution of the problems involved. We were, forexample, able to get the shipping industry toagree informally in January 1959 to a generalstatement of principles for approaching thetechnological problems of the shipping industry-nd the dockworker. It was this statement of.;)rinciples wlich launched our joint labor andmanagement nmittee on its quest for mini-mizing the hardships that can be visited onworkers by changing technology, and for equi-tably spreading the benefits of such changesamong workers, employers, and the communityas a whole. In that statement to the longshoreemployers we said, in part :

Our first obligation is to the longshore workers werepresent in all of the Atlantic and Gulf ports.However, we are prepared to give careful attentionto both the immediate and the future implicatimsfor business and the community of any proposalsthat come out of these discussiops. Be assured thatthe Union is on the side of technological progress.We do not aim to obstruct or discourage progress.At the same time, our concept of progress does notinvolve casting longshore workers adrift withoutjobs or income. All we ask is that where there isprogress, that it shall be progress for everyoneincluding the dockworker. One of the principlesto which we will hold firm throughout the courseof our discussions with the employers is that noprogram which calls upon the dockworker and hisfamily to give up eating can represent progress.

However, it has been a far cry from an agree-ment on general principles to the achievementof a functioning program which spells bothprogress and security for industry and forlabor in the face of automation.

Our current collective bargaining contractcovering the period from October 1, 1964,through September 30, 1968, contains provi-

INTERNATIONAL LONGSHOREMAN'S ASSOCIATION 153

sions which reflect the furthest point of advancein our campaign to meet worker and industryneeds in this era of rapid technological change.I regret to have to report that we are still farfrom having produced a satisfactory solutionto the job and income problems faced by thedockworker as a consequence of further changesin cargo handlinfr methods. What we do haveamounts to a --stop-gap arrangement achievedthrough the ordeal of that traditional trial byef-mornic combat, collective bargaining. Thoseprovisions in our contracts with the shippinglines that have a bearing on dock vorker securityin this time of evolving technological changerepresent nothing more than a truce over the

,. issues involved. We have yet to produce safe-guards against the economic disaster ,,nat liesahead for the dockworker as the shipPing in-dustry steps up its efforts to increase produc-tivity through the adoption of labor-discardingmethods of cargo handling.

We have since 1959 publicly and repeatedlycalled upon management to help develop a for-mal program of job and income protection forthe dockworker. We have called, at the sametime, for a chart for the future of projectedmethods changes. We have won only a faintresponse to these calls.

The cargo handling methods and practicessome new and some oldwhich continue to bea threat to the earnings and jobs of the mencovered by ILA collective bargaining contracts,include the following, among others :

1. containerization of cargo,2. preunitization of cargo by means of par-

tially enclosed pallets and by means ofopen units or boards,

3. bulk loading for liquid products, semi-liquid products, and for any cargo thatcan be pulverized,

4. gluing of cartons and bags to one anotherto make up a single unit,

5. the use of steel strapping, nylon tape,twine, and steel wire to preunitize cargoon shipping line skids or on the shipper'sor transporter's own lightweight pallets,

6. enclosing cargo in a cardboard or woodframe, or strapping it to a pallet or skid,

7. shipping liquid cargo in bulk in very largetanks carried on the deck of a vessel,

8. the use of rollers on trucks which movecargo to and from the piers,

9. the use of side port loaders,10. unloading cargo from the tailboard of

the truck onto skids by other than laborworking under ILA contract, and

11. the use of one or more fork-lift trucksin the hold of the vessel.

Each of these shipping practices has a sig-nificant effect on the work time available to the

dockworker. Each of these practices has yieldedmarked savings to the employer and markedlosses to ILA labor.

No better proof of the adverse impact on thelabor force and the favorable impact on theemployer's costs is needed than an examinationof ship turnaround data in the port of NewYork. Vessels that used to lie in port for 60hours while unloading and loading cargo, nowtake from 8 to 20 hours. Prepalletization ofincoming whisky cargo in the form of 1- to 2-tonunits has cut turnaround on such vessels from5 to 2 days of work. The side port loader canhandle at least 35 drafts per hour, eliminating4 to 6 hours per man from the hours used forhandling cargo by conventional means.

The growing diversity of commodities whichare being shipped in containers or in other pre-unitized forms is well illustrated by a sampleof such items reported in a study made for theILA. The following are either shipped in or outby preunitized means:

whiskyCoca-Cola concentratecanned transmission fluidcheesesheets of rubberPepsi-Cola in drumscanned fishmortar in bagstiletelevision tubesreelstandscanned tomatoes--fiberglass rollslumberwine in gallonsfilmtoysart materialselectrical appliancesrubber tiresoil in drumsmayonnaiseflour in bagsjuke boxescanned pineappleglass tubingglass sheetssteel wire in coilssteel sinkspaintelectric meterspowdered plastic in bagsdiced synthetic rubber in sacksrecording taperubber hose

And this is only a partial listing.We have never raised general objections to

the shipping industry's attempts to introduce

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cost-saving approaches to their operations.But we have objected and will continue to objectto cost-cutting which is labor-discarding.

The protection we seek for the dockworker isno different in principle than the protection thathas been built by the Federal Government intothe operations of our shipping lines. The ship-ping lines receive Government subsidies whichguarantee them a profit on capital used in sub-sidized operations. They are permitted tax-freereserves under their subsidy contracts. Theyget 100 percent mortgage insurance by the Gov-ernment to make it cheaper for them to borrowmoney for converting existing vessels, or forbuilding ,i.ew container ships.

We of the ILA are not willing to stand by andwatc:i the shipowners jump off to ever higherprofits from the top of a mountain of unem-ployed dockworkers.

'' he shipping lines can enjoy ample cost-savings from containerization and preunitiza-tion alone without discarding one longshoremanor one man-hour of working time. Such cost-savings accrue through the following:

1. reduction of the costs from lost cargo,2. reduction of the costs from damaged

cargo,3. reduction of the costs from detoured

cargo,4. reduction of the costs from stolen cargo,5. reduction of the costs from repairs to

cargo in transit,6. reduction of the costs which arise from

cargo deterioration in transit,7. reduction of the costs of time lost in

customs,8. reduction of costs through the time

saved in speedier turnaround of vessels,9. reduction of costs through time saved

by quicker discharge of the load at theport of destination,

10. reduction of the costs to the shipper ofmultiunit export packaging,

11. reduction of insurance costs, and12. reduction of the costs of time spent in

handling cargo documents and doingpaper work.

The employers in the shipping industry haveadopted a position which is traditional through-out industry in the United States. As theirlabor-discarding methods are introduced, theysee opportunities for improving the wages andfringe benefits of those workers who are notdiscarded from the industry's labor force. Suchan approach regards human beings as expend-able. Too many employers regard labor as justanother factor of production. It is an easy stepfrom this view to that of treating the laborforce in the same manner as industry treats

obsolete industriai techniques and machines.This is the heart of the matter for the dock-worker. We mean to continue to campaignagainst the treatment of dockrorkers as expend-ables. We campaigned successfully in the pastfor protection against the hazards of industrialaccident, the burdens of old age, and the risksof ordinary unemployment. In each instanceGovernment acted to protect the worker on thegrounds that such burdens are not properlyheaped on the employee. These risks were,rather, additional employer costs of doingbusiness.

We maintain that the unfavorable employ-ment effects of changes in technology mustcome to be regarded as an added cost to theemployer who puts such changes into effect.Business investment in new techniques must bebroadened out to include any human costs thatmay be involved.

We believe that the Federal Government musttake steps to cope with the technological dis-placement of labor force. Industry is not upto the task, and collective bargaining over theissues involved cannot produce lasting or satisfy-ing results. A technologically displaced workermust be treated as a ward of the Government.Such a worker has invested all that he had toinvest in his industryhis strength, his ability,and his years. All we ask is that this invest..ment be treated with at least the same tenderconcern that money investments are treated intimes of stress. Moreover, capital is movable,but the average dockworker's skills are nottransferable. And, our statistics show that heis beyond the age when a man can be considereda good prospect for retraining for work of thetype available in industrial activities which aregrowing.

Much of the attention of the ILA and the em-ployers in the shipping industry has centeredon the Port of New York. This does not meanthat the other major East and Gulf Coast portshave developed job or income stability, or thatthey have met the problems arising out ofchanging methods with some happy solutions.The dockworker's job security is even shakierin some of our eastern ports than it is in NewYork.

In New York, there are about 24,000 long-shoremen available for work, yet peak portneeds on any 1 day are filled by no more than19,000 longshoremen, and such peak days areunusual.

In Baltimore. there are less than 4.000 long-shoremen available for work, but peak-dayemployment is about 2,800.

In Philadelphia, there are about 7,000 long-shoremen, with only about 3,000 at work ona peak day.

INTERNATIONAL LONGSHOREMAN'S ASSOCIATION 155

In New Orleans, there are about 15,000 long-shoremen, with peak-day employment at about6,800.

And so it goes from port to port in EasternUnited States. Furthermore, average dailyemployment of longshoremen is typically farbelow peak-day levels. The work is casual, andthe hiring commitments are short. Longshore-men are employed for 4 hours at a time ; this isthe extent of the employer's commitment whenhe hires the dockworker. In much of Americanindustry, the worker is hired by the week orthe month. As a minimum, some industrieshire workers by the day. Some even hire work-ers by the year. In the very shipping industrythat hires longshoremen, the minimum employ-mmt of vessel personnel is on a voyage basisand at a monthly rate of pay.

The annual earnings of longshoremen high-light further the security problem confrontingdockworkers. In the port of New York, dock-workers average about $5,000 a year, while inNew Orleans they average about $2,000 a year.In Galveston, the average earnings are evenlower. The hourly rate of pay is for all intentsand purposes similar from port to port, but thehours of working time vary widely. Hence, theannual earnings vary widely.

So that there can be no misunderstanding ofwhat the ILA regards to be inadequate con-sideration of the dockworkers' problems by theshipping industry, a summary of the key pro-visions pertaining to job security, cargo han-dling method changes, and flexible use of thework force in our October 1, 1964 to September30, 1968 collective bargaining agreement is setforth below. We of the ILA do not intend toderogate the results of our best bargainingefforts to date. But neither we, nor anyoneelse, should exaggerate the significance of theseresults. We have not solved the dockworker'semployment and income insecurities. We havesimply been groping our way towards solutionswith the best means at hand. It is simply theplain fact that the best means available at thisdate in our Nation's history are not good enough.

Some of the provisions of our new Port ofNew York contract provide:

1. A $125-per-month pension for employeesretiring between April 1, 1965, and January 1,1966. A $175-per-month pension beginningJanuary 1, 1966, for retirements of employeeswho attain age 62 and have 25 years of service.

2. A disability retirement benefit, beginningJanuary 1, 1966, of $125 per month for an em-ployee at age 45 after 15 years of service, up toa maximum of $175 per month after 25 yearsof service.

3. Beginning April 1, 1966, employees with

700 or more hours of pay from April 1, 1965,to March 31, 1966, are guaranteed 1,600 hoursof annual income in the contract year October 1to September 30. Payments, up to 75 percent,of the guarantee are made after the first three-quarters of the contract year. Employees whoare away from work and are receiving benefitsunder workmen's compensation, disability law,or the ILA and management Welfare Plan re-ceive credit at the rate of 20 hours per weektowards the 700 hours qualification. Grossearnings received by an employee in the incomeguarantee period are deducted from the incomeguarantee. If an employee fails to report forwork when oniered out or if he fails to makehin.self available for work at 7 :55 a.m. in thework section in which he is registered, he loses8 hours of guaranteed income. A man whoreports for woek as ordered in an initial periodbut fails to return to work if reordered for thenext period loses 4 hours of income guarantee.An employe who fails to make himself availablefor employment in accordance with the stand-ards of the agreement can be disqualified fromreceiving the income guarantee.

4. As of April 1, 1966, the employer has theright to hire only the number of clerks, checkers,other crafts, and terminal labor as are necessaryto perform the work.

5. All frozen details are eliminated.6. Detail men, when ordered in, are assign-

able at the discretion of the employer to anyother productive work within their craftjurisdiction.

7. When 250 regular checkers and clerks withvalid seniority car& die, retire, or become per-manently separated from the industry in thePort of New York, employers who wish to elimi-nate hatch checking may do so if they deemsuch checking unnecessary.

8. '1 he employer has the right to distributethe members of the work gang to any assign-ment within the gang which they are qualifiedto perform.

9. Extra men addecl to a gang by the em-ployer may be transferred from gang to gangas needed.

10. The employer may transfer gangs fromhatch to hatch and ship to ship in a terminal,if the transfer does not displace another gang.

11. The contract standards for testing safety,health, and reasonable workloads on one or moreemployees are to be observed in making man-power shifts.

12. As of April 1, 1966, the employer has theright to drop two men from the minimum gen-eral cargo gang. And, as of April 1, 1967, oneadditional man is dropped from the gang.

13. The ILA and NYSA Human Relations and

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Implementation Committee is authorized towork on means for improving borough, area,and portwide mobility of longshoremen.

14. The Human Relations Committee is au-thorized to work out a system of penalties forabsenteeism and tardiness.

15. The existing seniority provisions are t )be reviewed so as to produce changes facilitat-ing portwide availability of longshoremen.

16. The employers have pledged to join theILA in efforts to close the Waterfront Commis-sion's employment register.

17. A Management-Labor Employment Coop-eration Committee has been formed to effectu-ate contract provisions relating to availabilityof labor, work force mobility, stability of workopportunity and earning 4, control of tardinessand absenteeism, procedures for chsing theemployment register, and arrangements forhaving ILA representatives at Waterfront Com-mission Hiring Centers to monitor hiring andassure carrying out -,he income guarantee pro-vided under the contract.

18. In addition, wages are to be increased by36 cents an hour, employer pension contribu-tions by 24 cents an hour, Welfare Fund con-tributions by 5 cents an hour, and Medical andClinical Services Fund contributions by 3 centsan hour over the 4-year duration of the contract.

To those who are not intimately involved oracquainted with the longshoremen's job andincome problems these few advances spelled outabove may appear to be impressive. We ofthe ILA who have struggled to produce thesefew gains have found in them no cause forcomplacency.

To those who are not intimately involved oracquainted with the managements who consti-tute the longshoremen's employers it may seemthat they have been willing partners in a pro-gram for coping with their dockworkers' prob-lems. This is far from true. We have inchedalong the road towards dockworker security,pulling the dead weight of unenlightened man-agement behind us.

We face the prospect today of having a hard-woia guarantee of an income minimum for thedockworker become his income maximum.

Our problem as a nation may be that industrygrabs too recklessly at opportunities for techno-logical change. We commend to the FederalGovernment the view along these lines expressed

by Professor Walter L. Eisenberg, chairmanof the department of economics, Hunter Collegeof the City University of New York, a leadingexpert on the effects of automation on the workforce. He puts part of the matter in thesewords:

Not all technological change deserves to be describedas technological progress. The history of industrialdevelopment in the United States warrants the con-clusion that the very quest for technological improve-ment has been institutionalized. Our industrieshave made a fetish of changing machine technologyand the methods for organizing and distributingproduction. Consideration should be given to thepossibility that an imaginative estimate of netsocial gains accruing from a specific change in tech-nology would show zero or negative results. Theimpression that grows out of study of the increas-ingly inflexible skill, experience, and other charac-teristics of the labor inputs into production is thatthere are substantial social cost-offsets to the spe-cific cost-reductions that may accompany particularchanges in industrial technology. Our economicanalysis of the consequences of technological changesmay be too narrow in conception. A more com-prehensive accounting of consequences may revealthat numbered among the technological "improv',.ments" are changes that produced merely different,rather than better, ways of producing some of theNation's output of goods and services. If a par-ticular firm's or industry's gains from a change inoperational techniques are more than matched bylosses incurred by the labor force, or by other indus-tries, or by consumers as a direct or derived resultof such changes, then innovations of techniqueswhich are simply changes must be carefully die-tinguished from the concept of technological prog-ress. "Progress" is a value judgment which hasbeen too loosely applied to the industrial manifesta-tions of the genius of laboratory scientists and engi-neers. An enlightened society should indeed fosterbroadly based economic achances through techno-logical progress. It should not, however, standready to underwrite blindly the price of changefor change's sake.

Professor Eisenberg's views cut to the rootof our concern over methods changes in theshipping industry. A sound evaluation of newcargo handling methods may well show that theshipping and other industries' profits from thesenew methods are overshadowed by worker andother losses. Perhap3 such methods changesshould be blocked.

We hope that Government will address itselfto this concern with imagination and boldness.If it does not, the dockworker and many anotherworker in American industry face a dismal,troubled, and turbulent future.

STATEMENT


International Union of Mine, Mill, and Smelter WorkersDenver, Colorado

Statement by the International Union of Mine, Mill,and Smelter Workers

The Commission, in dealing with the defini-tion of unmet community and human needstoward which the application of new technolo-gies might most effectively be directed, and theassessment of the most effective means for chan-neling new technologies into promising direc-tions, can only point the way to an accelerationof the process which is already creating employ-ment problems with which our societyunions,companies, governmentis seemingly unable tocope in adequate fashion.

We can only cope with these problems by adrastic lifting of our sights in several majorareas, and it is on this that we wish to concen-trate our statement.

First of all, our rich societythe wealthiestcivilization has ever knownis poor in manyvital respects. We have many needs as yetunmet which, if met, would entail massive publicand private construction projects. We have inmind here the tearing down of all suustand. rdhousing, urban and rural, and its replacementwith housing which we can easily provide withthe human and material resources our societycommands, the overhaul and rebuilding of ourobsolete and rundown public transportationfacilities, a long range attack on the waterproblems of the arid West and increasinglywater-short Northeast, a reversal of the pollu-tion of our streams, rivers, and lakes, and pro-vision of a host of public facilities in the formof schools, hospitals, parks, and the like. Youwill appreciate that this catalogue is not com-plete, merely illustrative. We are moving inall of these areas, but too slowly, and too un-imaginatively. We believe the Commission canmake a great contribution toward lifting oursights by setting forth, in monetary terms, aprogram of investment In these and other typesof projects that will be of a completely neworder of magnitude, but one within the capa-bilities of our economy mobilized to achieve abetter life for all.

Such a program would for many years pro-vide enough jobs to remove the threat of massunemployment that faces us in the next decade.It would ease the tensions which, as PresidentJohnson has said, will otherwise inevitably bringus repeated outbursts, like the Los Angeles riots

which shocked the Nation. It would ease thepressure of unemployment c: wage and earningstandards of the unorganized in the service andother low-wage industries, and of the self-employed in small business and uneconomicallysmall farming operation. It would meet theemployment needs of the millions of youngpeople who will soon be in the labor market.It would buy us time in which to plan kr abetter social order 20 or 30 years from now.

Ultimately, as such writers as Robert Theo-bald and Richard Heilbroner (Fund for theRopublic and the Ad Hoc Committee on theTriple Revolution) have cogently demonstrated,we will be faced with a situation in which ourproductive economy will be unable to providejobs for a large proportion of our adult citi-zenry, and where a living will have to be pro-vided for large numbers of people from sourcesother than earnings. We can look forward withanticipation to the continued contribution whichautomation and technological change will maketo the elimination of dull, heavy, and repetitivework such as still characterizes much industrialemployment. But the satisfactions which ensuefrom secure employment in work which isintrinsically challengingwork which placesdemands on human intelligence and capabilityshould be husbanded and equitably shared.

As we move into an era v iere employmentrequirements will inevitably diminish, we needto plan most intelligently for a balanced sharingof employment and growing opportunities forleisure. We can only sketch the broad outlinesof a comprehensive approach to this problem.one which would include earlier retirement, ade-quately provided for, an extension beyond highschool of the education and training of all ofour young people, a shortening of the standardworkweek, and much more extended periods ofvacation than are now available to most of ourworking population. By moving progressivelyin these directions, we can extend for manyyears into the future the opportunity of employ-ment for all of our citizens during the most pro-ductive years of their lives. At the same time,a better educated population can be preparedfor a more satisfactory enjoyment of the leisurewhich shorter hours, longer vacations, and

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earlier retirement will provide. Ultimately,with further technological progress, we mustprepare many of our citizens for self-fulfillmentwithout employment in the traditional sense ofproductive work. We hope that this stage canbe postponed through the approach outlinld, inthe interest of a vradual and planned transitionto a way of life for which many of our citizenswould now be unprepared.

In closing, we wish to express the convictionthat the objectives sketched here, and withwhich hopefully the Commission will broadlyconcur, can only be achieved as they emergefrom the workings of an informed and under-standing democratic process. We concur in thestatement which appears at the conclusion ofThe Triple Revolution issued by the Ad HocCommittee on the Triple Revolution : "Democ-

racy can only be rooted in a political and eco-nomic order in which wealth is distributed byand for the people, and used tor the widestsocie- benefit." Our organization welcomes thegrowing democratization of our societytheenfranchisement of our Negro population andother minority groups ; theii growing politicalawareness ; the Supreme Court's landmark deci-sion removing the hobbles with which ruralminorities too long have fettered our State legis-latures ; and the growing public awareness ofour economic problems as manifested by thedomestic legislative record written by the 89thCongress. Our union awaits the report of theCommission as an important contribution to aneven better understanding by our democraticsociety of the hope and the challenge whichmodern technology pri ,nts.

STATEMENT

Pkepared for the Commissionby tIsle

John Hancock Mutual Life Insurance CompanyBoston, Massachusetts

Statement by the John Hancock Mutual Lifeinsurance Company

Some general comments concerning three ofthe five parts in the Commission's charge fol-low. You will appreciate, of course, that theypertain primarily to the insurance industrytheonly industry whose technology is thoroughlyfamiliar to the writer.

1. Large-scale data processing machineshave been in use at the John Hancock since1955. The original equipment is still inase, but it has been augmented graduallyby more advanced machines. It seemsclear that the rate of technological changeis accelerating and an increasing challengeis presented to use most effectively thetools at our disposal.

As with most early users of computingequipment, this company first convertedroutine, repetitive accounting functionsfrom manual or electromechanical to elec-tronic processing methods. Only recentlyhas our attention turned to the more de-manding area of management informationsystems.

The number of employees in the homeoffice has shown a gradual increase, from5,143 in 1955 to 5,475 in 1965. A notice-able upgrading of jobs has occurred duringthis period as repetitive tasks have de-creased and systems and programing workhave grown in scope.

2. The future lines of development in

electronic data processing seem to beclearly indicated by the events of the last10 years. Electronic installations can beexpected to grow in both size and numberas the cost of computing ha. lware is re-duced. System complexity will increasesharply and there will be a growing de-mand for systems engineers versed in com-puting and communications techniques.

We anticipate a growing emphasis oncomputer understanding in secondaryschools and universities. Through ad-vances in modular programing techniquesand universal languages such as COBOL,use of the computer as a data processingtool will be within the reach of a growingnumber of people. First attempts at timesharing, such as MIT's project MAC, canbe expected to expane to much largerproportions.

3. Within the insurance industry, themajor unmet community and human needswe see arise from the wholly inadequateinsurance program of the average U.S.citizen. In part by use of electronic com-puters, we anticipate freeing our fieldforces from the routine clerical tasks ofpremium collection, accounting, eta. Theirfull time can then be devoted to carryingthe insurance message to the Americanpublic.

163

STATEMENT


Raymond H. Kahn, M.D.University of MichiganAnn Arbor, Michigan

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I shall try to set down a few general state-ments in the hope that they will be of someassistance.

a) The Commission and Congress are un-doubtedly fully aware of the past and currenteffects of technological change on our society.What has evolved in the last 20 years wouldhave stretched the imagination of any prog-nosticator of the future. In the area of biol-ogy, we have leaped from a purely taxonomicscience to what can best be described as a basicand applied science. We have seen within ourlifetime the development of a vast array ofantibiotics too numerous to mention, systemsof vaccination against dreaded diseases, skillsin surgery so profound they would not havebeen considered possible 20 years ago. Moreimportantly, the basic findings coming outalmost daily prophesize that we are on theverge of many more discoveries and advances.The cause and treatment of cancer, in all itsmany forms, are on the brink of being resolved;the ability to replace diseased organs withhealthy ones is almost a reality ; for the firsttime we are learning about congenital diseasesand their causes; mental disease and its treat-ment is slowly becoming a science and notjust an art. These advances are not surprisirgwhen one realizes that we now have on earthmore living scientists that ever existed in allrecorded history oZ man. Furthermore, pres-ent data would suggest that this figure willdouble by the year 1980.

b) With this revolution in technologicalchange, it is self-evident that the next 10 yearsmust be years of educating and communicatingthese changes to society and specifically to ouryounger people. The blue-collar worker and tosome extent the white-collar worker are alreadyin less demand, while jobs requiring technicallytrained personnel go begging. For example,there are now over 200 budgeted vacancies foranatomists in the United States, and with theadvent of more medical and dental schools, thedemand will be increased.

c) Thus, our society and specifically theState and Federal Governments must resolvethe problems of education and communication.

In the area of education, the basic questionwe must face is whether or not education, at alllevels, is a luxury, a privilege, and an invest-ment which is solely the responsibility of therecipient, or a service to society which societyshould be willing to ritzy for. I would take thelatter stand and suggest that the Federal andState Governments inust increase, their im-portant role in the training of teachers, sci-entists, and students. Programs such as theHealth Professions Assistance Act, the NationalDefense Education Act, and United States Pub-lic Health Service grants and awards must beaugmented and expanded to include all intel-lectual levels of our society. We need morephysicians, but we need more medical tech-nicians as well.

As far as communication is concerned, man'sability to follow our technical progress is hamp-ered by the sheer mass of material published.It is becoming practically impossible to followthe literature, and the problem will get worserather than better. The Federal and StateGovernments must continue to investigate waysand means of disseminating information. TheMEDLARS system, currently supported by theFederal Government, is a small beginning inthe area of medical literature which should befostered and expanded to other areas of tech-nical need.

d) With the increased availability of educa-tion to all members of society and with mech-anisms for communicating new advances, thecivilian industries will yeap benefits and, inturn, benefit society.

e) Thus, government at all levels must :1) make education a responsibility of society

in general by lowering tuition to tradeschools, community and junior colleges,as well as universities, rather than raisingthem as is the present trend ; providemore scholarships to deserving studentsat all levels of academic endeavor ; fosterthe training of teachers by making acareer in teaching an honorable, lucrative,and esteemed one;

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2) continue to promote scientific achieve-ment by stipend, scholarship, and grants.However, such support should be tied toa teaching role as well. In other words,I believe the scientist must be obligated

to teach his findings rather than expectothers to do it for him;

3) instigate mechanisms for exchange ofinformation utilizing modern computermethods at all levels of technical interest.

STATEMENT


Lockheed Aircraft CorporationBurbank, California

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Permeating a number of the points set out inthe Commission's mandate is the thought thattechnological change can potentially harm theNation's economy. We believe that it will beimportant to reshape the tone of these pointsto stress the view that technological change isvital to the continued growth of the economy, aswell as to improvement of our standard of liv-ing. Permit us to cite the experience of theaerospace industry in this regard.

In its early days, the aerospace industrybuilt planes made from bits of wood and cloth.These planes were slow and had limited useful-ness. Then designs were evolved that madeextensive use of metals and new propulsion sys-tems were employed. Now the industry is onthe verge of making the transition from theemployment of soft metal (aluminum) to hardmetals (stainless steel and titanium), and evenmore advanced propulsion systems will be used.Paralleling these changes in technology, wholenew industries have been spawned to imple-ment the new designs. Examples of new indus-try abound in the subsystems areas, such assuppliers of cooling equipment, auxiliary powersupplies, and avionics manufacturers.

An even more outstanding example of thecreation of new industry stemming from theexploitation of new technology is to be foundin the missile and space vehicle portion of theaerospace industry. Here again, the effect hasbeen to nurture the growth of new supportindustries in parallel with the growth of thevehicle manufacturers. Attendant to these de-velopments has been the creation of thousandsof new jobs throughout the Nation.

Relating to defining unmet community andhu man needs, we shall cite a number of press-ing needs without proposing solutions, recog-nizing that the Commission can relate proposedactions to these needs. In brief, outstandingcommunity and human needs that should betreated are :

a. Reinforced activities to reduce air andwater pollution in urban areas.

b. Accomplish research related to thegrowing geriatrics problem. In particular,research that seeks treatments for the ill-nesses unique to the aged, as well as re-search that is aimed at maintaining vigorin the aged, is urgently needed.

c. Developing solutions to the problemof providing satisfactory low-cost housingrequires both political action and techno-logical development.

Regarding the proper relationship betweengovernmental and private investment in theapplication of new technologies to large-scalehuman and community needs, not infrequentlythe introduction of new tech -,ology for statedpurposes requires Federal Government actionbefore significant technological progress can berealized. This is either because the new tech-nology is concerned with projects that are toocostly for private industry to afford, or politicalconsiderations render industrial activity un-attractive. Examples where new technologycan be too costly for private industry are giantcivil engineering projects spurring the intro-duction of nuclear power into the civilian econ-omy, and the development of high-cost, highlysophisticated aerospace vehicles. Examples ofwhere the introduction of new technology lagsbecause of political constraints are air andwater pollution and new forms of housing, thelatter due in large measure to archaic buildingcodes. Tn these situations, the Federal Govern-ment cc-n properly assume a position of leader-ship with private industry expected to assumea growing degree of involvement as rapidly asthe financial risks are reduced to reasonablelevels or as political constraints are set aside.

With relation to adopting measures whichwill facilitate occupational adjustment and geo-graphic mobility of workers, it is our firmbelief that most of the major corporations inthe United States have seen fit to diversify theirorganizations geographically for a variety ofsound business reasons. This characteristic ofour free enterprise system can be counted on inthe future to solve many of the problems im-plicit in this point. For example, the LockheedAircraft Corporation has diversified from asingle division located in California to 9 divi-sions with activities in 10 states within thespan of a single decade. Related to this pointalso, the current efforts by the Administrationto improve the economy of the Appalachianregion comprise excellent governmental actionsto attract industry to a new geographic region.

171

STATEMENT


P. R. Mallory & Co., Inc.Indianapolis, Indiana

CIAIL --.L L__ 71 77b 711,__11........... 0 !V _ 7r_ _otuteirtent uy 1-.11,9 iriutwry oc cu., Inc.For the past few years, and for an indefinite

time in the future, we have been and will beliving through a technological revolution saidby some to be greater than the industrial revo-lution of the 19th century. We agree with thisstatement. In the near and immediate future,it will be necessary for some areas of tech-nology to catch up with, and complement, otherareas where progress has been greater.

The technological improvements referred toabove will necessarily result in worker dis-placement during the next 10 years. On theother hand, with the economy growing therewill be more job opportunities. In view of theexpected greater leisure time and greater eco-nomic resources to our population, a shift willoccur in employment to the leisure time andservice industries. There will be an increasingnecessity for educating the worker, both thewage earner and salaried worker. In the areaof technology, there must be a shift to greaterunderstanding of materials and further medicalresearch. There will be a greater shift tourban communities, and especially to themegalopolises.

The most effective application of new tech-nologies, including those supported by the Fed-eral Government, for meeting unmet commu-nity and human needs would be in the area ofmedicine.

The most effective means for channeling newtechnologies into promising directions is forthe Government to encourage greater profit in-centive to industries. One method might beto give additional relief in taxes for research intechnologies which are considered to be themost beneficial for the Nation. This approachhas been initiated in several countries, includ-ing Canada.

In order to facilitate occupational adjustmentand alleviate the adverse impact of change ondisplaced workers coming from the necessity toadjust occupations, greater education and bet-ter education is necessary. Consequently, Fed-eral and local governments should give con-sideration to deductions for tax purposes of apart or all of educational costs, provided theeducation meets certain standards which areestablished to promote the public welfare.

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STATEMENT


McGraw-Hill, Inc.

New York, New York

Statement bu McGraw-Hill, Inc.The issues to be studied by the Commission

are of great national importance and worthy ofcareful and thoughtful investigation. Becauseof our concern for sound and rapid economicgrowth, and our particular interest in all typesof education and training, we at McGraw-Hillstrongly endorse your efforts to increase under-standing of these issues.

In the light of some of the hysterical pro-nouncements and exaggerated fears of "auto-mation," it is heartening to look forward to theobjective approach which is made possiblethrough the establishment of the Commission.

Much current discussion of this subject lackshistorical perspective and magnifies unduly theeconomic dislocation associated with techno-logical change. In the first place, it should berecognized that recent technological advancesdo not represent an abrupt break with historybut rather a continuation of the steady streamof discoveries, improvements, inventions, andnew techniques which have affected economiclife, particularly since the industrial revolutionof the 18th century. It is true that techno-logical change is cumulative and thus has aprogressively greater impact over time, but thisvery cumulation rules out the notion that auto-mation is a phenomenon peculiar to our par-ticular da- The great scientific achievementsof modem times are thus part of the longsweep of man's growing understanding of theuniverse.

In the second place, practical considerationsimpose a moderation and a regularity in thepace at which technological change enters theeconomic system. It is a long way from thefirst controlled atomic chain reaction to wide-spread economic generation of electric powerby nuclear reactors. Existing plant and equip-ment cannot be scrapped overnight even afterpractical applications have been developed frominitial scientific discoveries. Financial consid-erations also impose limitations on the abilityof corporations to innovate. Consumer marketsadapt to new products only with a considerablelag. Although our economy is noted for itsdynamism and flexibility, even in so responsivea system change necessarily evolves at a fairlymoderate pace.

In the third place, data on the rate of pro-ductivity improvement in the United States

show quite clearly that there has been no reallymarked escalation in the rate of technologicalchange over a long period of time. Output perman-hour can change because of forces otherthan the introduction of machinery, but cer-tainly a marked escalation in the rate of tech-nological change would be reflected in a markedescalation in output per man-hour, and therehas in fact been no such marked change inproductivity growth.

In the fourth place, the low level of currentunemployment rates demonstrates the invalid-ity of the hysterical notion that the machine isabout to throw us all out of work. Since 1961,plant and equipment expenditures have risensteadily and substantially, yet during this sameperiod the unemployment rate of expP..iencedwage and salary workers has declined steadilyand substantially and is now almost down tothe low level of early 1957this despite thefact that the average workweek in manufactur-ing, which in the long run has shown a pro-nounced shortening, is today higher than in1957.

If, then, it is a mistake to suppose that weare faced with a crisis because of advancingtechnology, does this mean that technologicalchange poses no problem? Not at all. Changealways brings temporary dislocation which forsome business concerns and some individualscan produce distressing effects. The solutionis not to be found, however, in going back tothe horse and buggy but in improving the abil-ity of society to adjust to and capitalize on thischange. The primary need here is the develop-ment of better systems for education arid train-ing of the labor force, as well as private andGovernment programs designed to facilitate themobility of labor and ease the problemsfinan-cial and otherof transition from one job ortechnique to another. We need not add that aprosperous and rapidly growing economy is anecessary prerequisite to these transitions andadjustments.

At McGraw-Hill we are devoting vigorousefforts to the development of job training sys-tems and to the improvement of textbooks,audiovisual aids, and new and more effectiveeducational means. Education is the basic keyto many of the issues under consideration bythe Commission.

179

STATEMENT


Metropolitan Life Insurance CompanyNew York, New York

avtntomont, hy the Motrnpolitnn rife, Insurfince rot:wimp,Role and Pace of Technological Change

Both the long-term trend away from farmemployment to nonagricultural business andindustry, and the more recent employmentshifts from the goods-producing industries tothe service lines, resulted in large part from thetechnological progress of past years. As thesefundamental transitions were developing, over-all employment expanded generally except dur-ing business recessions, indicating a basicability of the U.S. economy to absorb workersdisplaced by technology. As strong evidenceof this, new plant and equipment expendituresby business in the United States have climbedfrom $20 billion a year in 1950 to an expected$50 billion in 1965, and during this period some13 million new jobs have been added in theU.S. economy.

In fact, it would be very helpful if the usersof unemployment data would focus more oftheir attention on the low unemployment rateamong married men at 2.4 percent, instead ofonly the average rate for all workers at 4.7percent (as of this writing), and if at leastequally ample data were available OP job vacan-cies and forward planning for employment.

Although automation has been developing foryears, the type most often discussed may be inits early stages--computerization, cybernetics,etc., possibly leading to a reorientation of ourbusiness and industrial structure. There is, ofcourse, a limit on the degree to which businessand industry is adaptable to automated pro-cesses. Various lines of activity are very dif-ferently suited to the introduction of intensiveautomation.

New industries producing new products maybe heavily automated at their inception. How-ever, there is more concern now with the tran-sition of established industry to more auto-mated operation. The time required forsuch transition is both costly and beneficial.The cost element is obviousthe beneficial as-pect of the slow pace perhaps less so. Thecomparatively long time between the first stepstoward automation of a process and actual in-stallation and full functioning allows time forattrition, for each firm's own planning regard-ing internal shifts of the current labor force,and for any other type of preparation which

might be devised and tailored to a particularindustry or business. Much of the current dis-cussion has been stimulated by the actual in-stallations, and little attention is paid to thenecessary planning period.

As one illustration, the Metropolitan LifeInsurance Company, one of the Nation's largestcompanies, is a major user of electronics equip-ment for data processing. We were pioneers inthe use of large-scale computers in offices, hav-ing a major operation installed and fullyprocessed by a computer as early as 1955.Our use of automatic data processing equip-ment has grown steadily through the years, andwe now have in operation 30 electronic com-puters handling a wide variety of clerical opera-tions. While this experience does not qualifyus to forecast the possible effects on the wholeeconomy and structure of the Nation, it never-theless enables us to offer such opinions as canbe derived from our own 10 years of develop-ment, experimentation, and use of automaticdata processing equipment.

The obvious social benefits of these techno-logical improvements in the insurance businessare the contribution which they can make to-ward lowering costs and providing the publicwith more protection for their money, and theimprovement in quality of service to our 45million policyholders.

Impact of Technological Change and UnmetNeeds

Owing to the high level of economic activityand to the relatively slow pace of progress, theresults of automation in industry so far havebeen reasonably orderly, even with changingjob requirements over recent years. It is onlynatural to expect that a prosperous economycan better accommodate workers displaced bytechnology than can an economy in which theseworkers are competing with more numerousothers, unemployed for different reasons.

Industries and occupations most affected byautomation, both in the past and in the yearsto come, are those involving easily definablerepetitive procedures and processes, eithermechanical or clerical. Geographically speak-ing, it is difficult to pinpoint an area or areasin which automation might be an overriding

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factor. With the exception of the fixed locationof natural resources and the mechanizing oftheir extraction, geography in itself is notusually significant.

A recent study by the Bureau ,)f Labor Sta-tistics on technological trends in selected majorAmerican industries revealed that technologicalchanges presently in view would probably bringreductions in employment in 1970 in some 1,9.of the industries surveyed, while growing a.:mand in 14 other industries is expected to resultin increased employment along with techho-logical improvements. It is significant thatthese latter 14 industries, which included insur-ance, accounted for two-thirds of the employeesin all the industries surveyed.

It is recognized that specific individuals maysuffer from automation. Some workers maylose jobs (although not at Metropolitan) andsome firms may lose markets as a result ofrapid obsolescence and other factors. But notall automated processes have the same effec'Some will eliminate jobs, while Athers will re-quire more labor. Moreover, advancing tech-nology creates new and better jobs andbroadens markets. Needless to elaborate, therecan be no direct balance between these plusesand minuses. Investment in education, at alllevels, emerges as a very important tool. Thisis necessary all along the line, from vocationaltraining and on-the-job training in a specificbusiness to the attainment of university degrees.

An account in somewhat more detail ofMetropolitan's experience in the mechanizationof office work may be of interest to the Com-mission. Metropolitan was a pioneer in theuse of punched card equipment, in the introduc-tion of management controls, such as workmeasurement, in functionalized work assign-ments, and in other now familiar devices usedto lessen the cost of recordkeeping and dataprocessing and to adapt the company's require-ments to the increasing number of youngpeople, particularly young women, who scughta rather simple clerical job at the beginning oftheir careers, but who did not expect, with anycertainty, to continue clerical work for the fulllength of their lives.

We introduced general purpose electronicdigital computers into our record processing in1954, and after 5 years' experience came to theconclusion that we should press ahead with theapplication of the new means of recordkeepingand data processing as fast as we could.

One of the first steps taken following theplacing of the purchase order for our firstmajor computer in 1953 was to explore asthoroughly as possible the effects which auto-mation would have on our organization, em-ployment, job requirements, etc. Policy was

developed and published for the guidance ofour executives which, in summary, provided(a) for keeping our employees fully informedas far in advance as possible of the projectedchanges, and (b) for assuring all concernedthat no employees were to be terminated, laidoff temporarily, downgraded, or suffer reduc-tions in salary because of technological changes.The company would undertake to retrain,where necessary, and transfer displaced em-ployees to other positions of a comparablecharacter wherever possible, but in any eventtransfer them to a useful position. Double dis-placements would be avoided and other stepstaken to eliminate or reduce as far as possibleany adverse effects on our employees. Thispolicy has been scrupulously carried out despiteextensive new applications of automatic dataprocessing over the past 10 years. It has beenfacilitated by a policy of "recruiting fromwithin," and employee development andpromotion.

Like many other companies feeling the effectsof the low birth rates in the 1930's, we had for20 years (or since the early 1940's) experi-enced severe difficulties in attracting and re-taining adequate clerical help to do the neces-sarily tedious jobs which some of ourprocedures involvedprocessing new policies,premium notices, receipts, claims processing,and routine correspondence and notifications.The transition to automatic data processing,where it has been applied, has been effectedwithout any involuntary separations from ourpayrolls. This has been a matter of policy aswell as of fact.

As has been the case elsewhere, Metropolitanhas found that employee displacement has notoccurred nearly as rapidly as was forecast.As a matter of fact, normal attrition fromresignations, deaths, retirements, etc., far ex-ceeded the number of employees offset by auto-mation. Our primary task was, therefore, notone involving numbers of people, but rather thereassignment and retraining of such employeesas were displaced. Automation only added in arather minor way to the process of trainingand retraining already familiar to us becauseof attrition and promotions.

Another pertinent factor has been our bur-geoning national economy. Our own businesshas grown and expanded apace with it and isexpected to continue to grow in the future.While electronics has helped up to handle thisincreased volume, the growth of our businesshas also helped us to place available employeesin suitable vacancies in different units.

Our objective in utilizing modern electronicautomatic equipment is to enable us to providebetter service to our 45 million policyholders

METROPOLITAN LIFE INSURANCE 185

at a reduced operating cost. Savings in clericaland administrative costs are of direct benefitto our policyholders and help us to providethem with insurance protection at favorablerates. Lower costs benefit millions of families.

The overall effect on the composition of jobsin those areas where computers have been ap-plied has been to reduce the routine, repetitive,and monotonous types of work and to increasethe more technical, creative, and challengingpositions. In our particular case, there hasalso been a reduction in certain types of semi-manual skills, such as typing, although this hasbeen partially offset by increases in the numberof key punch operators. At the same time,there has been a marked increase in the numberof people directly engaged in electronics opera-tions, such as programers, computer operators,auxiliary machine operators, tape librarians,etc. We would expect this trend to continue.We are currently developing and installing adirect wire computer hookup between our homeoffice and some 900 district offices, which willfurther accelerate this trend.

On the whole, it would seem that the prob-lems, and possible problems, have been magni-fied and given more adverse publicity than theydeserve. In May of this year, Governor NelsonA. Rockefeller released a summary of a reportof the Advisory Committee on the Impact ofAutomation. The committee noted that therehave been problems of employee displacement,but most of these have been met. It likewisenoted a number of other rather favorable de-velopments which are, on the whole, consistentwith our own experience. The committee re-port has many items which are very pertinentto the Commission's studies.

Automation has and will continue to have animpact upon office employment ; but while ex-tensive readjustments may be required, we seeno need, on the basis of our own experience, toview the situation with alarm. Automationwould appear to represent an opportunityanother step forward in the technology whichhas produced our abundant economy. Alreadyit would appear that such displacements ashave occurred in the office are being absorbedin other services, and that such displacementshave not cccurred at a rate which is beyond thecapacity of the economy to absorb.

Of course, even in Metropolitan we have notgone as fast as we would have liked, for a widevariety of reasons. We have, however, madevery considerable progress although we wouldhesitate to say just how many more clerks wewould have in the absence of computers (or forthat matter, without electronic accountingmachines, desk calculators, adding machines,typewriters, etc.), since there have been too

many other changes in our operations for usto spend time making any detailed study as towhat we would be doing if we did not have themachines. However, the savings that have sup-ported the cost of equipment and of develop-ment work have come mainly in the eliminationof clerical jobs at the beginning levels wherethere is normally a rather high turnover rateranging from 20 to 40 percent per annum,mostly for reasons of marriage, family circum-stances, or promotion (normally rapid at thelower levels), which last plays an importantpart under our personnel policies.

We would like to emphasize that where humaneffort has been replaced by machine processes,at no time has the annual rate of replacementapproached the annual rate of attrition at thebeginning levels, from promotion and resigna-tion. We doubt that the average annual ma-chine replacement rate has been as large as10 percent of the annual turnover rate at thejob levels primarily affected. This means thatthe machine replacement rate by number ofjobs has probably been less than 1 percent ofthe total number employed by the company andhas not come anywhere near the annual rateof growth in the business.

While we expect that during the next 2 or 3years we will have a temporary bulge in therate at which machine processes will replaceclerical efforts at the lower job levels, the con-clusion that can be drawn from past experienceis that the rate of company growth will prob-ably continue to exceed the annual rate ofreplacement of human effort by mechanicaleffort, although there may be short periodsmeasured in months, the culmination of severalyears' development work, where the reversemay temporarily be the case.

Metropolitan has not discharged anyone, re-duced his salary, or laid off anyone temporarilybecause of mechanization of clerical work, andhas no intention of doing so. While the numberof jobs at lower levels in future years will beless than it would have been in the absence ofmechanization, we think the opportunities athigher levels will be greater, as well as morenumerous, than they have been. All this hasbeen true with respect to introduction of officemachines in the past and we expect that it willhold for the indefinite future.

What has been said with respect to the"mechanical replacement rate" in comparisonwith the annual growth rate of the businessshould not be interpreted as necessarily mean-ing that the total number of clerical jobs atMetropolitan will or will not increase in abso-lute number in the future. For a complex ofreasonsmechanization, changing businessmix, new methods and systems, etc.we be-


lieve that the productivity of the clerical forcewill continue to grow, and that it is conceivablethat in some years the coinciding impact of allthese factors may result in an actual reductionin the clerical force (by attrition). However,we also believe that there will be other periodswhen growth in number of clerical jobs willcontinue, although not at as rapid a pace as thegrowth of the business.

We would like to urge that the Commissionin its studies not overlook other factors in in-creased productivity which may be as importantor perhaps more important than automation oradvancing machine technologies. Increased ef-fectiveness of human effort, through modifica-tion of systems and procedures, change in mixof products, lowered overhead unit costs due toincreased volume, and increased familiarity ofpeople with their tasks because of continuingstability of employment, have all been substan-tial factors affecting clerical productivity atMetropolitan.

We think that this increased productivitywill undoubtedly contribute significantly in thelong run to reducing the cost of insurance forour policyholders, since Metropolitan is amutual company.

Although we have not made any survey ofthe situation in the life insurance industry as awhole, and there is a very considerable range ofexperience among life insurance companies asto rate of progress with mechanization, depend-ing on the complexity of the problem faced andthe extent to which they can take advantageof the experience of others, we would suspectthat the same thing would be true for our wholeindustry.

It must be borne in mind that when weare speaking of clerical work or paperworkrecordkeeping and data processingwe aretalking about matters that are the primary con-cern of about one-third of the people employedby the life insurance business. But only athird of theseor approximately 10 percent oftotal employment in the entire life insurancebusinessis directly affected by mechanizationof paperwork in the sense that these jobs area probable target for replacement by machineeffort.

The remaining two-thirds of the people inthe life insurance business are employed di-rectly in selling or servicing policykolders outof local offices ; that is, branch or district offices,or in professional and technical fields. Theeffect of mechanization appears likely to freethis latter two-thirdsespecially the sales forcefrom the presently necessary paperworkchore that can be an impediment to their mainactivities. To the extent that they can takeadvantage of this increased freedom to do a

more effective job, the cost of insurance shouldbe reduced indirectly, just as it will be reduceddirectly by the mechanization of paperwork;and the productservice to policyholders andpublicwill be improved. So it seems likelythat the direct impact of mechanization opemployment opportunities in the insurance busi-ness will be proportionately very small, overall,even though in certain narrow areas it may berelatively large in the long run, though slowin emerging.

We should like to paraphrase in this connection a comment made by Charles E. Silbernrin a recent article in Fortune magazine, tuthe effect that in speaking of automation wemust distinguish between what is technicallypossible and what is economically practical. Itseems to us that the implied restraint is one ofthe reasons for the rather slow pace of thebroad spectrum of activities that is sometimesreferred to as "automation" and for its rela-tively narrow fields of impact.

Another point made by Mr. Silberman thatseems to have a general bearing on the prospec-tive roles played by people and machines and onthe impact of technological change is that whilemachines have been developed that are veryingenious in processing information, in form-ing and shaping materials, and in fetching andcarrying things, they are not very good in see-ing what is going on around them, particularlyin seeing what needs to be done and in seeingnew situations and new ways to handle things.I would not want to underrate the numerous ad-vances in mechanical perception of color, tem-perature, pressure, etc., or the progress thathas been made with electronic character read-ing, nor underrate the prospect of futureadvances. But the fact is that people are pre-eminent at the job of seeing what is new andwhat is wanted; we believe that will continueto be so for a long time to come.

It seems that the planning and design, theexposition and argument, the perception andanalysis that are involved in selling, in controlof business activities, and in day-to-day rela-tions between a businesJ and its individualcustomers (not to mention a government andits citizens), are likely to be increased in thefuture and that this expansion will be inti-mately related to a continued rise in the stand-ard of living through the country. All of theseactivities will demand more and more man-power.

Channeling New Technologies

In developing effective means for channelingnew technologies into promising directions, itis important that a favorable climate for vig-

METROPOLITAN LIFE INSURANCE

orous business investment be sustained. Suchgoals as a successful war against poverty andthe provision of remunerative jobs for an ex-panding population cannot succeed indefinitelyby massive public works and artificial stimuli.Jobs will only materialize where business andindustry are investing to their own and theeconomy's best advantage, and where trainingis selective and related to real demand.

Capital investment in plants and machineryis the major factor in economic growth and ingeneral prosperity. Industries which obtain orgenerate investment capital and put it into mod-ern automated equipment make better productsat lower prices. Increase in demand for theselower-priced goods creates a need again foradditional employees to distribute and servicethem. Similarly, as complex new equipmentbecomes more prevalent, the demand for betterpaid repair and maintenance personnel in-creases.

Government Responsibility

It cannot be too strongly emphasized that aprosperous private economy is essential notonly for its own sake, but also to provide acushion for the dislocations which are bound totake place as technical advance continues andpublic demands change and expand. Preparingpeople for a future, however changed under newtechnologies, cannot be achieved by any whole-sale giveaway programswhether sponsored bygovernment or conceived on some other basis.The beneficial consequences of automation canbe attained only by adopting sound economicpolicies.

The rapidity of advances in automation doesnot change the fact that profits make invest-ment and investment makes jobsnow or inthe future. For business to invest at an opti-mum level, it is necessary to guard against aninflation in the general price structure. In ad-dition to the application of sound fiscal andmonetary policies, inflationary pressures can becombatted by continued and appreciable growthof productivity in our economy. By using moreand better plant and equipment and by trainingand utilizing labor in ways that increase outputin services as well as goods-producing lines, itshould be possible to arrive at lower costs perunit of output on a wide scale. Investment willcreate jobs if the means to do so is not con-sumed by extravagant demands upon businessand industry or siphoned off by heavy taxes orinflation.

In regard to the actual use of plant and equip-ment, it must be recognized that a consequenceof reduced hours of work has been some loss ofefficiency. As an illustration, a 36-hour week

187

for a large life insurance company's clerksmeans that a rather substantial amount of realestate, furniture, and equipment is being usedonly 36/168ths of the time. Since most of theobjects represented by this investment go outof use by obsolescence rather than by wearingout, the more intensive use through a differentmode of operation would contribute to a higherstandard of living through lower unit costs. Intheory, this might be done by shift operations,which are a familiar aspect of the manufac-turing field. However, the social habits of ourpeople are so strong and the difficulties of or-ganizing shift work so great that, with the ex-ception of some banks, very little has been doneso far as we know by any large institution. In-centives to the institution itself are not suffi-ciently great to overcome inertia of tradition.

We want to acknowledge that in the field ofcomputers and data processing, much of whathas been accomplished in the last two decadeswould have been impossible without pioneeringand development work financed by the FederalGovernment. Many of the things that havebeen done would have appeared economicallyimpractical to even the larger business units,and governmental interest in this field has, wefeel sure, tended to reduce costs indirectly.

We believe it follows from this that a ratherwidespread impression is correctnamely, thatthe larger the economic unit, the lower unitcosts are likely to be, and that the larger unitsdo in fact contribute materially to economicprogress and to the rise in standard of living,not merely by lowering unit costs, but bybeing able to finance development work thatcan later be used in many cases by smallercompeting businesses.

Over a long period, government at all levelshas come to play a more active role in theeconomic life of individuals and businesses,usually by laws and regulations directed at spe-cific economic symptoms thought to be undesir-able. In some cases, the impact of theseextensions has come to be much greater thanoriginally contemplated, because of changes inthe framework arising from technological ad-vances, population redistribution, etc., or be-cause of an increasing body of interpretationsometimes influenced by new circumstances andsometimes a too literal or too imaginativerefinement of interpretation.

The multiplicity of regulatory agencies hasbeen a retarding influence on economic expan-sion. In some cases two or more governmentagencies must be consulted before action can betaken. In some cases it takes years to get adecision that is needed to expand and createnew jobs.

--,


Almost every program of the government inthe economic and business field could, withprofit, be periodically reviewed in the light ofcurrent circumstances and future trend. It isalmost axiomatic with us that an operation thathas not been reviewed for 10 or 15 years usuallyneeds a thorough new look , times will havechanged, and there is a limit to the improve-ment that can be economically effected byconsidering small elements of the operationseparately.

Another matter that may deserve some at-tention is the contribution of governmentalregulatory activity to the rising tide of paper-work and recordkeeping. While much has un-doubtedly been done to ease the burden ofreports and questionnaires, it seems that when

new legislation is being considered, the Con-gress might well require from the responsiblecommittee a review of the probable incrementto the Nation's recordkeeping. Reviewing thepast 30 or 40 years, we need mention only theSocial Security Act, Income Tax Withholding,the Selective Service Act, the Wages and HoursAct, the Labor Relations Act, the Pension andWelfare Funds Disclosure Act, and the raPantMedicare legislative activities as examples ofsubstantial increases in paperwork incidentalto the basic purposes of the legislation. Whilemany things have been done by people workingcooperatively to simplify the recordkeepingprocesses in many of these areas, it is probablethat more could be done, perhaps by refrainingin some cases the basic concepts involved.

STATEMENT


National Association of ManufacturersNew York, New York

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of ManufacturersThe Impact of Technological Change Upon Our Economy and Society

Part 1. Some Observations on Automation andEmployment

Basically, let it first be said that we fail tofind hard evidence of drastic acceleration in therate of technological change.

True, there have been startling developmentsin particular industries, but if automation wereproceeding at anything like the rapid rateswhich have been claimed, the results ought toshow up in the form of either a rapid increase innet unemployment or a rapid rise in the rate ofproductivity growth, or both. But neither ofthese consequences is to be observed, at leastin the last decade or so in which the most dra-matic strides in automation are alleged to haveoccurred.

A further weakness in the thesis which linksalleged rapid increases in productivity to ac-celerating automation stems from the assump-tion that automation, or more generally thesubstitution of capital for labor, is the onlyfactor causing productivity increases. This,too, is an erroneous notion. Of course, pro-ductivity may increase because of technologicaladvances. But productivity may also increasebecause of improved management techniques inadministration and plant operation; it may in-crease because workers are better educated, orhealthier, or more mobile.

Clearly, investment in human capital, in edu-cation and training, has had and will continue tohave a substantial effect on our productivitymovements. More aggressive salesmanship inhome and foreign markets may increase sales,raise the rate of capacity utilization, and tothat extent increase the output per workerfrom given facilities. Productivity, in otherwords, is to an important degree a function ofthe salability of the output.

Like all processes of change, technology un-doubtedly results in short-run frictions in theeconomic system. These frictions contain botha challenge and a danger. The challenge is todistribute both the short-run adjustment costsand the long-run benefits arising from techno-logical change in such a way that the process

itself is not slowed down. The danger is thatthe short-run adjustment process will giverise to widespread acceptance of the conceptthat technology, of itself, creates long-termunemployment.

The key to the problem lies in the relation-ship between growth and productivity. Eachis a spur to the other. When an economy, anindustry, or a company is growing rapidly,technological changes can be introduced morereadily than in a situation involving little orno growth ; economies of large-scale productionare made possible ; and if growth is more rapidthan the accompanying productivity increases,no unemployment need result. At the sametime, the cost reductions resulting from tech-nological change and other sources of produc-tivity increase permit a lowering of prices ofthe affected products relative to all other prices.This, in turn, encourages increased demand forthese products, the exact impact depending onhow responsive that demand is to changes inprice.

This point that under conditions of rapidgrowth, productivity increases de not lead tocontinuing unemployment can be demonstratedin many ways. Internationally, the countriesof Western Europe which experienced relativelyhigh rates of productivity increase during the1950's, at the same time reduced their unem-ployment rates. This indicates that their econ-omies grew rapidly enough to absorb workersdisplaced by machinery and new entrants intothe labor force, as well as some of those unem-ployed at the beginning of the 1950's. In con-trast, the United States; United Kingdom, andCanada, with slower rates of productivity in-crease during this period, experienced increasesin their unemployment rates. (see table 1).

Looking at the industrial picture in theUnited States a similar picture emerges but itcannot be depicted with the same type of data.From a conceptual standpoint, there is no wayto analyze unemployment on an industry basis.Therefore, our national industrial comparisonmust be made between productivity change andemployment. Studies of long-run factors in

191


TABLE I. UNEMPLOYMENT TRENDS COMPARED WITHRATES OF PRODUCTIVITY CHANGE IN SELECTED

INDUSTRIAL COUNTRIES

CountryPercent rale of

productivity changelPercent unemployed

1951 1962 Trend

West Germany 4% 9.0 0.7 Down

Italy 4 above average 8.8 8.0 a

r zwueo ,

Netherlands 3 2.3 0.8

Belgium 8 average 9.8 4.0

Norway 8 1.1 1.4 Up

United States 2 3.8 6.6

Canada

United hingdom

2

2

below average 2.4

1.8

6.9

2.1 a

1 Average annual rates of growth in "real" GNP per employedperson 1950-60.

2 Not available in terms of an official unemployment rate. How-ever, the index of nonagricultural employment rose during thisperiod while the number of unemployed persons declined.

Source: National Industrial Conference Board; United Nations.

TABLE 2. RELATIONSHIP BETWEEN PRODUCTIVITY CHANGEAND EMPLOYMENT CHANGE IN 33 AMERICAN INDUSTRIES

1899-1953

IndustrY

Oil and gas productionPaperPrinting, publishingChemicalsPetroleum and coal productsRubber productsStone, thy, and glassPrimary metals manufacturingFabricated metalsElectric machineryTransportation equipmentMiscellaneous manufacturingTelephoneElectric utilitiesNatural gasMetal miningNonmetal miningTobacco manufacturingTextilesRailroadsLocal transitResidual transportTelegraphManufactured gasFood manufacturingBeverage manufacturingApparelFurniture'Nonelectric machineryAnthracite coal miningBituminous coal miningLumber.productsLeather products

Productivityincrease

Employmentincrease

+ Indicates a percent increase greater than that for the privatedomestic economy as a whole.

Indicates a percent increase smaller than that for the privatedomestic economy as a whole.

Source: Kendrick, John W., Productivity Trends in the UnitedStates, pp. 212-213.

the economy indicate that in industries withproductivity increases more rapid than thoseexperienced by the economy as a whole, em-ployment has grown faster than the overallindustry rate more often than it has grown atbelow average rates (table 2). Similarly, the

overall performance of the American economybetween mid-1964 and mid-1965 provides ashort-run illustration of what can be achievedthrough growth. With "real" GNP increasingat an annual rate above 4 percent, the economywas able to absorb an increase in the labor forceof more than 2 million persons, and at the sametime register a decline in unemployment.

Since World War II, companies in practicallyall industries have been automating their pro-duction lines and processes as rapidly as pos-sible. A survey by Automation magazineshowed that $10 billion would be spent in 1965to autorlate industry, with $6.5 billion goingfor equi ,Inent and $3.5 billion for controls.This amphasis on r.Aomation springs fromcomimli,:s' desire to reduce their productioncosts as much as they ma, improve their pro-duction, and increast- their output. The Ma-chinery and Allied Precincts Institute has statedthat the progressive reduction of equipmentprices relative to labor costs has increased theamount of equipment per worker over 175percent of the level 40 years ago.

But to put this situation in perspective it isimportant to consider the cost of automating.Yale Brozen of the University of Chicago, whospeaks with considerable authority in this field,points out :

To automate as completely- as possible with presenttechnology, only one major segment of the Ameri-can economy, manufacturing, would require an ex-penditure of $2% trillion (this comes to $12,000per man, woman, and child, and the total stock ofinanimate goods in the United States has been esti-mated to be worth only one-sixth more, $3 trillion).

Even to modernize manufacturing to the levels ofthe new plants built in the 1950's would requireover $500 billion, since total spending on newplants and equipment in manufacturing amounts toabout $15 billion per year. American manufactur-ing could not be modernized even to the technologyof the level of the 1950's for over 30 years, andthis is under the extreme assumption that all theexpenditure is used for modernization and none forexpansion. With the current division of capitaloutlays between modernization and expansion, mod-ernization to the level of new plants of the varietybuilt in the 1950's would require about 50 years.

To automate completely the manufacturing indus-try with no increase in total output would requiretwo centuries at current rates of modernization.If we expand output at the rate necessary to keepup with population growth, however, present ratesof capital formation will never result in completeautomation of manufacturing unless the cost ofautomation is reduced to less than one-sixth of itspresent expense. This is unlikely to occur withinthe foreseeable future.

Basically, the potentials of technologicalchange for increasing the standards of livingin the United States can best be realized by

NATIONAL ASSOCIATION OF MANUFACTURERS

the a doption of policies designed to foster max-imum sustainable economic growth. It isthrough this route that jobs can be createdin an economically constructive sense.

There are a great many forces and factorsbearing upon employment and unemployment.The net ultimate outcome for the near term orlong term is not yet clearly predictable. Atthe present trne, there are skills which are inshort supply and at the same moment there isincreasing need for new skills that seem almostunavailable. Gradually we note there are otherskills that seem less and less needed.

Until recently, trends in employment and un-employment seemed to favor the skilled asagainst the unskilled, nonproduction workers asagainst production workers, and white-collarpeople against blue-collar people. It is widelyassumed that these trends reflected funda-mental changes in the character of demand forlabor and that they could be expected to con-tinue indefinitely.

However, developments during the businessexpansion which began in 1961, and especiallyduring the past 2 years, have called this as-sumption into question. Actually, employmentof unskilled laborers and semi-skilled operatorshas been increasing faster since 1963 thantotal employment. The proportion of nonpro-duction workers in the manufacturing labor-force which had been rising steadily in the post-war period until 1960, has fallen slightly sincethat date. The unemployment rate amongblue-collar workers is below its level in theprosperous year 1957, whereas the rate forwhite-collar people is slightly higher than inthat year.

It is too early to say that the facts just men-tioned indicate a fundamental reversal of pre-vious tendencies. But they do suggest thatfears of the effects of automation on relativelyunskilled blue-collar production workers havebeen greatly exaggerated. Apparently, whenthe economy is prosperous and growing, em-ployment opportunities keep pace with the jobneeds of thP less trained and less skilled seg-ment of the population. There is no sign thattechnology is rapidly leading us to a situationin which a large residue of untrained and un-trainable people will be left with no place inthe productive process.

The man who is adaptable, trainable, and notemotionally imprisoned by his past working orliving environment will readily find and holdhis place.

Finding the best solution for the short-runfrictions which may accompany the process ofchange will help to preclude more drastic reme-dies which might endanger future productivityincreases. Minimum wage laws, job mainte-

193

nance, or job creation through artificial means,such as featherbedding or elimination of over-time by the imposition of stringent penalties,would merely result in a slowing down ofeconomic progress.

Resort to shorter hours of work as a meansof spreading employment opportunities, sinceit would undoubtedly be accompanied by pres-sure for maintenance of take-home nay. wouldnot accomplish its objective. Instead A wouldproduct an inflationary potential. While Amer-icans traditionally have chosen to take part ofthe fruits of productivity increase in the formof shorter hours, this should be a gradual proc-ess geared to the rate of productivity increase,not a sudden change adopted to solve ashort-run problem. .

Many companies are going to extraordinarylengths to make it possible for employees toswitch from work at outmoded, older jobs towork on new products in new facilities. Some-times this is done by locating new plants nearthose the company is closing and by extensivetraining and retraining programs to enableemployees to shift easily to new products andmore highly skilled jobs.

Some specific comments by significant com-panies regarding the outlook, as they see it, areset forth as part 2.

Part 2. Some Company Estimates of the Im-pact of Technological Change on EmployeePatterns in Next 5 to 10 Years

An Integrated Producer of Forest Products

Our job skill levels range from unskilled labor tomany highly specialized technical positions. Inlooking at our anticipated employment patterns forthe next 5 to 10 years we foresee no technologicalunemployment that cannot be absorbed by normalattrition. In the next 5 years we expect an in-crease in overall employment slightly in excess of10 percent. Within that increase we do expect asomewhat higher level of manual skill requirements,and a commensurate increase in the number ofclerical and administrative positions.

Our 10-year forecast indicates a decreased require-ment for personnel with limited educational back-ground. We plan to maintain our basic educa-tional requirement of a high school minimum.

In general, we anticipate manufacturing employ-ment to remain constant for the foreseeable future.It is expected that expanded production capacitywould offset any reductions in total employmentdue to automation. We feel that opportunitieswith this industry, as opposed to elsewhere, willenable us to develop an outside hiring programwith increased emphasis on getting better qualifiedapplicants in terms of available skills and the willto work. With a few local exceptions we believewe will meet these needs from the labor forceavailable in our plant communities.


In commenting on our attitude toward trainingopportunities, we strongly suggest some emphasison improved local training capabilities to meet thejob requirements within a geographic area. Itseems desirable that some type of concentratedeffort be directed toward the vocational trainingportions of our public school systems.

An Oil Company

The company foresees no acute problems in person-nel reduction which can be attributed to technologi-cal or economic change. Automation is inevitableand is viewed as an essential ingredient of thepetroleum industry's growth. Technological changein the industry is evolutionary. It has not beenunduly rapid so as to be of disruptive nature, andit is anticipated that the company's employmentpatterns for the future will not involve majorworker displacement. Technological change in theindustry wiii continue at a moderate pace which willenable the company to reduce personnel throughattrition primarily.

There is and will continue to be greater emphasison skills and education to keep pace with the re-quirements of technological change. We have lessand less need for unskilled workers. The petroleumindustry seeks trainable people in whom skills canbe developed to handle new procesies. In this re-gard, the company is able to provide for the train-ing of its employees. In most instances traininghas enabled our skilled and experienced employeesto attain competence with new equipment.

The employment of professional employees willcontinue at a substantial level, and small numbersof wage personnel will continue to be hired atseveral plant locations.

We do not foresee any great external (energysources outside the petroleum industry) techno-logical developments in the next 10 years that willaffect the industry.

A Flour Mill

The impact of automation and other technologicalchanges is obviously going to be much greater insome industries than in others in terms of produc-tion and employment. In spite of considerableeffort in the area of research and product develop-ment, the food industry is less technically orientedthan is the average U.S. industry, and thereforethe effect of technological change will be somewhatless.

In considering our company specifically, the valueadded by manufacture in flour milling is con-siderably less dependent on the efforts of manuallabor than on mechanization. Relatively few de-velopments have taken place in flour milling sincethe time when many of our mills were constructedaround 1900. The labor input of our newest millsis little 3.ifferent from that of our oldest. In otherwordr 'flour milling has always been a largelyautoi,Alted process.

In considering the manufacture of other food prod-ucts, we find the same general characteristic pre-vails, but to a lesser degree. Within the last 10years bulk handling of ingredients and flour prod-ucts has been largely effected. We see little further

change in the next 10 years. One significant de-velopment also accomplished in the last 10 yearshas been the development of automatic palletizers.These are now capable of taking cases of productsfrom the production stream and assembling palletsautomatically. One change which may be possiblein the coming 10 years will be that of convertingcustomers to the ordering of complete pallets of agiven product so that the pallet may be mechani-cally loaded onto rail cars without the present manhand-pulling of eases prior to shipment. The effecton employment would be minor, but increased vol-ume could be handled with the present complementof personnel.

As new plants are developed, increasing levels ofautomation will be employed which will requiresome upgrading in employment standards. Presentrequirements based on validated testing measureprimarily mechanical comprehension and adaptabil-ity. In the future the minimum qualifications willhave to be raised, but we see little employee dis-placement as volume increases will require addi-tional people.

One area where technological change has definitelyaffected employment is in the displacement of clerksand clerical supervisory personnel with the adap-tion of invoicing and other clerical tasks to thecomputer. The net result in our company has beena reduction of 350 field people from various partsof the country. This has been offset by the addi-tion of some 150 people at other plant locations.The types of people now employed are chiefly in thecomputer programing and computer operation voca-tions. While hiring standards are somewhat higher,a major part of the training is done on the job.In the next 10 years, we see much less of this typeof displacement since it has essentially been accom-plished. The total might reach about 50 percentof the net change of the past 10 years. We alsosee some switching from middle management skillsto computer technology.

While the effect upon employment will not be great,the major efficiency will be obtained in the materialusage. For instance, in the past 4 years, whilethere was some reduction in employment there wasa 40 percent increase in the number of items han-dled. This trend should continue to some extent.

A Ball Bearing Manuf acturer

Our views can best be summarized briefly asfollows:

1. We endorse and support the conclusions aboutthe effects of and solutions to the problems of`automation" presented in the Machinery and AlliedProducts Institute book, The Automation Hysteria,prepared by !leorge Terborgh. Both history andlogic int.lif.a'z technology does not result in a lossof jobs 7:r t,he total economy. Economic growthand incre...,ed welfare accompany automation andtechnologml change. The problems created bythese developments should be solved by steps tomake the labor force more flexible, mobile, andadaptable.

2. Our own experience has been that employmenthas increased along with the greater use of com-puters and the introduction of new technology andautomation. Total volume has risen and the distri-bution of employment among the various types of

NATIONAL ASSOCIATION

jobs has changed. We are in a better competitiveposition particularly vis a vis foreign producers.We have no way of disentangling the various forcesat work and determining just how many additionaljobs were created by increased automation andtechnological change but there has been an increase.

3. Looking ahead 5 or 10 years we anticipate adecline in our need for routine hand clerical, in-spection, and material handling workers. We ex-pect increases in the number of business machineoperators, engineering technicians, electronics tech-nicians, and machine tool builders. hese are inaddition to the changes resulting from normalgrowth.

4. Because of the diversity of problems and be-cause of their difficulty and the resultant need forvariety and experimentation in finding solutions,we suggest Government encourage private activityto facilitate occupational adjustment and geograph-ical mobility.

An Electric Utility Company

Like many other companies in the business of sup-plying electric energy, we ha- e had experiencewith "automation". It does present problems, butits effect on employment has been greatly over-rated. In our own experience, the change is grad-ual and the work force has been adjusted withoutlayoffs, through retraining and attrition. Here aretwo examples:. . . In changing over to electronic data-processingequipment, the shift stretched over about 10 yearsfrom inception to completion. No layoffs weremade, but there was some reduction in force throughattrition. Production increased, with a consequentlowering of the costs involved in customer billingand allied transactions.. . . Another change contrasts one of our oldersteam generating plants and one of the newest.The new plant was manned largely by employeesfrom the older plants, so the problem of dislocatingemployees by change did not occur. However, therewas an impact on the older plants, since they werenot operating when the system load was light. Inone sense, many of the employees in the old plantswere surplus, but it was not economically feasibleto abandon the plants. Even if on "standby",about the same number of employees were required.There were no layoffs.

Our substations have been gradually made "auto-matic" over the years. The operators are assignedto a group of stations, which tlney visit periodicallyor on signal. The total number has been reducedfrom that required when an operator was in at-tendance at the larger stations 24 hours a day, 7days a week. However, there were no layoffs.Attrition reduced the force, and conversion wasmade at a rate which did not make employees "ex-cess" except for a temporary period. The presentforce is more highly skilled and higher-paid thanthe former attending operators.

A computer has been adopted for the work of sys-tem supervision or load dispatching. As nearly aswe can determine, this will not cause any reductionin the number of men required. Its effect has beento absorb some of the more routine work, and im-prove the speed and quality of control.

A study has been under way, estimated to take 2

OF MANUFACTURERS 195

years, of EDP equipment applications to paperworkthroughout the company. Assuming that it is rec-ommended, we look for about the same sort ofproblem that was experienced in the changeoverfrom mechanical to electronic equipment in cus-tomer accounting.

The foregoing "automation" changes have causedproblems. However, the problem of displaced em-ployees is just as severe from causes that havenothing to do with automation. Development andinstallation of conveyors to handle coal has dislo-cated some employees. Others have been displacedby the substitution of Euclid earth-moving equip-ment for locomotives and locomotive cranes.

A change in the organization of our maintenancework in 1953 caused personnel problems similar tothose usually associated with automation. In early1953, each of our major power plants had a forceof skilled tradesmen large enough to handle theaverage workload. They were in trades such aselectricians, pipefitters, stoker repairmen, pipe-coverers, and painters. We also had a centralizedconstruction department which supplemented thelocal plant force for major projects. Late in theyear we established a skeleton force of generalmechanicscombination electrical and mechanicalrepairmenat each of the plants. The remainingtradesmensome 250were transferred to the cen-tralized construction and maintenance department,remaining in their trade. This disrupted previousreporting points, supervision, working hours andconditions. There were a few layoffs in 1958-1960,due to a lessening of new construction work. Arelatively smaller work force today is handling alarger volume of maintenance work. The reducednumber is due to reorganization of the work, not"automation". The skill levels and pay rates haveincreased materially.

In our construction activities, mechanical equip-ment has taken the drudgery out of mueh manuallabor, such as digging trenches and climbing poles.This is equipment such as bucket trucks, backholes,sod cutters, and tampers. It reduces manpowerotherwise required, but is not "automation."

In brief, we believe that changes in organization,in methods of doing work, in materials, and in useof power equipment have more effect on manpowerrequirements than "automation." In either case,the impact on employees can be lessened by plan-ning the moves to coincide with attrition, by re-training, by layoff allowances if there is no alter-native. Right now, in oar area, there is a shortageof skilled tradesmen and qualified learners.

An Airframe Company

Changes in the composition of the work force inour company over the past 10 years reflect a shift-ing of employment from blue-collar workers towhite-collar workers. Also, as generally expected,there is a sharp decline in the unskilled workercategory and a lesser decline of the semiskilledworker. It is significant to note, however, that therate of decline in blue-collar employment is slowingdown.

The changes in our work force over the past 10years are due almost entirely to our changing prod-ucts, which result from technological advances.The product shift from airplanes to missiles to


space vehicles has created the need for many moremanagers, engineers, and technicians, while de-creasing the requirement for production workers.Automation, although an important expression oftechnological change, has so far had little directeffect on the changing skill mix in our industry.However, as we continue seeking cost-cutting meth-ods and techniques, we expect automation to in-crease as a specific factor in changing our occupa-tional categories over the next 10 years.

During the next 10 years we believe that the trendof increasing white-collar employment in our in-dustry will continue, but at a slower rate thanduring the past several years. We also believethat the education and skill levels required willcontinue to go higher, causing even greater prob-lems for the uneducated and inexperienced person.

A Chemical Company

It is an almost impossible thing to predict wheretechnological change is going to be most conspicu-ous over the next 10 years. It has been occurringin practically all lines of activity and we have toassume that it will continue to do so, but wherethe greatest impact will occur in terms of indus-tries, jobs, and geographic areas is an exercise infutility.

Technological impacts appeared first in the produc-tive processes, both farm and industrial. Theyhave now spread to practically all lines of activity,including the white-collar jobs and the service in-dustries. The impact on employment has been mostconspicuous among factory workers. The effecthas been no smaller in the white-collar areas, butbecause more displaced persons in this group havebeen able to find other jobs, there has not been somuch clamor regarding the unfavorable impact onworkers. Perhaps this is because with somewhathigher average education and with the kind ofskills that can be adapted to a variety of jobs, thesepeople have greater job flexibility. In addition, thegrowth of the white-collar and service industryjobs has minimized the problem.

One key point is that the rising cost of labor, par-ticularly unskilled labor, is the basic justificationfor capital installations which eliminate jobs. Atthe present time average labor rate often is $3 perhour plus about $1 in fringe benefits. Four dollarsper hour times 2,000 hours per year creates a costof $8,000 per individual. If the job is a 3-shift,7-day per week activity, the labor cost is $33,600per year. A capital installation of $150,000 whicheliminates a jot completely will therefore make areturn of about 6 to 10 percent net after taxes oninvestment. This is exactly what has been goingon in the chemical industry and is accelerated everytime labor rates are raised.

The simpler jobs, such as packaging and loadingof trucks and railroad cars, are among the mostobvious points of attack, since most chemicals andplastics can be handled automatically. The samepoint applies to maintenance, however, since moreexpensive and more reliable equipment and greaterinstrumentation can be justified as a means ofavoiding maintenance work.

Obviously, the typa of wc :er most readily affectedis the nonskilled worker, since the only jobs left

are the ones requiring a high degree of trainingand a high degree of individual responsibility.Geographically the greatest impact is likely to befelt where there is the greatest concentration ofunskilled labor.

Unquestionably, as the insatiable demands of unionsare thrust upon industry, greater efforts will bemade to streamline and automate those tasks whichnormally and historically require the applicai, nof muscle and the human nervous system. Suchbeing the case, there of course will be resultantproblems for the Nation on the economy as a whole,particularly with regard to retraining and upgrad-ing the skills of our people.

There is likely to be a continuing gap between thedemand of industry and the location and capabilityof talent at any one point and time. Thus, inthinking in terms of the geographical areas whichare most likely to be in continued difficulty, onemight well identify portions of Appalachia as wellas particular concentrations of skilled and un-trained labor in the South. We will continue tosee a shift from rural to urban areas with all theresultant problems that may possibly occur withthis kind of migration.

Part 3. Channeling New Technologies intoBroader Areas

As pointed out in part 1, the economy's rateof growth and the levels of unemployment donot indicate that we have been experiencing anacceleration of technological advancement norcan we predict that such a period will occur inthe future. Further, new patent applicationsconfirm that view.

The NAM has pointed out in its statemer+,with respect to the State Technical ServicesAct of 1965 that the U.S. Department of Com-merce has established recently a Clearinghousefor Federal Scientific and Technical Informa-tion. The purpose of this monthly publicationis to disseminate to scientists, engineers, librar-ians, and management new-classified Govern-ment technical information. This is such arecent development that it is impossible toassess its effect in more effectively channelingnew technologies throughout industry for morewidespread adoption. However, we do believethat it is a constructive step by Governmentin the right direction.

In the private field, it was also noted in ourstatement that there are more than 2,600 busi-ness and professional publications issued reg-ularly. They cover every conceivable occupa-tion and their major purpose is to make knownto those interested in the field the latest tech-nological developments through articles and ad-vertisements. That these publications prosperand their number continues to grow is an indi-cation that, to some degree, they fulfill theirpurpose.

Therefore, it appears to us that efforts on

NATIONAL ASSOCIATION OF MANUFACTURERS

the part of both Government and private in-dustry are being applied constructively to theproblem of channeling new technologies overbroader areas.

A further constructive step, recently inaugu-rated in the U.S. Senate, was the hearings onGovernment policies with respect to patents.Testimony overwhelmingly supported the prop-osition that a change in policy would promotethe use of new technologies discovered throughGovernment contracts into civilian industries.

Present policy under Government researchand d- Iment contracts, in many cases, veststhe : - ,o new inventions in the Government.

According to testimony, many companieswhich have done considerable research in a par-ticular area and wi ?I would hold basic back-ground patents refrain from bidding on Govern-ment research and development contracts forfear of losing their background rights. This de-prives the Government from obtaining theservices of the company which may be the mostknowledgeable in the field and results in dupli-cation of effort and waste of money andscientific manpower.

Further, it is a rare occurrence that an in-vention made under Government research anddevelopment contracts can be adapted to civil-ian or commercial use without the expenditureof considerably more time and money forfurther development. However, if the Govern-ment holds the patent rights, there is littleincentive for private enterprise to make theseexpenditures if it does not have the patent rightto exclude others from using the inventions.The Government does not have the right toexclude others, nor should it, but sinceGovernment-owned patent rights are availableto all, the incentive to risk funds to develop andmarket such an invention is lacking.

A change in Government patent policy to vestthe right to new inventions under Governmentresearch and development contracts (except inunusual c-ses) in the hands of the inventorwould enhance the prospects for greater indus-trial application of inventions discovered underGovernment contracts. Bills to accomplish thischange in patent policy have been introducedin the Senate. Passage of such legislationwould be an effective means for channeling newUnhnologies into promising directions.

Part 4. Some Comments on the Overall Taskof the Commission

With respect to the general approach of theCommission to its assignment, may we makefour comments :

1. Extensive fact-gathering, research, andanalysis is under way on this subject, but

197

unless the business input is combined withthat from universities, unions, and Gov-ernment, it is unlikely that the intent ofPublic Law 88-444 can be realized. Thisfact v uld have special pertinence in de-cisions as to how public monies for re-search on these questions are to beallocated.Our thought on this is that coordinatedsolutions of real problems and the explora-tion of tomorrow's real opportunities willflow from constructive research by all in-terested bodies, rather than merely de-fending points of view or advancing theself-interest of constituents.

2. The business community has amply dem-onstrated that it can and will train peopleto do the jobs which need to be done. Itis spending billions of dollars annually tothis end.If State and local governments can be en-couraged to continuously improve andbroaden our educational system by grad-uating young men and women who arewell versed in English, mathematics, sci-ence, history, and the arts, this would bea great spur to economic growth. We cantrain people if the schools will educatethem.

3. If we are to provide opportunities for anexpanding population and provide job op-portunities for those whose skills are madeobsolete by technological change and auto-mation, a primary area of such job oppor-tunities must be in the service-orientedbusinesses. We suggest that the key toat least the economic aspects of our mi-nority group problems lies in the growthof service-oriented businesses because jobopportunities are most readily available inthe fastest growing segments of theeconomy.

4. Opportunity for profit is essential to op-portunity for employment, for the formercreates the latter.The general profitmaking atmosphere,therefore, becomes a prime considerationto anyone planning to start or expand abusiness.If the Commisison's final report reflectsthe position that the role of Governmentis to create the economic climate whichwill lead to increased consumption andinvestment and therefore, more employ-ment, it will do the Nation a genuineservice.An important part of the prescription forhigher employment is a rer!sion of thetax structure so that industry is encour-aged to modernize its plants and equip-ment and realistic depreciation guidelines

i


are laid down. A reduction of the Gov-ernment's drain on savings would betterserve the country as investments in

growth than in taxes to cover, amongother things, welfare programs made nec-essary by the lack of growth.

!

APPENDIX

NAM Policy Positionon

FACILITATING ADJUSTMENT TO CHANGEApproved by NAM Board of Directors

December 1964

The increasing velocity of progress requires a sharpening of the traditional efforts by privateinstitutions to aid people in meeting their individual responsibility of adjusting to change andparticipating in its benefits.

Industry believes that it should encourage voluntary study and action to meet local needsfor the adjustment of individuals to change. Such study should include ways to ease employeeshifts to new occupations and methods of equipping individuals to relate their capabilities tochanging job content.

199

STATEMENT


National Farmers UnionWashington, D.C.

Statement by the National Farmers UnionThe following are viewed as unmet commu-

nity and human needs :

Community: zoning, educational facilitiesof all kinds, development planning, landuse for other than agriculture, water fa-cilities and flood control, medical and hos-pital services, balanced and stabilized econ-omy, senior citizen housing, recreationfacilities for all ages, police and fire pro-tection, all-weather sundary road system.

Human: adequate disposable income, fulland equal educational opportunity, healthand medical services, decent housing, coun-seling and occupational guidance, retrain-ing and manpower development.

New technologies may best be applied to therural sector by means of national policies di-rected toward solution of the most pressingneedsincome, employment, opportunities forhigher education, and health and welfare facil-ities. Short of national policies with inter-regional application, States are limited in whatthey can do.

As regards financing, the terrific capitaldraining out of rural America needs to be re-versed by means of national-State programswhich revitalize rural economies.

Producers of raw material have always beendisadvantaged in the marketplace. This eco-nomic disadvantage of paying at administeredprice levels and selling in buyers' market canbe remedied only by means of broad nationalpolicies.

The development of a mixed and stable ruraleconomy will initially be stimulated by meaL 1of encouragement of agriculturally related in-dustries. Agriculture is a rapidly enlargingindustry, even though the means af agricultureare in transitional stageslarger farms andgreater capital requirements.

In spite of the radical changes being experi-enced in agriculture resulting in greatly in-creased per man-hour productivity for theforeseeable future, the geographic distributionof agriculture will remain stable. The surplusof manpower will continue to flow out of agri-culture even under the best of circumstances.

A hard look needs to be taken at (1) provid-ing for the continuation of a private enterprisesystem and policy in agriculture, (2) ways andmeans of recapitalizing rural America andmaking the transfer of equity capital a work-able process, (3) long-range development pro-grams to rehabilitate the towns and cities andtheir peripheral service areas, and (4) articu-lating the Nation's responsibility for the ad-justments rural people have to make wherevermigration or change of occupation takes place.

Unfortunately, neither local nor State gov-ernments can generate the type of regionalplanning which is needed. Interstate compactsattempt this, particularly in water use andpower arrangements. However, the broad re-gional development of a Missouri Valley Basininvolving multipurpose development is as nec-essary as Federal initiative in an Applachiaprogram.

203

STATEMENT


National Marine Engineers' Beneficial AssociationNew York, New York

Statement by the National Marine Engineers'Beneficial Association

In reply to the Commission's request for per-tinent data on various phases of technological,automation, and economic progress and itseffect on productivity and employment with thisindustry, it embarrasses us to answer that wedo not know, and therefore hesitate to answerthe five questions you have posed to us.

The main reason for our hesitancy is theattitude on behalf of the management and Gov-ernment within the subsidized segment of themarine industry. Reference is pointedly madeto the subsidized segment, since the majorityof new ship construction is on their behalf.Perhaps we can aid you by referring to thetechnological and economic progress achievedby the nonsubsidized companies by examiningthe capital investments of these smallercompanies.

In the past decade there have been manychanges prior to the introduction of "automa-ion" to our industry. Unfortunately even with

all these changes our industry, once the largestin the world, is rapidly shrinking to one of theminor shipping nations. The most noteworthyadvances have been made by the nonsubsidzedor independent operators. The mainstay oftheir fleet during the fifties was the 10,000-tonvessel with a crew of about 50 men. Today,plying in the same trade, they have faster ves-sels with an increased carrying capacity butwith no increase in crews. As an example, avessel in excess of 100,000 tons has a crew of50 men. Therefore, today, one such vessel caneffectively displace 10 vessels and crews of adecade ago. In this manner the independentoperators have remained in operation withoutGovernment subsidy.

The independent segment of the industrymust be commended on their forthright ap-proach in their shipbuilding program. It wasthrough an effort made on behalf of labor andmanagement that the development of the largercompetitive vessels was achieved. The inde-pendent companies have cooperated with thelabor unions and conferred frequently to dis-cuss the technological changes and their impactupon employment. It was through such meet-ings that mutual agreement was achieved witha minimum of labor-management conflict.

The subsidized segment of the industry isdependent upon the Federal Government forsubsidies to construct and operate their vessels.The subsidies are basically used to maintainU.S. flag vessels competitive with foreign flagvessels on specified routings. The FederalGovernment as represented by the Federal Mar-itime Commission has considerable influenceover the operation and construction of thesubsidized company fleets.

At present, a majority of the vessels builtunder a construction subsidy contained withinthe Merchant Marine Act of 1936 are reachingthe end of their economic lifetime and are duefor replacement. In an effort to reduce thecost of the operating subsidy the Federal Mari-tinl, Commission has set forth automation pro-grams for subsidized vessels novr in operationand vessels soon to be constructed. The pro-grams for subsidized vessels now in operationvessels to be reduced by the inclusion of"automation features."

The marine industry or the Federal Mari-time Comission do not have facilities fordeveloping and testing automation features re-quired aboard new shipboard construction butdepend upon vendor-developed equipment beingplaced into service with the hope that it will befunctional.

The Federal Government is controlling theaddition of automation features aboard sub-sidized vessels by edict, not through logicaldevelopment. Currently, all new ships nowrequire the inclusion of designated control ele-ments and subsequent manning reduction priorto the company receiving approval for a con-struction subsidy. The labor unions whosemembers are displaced by the manning reduc-tions have no information presented to themfrom either the company or the Governmentsetting forth the features which outline the jus-tification for manpower reductions. Further-more, the act of putting a ceiling on manningwithout basing the reduction upon careful con-sideration and study or conferring with theaffected unions has caused labor unrest in themaritime industry. Consider the problemscaused by the Government edict placing a ceil-ing on manning. The companies are required

207


to inform the unions that there are a limitednumber of jobs, and each union will have totake a reduction in jobs whether they aredirectly affected or not by the new features.The end result is disunity among the unions.Each labor group is forced to obtain the bestmanning agreement upon their own.

HAw affaPtive is thia method ? Tha inaptapproach of the Federal Maritime Commissionin presenting a specter of automation by edictin the marine industry has caused the state ofpresent labor-management chaos. The MarineEngineers' Beneficial Association is now [July1965] engaged in a major strike with most ofthe subsidized shipowners because of shipboardmanning issues.

Automation and technological advancementcan be brought to our industry, but not byedict as practiced by the Federal MaritimeCommission or by burying one's head in thesand as practiced by the companies. We believethat secrecy should be eliminated and that theadvances needed by the industry be broughtAnt And discussad in n fArthright fashion.Labor should participate actively in the appli-cation and development of technological ad-vances and its effect on employment. It is onlythrough mutual understanding and agreementbetween labor and management that the cur-rent problems created by the misapplicationof technology can be rectified.

STATEMENT


National Tool, Die, and Precision Machining AssociationWashington, D.C.

Statement of the ATational Tool, Die, and PrecisionMachining Association

Introduction

The information contained in this report wasobtained from questionnaires completed by 112tool, die, and precision machining companieslocated in different geographical regionsthroughout the Nation. In 1964 the respond-ents employed 7,300 persons and reported totalsales of $133 million. The range in number ofemployees was from less than 10 to more than500; in annual sales, for less than $50,000 tomore than $9 million. In all important re-speds, the respondents can be considered repre-sentative of the total industry.

Statement of Purpose

The purpose of the survey was to elicit in-formation most accurately reflecting the influ-ence of automation and new technology on allphases of the industry, both as that influencehas already been felt and as it is expected to befelt. Information was obtained for the years1956, 1964, and projected for 1968.

Definition of the Industry

The tool, die, and precision machining indus-try can best be understood by comprehendingits essential bedrock role as a supplier industry.

The products of tool and die companies donot appear on superhighways, nor do theybeautify homes or compile employee payrolls.But it would be impossible to produce automo-biles, color telephones, office machines, or anymass-production product without toolingandthis comes from the tool, die, and precisionmachining industry.

Tooling represents a number of operations ;the word is an umbrella that covers about adozen meanings. Tooling can mean punches,dies, molds, jigs, or fixtures, all used singly orin combination in metal-cutting or metal-forming machine tools to produce consumerand industrial goods or their parts andcomponents.

Tooling can also mean the special machinesengineered and produced by tool and die corn-

panies to perform new, highly specialized pro..duction operations, or to improve upon formermachines or methods.

Precision machining is a more recent aspectof the tool and die industry, stimulated to agreat degree by the astonishing growth of theaerospace industry in the last decade. Tooland die companies have always performed whatwas regarded as precision machining, but thesupercritical requirements of space vehicles de-manded new and higher standards of the indus-try. Customer demands for longer-lasting,more reliable products have also led many con-sumer industries to impose stiffer qualitystandards on their tool and die companysuppliers.

As an industry, precision machining is gen-erally understood to mean the production ofclose-tolerance prototypes and piece parts.Tool and die companies also employ precisionmachining to make their more standard prod-uctsthe punches, dies, and other itemsmentioned earlier.

Industry gets its tooling from two sources:from captive shops, operated by large manu-facturers as a source of self-supply, and fromcontract shops. This survey is concerned onlywith contract shops, although some of the con-clusions may be valid as well for the captiveshops.

The tool, die, and precision machining indus-try encompasses an estimated 6,000 contractshops employing more than 125,000 personspredominantly skilled toolmakers and diemak-ers, and skilled and semiskilled machinists.Employment in some single companies reachesseveral hundred, but is much more likely to fallbetween 10 and 50 persons. Total annual in-dustry sales are curently estimated at about $2billion, or about 6 times the 1939 figure. It isapparent from this figure that the industry is .relatively small ; but its customers include al-most all the major U.S. corporations, and thetool and die companies must produce workacceptable to those companies. In many re-spects, then, automation and new technologyhave not only affected the industry directlybut they have also exerted an indirect influencethrough their customers.

211


Selection of Major Impact Areas

The respondents were asked to evaluate sev-eral individual factors in five categories, choos-ing within each the factor that had most con-tributed to change within that company.

Factors cited most often were equipment re-placement and machine obsolescence, which, ifconsidered as related factors, drew 51 "mostimportant" responses.

The other "most important" individual fac-tors, by highest number of mentions, were skillrequirements for production workers, speciali-zation, quality control, diversification of cus-tomers, training programs, competition, andtighter tolerances.

By broad category, the most sharply feltchanges had occurred in methods, men, ma-chines, and markets. Materials, a fifth cate-gory, was considered far less important thanany of the other four.

A Discussion of Major Impact Areas

1. Machines. As stated, equipment replace-ment and machine obsolescence, assuming arelationship between the two, dominate theindividual factors of change in the characterof the industry.

An examination of normal tolerance ranges,the percent of assets by products or services,and the percent of assets by customer or enduse indicates the influence of automation andnew technology in this area. The trend towardtighter tolerance requirements implies the needfor new, automatic machine tools to remove orat least minimize the possibility of operatorerror.

The sharpest change in percent of assets byproducts or services has come in the precisionmachining area, where the tools of a decade ormore ago are often technically unable to meettoday's new, higher specifications. Thus, atotal of 63 companies reported having assets inthe precision machining field in 1964, an in-crease of 40 percent over 1956.

The fil;ures for assets by customer or end usealso point toward a greated employment ofautomated tools of one kind or another. Theonly significant increases by customer categorywere registered in the space, other military, andbusiness machines and electronics fieldspre-cisely in those areas where the single, most im-portant manufacturing change has been a fas-ter reaction time from design conception toproduction. It is these industries that havebeen the quickest to demand precision, short-run tooling and prototypes which are often pro-duced most efficiently on electronically or other-wise automatically controlled machines.

The tool and die industry is also beginningto feel similar pressure from f-,e automobileindustry, which, to satisfy custuaer demandsfor more and more models and opaons, is mov-ing toward automated production of its tooling.Since the automakers and their suppliers repre-sent the number one market of the tool and diehidustry, it will have to react in kind to retainthat market.

2. Methods. It can be stated almost withoutreservation that automation and new technol-ogy have been behind nearly every markedchange in methodology in the tool and die indus-try, whether in the production or managementarea. To understand this, these changes mustbe regarded in the broadest possible sense : notsimply as machines and processes, but rather asa psychological attitude of seeking always todo something better or faster.

Tool =Id die companies, sharing that atti-tude, have moved roughly with the rest of themetalworking industry both in adapting andreacting to automation and new technology.Some operations peculiar to tool and diemakinghave not yet beenand possibly may neverbeamenable to specific new production meth-ods. But where methods have been evolved, theindustry has shown no reluctance both toemploy and benefit from new methods.

In the shop this has meant a clear trendtoward the use of electrical discharge machinesto produce stamping dies, plastic molds, forgingdies, many aerospace parts, and other products.In the last year or two tool and die companieshave begun to adopt numerical control, a ma-chine method by which machine tools are op-erated by a numerical code, usually fed intomachine control systems by punched papertape. This method is most profitable for shortruns and prototypes which traditionally havedominated the workloads of tool and diecompanies.

Whatever reluctance there may have been toemploy numerically controlled tools has usuallybeen traceable to one of two factors : 1. alegitimate desire to learn more about the tech-nique before using it, and 2. the cost of themachines, which can run 2, 3, or 4 times asmuch as a similar machine without the controlsystem.

Both of these factors are easing off in im-portance. Educational seminars, the businesspress, and other communication mediums havebrought information about numerical controlwithin the reach of most. And machine priceshave been reduced, either absolutely orrelatively.

Absolute reductions have occurred in themost generally used machine tool lines, which,

TOOL, DIE, AND PRECISION MACHINING

as they became accepted, have been able to beproduced in greater quantities with subsequentprice cuts. More interestingly, users havebegun to recognize that the greater costs ofthese tools are more than offset by increasesin machine utilization and thus in productivityper man-hour.

In the management area, more and moreattention has been demanded by productionscheduling, cost accounting, estimating pro-cedures, and other management functions. Allare affected by, and in turn affect, changestaking place on the shop floor.

For example, not too long ago an extremelycomplicated and precise job would probablyhave been delivered in a correspondingly longtime. But the trend today is toward more pre-cision and shorter delivery times ; therefore, thesituation demands that some way be devised todo a better job faster.

Many responses are possible to that kind ofchallenge, with a specific piece of automatedequipment only the most obvious. The funda-mental factor as far as automation is concernedis not the purchase of a specific piece oi equip-ment, but that the purchase will have beenbrought on by an "automation situation".

3. Men. The tool and die industry is heavilydependent on skilled labormore so than the"normal" industrial hard goods manufacturer.The labor content of tool and die prices, as aconsequence, is abnormally high, runing toabout 70 percent.

Automation and new technologyagainusing the words in a very broad sensehavecertainly not reduced the labor force in thetool and die industry. Total employees percompany rose from an average of 45.9 in 1956to an average of 68.9 in 1964, and the figure isexpected to rise again, to 82.3, by 1968. Evenwhile direct labor employees decreased as apercentage of the total work force, they rosein absolute terms over the same 1956 to 1964period.

Much more significant is the number ofdirect labor hours worked, which rose froman average of 2,237 in 1956 to 2,269 in 1964.Assuming a normal work year contains 1,900to 2,000 hours, overtime is obviously a definitecharacteristic of the industry. In other words,the requisite skills are in too short a supply toget the job done on time and to specificationswithout overtime employment. And this isoccurring even while great technological stridespermit more work to be done in less time. Thismust imply that whatever the productivitygains, the market has so far been more thanable to consume those gains, keeping more peo-ple on the job and working longer hours.

213

For the tool and die industry, then, automa-tion has in no way been an unemploymentfactor. Automation has presented a challengein another way, however, and that is in skillrequirements. While these requkements havealways been high, they are certainly beingfurther raised by the new machines, processes,and management techniques being absorbed soquickly in metalworking today.

As with all metalworking companies, tool anddie firms prepare employees for new nr modi-fied job functions. The operator of an elec-trical discharge machine, for example, must beable to comprehend not only its mechanical ele-ments, but he must also appreciate its electricaland metallurgical aspects. Numerically con-trolled tools have opened up an entirely newjob function, parts programing. Various man-agement methods, such as value analysis andthe so-called Zero-Defects programs, have ledto training persons specifically for these tasks.Mathematicians, almost nonexistent today as arecognized job classification in tool and dieshops, are expected to be on the payroll of mostmajor companies in the industry within thenext few years.

The list is much longer, but the point issimplewith each new tcchnological advance,persons must either be imported into the indus-try with the required knowledge, the currentwork force must learn it, or persons from theoutside must be brought in and instructed in it.Even when the knowledge can be purchased onthe outside, the tool and die company is obligedto see that knowledge is transmitted to othernr- tAbers of the production or managementstaffs. There is too much interdependence offunctions to permit otherwise.

As a result, tool and die companies are al-ready placing great emphasis on training pro-grams, an emphasis that can be expected toincrease. It may seem a simple matter, but theimplications are profound. One relativelylarge-size company, for example, is alreiTyplanning to increase its supervisory staff from10 supervisors to 12, representing a 20 percentincrease. This is projected not so much be-cause the supervisory load has become greater,but because at any time two supervisors areexpected to be engaged in learning or updatingtheir knowledge of some production or man-agement function.

Apprenticeship training, wMch has alwaysbeen the base of the tool and die industry'straining efforts, has, with Government assist-ance, begun to overcome the skill drain in theindustry. But the skilled manpower shortageis still acute, and can be expected to remainso for many years to come.


4. Markets. Sales showed a decline in thepredominance of tooling and a trend to-ward greater diversification when analyzedfrom the point of view of product or servicecharacteristics.

Tooling, which amounted to 52.3 percent ofsales of all companies in 1956, declined to 41,1percent in 1964, and is expected to declinefurther to 36.3 percent by 1968.

Sharp increases in relative importance oc-curred in proprietary products, which grewfrom 9.8 percent in 1956 to 15.6 percent in1964, and in contract production, which grewfrom 9.8 percent to 13.6 percent over the sameperiod. In both cases, further increases in theshare of total sales are expected by 1968.

LessEr increases were recorded in precisionmachining, while special machines and "other"barely maintained their share.

The trend toward diversification is especiallypronounced among larger companies. By 1968,these companies anticipate that no one of fivespecified products or services will make upmore than 28.3 percent or less than 13.2 percentof their total sales. Proprietary products willmake up almost a quarter of total sales.

Smaller companies, on the other hand, willcontinue to rely predominantly on tooling, andto a lesser but still important extent, on pre-cision machining. The two items are expectedto comprise 79.2 percent of 1968 sales of--nedium-size companies, and 73.0 percent oftotal sales of small companies.

Proprietary products, while increasing in sig-nificance for larger companies, are of smalland declining importance to the other companies.

Looking at sales from the point of view ofcustomer or end use, the following majorchanges are apparent :

(a) Business machines and electronicsdoubled their share of total sales between 1956and 1964, going from 12.5 to 22.3 percent. Asmall further increase, to 24.5 percent, isexpected by 1968.

(b) The importance of sales to the militaryis slowly increasing. Within this category,however, the aircraft industry percentage of allsales dropped from 12.1 to 6.7 percent between1956 and 1964, while the space industry sharerose from 0.8 to 5.3 percent.

(c) Sales to the automotive industry de-clined from 1956 to 1964, although the autoindustry was still the largest single customer.By 1968, it is anticipated that manufacturersin the business machines and electronics indus-tries will be buying as much as the autoindustry.

(d) Sales to the appliance industry are ex-pected to recover slightly by 1968 from a sharpdrop, from 16.6 to 9.7 percent, experienced

from 1956 to 1964. The 1968 appliance indus-try percentage is projected at 10.1 percent.

(e) Companies of all size groups tend tofollow the same trend for the period encom-passed by the survey, 1956-68. The onlystriking difference is that the importance ofautomotive sales for small comnanies remainsrelatively stable compared to the percentagedecline which either took place or is expectedto take place among larger companies.

Export sales demonstrate a definite upswingin interest and activity. Only 13 of the 91responding companies reported any exports in1956, and none were above 10 percent of totalsales. The number increased to 24 by 1964,and 3 indicated that foreign sales accounted formore than 10 percent of total sales. The trendis expected to continue, with 37 companies ex-pecting to be doing some export business by1968.

Larger companies are more deeply involvedin exports than smaller ones, and their in-volvement is growing rapidly. Among largercompanies, fewer than one out of three hadexport sales in 1956 ; by 1964, it was morethan half ; and by 1968, it is expected to bethree-quarters.

Local sales figures reveal a decided shiftaway from dependence on local markets. In1956, 31 percent of all companies were purelylocal ; by 1964, the percentage was down to15.7. At the same time, the degree of depen-dence on the local market was cut: In 1956,only 13 companies made less than half of theirsales locally ; by 1964 the number had almostdoubled to 25.

Smaller companies, as might be expected,depend more heavily on the local market thanlarger companies. But even the smaller com-panies are reaching beyond their local markets:By 1964, 60 percent of all small companies hadsome sales beyond 100 miles of their locations.

Summary and Conclusions

Automation and other forms of technologicalprogress have had a definite impact on the tool,die, and precision machining industry, and thisimpact will unquestionably increase over thenext 5 to 10 years.

Some conclusions might include the following:1. The industry is an essential supplier of

tools, dies, and other products and services onwhich other industries depend and will con-tinue to depend for their technological progress.

2. The demand for the industry's productsand services is at a high point at the presenttime, a state which is certain to continue intothe foreseeable future. The basis of this futuremarket is automation and technological prog-

TOOL, DIE, AND PRECISION MACHINING

ress, which place an ever greater total work-load on the tool and die industry.

3. Electrical discharge and numerically con-trolled machines are being introduced into theindustry at an evolutionary pace. These ma-chines and other forms of technological changehave increased productivity and enabled theindustry to perform production tasks not previ-ously possible. However, mechanization willcome relatively more slowly to this segment ofthe metalworking industry because of (a) theall-around machinist skills which will continueto be required, and (b) the high cost of mech-anization to relatively small companies.

4. In spite of productivity increases, the in-dustry is under heavy pressure to producemore. This demand for the industry's outputis growing faster than output can be satisfied,continuing a critical shortage of skilled laborwhich can be relieved only by recruitment andtraining. In this industry mechanization isnot the solution to the skilled manpowerproblem.

5. Replacement and purchase of new, addi-tional equipment will become mandatory as theindustry reacts both to the demands of sup-pliers and intraindustry competition.

6. Further diversification and specializationcan be expected as the industry utilizes newmachines and methods to perform the old jobs,and ventures into new fields opened up by these

215

new machines and methods. The high pricesof particular types of new equipment and theskills necessary to operate them will tend toreinforce both diversification and specialization.Competitive pressures are particularly active inthese areas.

7. The tool and die industry will continue togrow in sales, investment, and labor force, bothin terms of individual companies and as anindustry entity. Annual per-company sales al-most doub!)d between 1956 and 1964, and areexpected to increase by half again between1964 and 1968. The number of companies hav-ing annual sales of less than $250,000 will con-tinue to decline, and those with annual sales ofmore than $1 million will continue to increase.Respondents may well have experienced growthrates faster than those for the industry as awhole ; nevertheless, the growth pattern isapparent.

8. Automation and other forms of techno-logical progress have not only not harmed theindustry in any discernible way, hut they havestrengthened it. They have required that theindustry become more efficient, better man-aged, and more flexible, both literally and psy-chologically. The same pressures have alwaysexisted in the tool and die industry as theyhave in all industries; automation and techno-logical advances have simply made the achieve-ment of normal business aims more urgent.

STATEMENT


North American Aviation, Inc.Los Angeles, California

t

Statement bli North American Aviation, Inc.

(a) Identify and assess the past effects and thecurrent and prospective role and pace oftechnological change.

Technological change has affected NorthAmerican Aviation in almost every areaproducts, employee skills, equipment andffwilities, and organization and managementiffactices.

Our business is new knowledge and its reduc-tion to profitable application, with researchand development work providing about two-thirds of our dollar volume of sales. Advancesin technology have opened up entirely newareas in electronics, missilry, astronautics,aeronautics, and atomics. Many of our prod-ucts could not be built with the manufacturingtechniques of only 10 years agoindeed, somecould not with the techniques available at thevery time that the product was designed.

This opening of new areas has enabled ouremployment to exceed the peaks reached duringWorld War II, when the company was one ofthe major suppliers of military aircraft. Wereour products still limited to aircraft, employ-ment in the company would be substantiallybelow the current level, since aircraft productsand services are now approximately 20 percentof our sales.

Due to the greater complexity and highertechnical content of current products, the com-pany encourages and financially supports em-ployees in their efforts to further their owneducation and skills. Last year North Ameri-can employees took over 13,750 courses leadingto bachelors', masters', and doctors' degrees.During World War II our technical people gen-erally specialized in mechanical engineering,although some were electrical or aeronauticalengineers. Today some 175 different specialtiesare represented by North American employeesholding 24,200 degrees.

During World War II about 80 percent of ouremployees were so-called blue-collar personnel ;today, about 36 percent are. In absolute num-bers the blue-collar classification has remainedabout level since 1955, while our total employ-ment increased by more than 50 percent be-tween 1955 and 1965. The company conductstraining programs aimed at helping these peo-ple to qualify for higher positions ; a special

study made in 1961 disclosed that, partly as aresult of these programs, over 2,400 blue-collarworkers in our divisions in the Los Angelesarea alone transferred to white-collar jobs inthe 1960-61 period. Last year some 35,000hourly employees completed company coursesdesigned to upgrade their skills and to keepthem contempory with today's needs. We havealso had to go outside the company and providea number of our suppliers with training coursesto enable them to meet the higher skill require-ments of current products.

As further evidence of the significant impactof technology on the personnel of the company,about 18 percent of our employees are engineersor scientists in the aerospace disciplines, com-pared with 8 percent in 1955 and 6 percent in

1950. Moreover, this increase is not in quan-tity alone. It is matched by an improvement in

the education of our technical people; viz., theincrease in technical people with advanced de-grees has been faster than that of technicalpeople holding only bachelor's degrees.

Technological progress is also one of the fac-tors causing North American to institute aManager Development Program. The need tofind good managers from among professionalpersonnel who can direct technical activitieshas compelled the company to broaden itssearch for such capabilities. A system hasbeen established for identifying particularskills and experience throughout the companyso that a larger choice of candidates may beprovided for new openings at the manageriallevel. In short, this program attempts to sys-tematize the development of managerial talentto make more certain that the most qualifiedand deserving are placed in positions ofresponsibility.

Serving as a tool for this and other programsis the Qualification Inventory, which providesa ready reference of the various talents andexperience available in all fields throughout thecompany. Through this technique, a Skills andCapabilities Summary is maintained on all sal-aried personnel. When there is a need, evenon a temporary basis, for someone of specializedabilities and/or training, the criteria are pro-gramed into a computer which, in turn, providesthe names of one or more employees answeringthese requirements. More detailed profiles of

219


these particular employees are then consultedto help determine the choice in filling the open-ing. By such means as this, we are ableto satisfy critical requirements for highlyspecialized personnel.

The company spent over $230 million in thelast 6 years for new facilities. A large portionof these capital expenditures has been for re-search equipment and other highly specializedfacilities needed to meet the demands of ad-vanced technology programs. Laboratory floorspace increased from 82,000 sq. ft. in 1947 tomore than 1.6 million sq. ft. in 1964. And thecompany's independent research and develop-ment expenditures (partially reimbursed by theGovernment) increased from $1.6 million in1953 to $37 million in 1964.

Organization and management practices havealso been affected. Technological advance hasmade possible the design, development, andproduction of systems and components withvery high performance characteristics. Thesehave required the coordinated efforts of tal-ented people and complex equipment in manyprofessional disciplines. The management ofthese shmultaneous efforts and the integrationof newly designed components and subsystemsduring the developmental phase have requiredextra )rdinary improvements in administration.

Our first major response was to organize divi-sions in 1955 that specialized in somewhatspecified product areas. Next, within thesedivisions, we moved away from organizationalong functional lines toward program organ-ization. Each major program has its ownengineering, manufacturing, quality control,logistics, contract administration, and otherdepartmentswith certain portions of somefunctions remaining unchanged where we findcentralization to be more efficient. Thesestructures provide the needed flexibility in anindustry and company in the forefront oftechnological advance.

The development of electronic data process-ing equipment and of management methodssuch as the Program Evaluation and ReviewTechnique (PERT), PERT/COST, have pro-vided effective tools to upgrade the informationon which management bases its decisions.

With regard to the prospective role and paceof technological change, we believe that thiswill be a paramount factor in the future of ourcompany. North American is heavily orientedtoward research, development, and productionof products and systems of very high technicalcontent. We believe that the demand forhigher performance systems and equipment willcontinue in the foreseeable future, and we areprepared to continue meeting these challenges.

In broader perspective, the pace of technolog-

ical change will be determined by the volume ofeffort applied by national private and publicinstitutions. So far as private companies suchas ours are concerned, this effort will, in turn,be determined by the prospective markets.With regard to North American's markets, webelieve that the United States is committed toa continuing space exploration program, andthat it -All also require defense systems of veryhigh performance in the years ahead. We willcontinue to respond to the Nation's needs inthese fields. Moreover, the scientific and engi-neering progress made in these two fields overthe past few years has made possible the con-quest of some large-scale community andhuman needs, as outlined in our answer tonumber (c).

Therefore, to the extent that the UnitedStates continues or expands its commitment inthese fields and incentives are maintained forprivate participation, technological change willproceed at least as fast as its present-day pace.

(b) Identify and describe the impact of tech-nological and economic change on produc-tion and employment, including new jobrequirements and the major types ofworker displacement, which are likely tooccur during the next 10 years; the specificindustries, occupations, and geographicareas which are most likely to be involved;and the social and economic effects of thesedevelopments on the Nation's economy,manpower, communities, families, socialstructure, and human values.

We expect the technological trends of thepast 10 years to continue dominating the next10 so far as the company's production and em-ployment are concerned This means continuedhigh technical content in our products, upgrad-ing of personnel skills and education, and in-vestment in still more advanced facilities.

Automation has not posed any significantpersonnel problems for the company becauseour trend has been toward custom manufactureof products with high technical content requir-ing individual and small-group talents. Weexpect our personnel will continue to developthe higher skills required.

A principal area of automation that will con-tinue to grow is the use of data processing.Primarily this is a direct result of the enormousgrowth in the volume of data required in ourwork. Our use of computers and other dataprocessing equipment has grown with this re-quirement, with very little displacement ofexisting personnel. Likewise, use of tape con-trols in machine tooling has not brought sig-nificant personnel changes. It has stimulated

NORTH AMERICAN AVIATION 221

some of our people to take more training inmathematics and thus to achieve higher jobclassifications.

In connection with social and economic ef-fects, it should be pointed out that aerospacecompaniez such as North American have ac-quired over the past 10 years the ability tomanage large system development programsof unprecedented scope and complexity. Thisability can also be applied to large-scale proj-ects for meeting community and human needs,some examples of which are discussed in num-ber (c). In our belief, the fulfillment of suchprojects will not be limited by technical bar-riers. It will hinge largely on the degree towhich the Nation as a whole becomes activelyinterested and engaged, and on the adequacyof financial arrangements between privateindustry and Government.

(c) Define those areas of unmet communityand human needs toward which applicationof new technologies might most effectivelybe directed, encompassing an examinationof technological developments that have oc-curred in recent years, including those re-sulting from the Federal Government'sresearch and development programs.

Some 87 potential projects were recentlylisted in the recommendations of the Presi-dent's Committee on the Economic Impact ofDefense and Disarmament under the chairman-ship of Gardner Ackley. The committee's ex-cellent and comprehensive study covered 17areas of need, including such areas as PanamaCanal substitutes, Post Office automation,worldwide weather monitoring, antinoise pro-grams, new cryogenic industries, and a dozenothers. Some of the 87 proposed projectswould encompass long-range programs of majorscale, stretching over a decade or longer.

Rather than retrace ground already coveredby that survey, we shall merely direct attentionto just five urgent needs that might be metalmost immediately by applying comparativelylittle-known but already-proven technologies.

In each situation, the need can best be met bytimely development of a well-integrated systemrather than by piecemeal additions of new hard-ware and/or new procedures. The same spe-cial management techniques that have producedmajor space systems and weapon systems ofgreat reliability offer the best hope of efficientlymeeting these needs. As you know, organiza-tions skilled in systems management areexperienced in working under Governmentcontract toward definite objectives of greattechnical complexity, to be accomplished withinspecified limitations of time and resources.

Such organizations have learned how to inte-grate hundreds of technical and nontechnicalactivities in creating a single advanced system ;how to plan concurrent work on problems thatconventionally would be dealt with in succes-sion ; how to maintain flexibility in adjusting tochanges in requirements arising continually asa program avotups

Here are some of the needs toward whichtoday's technology and skill in systems man-agement might well be directed.

Health. It has been estimated that up to 400,-000 -4:ves can be saved each year in the UnitedStates alone by achieving an artificial heartsystem. Such a system can be made widelyavailable to humans by large-scale cooperationbetween both academic and industrial scientistsand engineers. Similar efforts could provideartificial kidneys, lungs, and other vital systemsfor widespread personal use.

Information. As Vice-President Humphrey haspointed out, society is faced with an avalancheof new professional data that threatens to makemost recently discovered information almostuseless. Yet those who could make beneficialuse of it may not even know that it exists.

This need for efficient handling of informa-tion is most painfully evident in the medicalfield, even though the U.S. Public Health Serv-ice has established a $3 million automated li-'nary known as Medlars, for Medical LiteratureAnalysis Retrieval System: Every 2 weeksthis system automatically indexes the world'spublished medical literature in a few hours.But no system yet exists for enabling hospitalsand physicians to make automatic use of Med-lars and similar aids. The Public Health Serv-ice has repeatedly warned that many thousandsof patients suffer or die needlessly each year"because the knowledge gained from researchis not fully used."

Lack of an_automated research system haslikewise slowed our courts, law offices, and leg-islatorsalthough legal data systems are nowoperational in a few States and could be quicklywidened with a major effort.

In fact, virtually every field of human prog-ress needs to be systematized by wider use ofautomatic data reduction, literature searching,abstracting, and cross-referencing. Existingmachines are doing such work, but links be-tween them are still scanty. A nationwidesystem of cybernated libraries and remote-control data displays is needed to put currentinformation at the fingertips of everyresearcher and administrator.

Already the Clearinghouse for Federal Sci-entific and Technical Information in Spring-


field, Virginia, is providing needed data athigh speed from more than 500,000 reports ofwork in the physical and engineering sciences.Dr. Stafford L. Warren, a member of PresidentJohnson's scientific advisory staff, advocates alarger systema National Library of Science,which would provide a central pushbuttonstorehouse from which all scientific informationcould be channeled swiftly to fact-seokers.Such a system is well within the present powersof American technology. Indeed, far more in-clusive systems are now possible. One corpora-tion has announced a memory device that couldstore inside a 6-foot cube all information re-corded in books, reports, and publicationsduring the last 10,000 years.

Rapid Transit. The magnitude of traffic con-gestion in many of our larger cities has begunto offer a sobering reminder of the transporta-tion breakdown in ancient Rome, when JuliusCaesar found it necessary to ban all wheeledvehicles during daylight hours. By 1970 it isestimated that nearly 140 million peoplemorethan the total U.S. population at the end ofWorld War live in overcrowded metro-politan areas. Yet the last all-new rapidtransit system in the United States dates backto 1907, when Philadelphia built its subways.Today, no technological breakthroughs areneeded for systems that can vastly ease andexpedite the movement of people and/or freightin the near future.

Surveys. Before any large, undeveloped re-gion can be opened up, it must be accuratelymapped. Not only its contours but its vegeta-tion and subsurface materials, its conditionsof wind and water, must be known. Only thencan developers begin laying out roads, pipe-lines, powerlines, irrigation systems, mines, oilcenters, and other improvements.

Until very recently, such a survey for evena small area has taken months or years. Hugeundeveloped regions on every continent awaitthe coming of modern technology, because re-liable surveys have not been available. Butnow the means are at hand to provide such pre-cise surveys at high speed.

Food. The world's population is estimated tobe growing by 100,000 per day. Food and watercrises in many parts of the world are forecastas early as 1970. New, more efficient systemsfor food production and water processing canavert these crises.

A British scientist wrote recently : "Bearingin mind the possibilitics for promoting humanwell-being, making nitrogen fertilizers is themost underexploited chemical discovery of all

time." Fertilization of present farm land wouldseem to offer the biggest and easiest singleanswer to the world's food shortage. Methodsare available for this.

Methods are also available for converting seawater to fresh waterat near-competitive op-erating cost if the system is large enoughandfor renovating polluted water for irrigationand industrial use, or even for drinking.

Many other human needs, of course, couldalso be met by current technology if public sup-port were sufficient. There can be large-scalesystems for reclaiming arid regions and elim-inating water shortages, for protecting againstweather disturbances, for suppressing forestfires, for improving the health of underpriv-ileged groups, for improving the operations ofeducational systems and police departments,and for other immensely valuable projects ofvarious kinds. Most of these, however, wouldprobably require more time to make their bene-fits felt than would the systems mentioned forhealth, information, rapid transit, surveys, andfood.

(d) Assess the most effective means for chan-neling new technologies into promising di-rections, including civilian industries whereaccelerated technological advancementswill yield general benefits, and assess theproper relationship between governmentaland private investment in the applicationof new technologies to large-scale humanand community needs.

The channeling of new technologies intopromising directions including civilian indus-tries is being accomplished primarily by threeavenues : (1) the publication of data generallyin trade magazines, technical journals, andtechnieal symposia ; (2) the interchange of dataunder license agreements ; and (3) the report-ing of data by contractors to the Governmentwhich, in turn, makes these data available toother contractors who need them. The firstand second methods are those normally followedby industry in our private enterprise systemand need no particular additional support. Thethird method provides for a general use ofdata which emanate from Government-spon-sored R&D work. The latter avenue, althoughindirect, is also a valuable method of spreadingtechnical data. It is here that additional im-provements could speed up the communicativeprocess.

The sheer volume of technical data has madecommunication the principal obstacle in scien-tific progress. Any institution, public or pri-vate, which operates at the frontiers of knowl-edge has difficulty in finding and digesting the

-

NORTH AMERICAN AVIATION

data available from all sources. Each organi-zation may develop its own system for indexingthe technical papers and other material on sub-jects of interest. North American maintainsa Technical Reports Index that is publishedevery 6 months, with monthly supplements.However, even governmental agencies attempt-ing to operate their own catalogs are findingit impossible to incorporate on a timely basisall the major sources of data. The NationalAeronautics and Space Administration is nowattempting to establish a data retrieval systemon a national scale. Some services within theDepartment of Defense are beginning to studythe same subject. Many persons at work inthis field assume that eventually the Govern-ment will establish a National Data RetrievalSystem attempting to incorporate all importantdata sources. Where unclassified data are con-cerned, even strictly commercial firms could beallowed to participate by subscribing to thesystem for a reasonable fee. North Americanendorses this principle, and believes that thepace of technological advance may be materiallyaccelerated by such a system.

With regard to the proper relationship be-tween gevernmental and private investment, webelieve in the Lincolnian formula that Govern-ment should restrict its activities to those whichcannot be done, or done as well, by privateendeavor. Where a public need may be filledby private financing, this should be the propermethod. Where the necessary investmentwould be too great for private companies, orwhere the return on an investment deemednecessary for the public good would not besufficient to attract private capital, then someform of Government participation would be inorder. We feel that the proportion of private-public investment can vary considerably accord-ing to the ability and interest of the former.But where it is clear that only the Governmenthas the resources or the motivation to carryout an essential project, it should do so if theeffort is supported by public policy. In suchcases, the most efficient and economic method,proven by longtime American experience, is bycontracting the effort to private organizations.

223

(e) Recommend, in addition to those actionswhich are the responsibility of manage-ment and labor, specific administrative andlegislative steps which it believes should betaken by the Federal, State, and local gov-ernments in meeting their responsibilities(1) to support and promote technologicalchange in the interest of continued eco-nomic growth and improved well-being ofour people, (2) to continue and adoptmeasures which will facilitate occupationaladjustment and geographical mobility, and(3) to share the costs and help prevent andalleviate the adverse impact of change ondisplaced workers.

The U.S. patent system has traditionally beena cornerstone of scientific and engineeringprogress and continues to provide both protec-tion and incentive for the making and utiliza-tion of inventions. There is considerableinconsistency and some confusion as to theownership and utilization of inventions ema-nating from Government-sponsored R&D work.This appears to devolve from the different prac-tices of the various Government agencies in-volved as set forth in the Space Act, the AtomicEnergy Act, policies of the Department ofDefense, and various other specilized guide-lines, such as the Saline Water Act. We believethat technological progress would be promotedif the United States could adopt a uniformpatent policy for all such technical activities.This purpose is embodied in proposed legisla-tion now before the U.S. Congress (S. 1809).We have recently expressed support for thislegislation.

With respect to inventions developed in com-mercial enterprises, the President has recentlyappointed a commission to review our patentsystem and make recommendations for chargesto strengthen and improve it.

With regard to the second and third parts of(e), we do no feel in a position to offer a sub-stantive contribution in these areas, since ourexperience has not included a significant level ofworker displacement due to automation or tech-nological change (as indicated in our responseto (b) ) .

STATEMENT


Northwestern Mutual Life Insurance CompanyMilwaukee, Wisconsin

Statement by the Northweste,rn Mrs 11IV11111 T.174.1.1".1.14/1111,41,1,1111 .81.41gol V

Insurance CompanyOne Company's View of Automation

Introduction

For many decades life insurance companieshave had to deal with volumes of paperworkwhich are quite large in comparison to otherindustries. This has prompted them to beamong the pioneers in the use of each new de-vice and technique for more efficient handlingof data. Thus life companies have .been earlyusers of typewriters, desk calculators, punchcard equipmentand computers.

The word "automation" is one of the newestin the English language. Perhaps it is also oneof the least understood. The definition of theword itself is straightforward, but the scope ofits application is beyond the comprehension ofmost of us individually. Although the diction-aries have acceptable definitions, one of the bestis included in the proposed American StandardVocabularly for Data Processing: "Automa-tion-3. The investigation, design, develop-ment, and application of methods of renderingprocesses automatic, self-moving, or self-controlling."

The concept of automation in life insuranceis included in that far-reaching definition.More specifically, however, automation in lifeinsurance is almost entirely contained in thatportion which is called electronic data proc-essing. The life insurance is essentially a setof services represented by a wide variety anddistribution of data in various forms. Thecomputer is an ideal tool for this activity.

The following observations relate to the im-pact of automation, via the computer, on theNorthwestern Mutual Life Insurance Company.In varying degrees they may be extrapolatedto apply to other life insurance companies.

Impact on Employment

In any large, complex organization there aremany concurrent forces at work which cause ameasurable change in the aggregate, but whichcannot be measured individually. So it is withemployment in the life insurance company.Forces which tend to increase such employment

include new products, extended and moreprompt services, increased sales volume, moreextensive reporting (whether internal or gov-ernmental), etc. On the other hand, forceswhich tend to decrease such employment in-clude the reverse of those just mentionedandthe use of laborsaving devices and teChniques.Over a period of years each of these forces willadd its weight to the aggregate result.

There is no doubt that computers, throughcomputer-oriented systems, have exerted asignificant force on life insurance employmentpatterns. We have experienced this at theNorthwestern Mutual Life, and we have ob-served it in the case of other life insurancecompanies. However, while the force was ex-pected (during the days of the feasibilitystudy) to be primarily toward the reduction ofoffice staff, the new vistas of product and serv-ice opened up to us by computers have gen-erated a strong force in the upward directionas well. The interplay between these twoopposing forces, intermingled with other forcestoward a better product and more intensivesales effort, creates a constantly changingpicture.

But the significant conclusion which we mustdraw from our experience is that the combina-tion of forces has served to increase the numberof our employees. This is shown clearly in thefollowing table which compares the most recentyear-end (1964) with that of 1956, the last yearbefore we began our major effort to utilizeelectronic data processing:

Employee classificationNo. of employees Percent of

increase1956 1964

Executive officers 14 14 0

Officers 71 88 23.9

Supervisors, specialistsand attorneys 103 154 49.5

Office staff 1,217 1,265 3.9

Total 1,405 1,521 8.3

227


Perhaps these changes in number of em-ployees will be more clearly understood whenviewed in light of certain other measures ofchange in the company. There is no singleindicator of the number of business transac-tions which take place in the course of a year,but the following figures provide something ofa composite indicator :

Item 1956 1954Percent

of'Increase

Number of piecesof outgoing mail

5,154,000 7,660,000 48.6

Number of policiesat year-end

1 ,595,000 1,712,000 7.3

Insuranceipremium ncome

$281 million $380 million . 35.2

Insurance in forceat year-end

$8.4 billion $12.7 billion 51.2

Net investmentincome

$127 million $218 million 71.7

How much did automation through com-puters contribute to the increase in personnelor how much more would the increase havebeen without computers in the picture ? Theforces of change are so completely interrelatedthat it is impossible to answer that question.Of course, it is possible to measure the numberof jobs eliminated by the consolidation of sev-eral files over the 3-year period required forconversion of records. Similarly, it is possibleto measure the number of jobs in the new divi-sion established to handle our Insurance ServiceAccountsa payment service which was madeavailable only through the use of computers.And there are other instances of clear-cutchanges in both directions. But not so clearare such questions as : How much new businesscan be attributed to the better sales and servicetools accorded by the computer to our agents ?What would have been our competitive posturewithout computers as compared with other lifeinsurance companies and with other savingsinstitutions? How much of our continuinggrowth can be attributed to a better-informedmanagement?

The comparative figures for 1956 and 1964have other interesting characteristics. Therewas no change in numbers at the very top levelof management, and there was a relativelysmall percentage change in the broad base ofemployees, the office staff. On the other hand,the middle managment and professional levelsincreased by a very significant percentage. In-cidentally, a more detailed breakdown of the

office staff also shows a higher job level thanbefore on the average. This phenomenon re-flects the increasing breadth and complexity ofour life insurance product and related services.

The impact of automation on employment atNorthwestern Mutual Life, then, is not easilydetermined. It does appear, however, thatautomation and other forces have combined toincrease total employment by a fair numberand to increase more responsible positions bya significant number.

A comprehensive study was made of employ-ment patterns at Northwestern Mutual Life in1963-64 by the Wisconsin State EmploymentService. This study resulted in the April 1964publication of "Automation Program ReportNo. 3: A Large Life Insurance Company Auto-mates ; Workforce Implications of ComputerConversion." A June 1964 supplement was en-titled "Changing Workforce Characteristics ofan Automated Insurance Company." Both ofthese publications were part of the U.S. Em-ployment Service, Automation Manpower Serv-ices Program, Demonstration Project No. III.

Impact on Products and Services

No doubt the most important result of theuse of computers at Northwestern Mutual Lifehas been in the expansion of our insuranceproduct and related services. We have experi-enced a dramatic upward surge in the diversityof our product and in the amount and presenta-tion of information to our customers, ouragents, and our management. Again, there arecorollary forces which have helped to promptthese innovations, and it took more than justthe computer to implement them. But thereare quite a number of examples which illustratethe unique contribution of computers.

The major innovation made possible onlythrough computer-power is our Insurance Serv-ice Accounts (ISA). This is an account facilitywhich permits an orderly series of payments tocover any number of policies with irregularpremium due dates, loan interest due dates, andloan principal repayments. There are intricateinterrelationships and complex calculationswhich bring together the processing of ISArecords and of the corresponding insurancepolicy records. The prerequisites for this serv-ice include not only the computers and thoseprograms specifically designed to handle ISA,but also a highly integrated computer systemfor our insurance records. The popularity ofthis new service is illustrated by the fact thatin the short time since ISA was made available(less than 3 years), the number of accountshas grown to more than 57,000including 10

NORTHWESTERN MUTUAL LIFE INSURANCE

percent of our 1,700,000 policies and 14 percentof our $13 billions of insurance in force.

Another example of improved service is ourPremium Notice. The computer permits bring-ing together an assortment of related data,transforming this document into a combination"notice" portion and "your record" portion.About 10,000 of these are prepared each work-ing day of the year. We have been able toshow also the "past year increase in cash value"the calculation of which would be completelyimpractical for the large volume of noticeswithout the computer. Still another exampleis our Policy Service Card which gives the agentcomplete and current status information foreach policy relating to his clients. About18,000 of these are prepared daily to reflect thenew policy status following current action, andthe calculations involved are usually extensive.With this Policy Service Card, however, theagent can give immediate answers to mostquestions which life insurance clients ask abouttheir policies.

Has the computer changed the basic con-tractual concept of life insurance? So far, ithas not. However, the computer does offer anew capability for more sophisticated and morepersonalized forms of life insurance. The im-plications of this capability and the possibleversions of a new contractual concept are beingstudied in many life companies. It is inevitablethat this capability will be used, that the com-puter will change the face of life insurance.The years it will take to accomplish this are areflection of the great complexities inherent inthis fiduciary contract which must stand fordecades.

Impact on Sales

The computer has been a friend to the lifeinsurance salesman. It has provided him withan improved product, a happier client (with avery few, but vocal, exceptions), and a moreefficient use of his time. This has been ac-complished through a variety of powerful salesaids and servicing improvements. The agentnow has at his disposal much more information,in a more useful form, in a shorter time.

Again, the computer's impact on sales iscoincident with a variety of other forces, andit is impossible to isolate them for individualexamination. There is no doubt in our minds,however, that the collective contributions madeby the computer have materially aided oursaleswhich were up 17.3 and 12.7 percent in1963 and 1964, respectively.

Impact on Management and Adminisiration

This view of the computer's impact is in one

229

sense simply a composite of the other impacts.But it is also more than that. By virtue of thenew high level of data manipulating ability,elaborate and complex analyses can be madewith relative ease. The manager potentiallyhas at his disposal virtually anything he wishesto know about past performance and currentstatus of the business. In addition he can ob-tain projections into the future based on theassumptions he specifies.

That description paints a far rosier picturethan progress to date would justify. Most com-panies have barely scratched the surface ofmanagement reporting via the computer. Man-agement is just beginning to understand thenature of the complex interrelationships whichare the fiber of any corporate entity. As thecomputer makes available more extensive andmore timely data, management finds that de-cisions are not easierbut simply much betterinformed.

At the Northwestern Mutual Life, the com-puter has been of material help in sales report-ing, markets research analyses, studies ofagency profitability, agent manpower projec-tions, etc. We have high hopes in the areas offinancial reporting, securities portfolio analysis,and others. The development of these activitiesrequires a great deal of timefirst, to establishthe specifications of what management reallyneeds, and second, to implement the systemseffort demanded for their completion.

Will these developments ultimately reducethe number of managers needed? Conceivablyso, but it is very doubtful that the demand forqualified managers will decrease. Managersmust have an increasing awareness of a widerange of subjects in order to be effective.Commerce and other segments of our economyare becoming more and more complex. Prod-ucts and services are rapidly expanding. Theinterplay between government and the privatesector of the economy is becoming much moreinvolvedboth in the regulatory and in thetax aspects. All of these continuing changeswill demand greater attention from manage-ment, and it seems likely that this upwardinfluence is more than enough to offset thelower forms of traditional management activ-ity which the computer might be able toencompass.

Impact on Organization

Perhaps it is worth a brief note to mentionthat the computer does have an impact on or-ganization. It provides significant new ways fordoing business, and this cannot help but have anequally significant effect on organization.

The nature of this effect varies greatly by


industry and by company. At the Northwest-ern Mutual Life, the lower levels of organiza-tion have changed dramatically in three majoroperational departments, but the larger organi-zational structure is little changed. The lattercircumstance may be attributable to a desire toassimilate the great operational changes beforegiving full recognition to their effect on basicorganizational struc cure. Also, the essentialfunctions to be performed in a life insurancecompany have not yet changed, even thoughthe "mix" of people-activity and machine-activity has changed.

Impact on Costs

There is no doubt but that, at the North-western Mutual Life, the costs of doing busi-ness according to precomputer standards havebeen reduced. However, there is also no doubtthat the postcomputer products and services,more elaborate and more useful to the con-sumer, are being provided at costs somewhathigher than before.

As we have noted several times, a widevariety of forces has interacted, and it is im-possible to define the precise impact of each ofthem individually. It may be of interest, how-ever, to compare the changes in salaries, inequipment costs, and in total personnel betweenthe years 1956 and 1964 (before the computersarrived here, and the most recent completedyear, respectively). For comparative purposes,these figures may be related to the indicatorsof company growth and activity shown above.

Item 1956 1964Percent

ofincrease

Salaries, wages,and benefitplans

$8,767,000 $13,210,000 50.7

Cost or depreci-ation of furnitureand equipment

$ 186,000 $ 524,000 181.7

Rental ofequipment

$ 174,000 $ 113,000 35.1

Total personnelat year-end

1,405 1,521 8.3

An evaluation of these comparisons musttake ft:to account several observations. First,it should be noted that this is not the wholestory of costs. There are several offsettingcost considerations, most important of which isthe reduction in "collection fees" in the agencyoffices. Thir item approaches $1 million per

year, well over twice the increased annualequipment costs.

Second, we are well aware of the many addi-tional complexities brought about by our im-proved insurance and annuity benefits and serv-ices. The Northwestern Mutual Life has beenamong those companies having an extremelyhigh rate of change in this regard during thepast 15 years. These new benefits and servic shave been received with unusual enthusiasand they have required the continuing atteiition of a significant number of qualified people.New equipment and new techniques have beenadopted by most life insurance companies inone way or another and competitive pressureshave caused the subsequent adoption in othercompanies to be widespread. In any event, thisgeneral consideration of improved benefits andservices is probably the major reason that sal-ary costs increased more rapidly than "totalpersonnel." As the average levels of skill andresponsibility have gone up, so too have salarylevels.

Third, worthy of some note is the persistentincrease in salary levels for the same job duringthis period.

In summary for this consideration of thecomputer's impact on costs, it may be said thatcosts would have decreasedwere it not forthat dynamic tendency of our economy to pro-vide a bigger and better product for the con-sumer. The consumer's standard of living as itpertains to life insurance, and as in many othersectors of the economy, has been improvedmaterially by the computer.

General Observations

A limited view of automation (and even ofthe computer) such as this must be qualifiedto show the larger context. Over and above itsimpact on one particular company is its impacton an entire industry. The life insurance in-dustry has received from the computer muchassistance in its efforts to retain its traditionalshare of the nation's savings dollars. Whatmight have happened to life insurance duringthe past decade without the computer is prob-lematical, but the larger companies felt greatpressure on Ineir systems and space capacities.No doubt solutions would have been found ;however, the effect on the life insurance indus-try's competitive stamina must remain anunanswered question.

Beyond this discussion of the life insuranceindustry is the impact of the ,omputer, and ofother forms of automation, on many other in-dustries. Each industry has its own peculiarcharacteristics and, hence, its own reaction toautomation. Although there are a number of

NORTHWESTERN MUTUAL LIFE INSURANCE

dramatic instances in which automation hasreduced employment, the literature tends toindicate that they are distinctly the exception.It is our impression that in most industriestime and progress have combined to offset per-sonnel savings via automation with personnelrequirements for expansion in volume andproduct line. Also, industry does try to easethe transition.

Beyond even the impact of automation on allindustries existing at a certain ir : in time isthe miraculous evolvement of ,r Justries.These come about in a variety 0. y::;

1. The tools of automa L. in must bedreamed of, designed, developed, manu-factured, advertised, sold, distributed,and maintained. These functions cre-ate many jobs.

2. New technologies combined with thetools of automation make possible manyinr?ortant new products. The economyfinas a strong market for these whereno such market existed before. Some-times old products are thereby madeobsolete, but other times the consumerhas acquired brand new tastes. Again,there are many functions required totransform these from ideas into con-sumables, creating many jobs.

3. The rising standard of living opers upa vast market for new services t.? allkindsin recreation, entertainment,beauty aids, housekeeping aids, ete.Even if these services use the tools ofautomation, they create jobs and manytimes the service is one of skill notlikely to be automated.

Not quite a Iew industry, but one which hasbeen expanding rapidly, is education. Educa-tion and training have a tremendously impor-tant role in our somewhat automated economy.The very large amount of knowledge whichmust be transmitted is taking, and will cc n-tinue to take, corresponding large amounts of"people-time"both for teaching and forlearning. The higher our standard of livingand the more complex its components, themore time must be spent to understand anyone of its facets. This is a growing activitywith the end nowhere in sight.

An Estimate of the Future

In spite of the first decade of automation andin spite of the expanding job force, unemploy-ment in the United States is at a relatively lowlevel. In fact, some think that unfilled jobsexceed job seekersbecause the skills soughtare higher than those available. In other

231

words, the free economy has demonstratedclearly that it can accommodate itself at leastto the present level of automation. But whatof the future?

Automation has two conceptual abilitiesitcan do certain things which have been done inthe past by people, and it can do certain thingswhich could not be done in any other way. Theimpact of automation in the future will bedetermined by the "mix" of these two abilities.The former releases people for other activity(or inactivity), while the latter provides a newnetwork for all kinds of jobs which requirepeople. The former makes existing productscheaper, while the latter provides new productsboth serve to increase the consumer's livingstandard.

Those who view the future with predictionsof very little work for human beings to do tendto look only at the examples of automationwhich replace people. They fail to recognizethe vast capacity of the human being to con-sume new goods and services when they appearon the market even though the "need" for themwas not recognized earlier. In this society, themost affluent in the history of mankind, wehave visions of a future in an environmentwhich requires astronomical expenditures oftime and materialsask any far-sighted cityplanner about what can be done to improve theliving standard of the city dweller ; ask anyAmerican (except perhaps one in 10,000 who isvery wealthy) what additional consumables hecould dispose of if given the opportunity. Thepotential market for even the existing varietiesof goods and services in the United States isextremely high. Yet we are finding new con-sumables at an increasing rate. And there areparts %,..: 1,lie world in which people exist at baresubsistence levels. With so much to be done inthis world, let alone in space around us, thereseems to be absolutely no doubt that peoplewill have workmeaningful, productive activ-ityfor many decades to come, if they desire it.

On the other hand, there are those who viewthe future as nothing more than an extensionof the past, failing to take into account theacceleration of change that we are experiencing.The higher rate of change does tend to causeincreasing disruption and dislocation in indi-vidual situations. These cannot be ignoredbecause to do so would mean a gradual accumu-lation of wreckageboth human and material.The answer is simply that some small portionof the fruits of change must be used to ?leanup the debris of change. That is easier saidthan done because the fruits of change are mostplentiful under a free economy, while the debrisof change is often handled by a governmentaleffort. Also, it is not easy to distinguish be-


tween the debris of change and the debrisresulting from incompetence and imprudence.

How can we enjoy the best of automation andat the same time minimize its problems?There is no sure-fire blueprint to guide us, butwe do have past experience to help us. Thesubject is so broad, encompassing such an ex-tensive range in the spectrum of our economy,that any general approach must be very generalindeed. To serve as a point of reference, how-ever, perhaps the following approach may beconsidered:

1. The people of the United States shouldreaffirm in every way possible throughtheir elected governments the strongconviction that we have achieved ourpresent level of progress only in a con-text of personal, political, and economicfreedom. Of course, there have beenappropriate constraints to ensure thatthe freedom of one does not subjugatethe freedom of another. It should betheir clearly stated objective, also, tomaintain this context of freedom. Aconsistently high level of progress canbe achieved only on such a foundation.

2. More specific to automation, the in-clination toward research, experimental,and developmental activities should beencouraged. At the very least, theyshould not be discouraged by regulatoryand tax policy. The cost of this phaseof industrial activity is high, and re-search efforts are frequently unsuccess-ful. The reward for success must besufficient to offset the prospect offailure.

3. Where a new use of automation islcling explored to do a job previouslydone by people, the cost of conversionshould include provision for retrainingthose whose jobs are terminated as aresult. It will be difficult to find apractical and equitable means of doingthis, but it does seem to be justifia blein concept. As a corollary, hiring !eli-des of the future must contemplate amore extensive training program fornew employees. This is particularlyimp Jrtant for certain groups which findemployment opportunities to be limitede.g., high school dropouts.

4. Education and trainingboth publicand privatemust be a primary pointof emphasis in the years ahead. Thisemphasis on the development of human

resources is essential for doing today'sjobs effectively and for adapting totomorrow's changes readily. This topicwas very ably summarized by MaxWays in "The Era of Radical Change",in Fortune, May 1964 :

. . . why [do] we need so much more organ-ized communication than our ancestors had.

The answer lies in radical change as a con-dition of life. Most members of a stablesociety absorbed almost unconsciously allthey needed to know about the life aroundthem. . . . With us it is otherwise. Allparts of society are in motion and mostmen are in motionchanging jobs, chang-ing residence, chinging acquaintances, buy-ing things they never bought before,confronting problems and seizing oppor-tunities their fathers never heard of. Inthe radically changing society the connec-tive tissue, the organized effort required tostay in touch, is enormous and every yearwill require a larger proportion of the totalwork.

This need is the real basis for doubting thatour grandchildren will have nothing to dowhen they grow up except chase one an-other around swimming pools.

Summary

Automation has had, and will continue tohave, a profound effect upon employment pat-terns. If we are satisfied to forego futureprogress, automation can be used to decreasethe employment requirements of the presentstage in our economy. However, the more weprogress, the more we see new fields )e con-quered. Our horizons for ultimate an ful-fillment are still virtually unlimite

The nature of work will change illy, itis truo. The level of knowledge ., ill re-quired for an individual to make ah effectivecontribution to society will increase. The paceof change will be rapid, but the problems willbe no more than we are able to resolvebecause in large measure we establish the lim-its of our own problems. Our majoi concernwill be the wisdom needed to guide this fasci-nating course. We must maintain our desirefor progress, and we must not tinker with theessential mechanics of it. We must give it"loose rein."

If we succeed in adapting to our changingenvironment, then human work, in the bestsense that we know it, will continue to be anessential prerequisite for human progress. Ifwe fail, there will be even more work to doand it won't be nearly as pleasant.

STATEMENT


Office Employes International UnionNew York, New York

Statement by the Office Employes International UnionIt would be a mistake to make comparisons

between the industrial revolution, which cre-ated mass production industries and jobs, withthe changes taking place today due to im-proved technology and automation. One of thepurpases of the industrial revolution was tocreate jobs, while automation is specificallydesigned to eliminate jobs.

Thomas J. Watson, Jr., chairman of theboard of IBM, in testimony before the Subcom-mittee on Unemployment and the Impact ofAutomation of the House of Representatives,stated in 1961 :

We seem to have automated our country sufficientlyto supply all of the basic demands and a goodmany luxuries, and still involve only 93 percent ofour work force. . . .

We can't aigue that technological change andand automation are not laborsaving processes. Ofcourse they are. They do cause displacement ofpeople. In fact, to do so is one of their majorpurposes. They may also upgrade people or in-crease the prosperity of an industry so that moreare employed. Nevertheless, we do have more un-employment than we can tolerate today and someof it has come from technological change andautomation.

Ralph Cordiner, chairman of the hoard ofGeneral Electric, in the same year before thesame Committee, put it this way:

If, in spite of the best planning we can do, somepeople are temporarily unemployed because oftechnological change, both industry and govern-ment have a recognized responsibility to help fam-ilies through any such periods of transition.

On July 16, 1964, David Sarnoff, chrirmanof the board of RCA, in a speech dealing withthe social impact of computers, stated:

The reduction of work will apply not only to execu-tives but in varying degrees to all echelons of oureconomic structure. Science and technology andthe progressive refinement of automation will, inthe next 20 years, justify the reduction of theworkday to 4 or 5 hours.

Here, therefore, we have three expert repre-sentatives of management closely identifiedwith the manufacture of electronic dataprocessing machines and numerous other labor-saving devices agreeing that automation andtechnological change are eliminating jobs.

The experience of the Office Employes Inter-national Union throughout the United Statessupports the contention of these business lead-ers and of leading economists, social scientists,and other labor organizations. Routine clericaloccupations are being eliminated at an alarmingrate. The computer is also making inroads oncertain technical occupations in addition to de-signers and draftsmen. Unskilled and semi-skilled blue-collar jobs have diminished innumbers since 1956. This reduction will con-tinue in years to come as the number of blue-collar workers relate to the total work force.

The Bureau of Labor Statistics forecasts thatby 1975, clerical and kindred workers will in-crease by approximately one-third the currenttotal of 10,900,000. These figures can be de-ceiving because they do not indicate the dra-matic changes in the makeup of clericaloccupations by the year 1975.

Another important factor would be the num-ber of new jobs created in the coming years ifautomation was not a reality. Several yearsago, the Bureau of Labor Statistics made astudy of eniployment in the commercial bank-ing industry, which indicated that without elec-tronic data processing, employment in thatindustry would have increased by 600,000 work-ers by 1975. With automation, the projectionindicates that only 400,000 workers will beadded by that year. It is indicated that by1970, banks with about three-fourths of allworkers employed by banks will either havetheir own electronic data processing installa-tions or utilize the services of computer centers.Studies in the savings banks field and the insur-ance industry reveal that the number of addi-tional employees who would normally be hiredwithout electronic data processing will be seri-ously c rtailed because of the use of computersand peripheral equipment.

While large numbers of routine clerical occu-pations, such as file, sorting, inventory control,ledger, bookkeeping, and accounting clerks, andnumerous others, will be eliminated in thefuture, the successor jobs, such as systemsanalyst, programer, computer operator, andconsok operator, will not provide adequate em-ployment possibilities. Routine clerical jobshave always provided a break-in area for youngpeople seeking permanent employment. Such

235


beginner-jobs will no longer exist in the future.Statistics indicate that by 1968 the average

age of Americans will be 25. Millions of youngpeople, the product of the postwar baby boom,entering the labor market in the coming yearswill create a dramatic change in the type ofperson seeking employment. It is difficult tounderstand how our economy can provide jobsfor these young people in the foreseeablefuture.

There are approximately 70 million workersin the labor market today. We must providejobs for 101 million workers by the year 1980.! -thor, industry, and the Government must con-cern itself with counseling, education, andguidance of our youth. We must insure thefact that they are properly educated in thenewer and more complex skills which are evolv-ing from technological change and automation.We must prevent education and training gearedfor occupations which will not exist in thefuture.

The problems generated by automation andtechnological change cannot be met or resolvedby labor, management, or the Government act-ing separately. The appointment of this Com-mission is a step in the right direction.However, we believe that this or a successorCommission will have to be given more thaninvestigatory duties. Eventually, tripartitecommittees at the Federal, State, and localcommunity levels composed of representativesof labor, management, and the government willhave to be appointed in order to meet theseproblems in all of the geographic areas of ourcountry. These committees or commissions,answering to a Federal commission, should beresponsible for the promotion of technologicalchange to insure full employment, economicgrowth, and profits. In addition to providingadequate training for workers in jobs whichwill exist in the foreseeable future, the Federaland local commissions will have to adopt numer-ous other measures to avoid an adverse impacton workers, business, and the community.

We believe some of these measures should bethe following:

1. The use of unemployment insurancefunds to transport displaced workers fromareas of labor surplus to areas and indus-tries where shortages of personnel exist.It is far better in our opinion to use someof our unemployment insurance monies forthis purpose rather than to pay weeklybenefits until they are exhausted.

2. Earlier retirement for all workers,with special consideration for women.Women now make up two-thirds of thework force of the United States. It is farmore difficult for a woman in her forties

or fifties to gain naw employment than itis for a man in the same age bracket.

3. We also believe chat unemploymentinsurance funds should be used for train-ing and retraining of workers displaced orabout to be displaced.

4. Special training centers should be es-tablished for workers advanced in age andnot readily adaptable to the operation ofautomation devices.

5. Business should be encouraged to cre-ate on-the-job training programs for work-ers faced with displacement by techno-logical change or automation. This typeof training is always more effective andmore readily understood by employees.

We feel that our companies and corpora-tions should provide an educational pro-gram for boys and girls in their senior yearin high school whereby these young peoplecan both attend school and work in orderto acquire various office skills. This isbeing done on a limited basis in variousparts of the United States at the presenttime and is highly successful.

6. Unemployment insurance benefit pay-ments should be made more realistic, t.ndsuch payments should take into considera-tion the time required to train workersdisplaced by automation or technologicalchange. In effect, therefore, our unem-ployment insurance system should be mademore elastic in order to meet more realisti-cally the peaks and valleys of our economicsystem.

7. A shorter workweek must be estab-lished.

Automation and technological change haveproduced a spiraling of profits produced bytremendous increases in productivity. At thesame time, we are faced with the fact that5 percent of our work force is unemployed.The future indicates that our employment prob-lem will get worse rather than better. Thosewho oppose a shorter work- eek are refusing 'face reality. The course of American industrialhistory shows that the workweek has been cutapproximately 3 hours per week per decadesince the turn of the century. Unions throughcollective bargaining have already cut into thefast fading 40-hour workweek. Actually, morethan 8 million workers in the United Statespresently work a basic workweek of less than40 hours ; 62 percent of office employees in thenortheastern part of the United States areworking a weekly schedule of less than 40hours.

Automation in the factories and the officeshas and is boosting production far beyond theincreases obtained through mass production in

OFFICE EMPLOYES UNION

the 1920's , thus a drastic cut in the workweekis essential. If we do not cut the workweekthrough Federal legislation, we must resignourselves to the fact that millions of workersin the United States will be unemployed andwill be supported by Federal funds producedthrough taxation of those employed andthrough profits created by business.

Even today, millions of people in Americaare weekly recipients of foods which are de-fined as surplus under American farm legisla-tion. If we do not produce a full employmenteconomy, we will find ourselves faced withhaving to give away free a large percentageof the output of American industry.

It is our feeling that a Federal commissionshould also consider the feasibility of the use ofcertain automation devices. Computer manu-facturers seem to be competing with one an-other for purposes of producing speeds ofoperation which are no longer realistic. Wenow have computers operating at speeds far

237

beyond our needs. Numerous banks through-out the Nation, for example, are able to per-form all of their services in their electronicdata processing installations within a matterof a few hours. As a consequence, they arenow competing with one another and with com-puter centers for the services of companies andcorporations in order to be able to make fulluse of the computers.

We cannot help but wonder whether or notthere should be more control over the use ofautomation where its capacity is greater thanthe work for which it was originally intended.Possibly, instead ef control, an educational pro-gram for executives in need of automationinformation is a must. In certain utilities, forexample, where there is no existing competi-tion, does it benefit our society to automatejobs out of existence, particularly when itappears that savings are not passed on toconsumers?

STATEMENT '47'


Radio Corporation of AmericaNew York, New York

t

Statement by Radio Corporation of AmericaStatement of the Problem

Automation is now widely recognized as asignificant means of accelerating the entireindustrial process. It offers rapid and increas .ingly economical means for performing repeti-tive tasks, routine decision making, and controlfunctions, and for handling information accu-rately at extremely high speeds.

While the long-range benefits of automationare generally acknowledged, its short-range dis-locations have provoked spirited controversyand given rise to concern among workers andtheir families.

In essence, the problem is one of adjustment.How can our industrial society adapt mosteffectively to the far-reaching changes whichautomation is bringing about in our nationaleconomy and social structure?

In the whole broad range of domestic prob-lems, this one stands out as distinct and differ-entin its immediacy and complexity, in itseconomic challenge and social impact, in itscompelling demands on our v ision and leader-ship. In considering the problem, many factorsare involved.

Perhaps the most important of these is thefear of massive unemployment. Will the higherproductivity resulting from automation betranslated into unemployment instead of intohigher living standards ? Responsible leadershave given voice to such fears. Other spokes-men have countered with statistics to demon-strate that automation has actually spurredemployment. It has been pointed out thatwithout automation, the coal industry wouldlong ago have succumbed to the competitivethrusts of alternate power sources. In themidst of these conflicting viewpoints, one sta-tistic is reassuring. Over the past few years,with automation gaining wider acceptancethroughout industry, the overall unemploymentrate, instead of rising, has actually decreased.

Another factor bearing on the problem islabor mobility. What can be done to encouragedisplaced workers to move to other geographicallocations where job prospects are more promis-ing? Is it desirable now, as some have sug-gested, to provide funds that would enableworkers to fespond to changing opportunities ?

1

If so, where does the prime responsibility restfor taking the initiative in this matter?

A third factor is the question of retraining.Would it be feasible to establish a nationwidesystem of training allowances ? Under sucha system, displaced workers might be paid forgoing to school and preparing themselves tomove into upgraded positions in an automatedindustry.

A fourth factor is the growing impact offoreign competition. How, without widespreadautomation, can the United States offset thelower labor costs of Japan, West Germany, andother countries, and still maintain its competi-tive position in the world economy ? WesternEuropean nations already are well along theway to automating their factories because theirneed for output in greater than their presentlabor force can produce. If they automatemore rapidly than we do, will they not acquirea decisive advantage in the internationalmarketplace?

A fifth factor is the rate of our national eco-nomic growth. How much of an increase inthe growth rate could be achieved with, say, a10 or 20 percent step-up in automation? Isthe extensive application of automated tech-niques to industry and commerce a requisitefor continued rises in our living standards?

Automation and the Electronics Industry

The electronics industry is both a source anda beneficiary of automation. In the first place,much automatic equipment is electronicallycontrolled, providing the means of replacinghuman judgment and control. Electronics pro-vides the sensing devices, the means of com-munication, and the computing devices forcomplex automated systems.

In the second place, mechanized processes areused in the production of electronic equipment.In assessing the impact of automation uponthe electronics industry, this statement willconfine itself to experiences of the RadioCorporation of America.

Technological Charage at RCA

The role and pace of technological change atthe Radio Corporation of America has been

241


gradual rather than dramatic and it appearsthat this will continue. For example, eventhough the equipment used in the manufactureof electron tubes has been mechanized over thepast 15 years the number of assemblers hascontinued to rise with the growth of thebusiness.

The steady growth of this business and thedevelopment of more sophisticated types oftubes and other components have led to thecreation of more complex electronic systems.The increased use of electron tubes in com-puters and television, for example, created theneed for other components such as semi-conductor devices and tiny integrated cir-cuits, which, in turn, stimulated new areasof business and offered additional employmentopportunities.

It has been RCA's experience that as busi-ness has grown in terms of gross sales, em-ployment has also grown in spite of the gradualintroduction of more efficient technology. It isanticipated that this relationship will continue.During the past 10 years sales have increased70 percent while employment has increased34 percent.

Job Requirements and Worker Displacement

In terms of types of workers, there has beena change. During the 1950's hourly-p,id (pro-ductionunskilled and semiskilled) employeesrepresented approximately 60 percent of theemployee population, while now in the 1960'sthey represent approximately 45 percent of thepopulation. Increases have generally been inmore highly skilled occupations, such as in theengineering, technical, and administrativearea s.

The effect of this change appears to havealready been recognized by business, educationinstitutions, and the Government. Newspapers,Government literature, and other media havedescribed the situation in such statements as,"Employment opportunities exist for the well-educated, but opportunities are diminishing inthe less complex and less intellectually demand-ing occupations."

Many programs supported by the Govern-ment and the private sector appear as possiblesolutions to this problem. For example, indus-try's aid to higher educationscholarships,grants, fellowships, tuition-refund programsfor employeesand Government programs aid-ing the colleges and universities will increasethe numbers receiving college education andadvanced degrees. As this effect is felt, thegrossly undereducated and underprivileged nowbeing helped through the antipoverty andMDTA programs should be capable of assuming

the unskilled and semiskilled occupations pres-ently held by people with college potential.

Recommendation for Support of AdvancedEducation

Great effort and much money is being spenton the antipoverty program and MDTA. Itwould appear that an equally aggressive effortshould be made in urging and supporting\ col-lege attendance. Unless those with collegepotential complete higher education and acceptmore intellectually demanding positions, therewill be no places available for the antipovertyand MDTA graduates.

In other words, the grossly undereducatedand underprivileged and those with collegepotential must all be elevated together at thesame time. More emphasis should be placedon the college prospect through counseling,financial support, and subsidy, or the Job Corpsgraduate who cannot compete will find littleemployment opportunity.

Recommendation Regarding School Systems

Changes of great impact are characteristicof industry, the Government, and many otherinstitutions, appears that the institutionleast affected by new theories, concepts, andtechnology is the school system. An unwilling-ness to accept new educational ideas and meth-ods contributes significantly to the dropoutproblem, lack of motivation, and inferioreducation.

A number of new concepts are being formu-lated that deserve wider consideration; forexample : (1) an examination plan which wouldgive credit for knowledge already assimilatedwhether or not through the formal classroomallowing the student to graduate sooner or takeother courses ; (2) computer-aided instruction ;and (3) less rr 3chanized programed instructiondevices. More is known about motivation andlearning theory than is being practiced in theusual school system.

An aggressive program of training and re-training of teachers appears needed. A na-tional task force to study and recommend newstandards and concepts of education at all levelsseems extremely desirable.

Recommendation Regarding Direction of Gov-ernment Programs

It appears that the Government programsantipoverty and MDTA--have not fully utilizedthe skills of industrial training directol a. Since

RADIO CORPORATION OF AMERICA

the educational success of these programs willbe judged in terms of the graduates, it may bewell to have guidnnce from industrial trainers.Competitive forces have required industrialtrainers to develop and utilize more sophisti-cated learning devices than any other group invocational training and education.

It is recommended that industrial trainersbe represented on local and national committeesconsidering the problem. Some considerationshould be given to an arrangement with indus-trial companies to release highly skilled trainersto the Government on a year's leave-of-absencebasis.

While the foregoing discussion is by nomeans exhaustive, it does include points thatare important and relevant to RCA's experiencein adapting to changes created as automationis introduced on a rising scale.

It should be recognized at the same time thatthere is a risk of attributing to automation ortechnological change dislocations that resultfrom other causes, such as a shift in consumer

243

demand. The problems of dislocation are thesame, whatever the cause, and they are cer-tainly not to be underestimated. However,blaming automation for all of our social andeconomic problems is more likely to hinder thanto help in determining the rate at which weshould proceed.

In the long run, if the growth trends of theUnited Statis prove adequate, the economyshould be able to absorb the results of increasedproductivity without appreciable disturbance.When the national economy is on the upsurge,automation can be effected with relative ease.During a period of economic softness, the ten-sions of transition are magnified.

It therefore becomes essential to direct in-tensive analysis to the problems of growth andto formulate procedures which will promoteadequate growth. One way to advance growthis to stimulate the creation and development ofnew industries. The Government can help sub-stantially in this respect by providing properand adequate incentives.

i

i

STATEMENT


Retail ClerLs International Association

1=111

1

Statement by the Retail Clerks InternationalAssociation

We welcome the opportunity to state ourviews on problems of technological change tothe Commission. The Retail Clerks Interna-tional Association, which now has a member-ship of approximately 460,000, has always beenconcerned with the work conditions affectingemployees in the retail trade. Our constitutionspecifies as one of ou'r objectives the elevationof the moral, intellectual, and social conditionsin the trade, and it is clear to us that technologyhas a serious impact on these. conditions.

We do not propose, in this statement, todiscuss the many issues that flow from techno-logical advance in general. Rather we wish tolimit ourselves to the developing situation inretailing. It is frequently said that wherehuman services predominate, automation is im-possible. Yet, as we view the current scene,we discover that computers with feedbackmechanisms, as well as electronic data process-ing, are increasingly utilized in this area, justas in manufacturing, public utilities, mining,and elsewhere. As retailers become aware ofthe possibilities of these techniques, engineerscome forth with devices that can be useddirectly in merchandising itself.

Today, all sorts of flexible automatic loadingdevices and materials handling equipment arebeginning to appear. In retailing and distribu-tion, the outstanding developments are found inprepackaging and automatic handling of ma-terials at both the warehouse and retail level.Once these devices are connected with dataprocessing equipment, automation is firmlyestablished.

Naturally enough, the introduction of auto-mated equipment first reveals its( in largerenterprises. Elaborate systems of conveyors,ferris wheels, pallet lifts, and monorails, fre-quently linked to computer systems, are beinginstalled in department stores and supermar-kets, thus demonstrating that retailing is catch-ing up with industry in the use of advancedmethods for the handling of goods.

One of the impediments that retailers needto overcome is the lack of sufficient flexibilityin some of the mechanical systems. Depart-ment stores, particularly, stock thousands ofitems in containers of varying size, shape, and

weight. Nevertheless, goods handling has beenperfected in a number of department stores andspecialty operations permit merchandise to bemoved through conveyor belts and monorailtracks from the delivery platform to the sell-ing floor, all governed by computer controls.

These advances can be described as automa-tion, for they fall into the category of processredesign and control of operations. The under-lying conditions of mass purchasing power,relative labor scarcity, and high operating costsare well known. In retailing, these factors aresupplemented by the existence If suburbia,mass transportation, refrigeration, and an in-dustry which has exhibited a steady growthpattern since 1950. Increasingly, the humanresponse in retailing is being eliminated andelectronic connections are being substituted.

These installations are not costly. The factie that computer systems of various sizes areavailable to firms in the retail and distributionfield which do not require heavy investment andexpensive equipment. Allen Harvey of theDasol Corporation remarked some years agothat small firms can readily reap the benefitsof automatic data processing. He stated thatvirtually any concern can install a system in-volving computer equipment that will satisfyits specific needs and at the same time beeconomically feasible.

Here are some of the advances now beingmade: Shoe chains are adopting data inputdevices at the .point of sale ; cash registers cre-ate a punched tape which records details ofevery transaction ; variety chains are workingon ordering systems based on a universal codewhich identifies each item, involving printpunch tickets ; drug store chains are installingcomputers for merchandising purposes ; depart-ment stores continue to experiment with point-of-sale devices; apparel chains are usingcomputers in merchandising and inventory con-trol and in preparing documents relating tocharge accounts ; mail order concerns utilizecomputers to control warehouse inventories andto produce order-picking sheets and store in-voices ; food chains are experimenting withinstallations which produce punched papertapes representing the daily order of perish-

247


ables so that the data can be transmitted bywire to the company's regional distributioncenter; and a number of retail concerns areputting into operation merchandise control andreordering systems based on the use of fullsized punched card systems.

Automatic reorder techniques utilizing com-puters have decided advantages for the retailchain in that they save much labor and alsoprovide more balanced stocks ; more businesscan be done with less inventory. Of course,these techniques can be applied more easily tosmall staple lines that include a wide range ofsizes, styles, and colors and that have a highturnover rate. But it is rather difficult to applythe automatic computer system to bulky goods,high fashion lines that change rapidly, sea-sonal goods, or slow turnover departments.Yei, areas involving model changes can be madeamenable to computer systems as illustrated bythe numerical control system in the machinetool industry. Similar principles can be appliedto retailing. Of course, some managements dorecognize that there is a certain cost in theimpact which, these systems have on humanbeings that must be taken into account. Saidone management expert, quoted in Chain StoreAge, January 1958:

The danger of push-button merchandising lies inthe fact that the chains can lose their merchandis-ing talent at the store vel. Automatic reorderingtakes the fun out of work for the salesgirls. Peo-ple like to feel that they are in control of anoperation and even making mistakes is benefi,lialbecause it gives them a sense of importance.When you get too automatic you get restless orlistless help. The salesgirl's planning instinctsbecome dulled from disuse. She becomes so ac-customed to ordering automa tically that she losesthe ability to plan for future seasonal and fashionpeaks.

Yet, at store equipment exhibitions, labor-saving devices usually capture the enthusiasmof retailers. As often reported in trade jour-nals, equipment is now available to weigh,label, and compute the price of merchandise byelectronic methods. There is cellophane wrap-ping machinery for prepackaging eggs; track-ing equipment to enable the vertical stockingof items such as detergents, beer, soda, andother heavy and bulky merchandise ; power-adjusted wrapping machinery for prepackagingmeat, fish, poultry, and produce ; a meat-chop-ping device featuring a double-grind processwhich, in a single operation, can reduce theneeded number of man-hours by 60 percent;automatic machinery to wrap and label meatsin a single operation ; industrial sweepers forwarehouse and parking lot use, as well as avariety of other devices.

The backroom in the sur mnarket is, ofcourse, a most important a.,:ea for improvedmaterials handling. The trend to mechaniza-tion is most evident in the handling of non-perishable items. Equipment to speed the flowof stock from truck to shelf has been gainingwidespread acceptance among food chains.While conveyor systems of both the gravityand power type have been used in single-leveland two-level stores for many years, the trendis for more automatic installations. Full con-veyor systems are now in use in which the lineof flow of merchandise is along the most directline from the truck to the shelf. Alternateflows are built into the system so that the stockmay go to a holding area until needed and thento the price-marking station.

Supermarkets are also using the pallet orplatform loading system more extensively.Full loads of stock of one item or of items forone section are loaded on wooden pallets in thewarehouse and placed aboard a trailer by fork-lift trucks. At the store they are unloaded byanother forklift and the stock is then trundledto its holding bin in the backroom. Sometimesthe pallet is taken directly from the truck outto the sales area for price-marking and stock-ing. Supermarkets are installing overhead railsystems for unloading and transporting sidesc. beef, more power equipment for cutting,grinding and 'aping, more highly poweredautomatic and semiautomatic wrapping ma-chinery, and more scales which automaticallyprint the price on the package. Linked up tothese devices are both power and gravity con-veyor systems. Wrapping machinery accel-erates the mechanization of the various depart-ments and such machines often require alinked-in materials flow system to keep up withtheir wrapping capacity. Much of this heraldsthe beginning of an automated operation, forwhat is utilized here is the principle of thetransfer machine linking disparate operations.Tie a compliter into the operatioa and we haveautomation.

The backrooms in supermarkets, where fruitsand vegetables are prepared for display, arebeing more highly mechanized. At work sta-tions trimmings fall into automatic disposals.Cases of produce are set securely into givenpositions reducing handling to a minimum.The produce workrooms are being styled in themanner of meat department work stations, withwrapping materials, trays, heating irons, andhot plates carefully arranged for maximumefficiency. Movable racks are used which willhold a dozen or more trays of produce, whilein other systems conveyors carry packages be-hind the produce racks. In some stores, sliding

RETAIL CLERKS ASSOCIATION249

windows have been introduced into refrigeratedproduce racks, enabling the merchandise to bestocked from the backroom in the same manneras meat is stocked in the wrapping rooms.

As a consequence of these developments,dairy department backrooms frequently have tobe provided because of the new equipment intro-duced in other depart% ants. Actually a dairybackroom is part of the display itself, since thenew cases and curtains which allow customersmerely to reach for the merchandise are madeso that the backroom s tock is directly behindthe sales display. As customers re nove mer-chandise from the display the stock clerkmerely slides new products into position frombehind. In order to mechanize the operation,however, belts are being introduced so that anew item is brought forward automaticallywhen one has been removed from the front.

What is important to note is that these de-vices feed on each other. The trend towardmore prepackaging of produce, for example,leads to more mechanization in the steps bothpreceding and following the packaging opera-tions. This, in turn, leads to larger depart-ments with a relative increase in storage andpreparation areas. And, in turn, this creates aneed for more materials flow equipment. This,perhaps more than anything else, is the mostsignificant thing in mechanizing retail opera-tions. One step produces another, and in theend human beings become less important in theconduct of business.

Such streamlining and mechanization haspaid off quite well. One supermarket installa-tion in Minneapolis makes the fullest possibleuse of laborsaving machinery. It is air-cooledat 65 percent humidity and employs a sales staffof seven men and four women. While the com-pany has not provided any figures on the extentof laborsaving resulting from mechanization,this particular store uses the same size workforce as a market with approximately two-thirds of its volume. Trade journal commenta-tors, while stressing the gains in efficiencysecured from mechanization and automation,are not adverse to pointing to the laborsavingthat stems from the installation of newequipment.

When these mechanical devices are linkedwith electronic control systems, we create thepossibility of establishing a completely auto-.mated retail establishment in such a way thatthe customer will be able with a minimum ofeffort to place her order, have the merchandisedelivered to the front of the store, and pay herautomatically computed bill. In fact, such asystem has been proposed by the InternationalTelephone and Telegraph Company and is in-tended primarily for chains of 150 stores or

more, all of which would draw merchandisefrom a central warehouse. The system cantransmit orders, say, for 37 cases of eggs, 96bunches of bananas, and a half ton of instantcoffee which are delivered automatically to thestore. The orders are transmitted at the storeinto a telephone. While the sounds are notintelligible to the ear, they are automaticallydecoded and fed into a printer Ana card punch-ing machine or calculator which then goes towork gathering the order. The system can belinked to a data processing computer so thatorders coming in from all stores may be totaled.

In November 1959, the General Telephoneand Electronics Company announced a machinethat can be placed at supermarket checkoutcounters where it will read or scan fluorescentstickers on each grocery item as it passes ona traveling belt. This information is passed toa computer which totals the customer's pur-chases. Such an automatic checkout operationtakes about two-thirds the time now requiredfor manual handling by checkout clerks. Auto-matic checking thus speeds customer flow, pro-vides more accuracy in totaling orders, andsupplies an automatic reorder system for thewarehouse. The scanner is connected to thecash box,awhere a similar device enables theelectronic reader automatically to record pricesof the individual items at the checkout. Prob-lems of handling items selling for prices incombination, such as 3 for 290, are solved byhaving the device renumber the first two itemsat 100 each and ring the third at 90.

According to the spring 1959 issue of TheJournal of Retailing, a department store in1965 may look somewhat like this : The cus-tomer walks through an invisible curtain of airand passes from the 95 degree (Fahrenheit)temperature outside into the 75 degree tempera-ture inside. She then takes an automatic ele-vator to the sixth floor, where she goes to thehousewares department, which operates on aself-servicc basis with checkout counters. Se-lecting a coffeemaker from a display counter,she takes it to the checkout stand, deciding topurchase it on credit, have it delivered, andcharged to her account. Unknown to her, thesales register receives authorization for thecredit sale (as a result of the cashier puttingher authorization plate in a special slot in theregister) and sends complete information aboutthe transaction back to a computer, which up-dates her account and includes her purchase inall sales and stock control reports being cur-rently compiled of the day's business.

Our customer af 1965 boards anotheroperator-less elevator and goes to the first floor.She stops at the men's furnishing departmenton her way down and buys a shirt for her


husband from one of the vending machineswhich sell the fastest moving sizes, color, andbrands of men's shirts. She again makes acredit purchase by placing her authorizationplate in the special slot.

This action on her part causes all informationconcerning the transaction to be electronically re-layed to the sales unit, accounts receivable, andstock control departments. On the way to thegarage, where her car is parked, she stops in thelobby of the entrance to the store and purchases apair of hosiery from a vending machine whichtakes her currency and returns her change.

This is the store of the future. Completelyautomated systems eliminate many of the cashregisters, bhopping carts, and expensive fix-tures ; they reduce the size of supermarkets andreduce the siib of inventories ; they end theneed to price-mark individual items and willdrast4cally reduce the number of workersrequ,red.

In the supermarket area, all that seems neces-sary at this time is for one of the giant chainsto undertake such an installation and to ac-custom the public to its use. This does notseem too difficult a public relations task. Whensupermarkets were first started, customerswere unwilling to purchase prepackaged meatand insisted on seeing the butcher at his work.This problem was solved by the late LansingShields of the Grand Union Company by mov-ing the butcher workmen out from the back-room closer to the selling area to do his jobbehind a glass window. Gradually the house-wife became accustomed to prepackaged meatand today one seldom sees the butcher at hiswork. Prepackaged meats are placed in at-tractive displays and counters and the house-wife is quite content. Personal relationships,once thought so necessary to the success of aretail operation, are being reduced to a mini-mum, if not entirely eliminated.

One of the major problems in supermarketoperation is the tendency for customers toqueue up during peak-hour operations at thecheckout counters. To help solve this problem,one concern is experimenting with an auto-matic packaging machine at the checkoutcounter. As the customer approaches thecheckout clerk and places the merchandise ona conveyor belt, the clerk adjusts the machinefor the size of the order. While the order ischecked on the register, the merchandise isplaced into a loading bin with light and fragileitems on the top. As the loading bin is filled,the cashier presses a button and the bin pushesthe merchandise into an open bag, which isthen lifted onto a receiving platform while thebin reopens to accept a new load of merchan-dise. Should it become necessary to resack a

heavy grocery order, either at the customer'srequest or because of injury to the bag, theautomatic bagger can do this in less than 10seconds by merely reloading the filled bag intothe loading bin and starting the machine whichautomatically does the job of repackaging.Equipment of this type not only increases pro-ductivity in the sense of speeding up the flowof merchandise through the checkout counter,but also eliminates the need to have an extraemployee to do the bagging. Such a device canbe easily linked to electronic data recording andprocessing equipment for inventory and salesrecords.

Even change-making is being mechanized.Clearly, with the development of automaticvending machines, the possibility of completelyautomated retail stores is virtually upon us.For a long time, growth in automatic vendingwas limited by the lack of a reliable machineto handle paper money. After years of work,the Atwood Vacuum Machine Company of Chi-cago developed a device which, when presentedwith a dollar bill, delivers 2 quarters, 3 dimesand 4 nickels in change. The Atwood deviceoperates by holding a bill in a perforated screenunder a photoflood lamp and then electronicallyreading the amount of light passing throughthe perforations. It can be adjusted to acceptdenominations other than a dollar and deliverany combination of change.

Said Architectural Forum of December 1958,in discussing retail automation :

It is too early to say what all this will do to theranks of service workers, currently the mostsharply rising sector of U.S. employment, thus faralmost untouched by automation. It may somedaypose a problem of no mean dimensions.

In the light of these developments, it is notunwarranted to assert that retailing is an areain which jobs can be simplified and made rou-tine so that electric computers can replace theworker entirely or permit one worker to do thejobs of several. Obviously industries, or evenparts of industries, do differ with regard tothe extent to which automation can be applied.But in materials handling and in retailing, therange of application appears to be a fairlybroad one.

We are told that job retraining, unemploy-ment insurance, and diversification can helpworkers adjust to this new situation. Skillsmust be directed toward repaii. and mainte-nance, instrument reading, and the like. Abili-ties will have to be of a higher level. But thequestion still remains whether room will bemade in the retail industry for the developmentof the semiskilled technicians required to oper-ate the new equipment. Certainly the impact

RETAIL CLERKS ASSOCIATION 251

of automation here would be lessened if therewere actually an upgrading of jobs. Certainlyit is desirable that the "humanization of work,"which many predict will stem from automation,should not be impeded.

The trade unions recognize that there maybe long-run gains stemming from automation.They know that progress in improving stand-ards of living has been possible because ofincreasing knowledge and increasing productiv-ity. The latter, measured in terms of valueadded, has increased roughly 3 percent a yearor, in constant dollars, 62 percent between 1947and 1960. There was, according to Bureau ofLabor Statistics data, a 17 percent rise in man-hours in retailing. Deflating output, byman-hours input reveals a 38 percent growth inretail productivity over the 13-year span ; vir-tually 3 percent per annum, a :eecord thatcertainly is as good as anywhere else in theeconomy. There is no denying the fact thatautomation will markedly enhance these trends.

Yet we must call attention to the fact thatsuccessful adjustments to automation is a long-term process and that the immediate impactdoes raisa serious social problems. The im-mediate short-run welfare of individual work-ers can be threatened by the haste to automateevery process and every technique.

We cannot agree that automation movesslowly. In the retail field, recent developments

have turned it into a veritable flood of change.The effects of automation are important enoughto require national attention. Automation wasunknown in retailing not too many years ago,but now it is increaFig in application and inintensity.

Rapid technological change can disrupt thelives of individuals and we must urge thatthought be given to programs for reducing theharmful effects of the new technology. Per-haps automated devices ought to be introducedcarefully, in accordance with some schedule, sothat the individual worker in retailing and dis-tribution will be protected against adverseeffects.

Trve, automation does have ancient roots,but xecent developments in auumating retail-ing represent a new force which has imposedupon the industry the need to revise time-honored techniques of merchandising and, moresignificantly, has altered substantially the tra-ditional relationships between management,labor, and the public. Retailing indeed is in astate of revolution. No longer can one identifygiven merchandise lines with given types ofretail outlets. Everyone sells everything.This is not only a matter of mere merchandis-ing; there is no question but that automationtoo has played an important role in makingpossible the striking changes that have occurredin the retail industry.

1

STATEMENT


Julius Rex ler

Loyola UniversityChicago, Illinois

Statement bu Julius Rezler, Loyola University, Chicago

The Impact of Automation on American Unionism and Its PossibleConsequences

This paper addresses its:gf specifically toidentifying the impact of automation on thevarious areas of production and employment(point (b) in the Commission's inquiry).

It is believed that unions as representativesof the labor factor in the political and economicscene are both directly and indirectly related toproduction and employment. Therefore, any-thing which would cause major changes in theseareas would, at the same time, have a derivativeeffect on unionism, too. This is clearly recog-nized by union leaders who are anxiously ap-praising the possible consequences of automa-tion for unionism. According to a recentsurvey, union leaders have unmistakably indi-cated tilat among the contemporary issues theyare primarily concerned with the latest phaseof technological change, generally known asautomation.'

The purpose of this statement is twofold :First, it is going to register some importanteconomic trends resulting from the emergenceof automation which have possible bearings onthe growth and structure of American unions ;second, the possible consequences of suchchanges for society, industrial relations, andthe worker will be evaluated.

Trend 1: Persistent shifts in the industrialand occupational composition of the laborforce

Changes in the industrial composition niay besummarized : The shares of manufacturing,mining, and transportation in total employmenthave been declining in the past 10 years, whilethe relative shares of the so-called service in-dustries, such as government, trade, finance,etc., have been growing.

What is the meaning of these changes in therelative employment of the major industriesfor unions ? The industries with decliningshares in total employment are by far the mosthighly unionized areas of our economy, whilelabor organizations have experienced little suc-cess in organizing the growing service indus-tries. In 1962, around 63 percent of union

membership were employed by firms in manu-facturing, mining, and transportation. Furtherdecline in the relative employment of these in-dustries wiluld slowly erode the traditionalbasis of union organizing.

Changes in tin occupational structure of thelabor force have even more ominous meaningfor the unions than the shift in the industrialcomposition. A secular trend which manifestsitself in the upgrading of the labor force hasbeen accelerated and reinforced by automation.As Kassalow noticed, "Somewhere along in the1950's the United States ceased to be a nationmade up primarily by industrial blue-collaremployees . . . it was around 1956-57 . . . thatthe number of white-collar employees in thelabor force begain to exceed those in the bluecollars." 2 Between 1955 and January 1965,the share of the so-called white-collar group intotal employment has increased from 39 to 45.6percent, while the relative share of the blue-collar group has declined from 39.2 to 36.3percent of the total civilian employment Acontinuation of this trend is projected bystudents of the labor market.

The implication of the above development fOrthe labor movement becomes clear when theoccupational composition of union membershipis considered. In 1962, 87 percent of theunionists belonged to the blue-collar groups,while while-collar workers represented only 13percent of imion membership.

The combined effects f the previously dis-cussed shifts in the indu crial and occupationalcomposition of the labor force tend to erodeslowly but surely the traditional organizationalbasis of American unionism. The repeal ofSection 14b of the National Labor RelationsAct would probably reverse the trend in thecontraction of union membership--but only forthe short-run. The additional members result-ing from the elimination of the legal ban on theunion shop would still come from the blue-

1Barkin, FolomonA.A. Blum, "What's to be Done for Labor?The Trade Unionists' Answer", Labor Law Jounwl, Mar. 19M,p. 17?.

2Kassalow. E.M. "New Union Frontier: White-Collar Workers",Hrtrverd Business Review, Jan.-Feb. 1962, p. 41.

255


collar occupations, and with the shrinkage ofthis group, the present trend would sooner orlater catch up with the unions.

The only way in which the labor movementcould counteract this trend would be to replen-ish the vanishing blue-collar members with amass orga.nization of the ever-growing white-collar employees. With the exception of a fewoptimists, however, American labor economistsare unanimous in their diagnosis: There arealmost unsurmountable difficulties in the wayof mass unionization of the clerical, tech-nical, and professional work force. Scores ofstudies have recently investigated the social,psychological, and economic factors which stub-bornly operate against the success of presentlabor organizations among these occupationalgroups. Their identification with manage-ment, the large portion of women employeesamong them, the low prestige of contemporaryunionism, the enlightened personnel policy ofmost corporate management are among themain reasons for which tbe chances are ratherslight that the present organizational patternsmight be changed radically.

Trend 2: Decline in the size of the averagefactory work force

Labor savings is one of the -principal goalsand major consequences of automation. In anautomated plant the original work force maydecline from 10 to 80 percent, depending onthe industry and the degree of automation.

Such reduction of ihe average work forcebasically affects both the size and the composi-tion of the bargaining unit. But the reductionin the size of the work force will usually resultfrom a decline in the absolute number and rela-tive share of the production workers. Thenumber of maintenance and technical em-ployees generally either remain at the preauto-!nation level or even increases.

Naturally, such a development would havea definite effect on the formation of the bargain-ing units. At present, it is not quite clearwhether the above changes would promote orhinder the formation of a single bargainingunit which would include the whole blue-collargroup in the plant. Experts list some factorswhich may cause a conflict of interest betweenproduction and maintenance workers, and couldlead to separate bargaining units ; at the sametime, some other factors are recognized whichmight promote the unity of the two groups ofworkers.3 However, if the average bargainingunit in an automated plant is already reducedin size due to the general labor savings effectsof automation would be further weakened bythe formation of separate units for the different

groups of factory workers, a considerable lossin the economic strength of unionism at theplant level would result. There may be someexceptions from this rule in particular situa-tions. Raskin points out that sometimes notthe size of the bargaining unit but its strategicposition is what matters.4 But in the greatmajority of the cases, a contraction of the bar-gaining unit would weaken the position of theunion vb-a-vis management.

Trend 3: Movement of the production facil-ities from the industrial centers to raraland small town areas

Industry in the era of mass-produci.lon tech-.nology relied heavily on industrial centers foradequate labor supply, and therefore its facili-ties were located mainly in the densely populatedmetropolitan areas. Automation, however, hasdecisively changed this pattern for two reasons.First, for its labor savings effects, it has re-duced the labor requirements of the automatedfirm to such an extent that the relatively smallwork force necessary for operation may easilybe available even in low labor supply areas,such as small towns ur rural communities.Second, the movement of plants away from theindustrial centers has been facilitated by auto-mation because, as pointed out by James Stern,"Automation accelerates the obsolescence ofexisting factories and thereby hastens the dis-persion and decentralization of modern indus-try to the less industrialized areas of thisco antry." 5

This geographical movement of industry isgoing to have profound effects on unionism.First, it works against the so-called proximityfactor which is generally acknowledged by thestudents of the labor movement as being oneof the essential preconditions of union growth."The hard cores of labor movements all overthe world have existed from the very beginningin the so-called industrial centers w ere hun-dreds of thousands of workers are employedand work side by side."

Whenever automation facilitates the reloca-tion of old plants and the construction of newplants away from the industrial centers, it notonly neutralizes the favorable effects of theproximity factor, but also puts two major road-blocks in the way of union organizing in thenew areas. It sometimes makes the costs oforganizing prohibitive, and increases the finan-

3Beal, E.F., and E.D. Wickersham, The Practice of CollectivsBargaining, R.D. Irwin, 1959, pp. 610411.

4 Raskin, A.11., "The Squeeze on the Unions", Atlantic Monthly,Apr. 1981, p. 58.

6 Stern, James, in Automation and Major Technological Change,The Industrial Union Department, AFL-CIO, Apr. 22, 1958, p. 12.

U. S. News it World Report, June 17, 1963, P. 72.7 Rezler, Julius, "Union Growth Reconsidered", Kossuth Founda-

tion, N.Y., 1961, p. 11.

AUTOMATION AND UNIONISM .257

cial burdens of unions just at a time whenincome from membership dues begins declining.E. C. Mattern, organizing director of OCAW,remarked that "it costs just as much to organize100 ...len as it does to organize 500 , . . as aresult the cost of bringing in new members hasat least doubled over the past 6 years."

But the financial burden of organizing insmall town areas is the lesser evil of the two.It is more disturbing for union organizers thatthey must operate in an indifferent or evenhostile environment when attempting to enrollworkers of plants which are located in smallconununities. James Stern observed that inthe rural areas "the traditions of unionism arenot firmly entrenched and, in fact, very littleis known about actual accomplishments or evenof the existence of the union itself. . . . In anorganizing campaign, therefore, the union rep-resentative must start from scratch. He hasthe task of not only persuading potential mem-bers of the rightness of self organization butalso of acquainting them with the history. . . .

and objectives of the union. . . ." 9But indifference due to ignorance is still bet-

ter than outright hostility of the communitytoward unionism. This is frequently the case,particularly in the southern rural communities,a segment of rapid industrialization. Undersuch conditions, the union organizer facesunsurmountable difficulties.

The retarding effects of recent plant move-ments due to automation have been recognizednot only by union leaders but also by manage-ment representatives. G. G. Mitchel, managerof industrial relations at Du Pont, noted withsome self-satisfaction : "The comparatively iso-lated locations of many of these plants undoubt-edly has allowed us a better opportunity to putour employee relations philosophy into practicethan has been the case with many of the so-called basic industries operating large plants inhighly industrialized communities." 10

Trend 4: Changes in job content and creationof new industries

Beginning with the first industrial revolu-tion, technological progress has constantly elim-inated or changed existing jobs and ineastriesand created new ones. This process has beenquantitatively and qualitatively accelerated bythe growing application of automated technol-ogy to industry. Already in 1955 Dr. Brunettilisted 23 new types of jobs that have beencreated by automation and he contended at thattime that this list constituted only a small por-tion of the new jobs resulting from automatedtechnology." A Department of Labor publica-tion describes 13 basic occupations opened up

recently in the field of data processing.12 Thepages of the Occupational Outlook Quarterlyare full of references to entirel-y new jobscreate3. by the various types of automation.

Experts agree that this trend will furtheraggrevate an age-long problem of Americanunionism, generally known under the termjurisdictional disputes. Kitangsworth con-cluded : "New kinds of jobs will probably in-crease jurisdictional disputes, not only betweenunions, but between groups within unions." 18Daniel Bell is even more pessimistic in evalu-ating the consequences of automation for inter-union relations : "With the rapid changes thathave been taking place in automation . . thewhole question of union jurisdiction has becomea complete crazy quilt." 14

A further centralize n of the union move-ment may result from La increase in jurisdic-tional disputes. The American labor move-ment has probably learned its lesson about theunfavorable effects of such disputes on thepublic and the government and will do its bestto bring them to a quick settlement. Thiswould inevitabily lead to an expansion of theauthority of the federation as an umpire overthe affiliated unions. Braunthal suggests : "Itis obviously easier to solve such problems wherethe authority of the national trade union centeris strong enough to mediate effectively betweencontending unions. ..." 15

Trend 5: Decreasing dependence of the firmon the nonsupervisory work force in main-tain'itg the continuity of production

This trend is caused by two related effects ofautomation. First, the size of the group ofproduction workers in relation to both the totalwork force of the firm and the quantity of itsproduction has been on the decline. Second,most of the functions previously performethis group which made them indispensable __Jrmaintaining the continuity of production havebeen more or less taken over by automatedequipment. As a consequence, the relative im-portance of the production workers to main-taining continuous production appears to bedeclining.

Both developments should reduce the effi-s Quoted by Stills, E.B. In Automation and Industrial Relation*,

Holt, Rinehart & Winston, 1963, p. 176.Stern, op.cit., p. 12.

10 Resler, Julius, "Labor Organization at Du Pont" Labor History,Spring 1963, p. 190.

" Automation and Technologica Change, Hearings before the Sub-comm. on Economic Stabilization of the Joint Economic Comm.,84th Cong., 1955, p. 885.

12 Occupations on Electronic Data Processing Systems, U.S. Dept.of Labor. 1959.

Killingsworth, C.C., "Auto* notion in Manufacturing", IRRAProceedings, 1958, p. 32.

14 Bell in Automation and Major Technologiccd Changes, op. cit..p. 7.

Braunthal, A., "The Trade Union Movement Faces Automat-tion," International i4abour Review, Dec. 1967, p. 656.

258 STATEMENTS : IMPACT OF TECIPTOLOGICAL CHANGE

ciency of the concerted actions which have tra-ditionally been used by unions to back theireconomic demands, The economic strength ofunions in the organized industries and com-panies have largely beer based on their abilityto withdraw temporarily the supply of nonsu-pervisory work force, particularly the produc-tion workers, from the firm and thereby bring-ing the production process to a complete halt.

A. H. Raskin has paid particular attention tothe effects of automation on strikes. He con-cluded : "When push buttons and electronic con-trol devices regulate every operation . . . ahandful of nonunion supervisors and clerks willbe able to keep acres of machines producing inthe face of a total walkout by unionized factorycrews." 10 He lists some of the industries inwhich the strike weapon already lost its formereffectiveness : "Changing technology alreadyhas made some industries almost totally invul-nerable to union shutdown. Notable are theBell Telephone System and the electric utilities,now so automatic that nothing short of sabo-tage or mechanical failure can disrupt theiroperations. The huge oil refinery and chemicalplant of the Shell Oil Company in Houstonmaintained normal operations for a full year inthe face of a solid walkout by its 2,000unionized employees." 17

Mr. Beirne, the president of CWA, appearsto be in agreement with the prognosis of Mr.Raskin, He stated : "In many industries it'sgetting harder and harder to strike against thenew technological machines that run automati-cally whether we work or don't work." 18

However, if due to the above effects of auto-mation, unions cannot any longer achieve theirgoals by strike or other concerted actionsagainst a firm or an industry, there will be aradical change in the methods used in collectivebargaining.

Broader consequences of the effects of automa-tion on unionism for society, industrialrelations, and the individual worker

If the trends analyzed previously would notbe arrested soon, a decline in the overallstrength of the labor movement could readilyensue. This process, in turn, would have someserious consequences not only for the unionsthemselves but also for the national politics,industrial relations, and the individual worker.

National Politics. In the past three decadesorganized labor has been among the main fac-tors of the American society which have shapedour national politics. Therefore, any changein the relative power of the trade unions wouldalso affect their role in the national power

-

structure. J. Raffaele noticed : "Effectivepower in the American economy is sharedamong managers, labor leaders, politicians,government bureaucrats . . . it is beginning tobe apparent that what is loosely called automa-tion is already affecting the tone of industrialleadership and modifying the relative influenceof its component parts." "

The direction of change may be projected byrecognizing the present role of organized laborin national politics. According to political sci-entists and practicing politicians, unions as awhole have played an important part in foster-ing liberal policies in general and progressivelegislation in particular. Therefore, if theoverall strength of unionism would suffer fromthe various effects of automation, the liberalwings of both parties would lose one of theirstaunchest allies in the political arena, and con-sequently, the country would experience ageneral shift to the right.

Industrial Relations. A long-term decline ofunion power, however, would have its farthestreaching consequences for industrial relations,the primary area of union functioning, parti-culary in the automated sectors of the economy.

At present, there are two schools of thoughtin evaluating the possible effects of automationon the relative power of unions in industrialrelations. The first school contends that a gen-eral decline in the numerical strength of unionswill not seriously affect their power at the bar-gaining table. Kassalow argues that "a rela-tively smaller, well-unionized blue-collar forcemight have even more leverage than it hastoday if it represented only 50 percent of laborcosts and 40 or 50 percent of the work force. . ..Such, after all, has been the 'We can be a bottle-neck' kind of rationale characteristic of somecraft unions." 28

Buckingham and Gross have come to similarconclusions. They both refer to the fact thatautomation requires a 24-hour operation of theproductive equipment, and therefore, manage-ment would go far to avoid costly interruptions.Buckingham further feels "that because of thedeclining weight of labor costs in total produc-tion costs and additional savings from automa-tion, management might more easily accept thedemands of unions than before." 21

The second school of thought on the relativepower of unions in industrial relations believesthat the expecte& decline in the number ofunionists, particularly in the mass production

18 Raskin, °PAL p. 66." Raskin, A.H., "Problems of Collective Bargaining in a Chang-

ing Technology." Labor Law Journd, Nov. 1962, p. 981," Quoted by Raskin. ibid." Raffaele, J.A., "Automation and the Comini Diffusion of Power

in Industry," Personnel, May-June 1962, P. 29.20 Kassalow, op.cit. pp. 44-46.21 Buckingham, Walter, Automation, Harper, 1961, p. 147.

1

AUTOMATION AND UNIONISM 259

industries, would indeed reduce the bargainingpower of labor vis-a-vis management. AlbertBlum states : "Collective bargaining may onlyhave limited utilitya utility which has beenlessened by the impact of automation." 22Laskin feels that labor's strength is alreadyon the downgrade.23

This writer agrees with the second school forthe following reasons : Two important effects ofautomation appear to neutralize any advan-tages for unions resulting from the so-called"need for continuous operation" and "thebottleneck situation."

First, automated equipment enables manage-ment to maintain uninterrupted productionwith supervisory personnel if this is requiredby the existence of a strike. Second, as a con-sequence of plant movements to areas indif-ferent or hostile to unionism, the entirebargaining unit which might have constituteda bottleneck could be eliminated.

If those labor economists are right who fore-see a decline in the bargaining power of unionsoperating in automated industries, then aradical shift in the power relations betweenmanagement and labor might take place infavor of management in the near future.Since a power vacuum cannot exist for long.As soon as unions are forced to relinquish theirformer postions, management would take overunless the Government would throw its powerto the support of the unions to enable them tomaintain the present status quo in industrialpower relations.

If the latter development would ensue, thepattern and concept of American unionismwould necessarily undergo a basic change.Unions whose power is more or less based onactive Government support would qualitativelydiffer from unionism as perceived in theAmerican society today. Such unions would berecognized as an extended arm of the FederalGovernment.

Individual Worker. The individual workerwho is involved in an automated productionmay, in many ways, be affected by the new workenvironment created by automated technology.

Here we are only interested in those effectsof automation on the worker which would resultfrom a weakened trade union movement. Toreach certain conclusions, it is assumed that theparticipation of workers in strong trade unionsincr bases their feeling of power and securityvis-a-vis their employer and their self-estimate,

and promotes industrial democracy. On theother hand, a declining labor movement wouldleave the individual worker without the feelingof protection and security, and thus wouldfurther the process of alienation of the workerfrom their work.

Acording to Robert Blauner, powerlessness isone of the main types of alienation in an indus-trial work situation. In his opinion, this formmay be caused among others by the inability ofthe workers to influence general managerialpolicies, and by the lack of control over theconditions of employment."

Wherever a strong union exists, the workers,at least in theory, are able to influence indirectlycertain managerial policies, particularly in thearea employment, and gain considerable controlover the terms of their employment throughcollective bargaining. Therefore, the ebbingstrength of unions in the automated industriesmay reverse the former process, thereby cam:ing the phenomenon of alienation in the non-supervisory work force. There is no need togo into detailed discussion concerning the pos-sible psychological and social effects of thisphenomenon. Here only the possibility of suchdevelopment is indicated.

In conclusion it may be emphasized that ageneralization concerning the impact of auto-mation on American labor organization wouldbe quite erroneous. Although a continued nu-n- :=.rcial decline of the American labor movementc. a whole would affect not onl, its own pres-tige, political power, and social status but alsothose of the component unions, changes in theeconomic power of the individual unions wouldgreatly vary with the degree of automation pre-vailing in the respective industry or occupation.The bargaining power of unions representingemployees of nonautomated industries wouldsuffer little, if at all, while labor organizationsin the automated or semiautomated industrieswill experience increasing difficulties in achiev-ing their objectives at the bargaining table.This is, however, only a preliminary observa-tion, and further research should be focused oncollective bargaining in various industries inorder to find out the difference between auto-mated and nonautomated industries in thisrespect.

22 Blum, A.A., "Labor at the Crossroads," Harvard Boehm* Re-view. July-Aug. 1964.

Rackiu, "The Squeeze on the Unions," °p.a.. D. U." Blauner. Robert, Alienation and FreedornThs Factory Workor

and His Industry, Univ. of Chicago Press, 1964, Dp. 16-21.

STATEMENT


Standard Oil Company of New Jersey

New York, New York

Statement by Standard' 'Oil Company of New JerseyWe believe that the problem being studied by

the Commission is important to the nationalinterest. Consecuently, we are pleased to pre-sent some observation based on our experience,particularly over the past 8 years :

1. The role of technological change has beenand must continue to be a fundamental of Amer-ican industrial life in both domestic and inter-national terms of reference. Technclogicalchange can produce only a positive impact inthe long run. The short-run problems that itcreates must be met and solved, and not beacceptea as a reason for attempting to blockthe change itself. As a business organization,we continually face the necessity for changeand work to create the most affirmative atti-tudes toward change despite some obstacles attimes.

2. We recognize that these changes can createserious economic and social problems. Indus-try, government, and labor share a heavyresponsibility for seeking solutions to theseproblems. Fortunately, though, many indus-tries have achieved remarkable degrees of suc-cess in technological change by innovation,experimentation, and real cooperation betweenthe parties. We believe American industry andlabor should build upon these constructive ex-periences in meeting future problems andaccommodating to change.

3. Within our own organization, automationper se has not been the prime mover in creatingthe downward shifts in employment in times ofrising production. These shifts have beenaway from the blue-collar occupations andtoward professional and technical personnel.Production workers have undergone markedchanges in job design, including upgrading ofskills, increased flexibility of use, job enlarge-ment, and cross-craft mobility. New methods,new organizational concepts, and persistent costconsciousness in the face of intensified industrycompetition have all contributed to the produc-

tivity gains and have in our own particular casebeen a far more significant factor thanautomatiOn alone.

4. It is difficult for an individual company topredict broad-scale changes in the compositionof the U.S. labor force. However, our companyexperiences suggest demands for more educa-tion and the long-term trend toward profession-alization of the labor fozce. Capital intensiveindustries such as oil cannot be expected toprovide any significant expansion of employ-ment. We see no lessening of the need formanpower efficiency in our industry.

5. Recent measures that we have taken toprovide for adaptation to technological changemay be of some interest. Recent manpowersurpluses in our company have necessitated thetermination of a sizable number of employees.We have sought to minimize the adverse impactof our actions in a number of ways. To theextent feasible, we have used natural attrition,coupled with retraining and transfers and vol-untary early retirement programs with supple-mental pensions to reduce employment. Ap-proximately two-thirds of the reduction in ourwork force was achieved by these means.Where layoff was necessaly, employees weregiven sizable severance payments. An effortwas made through advance planning to givesuch employees adequate early warning ofimpending termination. Many of the em-ployees facing termination were also given brieftraining courses in the best ways to seek outsideemployment, and in a number of instances wefound jobs for them in other companiec.

6. In consideration of our recent experience,we believe that investments in manpz-;wer effi-ciency deserve the careful consideration ofAmerican management. Such investment canproduce the economic tools that facilitatechange with the active cooperation of labor andwith minimum adverse effects upon people.

263

STATEMENT


Socony Mobil Oil Company, Inc.New York, New York

Statement by the Socony Mobil Oil Company, Inc.The comments which follow are lettered to

correspond with the five statements from themandate to the Commission :

(a) The past effects and current and prospec-tive role and pace of technological change

We believe that the current changes result-ing from advancing technology are simply acontinuation of the industrialization processthat has been going on in our country for manyyears. In spite of the frequent assertion thatthe rate of change is increasing, the facts indi-cate that the rate, as measured by rise inproductivity, has continued in recent years atroughly the average for the past 50 years.This is not to ieny that advancing technologydoes have initial displacement effects on someworkers, some individual enterprises, and onoccasion some industries.

Our present economically privileged positionis due in large measure to our technologicalleadership. Because of the rapidly increasingcompetition from the other developed countriesof the world, the maintenance of our economicposition in the future will require maximumexploitation of accumulated technology.

(b) The impact of technological and economicchange on production and employment

In Socony Mobil we are experiencing changesin the work force similar to those which havebeen reported on a broader scale for our econ-omy by the U.S. Department of Labor. Thenumber of blue-collar fixed-rate employees hasbeen decreasing in petroleum industry. At thesame time, the need for personnel such as opera-tions research analysts, engineers, computerprogramers, and financial analysts has been in-creasing. We expect. this trend to continueover the next 10. yearn. Overall, we expect that10 years from now there will be about as manyemployees in the petroleum industry as thereate now.

Although the overall result of technologicalchange is a benefit to society in general, thetemporary loss of employment for some indi-viduals is a very real and tangible problem.To the extent possible, Socony Mobil is seekingto resolve through its own efforts the dislocation

of its employees resulting from efficiency hn-provements in our work proceL les. Among theprograms we are relying on to accomplish thisare the following : within-company transfers,retraining of employees for other jobs with thecompany, tuition-aid for retraining of em-ployees who wish to prepare themselves for jobswith other companies and other industries, out-placement counseling services to employees ren-dered surplus, termination allowances, earlyretirement, and assistance to communities inwhich operations are discontinued.

(c) Areas of unmet community and humanneeds toward which application of newtechnologies might most effectively bedirected

We are sure that our Government representa-tives are more competent to identify the mostsignificant unmet community and human needs.We would suggest that careful attention be givento enlisting the aid of private organizations inmeeting these needs wherever possible insteadof relying on Government programs alone. Wewould suggest that the Federal Governmentstudy the current experiment being conductedin California where the State has asked fourprivate organizations to study and recommendsolutions to four community problems.

In order to promote rapid technologicalchange and cushion the impact of this changeon individuals, we need to provide more andbetter educational and training opportunitiesfor individuals and we need to increase themobility of the work force.

(d) The most effective means for channelingnew technologies into promising directions

The creation of new values for society hasalways involved a large element of risk. Thebusiness corporation has demonstrated throughits effective application of technology that itis probably society's best institution for takingrisks and marshalling the resources and talentsneeded to provide the goods and services mostpeople want. The motivating force responsi-ble for the effectiveness of the corporation hasbeen our free enterprise system based on profit.

267


We are convinced that the business corpora-tion will continue to be society's most effectivemeans for channeling new technologies intopromising directions as our society grows morecomplex. In the future, as in the past, Govern-ment can make its greatest contribution byPreating the climate in which business can func-tion effectively to create goods and services bytaking risks.

(e) Specific administrative and legislative stepswhich should be taken by Federal, State,and local governments in meeting theirresponsibilities

We think government should not try to slowdown the process of technological change or tospread work by shortening of the work week orby higher penalties for overtime work. Gov-ernment should seek to promote the expansion

of the private sector through reciprocal tradeagreements which are favorable and incentivetax programs which spur the development ofnew plants and modernization of old plants.

In respect to increasing the mobility of thework force, government should make everyeffort to develop more and better labor marketinformation in general and job vacancy sta-tistics in particular. Government should alsoimprove its programs for providing trainingopportunities for individuals as well as testingand counseling services. In addition, govern-ment should provide as economically and asefficiently as possible, financial assistance tocover relocation expenses of unemployed indi-viduals who can find employment in other loca-tions, and living expenses for unerpioyed indi-viduals who are qualified for, and desire to take,training for new jobs.

STATEMENT


Swift & CompanyChicago, Illinois

Statement bil Swift & Company

Technological change has contributed greatlyto the economic growth and expansion of em-ployment opportunities in this country. It istrue that with technological change there aresome dislocations and adjustments required.In some cases, out of such readjustments therehave been some hardships, such as temporaryunemployment, which are a matter of concernto both union and management. Insofar asthese short-run changes have been reflected tosome extent in unemployment in recent years,the question becomes, "How much unemploy-ment is due to technological change?" EwanClague, former Commissioner of Labor Sta-tistics, has said that no precise answer to thisquestion may be possible, because employmentresults from various factors, such as decliningdemand and output, competition, labor savingsmachinery, and product substitution, amongothers. These factors may operate simultan-eously and yet affect different parts of theeconomy and different industries in differentways. .

The other side of the question, i.e., how muchof the increased employment has been due totechnological change, would likewise be verydifficult to appraise and come up with anyprecise answer.

Product substitution can also be viewed asa technological change, and yet for those of usin industry as private entrepreneurs, this kindof change is one of the normal characteristicsof a competitive situation.

In our own industry, the change that hasoccurred over a period of time has shown upin terms of both the number of employees inthe industry, the shift in slaughtering facilitiesaway from terminal markets, and sharpchanges in the product mix over time. Someof these are the result of such technologicalchanges as the extensive use of mechanicallyrefrigerated trucks to replace the old-style ice

bunker railroad cars. Both in the procurementof /ivestock and in the distribution of meatproducts, this kind of technological change hasoccurred 'over a long period of time and hascaused shifts of employment.

Other changes in technology that have takenplace include such innovations as on-the-raildressing, which permits synchronized dressingof beef carcasses from a suspended moving car-cass instead of on the old floor or bed arrange-ment. More recent improvements include themechanical hide stripper, which reduces slaugh-tering floor labor requirements. With respectto changes in product mix, the tendency towardsconsumer packages has permitted the adoptionof automatic packaging and continuous proc-essing methods which may have increasedemployment.

Within Swift & Company, both the numbersof meat packing plants and numbers of salesunits in our distribution system have markedlychanged over a period of time. The numbers ofemployees have declined, with the peak employ-ment occurring in approximately 1956.

Let us discuss for a minute the methods ofcushioning such change. In the normal sea-sonal and cyclical flow of the industry, layoffand recall and turnover unemployment have oc-curred for year and years. Some of the meth-ods with which we have met them have beenp-escribed arrangements for layoff and recall.In addition, early pension, deferred pension,separation pay, and transfer arrangements inthe event of plant closings have been adopted.

It appears to us at this time that it would bemost difficult, possibly reaching beyond thepoint of diminishing return, to attempt to meas-ure or sort out the changes which are associatedwith technology and automation, changes dueto shifts in location of the industry, and changesin the product mix or output of the industry.

271

STATEMENT


The Equitable Life Assurance Society of the United States

New York, New York

C14..1,nsves.ess.-t LIIII 'Phan row1114:41.0.07.1.,, T ,1-1., A .-"........., Cf.-94,1-..1...71141VINOVitl WI .1 nu Edlitcraittutiv Jut/ e ziaauiuucv out,tviiiof the United States

The Equitable, like other life insurance com-panies, uses electronic data processing equip-ment quite extensively. We are committed tostill more extensive use as rapidly as we canget the developmental work done. Hence, al-though we are in a position to comment on onlya limited area of your ii tudy, hopefully thepoints that follow will be useful as an indica-tion of how we at the Equitable see some ofthese matters.

Our emphasis in the introduction of elec-tronic data processing equipment has been di-rected almost entirely at reducing the hugepaperwork and recordkeeping activity that rep-presents by far the largest element of cost inthe operations of a life insurance company. Wehave wanted to be able to absorb increasingvolume and increasing complexity without acorresponding increased clerical staff, and pri-marily, but not entirely because of EDP, weare succeeding in doing this. It is, of course,competitively a necessity to maintain costs atthe lowest levels compatible with a high qualityof policyholder service ; we also consider it amajor obligAtion of a mutual company to pro-vide its policyholders with insurance at costswhich refle-'; the most efficient administrationpossible.

While our work along these lines necessarilyresults in the elimination of a substantial num-ber of jobs, we have assured all of our peoplethat, as a firm matter of company policy, noemployees will be discharged because of theintroduction of EDP. In the aggregate, growthof our business and our normal rates of em-ployee turnover are together much more thanadequate to absorb the displacement due toEDP. For specific individuals whose jobs areaffected, we find appropriate jobs elsewhere in

the organization after careful consideration oftheir particular experience and capabilities.Our EDP activity has therefore caused no ex-ternal displacement, and will not under anynow foreseeable conditions.

We do recognize, of course, that EDP hashad an external effect in the sense that withoutit we would have to be hiring more new clericalworkers. On the other hand, we are hiringmany more people for planning and technicalwork than before, and both our needs and thelevels of opportunity for such people are grow-ing rapidly. The combined effects, by com-parison to where we would be without EDP,are essentially : (a) a smaller total staff, (b)a reduced proportion of people in the lowerskill levels ; and (c) a higher proportion ofpeople in the technical and planning levelswhere a much higher order of intellectualability is required.

As we turn in the future to greater use ofcomputers in mare sophisticated assistance tomanagement roles, we expect to find an evengreater increase in the need for highly trainedpersonnel with advanced educational back-grounds. A comparable trend is anticipated

with respect to managerial personnelthemselves.

Since the implications of much of this arein the direction of more employment oppor-tunities for those who are capable of under-taking work calling for intellectual skills, andfewer for those who are not, it seems inescap-able that ways must be found to apply thenew technologies to the improvement of ourNation's basic education procedures. We hopethat this will be one of the avenues of explo-ration given particular attention by theCommission.

275

STATEMENT


The Prudential Insurance Company of AmericaNewark, New Jersey

Statement by the Prudential Insurance Companyof America

The Prudential is a life insurance companywhich started in business 90 years ago. Overthese years, both the size and complexity of ourbusiness increased manyfold and the need fortechnological advance in the handling of statis-tics and calculations became apparent at anearly date. A multitude of records must beaccurately maintained for our many millions ofpolicyholders, and we process many thousandsof transactions for these policyholders on eachworking day.

For many years our accounting records weremaintained in large handwritten ledgers. Theadvent of punch card sorting and tabulatingequipment was an important development forthe company. This innovation enabled us dur-ing the 1930's to convert many of our hand-written files to punch card files and to performsome simple machine calculations. The resultwas to benefit our policyholders by keeping thecosts of administering our business under rea-sonable control. This period of mechanizationof manual accounting procedures through theuse of punch cards and mechanical accountingequipment continued in the Prudential through-out the 1940's and 1950's. During this time,our company continued to grow both as tovolume of business and number of employees.

During the mid-1950's electronic data pro-cessing equipment (EDP), became available toprivate industry. EDP made it possible tofurther mechanize and consolidate our files, andto increase significantly the number of calcula-tions performed by machine. As a result, thepast 10 years have been a period in which wehave converted most of our accounting work tosystems which use modern computers. At thesame time, we have begun to make advances inusing these computers not only for routineaccounting procedures but also to assist in theperformance of more complex analytical func-tions. Again, during this period of time, thecompany's business and size of staff increased.

Since the mid-1950's, when we began ourinstallations of electronic data processing equip-ment, computer technology has progressed sorapidly that we are again confronted with theneed to modernize our administrative system.During the next 10 or 15 years, we will further

reduce the size and number of our files bytransferring information to more compactstorage media directly available to the com-puters. An increasing amount of the opera-tional detail of our business will be written intoprograms for our computers. In addition, wewill be able to couple these computer advancesto modern communication and technology. Theresult will be lower costs for our policyholdersand more rapid, more efficient, higher qualityservice for them and for our agents.

As has already been indicated, there havebeen a series of technological advances in ourbusiness over the last 35 years. During thistime there has been a growth in the number ofour employees, and we expect to continue tobe a growing company in a growing industry.However, automation has caused changes in thenature of the jobs that our business offers.There are fewer routine filing, recordkeeping,and calculation-type assignments, and an in-creased number of jobs offering more challeng-ing work at higher levels. We expect thistrend to continue.

Whenever the job content changes as theresult of the introduction of new machine sys-tems, it is our practice to absorb all affectedemployees elsewhere in the company. Oftenthis results in retraining and in more interest-ing, higher-paying jobs. It has always beenand is our policy not to discharge or demoteemployees because of technological innovations.

The advent of the computer has unquestion-ably increased not only the general level of thework of our employees but also their need foreducational attainment. We have recognizedthis by conducting various management train-ing seminars and workshops and by encour-aging our employees generally to advance theirformal education. Further, as a corporatecitizen we are aware that this need extendsbeyond our own company, and in recognitionof this Prudential last year cooperated with fiveother local corporations and the Newark Boardof Education in setting up a work-study pro-gram for high school dropouts. A specialschool to help these people meet the require-ments for a high school diploma was set up,

279


and the students spent alternate weeks in schooland on jobs provided by cooperating firms.

Prudential is also participating in a projectdesigned to prevent students fe- .m dropping outof school for financial reasons. Newark com-panies make available afternoon work so longas students continue their regular schooling inthe !lamming. i!,.s part V. anothe.r program,our Building Service Division trained mach r e-shop helpers last summer. All those who com-pleted the training were able to find jobs withlocal firms.

In summary, although much progress has

been made over the years in all the areasdescribed above, we feel that in our businesswe are only beginning to realize the possibili-ties of automation with respect to benefits inthe form of improved products and services forthe public. It will continue to be our objectiveto keep pace with the growing needs for insur-ance Poveragas in Aur expandling populationand economy and to adopt improvements dueto new advances in automation, but always withdue regard not only to the interests of ourpolicyholders but also to our responsibilitiesto our employees.

I

STATEMENT '

Prepared for the Conunissionby

United Air LinesChicago, Illinois

!

-

Statement by United Air LinesWe shall confine our answers to the impact

of technology, automation, and economic prog-ress to the air transport industry, and par-ticularly United Air Lines. Specifically, theeffect has been as follows (identification letterscorrespond to your mandate) :

a. The airline industry has been char-acterized by rapid and far-reaching tech-nological change since its beginning 40 to50 years ago. We now find ourselvesfaced with the supersonic aircraft whichwill have further impact.

b. Undoubtedly, there will be illustra-tions of worker displacement because ofboth technological and economic changes ;however, we believe that there will be nonecessity for cutbacks in total employ-ment. In fact, Stewart Tipton, presidentof Air Transport Association, recentlyestimated that between now and 1970 therewill be an increase of 50,000 additionalworkers needed by the airlines. The majorchanges which will thus occur in our in-dustry can be handled by retraining ofpersonnel presently on the payroll and bythe selection of qualified new personnel.

c. We are not cognizant of any areasof unmet community and human needs re-sulting from the application of new tech-nologies. In fact; as our industry hasgrown, we believe that we have met theneeds of the businessman as well as thevacation traveler for safe, dependable, andeconomical transportation. We have also

contributed materially to the natio,security.

d. As we enter the supersonic era, wefind that our industry is unable to raise thestaggering sums of money required in thedevelopment of these airplanes withoutthe assistance of Government. Most ob-servers, both within and outside the indus-try, believe the development and productioncosts of these new machines will be beyondthe capabilities of the private investmentcommunity. In order for America to re-main competitive with European countries,it will be necessary for our Government tosubsidize the air transport industry withseveral billions of dollars for the develop-ment of supersonic equipment.

e. Other than the measures discussedabove regarding retraining and assistancein financing supersonic equipment, we be-lieve the air transport industry can handlethe problems arising from changes in tech-nology, automation, and economic progresswithout the support of governments. Ourindustry is, we believe, very conscious ofthe human relations aspects of change, forwe have seen the impact both upon work-ers as well as our customers.

Although these are very general, they dorepresent our faith in the ability of both ourIndustr3r and the communities in which weoperate to solve the problems of advancingtechnology in. air transportation without anyadverse effect on our Nafion.

283

STATEMENT


United Federation of Postal Clerks, AFL-CIOWashington, D.C.

Statement by the United Federation Of Postal Clerks,Aa FL-C1-0

The United Federation of Postal Clerks,AFL-CIO, regards the establishment of theCommission and its broad mandate as a majorforward step of great historical importance inshaping future national policy.

We welcome the invitation to contribute ourviews to the Commission's deliberations be-cause we too are concerned with the problemof alleviating inequities and dislocations arisingfrom automation and related technical progress.

At the same time we are hopeful that the ageof the computer heralds a new era in humanrelations.

Just as the industrial revolution broughtabout deep social change that ultimately pro-duced modern capitalism and a vast new middle-class, so the technological revolution can bringabout equally radical change with a new leisureclass status for the American worker. Theimplications and ramifications of such changeare, however, barely more visible to most Amer-icans at this stage than present-day capitalismwas to Adam Smith.

But our union also believes that a phenom-enon so vitally important to human welfarecannot be permitted to grow and develop in anatmosphere of laissez faire. Our society mustavoid the evils that accompanied the old indus-trial revolution.

That is the crux of the problem.Society, insofar as it is represented by the

entrepreneur, has always been more directlyconcerned with immediate gain than with moralresponsibility. It has always been thus ; it willbe so again unless we do something about it.

Already there are danger signals : the ac-cumulation, for example, of that ineluctable 5percent or hard-core unemployed who havebeendiscarded by the cutting edge of automatedmachines and mechanized assembly lines.

Another example is provided by a recentmagazine poll which showed a majority of cor-poration officials endorsing as basic "manage-ment principles of automation" such statementsas these:

The company is entitled to all of the savings frommechanization.

We are not obligated to compensate mechaniza-tion-displaced workers.

Charles Dickens wrote novels about peoplewho had similar views of their social obliga-tions under early capitalism.

But something more than literary gadflieswill be required to insure that the technologicalrevolution is built upon a moral foundationby this, in social terms, we mean a humanfoundation.

Such a revolution must serve humanity. Itmust provide the greatest good for the greatestnumber.

Government has the major role in providingthat insurance--and we use "government" inits broadest sense to cover national, State,and local bodies, regional groupings, andeven the industrial "governments" of labor andmanagement.

But the primary role belongs to the nationalgovernment. That role was spelled out lastMay at the Anglo-American-Canadian Confer-ence in Ditchley, England, on the impact ofautomation and technological change on tradeunion interests and policies, when the delegatesconcluded that

Whereas Government in many cases may find itnecessary to stimulate technological progress, itmust also maintain the responsibility for seeingthat the burden of the ill effects is not borne byany one group but is shared by the entire economy.

The Ditchley delegates also pointed out thatwhile

Government should be concerned with the long-range effects of technological change, it shouldalso be aware of its short-term impacts both favor-able and unfavorable. Steps should be taken atthe earliest possible moment to minimize any po-tential ill effects as well a3 to ensure the securityand enhance the welfare of both the employesdirectly affected and of society as a whole.

In this connection, they foresaw the need forgovernmental initiatives in at least four areas :(1) stimulation of demand to ensure themaintenance of full employment ; (2) retrain-ing of the work force affected by automation ;(3) mandatory advance notice of redundancyto workers affected by automation ; and (4)severance pay provisions.

These suggestions at best are only abeginning.

287


If the American people and their Governmentare prepared to accept the obligations of thisphilosophy, we have nothing to fear from thefuture of automation. If they fail to acceptthese obligations, the economy of the futurecannot carry the weight of its own waste.

Both President Johnson and the Congresshave already demonstrated a positive aware-ness of this challenge. They have recognizedthat the victims of technology must be retrainedand absorbed into the economy. They haverecognized that potential victims must bespared through foresight and planning. Thevery creation of the Commission is evidence ofhow clearly our political leadership under-stands that the benefits of mechanization mustbe used to enrich the lives of alland not justa privileged few.

Perhaps the most useful contribution ourunion can make is to analyze the problem areasof our own "industry" and the implications, aswe see them, of the ongoing mechanization ofthe U.S. Postal Service.

It can be argued that employees of the PostOffice are not likely to suffer from automation.

This, to be sure, is the argument advancedby postal management, which tends to view itsvast enterprise solely in terms of the labor-surplus problems associated with the advancingtechnologies of private industry.

Indeed, the Postmaster General may be tech-nically correctfor the time beingwhen hesays that "the development of mechanization isnot designed to, nor will it, cause the loss ofemployment to regular employees."

The pledge has some persuasive qualityagainst a background of increasing mail volumeand increasing worker productivity on the onehand and decreasing cost factors and decliningservices on the other.

It is less persuasive when we discover thatpostal mechanization in 1965 is still in theswaddling clothes of earliest infancy.

It is not persuasive at all when we broadenour view to contemplate the staggering impactwhich automation Wready programed will in-evitably have upon postal employees.

Since 1957 the Post Offi cewhich bills itselfas the biggest "business ' in the worldhasexpended only $87,669,000 on mechanizationa mere drop in the buoket compared to thebillions spent by private industry on automa-tion and the research and development whichundergirds it.

In fact the Post Office Research and Engi-neering establishment, which is responsible fordeveloping all technological improvements, wasnot set up until 1958. It is only 7 years cil d.

As late as 1963 the tptal amount spent fordevelopment of mechanical equipment was only

$224,000. But in the current fiscal year, budgetrequests for research and development fundsshot upward to $13 million.

In other words, funds intended for develop-ing new equipment have increased some 58times over the amount spent just 3 years agoa 5,800 percent increase.

milPh ha Q hoen firma in this hriAf spanincluding the emergence of the ZIP code con-cept. But ZIP codes are far from beingoperational. Some ZIP code elements will gointo effect in fiscal year 1966. But these willbe procedural rather than mechanical, becausethe system cannot achieve the ultimate effec-tiveness claimed by its supporters until a timestill in the futurewhen virtually all themail is sorted by electronic optical scanners.

Obviously mechanization of the Post Officeis only just beginning.

Even at this early stage, however, it isevident that a revolution in mail handling hasalready been programed.

The coming optical scanners, in concert withletter sorting machines already in operation,are intended entirely to eliminate the humanelement from the mainstream of the mail flowsystem.

The combination of the two will be wonder-ful machines, indeed. They will have a designcapability of reading ZIP codes and sortingletters to all States and 1,000 cities at a speedof 36,000 items per hour. The scanners willreplace the manual keyboards on existing letter-sorting machines, thus eliminating all need forhuman operators.

The Post Office experts claim that ultimatelysomething like 80 percent of all first-class mailwill be handled by conveyor belts, facer-cancelling machines, presorting machines, opti-cal scanners, sorting machines, tying machines,and other types of mechanical equipment need-ing only a minimum touch of human hands.

It may be useful to digress for a moment andconsider both the existing new programed ma-chines as well as a host of other laborsavingprocedures introduced during just the past 2years alone.

Prior to any actual sorting operations, rawmail must first be separated by physical char-acteristics for uniform handling. It must thenbe faced and cancelled.

Hoping to combine these processes into asingle mail-flow system, the Post Office Depart-ment, during the past year, devised an experi-mental mail-preparation line. The collectionmail starts at the beginning of the line and,with minimum manual assistance, diverts allodd mail which cannot be cancelled by machineand feeds the remainder into an automaticfacer-canceiler.

POSTAL CLERKS 289

During a 5-day period this assembly linearrangement reportedly processed over 757,000pieces of mail at an average rate of 27,250pieces per hour. It will receive its first actualfield tests during fiscal year 1966.

In this connection, the Department is alsodeveloping an electronic presorting device de-signed to scan letter mail at high speed and toseparate those susceptible to automatic process-ing with only 5 percent margin of error. Thispresorter is now undergoing laboratory tests.

Meanwhile, 204 automatic facer-cancellingmachines independent of the mail preparationline have already been installed in 72 postoffices. On the basis of cost analysis reports,it is claimed they have yielded an annual re-turn on investment of 46.8 percent. Annualsavings in clerk hire formerly required to facethis mail manually and to operate the old can-celling machines approximates $1.5 million,according to the Post Office.

The Department hopes to increase the effi-ciency of these machines by another 14 percentwith -a luminescent-sensing modification thatwill automatically- separate airmail letters forpreferential handlbg. A special luminouscoating on airmail stamps will activate themachines. This, too, will be field tested in thefiscal year 1966.

A design for the first parcel-sorting systemcapable of sorting both to primary and sec-ondary separations in a single operation hasalso been completed this year.

But perhaps the biggest breakthrough is thenew letter-sorting machine mentioned earlierand proudly described by postal engineers asthe world's finest machine of its kind.

With it, each of 12 operators can currentlysort 60 letters per minute to 300 separations.Soon, with new automatic electronic ZIP codereaders attached to these letter sorters, theywill sort ZIP coded addresses at a speed of36,000 per hour to 300 separations. The Post-master General predicts even greater capabili-ties for the future.

Engineering specifications for the letter-sorter machine alone include 300 pages of textand parts lists and 1,900 drawings of parts andassemblies required to manufacture the ma-chine. Also, there are 700 tool drawings forthe use of bidders when estimates are made ofspecial tool costs. The machine has 400,000individual items compared to only 3,000 or4,000 parts in an automobile.

Twenty-six letter sorters and 6 optical ad-dress reading machines are on order.

The first two new letter sorters off the as-sembly line are being installed at Philadelphianow. In November, two will be installed atWashington, D.C., and two more at Houston.

In 1966, two machines will be installed in eachof the following cities : Minneapolis, St. Paul,Portland, Seattle, San Francisco, Los Angeles,BJston, Buffalo, Louisville, and Miami.

Four a the address readers will be put onletter sorters at Detroit beginning in Novem-ber, and two more will be installed at Buffaloa year after.

It should be noted, incidentally, that 42 ofthe existing multiposition letter-sorting ma-chines are already operational, with 26 moreon order. The letter-sorters in Detroit aloneperformed over 1 billion piece sorts in the pastyear, with a daily peak output of over 10 mil-lion individual sorts. Since their installation,the Detroit machines have processed over 3billion piece sorts.

More than machines are involved in the radi-cal laborsaving procedures introduced by thePost Office during the past 2 years. Followingis a summary of these innovations:

1. Establishment of consolidated data cen-ters : Beginning in April 1964, the 14 regionalaccounting offices were consolidated into 6postal data centers where the use of electroniccomputers has, during the first year, effectedan alleged $4 million reduction in labor costs.

2. Elimination of money order center : Dur-ing 1964 the money order center at KansasCity was eliminated and operations centralizedin Washington in cooperation with the TreasuryDepartment with anticipated savings of $1million in the first year.

3. Use of vehicles on city delivery routes :By using 11,500 three-wheeled vehicles in citydelivery services, the Department claims sav-ings of $4 million per year through enlarge-ment of the carrier territories and reductionof driveout costs.

4. Reduction of parcel post service : On May4, 1964, delivery of parcel post was restrictedto a 5-day week basis.

5. Use of simplified postmark : Eliminationof the hour of mailing in postmarks is sup-posed to save over $3 million during the comingyear.

6. Precancelling of postal cards : Sale of pre-cancelled postal cards, initiated in November1962, eliminated the cancellation step in han-dling approximately one and a quarter billionpostal cards per year.

7. Elimination of the postal savings system :Currently pending, the dismantling of this 50-year-old service involves dubious economies thatare vigorously disputed by our union.

Finally, in a class all by itself, is the vauntedZIP code system which is still far from beingfully activated and whose ultimate impact uponjobs and labor staffing patterns cannot yet beestimated.


Already, however, the Post Office has startedthe process of closing down 70 so-called Gate-.way postal terminals throughout the Nation,including at least 12 in which widespread dis-placement and relocation of employees is cer-tain. These terminals will be superceded by533 sectional centers scattered according topopulation density and transportation facilities.

The Post Office claims that the new patternof sectional centers will reduce normal handlingof mail from 12 to 5 or 6 steps ; yet there isalready evidence in many local cases of mailhaving to be hauled miles out of its way underthe new system.

DeepLy intertwined with the new system isa collateral pattern of steady shrinkage in theenroute sorting of mail by mobile clerks withconsequent dislocations and complex seniorityproblems.

Unanswered as yet because there has beenno real field testing of the whole scheme is thelarger question of what will happen to theworkloads in major post offices affected by thenew system and what it will do to the elaboratetraceries of mail flow around the Nation.

In any case, despite the heady claims ofsuperefficiency hopefully to be realized, thewhole ZIP code system cannot be truly opera-tive until optical scanners have been perfectedand the automatic mail preparation lines havebeen installed in major post offices. In short,the system really depends upon full automation.

The foregoing review, we believe, clearlyestablishes the two points made at the outset :Postal mechanization and automation are stillin their infancy, yet already the developmentsand innovations envisaged through technologi-cal change are literally staggering in theirpotential impact on the existing human skillsand human resources of 585,000 postalemployees.

Let us look finally at this h uman element inthe Post Officeat the men and women whosespecialized knowledge, without parallel in anyother major industry, was basic to the success-ful processing of 72 billion pieces of mail in1965.

This volume is rising at a steady rate. It willaggregate 90 billion pieces annually by 1970.It will surpass 120 billion pieces by 1980.

This onrushing tidal wave of mail givescomfort to those in the Post Office who arguethat technology will never eliminate the needfor at least the existing level of clerks, mail-handlers, and postmen. Indeed, they say, with-out technology our human resources will beinundated.

This viewpoint will bear some further scru-tiny. It is all tied up with questions of human

productivity; and with changing patterns ofmail flow.

Productivity, as it is calculated by the PostOffice, can be increased in several ways:

It can be increased by reduction ofservices while assigning more manpower tomoving the

It can be increased by speeding mailmovements through improved organizationand increased mechanization.

It can be increased by squeezing morewor.:-- out of the same number of employeesthro..igh such devices as a work measure-m -nt sysiema bystem, incidentally, stillN> ',tidy used in the postal service.

As a matter of fa ;17, a combination of ailthese factors probaEi explains the recentrather impressive upward trend of postalproductivity.

We estimate that the productivity of clerksand mail handlers in 1965 will rise 1.4 percentas against only 1 percent in 1964 and 0.9percent in 1963. Indeed, there has been acumulative productivity increase of almost 5percent during the past 4 years in strikingcontrast with a cumulative increase of only 1.1percent during the previous 4-year period.

Comparing the two periods, it is evident thatproductivity of clerks and mailersmeasuredby the volume of mail handled per man-year--has increased almost 500 percent over the past8 years. Moreover, the rate of annual increasesince 1958 has achieved a pace that is morethan 6 times what it was at the beginning ofthis period.

So, on the one hand, we find mail volumemoving steadily upward at a rate of 3 to 4percent a year and, on the other, we see indi-vidual productivity now surging up at a rate ofalmost 11/2 per cent annually as against anannual growth rate only a few years ago ofjust better than a quarter of 1 percent. Andthis stepped up productivity has been achievedeven before most of the vaunted automationhas become effective.

It should be apparent from these facts thatfuture productivity increases--both absoluteand relativeought to be sizable indeed, espe-cially if the predicted efficiency of automatedtechniques is developed and sustained.

Even if we discount any phenomenal pro-ductivity acceleration and assume the rate ofincrease will not exceed a quarter of 1 percentannually, it will still require only 6 to 10 yearsfor such increases to catch up to and surpassthe annual growth rate of mail volume. Andthis assumes the present work force remainsconstant.

POSTAL CLERKS

Parenthetically, we might observe that re-cently the Post Office, with unusual firmness,demanded of Congressand gotan increaseof 5,000 employees to help handle increasedvolume. In p7evious years it has asked foreven more, but with only pro forma or routineenthusiasm.

In any case, our union believes as a matter ofprobability that productivity will continue toaccelerate, spurred by the many technologicalprograms in the offing, and that it will be amatter of only 3 or 4 years until productivitycatches up with volume.

The U.S. Government then will face a basicmanpower policy decision that goes right to theheart of the problem of automation.

It can phase out (to employ the officialeuphemism) x-number of employees as surpluswith skills that are useless in any other feldof enterprise. Or it can restore the emphasison servicean emphasis lacking since the earlyfiftiesby diverting more manpower to a res-toration and even a proliferation of postal serv-ices now unavailable or curtailed.

These options will bear further examination.Our union believes management grossly over-

simplifies the problem by swearing that noregular postal employee will lose his job be-cause of automation.

It is clear that mechanization and all othermail flow improvements, including the sectionalcenter and ZIP code concepts, primarily effectsthose employees concerned with mail handlingand sortingthe one group most highly trainedand most specialized, who constitute a largebody of elite skills in a very real sense.

But, says management, there are only 64 or65 post offices large enough to warrant theinstallation of sophisticated mechanization outof some 34,000 offices throughout the Nation ;so the demand for skilled sorters and handlerscannot diminish all that much.

Yet these are precisely the 64 or 65 offices inwhich almost one half of the entire postal fieldservice is employed to handle 70 percent of themail volume. Out of a total of 584,990 em-ployees in 1964, 252,222 were working in those64 offices.

Estimating that 30 percent of the employeesin a typical office are directly involved in thehandling and sorting of mail, it is safe to esti-mate that a minimum of 75,000 postal clerksin those 64 offices will be directly and adverselyaffected by automated equipment now underdevelopment or already being tested.

Very well, we are told, there are still manyother jobs available elsewhere in the servicewith no loss of seniority or status.

Even assuming, as we do not, that adequatejobs can be found somewhere in the postal

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service for all who are displaced by machineseither through proliferation of services orotherwise, this "solution" takes no account ofthe dislocations involved.

To say that members of a skilled elite canbe retrained for other jobs elsewhere is toargue that men and women at the top of theircraft, with long careers behind them, are ableand willing to undergo major adjustments thatwill substantially alter their status, location,and possibly their opportunity for advancement.

Perhaps this will happen in isolated cases ;the possibility runs counter, however, to everyknown shred of psychological knowledge.

The fruit of this fallacy has already begunto fall. Opening of the new sectional centersthis summer has caused major dislocations andhardships. In hundreds of cases, postal clerkswhose jobs have been eliminated have beenoffered alternative positions hundreds of milesaway.

From a management standpoint, the PostOffice has indeed assured them of continuedemployment. But from a human standpoint, toaccept this employment our clerks must uproottheir homes, disrupt family and social ties, selltheir property (at a loss in many instances),and incur many other tangible and intangiblelosses for which there is no compensation. Itshould be noted in this regard that the movingand related allowances offered these employeesare totally inadequate.

Rather than break out of an established andcomfortable economic and social environment,many employees may prefer to seek other em-ploymentif such employment can indeed befound.

It is for these reasons that assurances bythe Post Office Department must be temperedwith a vast skepticism.

On this score, permit me to cite the views ofthe late John I. Snyder, Jr., one of the greatpioneering industrial visionaries in the fieldof automation and, at the time of his un-timely death, a distinguished member of theCommission.

Speaking to the AFL-CIO national conven-tion in 1963, he called the idea that workersdisplaced by machines can be relocated withcomparative ease a major "fallacy" and a"silly" one at that. He said:

Workers who lose their jobs due to automation oranything else are usually those who are least ableto move in the first place. They are generally thelower paid, the older, the unskilled workers whoeither cannot afford to move from an economicstandpoint, or who are psychologically incapable ofbeginning a new life in a strange land.

As a matter of fact, Mr. Snyder also gaveshort shrift to the soothing notion that auto-

STATEMENTS : IMPACT OF TECHNOLOGICAL CHANGE

mation really isn't going to eliminate jobs. "Iwill stand," he said, "on the flat statement thatautomation is indeed eliminating jobs."

Whereupon he cited a long list of statisticalevidence which he called "frightening figures."

He has testified, moreover, that most of hisexperience refuted "the dreamy fallacy [that]all of those nice people who lose their jobs tomachines can be rapidly retrained and placedin other jobs requiring higher skills and payingmore money." His statistics on this score areequally frightening.

Surely, then, a Government weighing itsavailable options cannot in conscience settleonly for budgetary expediency. For the testis not how cheaply we can handle and move theeverincreasing volume of mail ; but rather it iswhat effect change will have on the way peGplelive, on their economic security, and on theirability to provide a decent education for theirchildren.

In a broader sense the same principle applies.Machines will not buy back the products theyproduce ; neither can jobless millions buy theiryield. The edifice of mechanization and auto-mation now abuilding must serve all. It hasvalue only to the degree that it helps makepossible a happier life and a more wholesomecommunity. This holds true for the short runno less than the long run.

Benefits not shared in equal proportionamong those who stand to lose as well as amongthose who stand to gain in the process of ad-justment will not be benefits for long. Theywill be a curse.

We are entering a period unlike anythingour predecessors have had to face. MostAmericans are still babes in the woods as faras the cybernetics revolution is concerned. Buta new age is already upon us. Automation inthe years ahead will do away with most manuallabor as we know it today. We are going tohave to learn how to meet the challenge of tha$age, how to devise policies to cope with it, andhow to take advantage of those machines. Wemust revise our old ways of thinking. We mustaccept the fact that muscle and brawn will beno match for circuitry and tubes. But aboveall, as Humpty Dumpty told the immortalAlice, "The question is which is to be masterthat's all."

So what we say to management is simplythis : We acree with you about the benefits thatcan conic:. 2rom automation. We welcome it.But when you dismantle the old system ofproductivity, you cannot discard your workers.

They must not, by themselves, bear the costsof progress.

With particular reference to the welfare andinterests of postal clerks, we believe it is es-sential that management enter immediately intoeffective prior joint consultations to allay theill effects of automation.

Similarly, we believe that a comprehensiveprogram of Federal legislation is necessary toprotect the welfare of our members.

The essential elements of such a legislativeprogram should include :

reduction of working hours -when nec-essary to maintain career employees at gullemployment ;

longer vacations, including periodicextended paid vacations ;

early retirement without loss ofbenefits ;

reduction of overtime ;generous severance pay ;realistic relocation and retraining

allowances.As the Ditchley Conference has pointed out :

One of the major purposes of introducing tech-nological change on a national level in the economyis to ensure growth, productivity, and an increas-ing standard of living. The government should beconcerned that the economic growth and increasedproductivity which technological progress willbring about benefit not only the companies and theindustries but that the benefits should be sharedby the employees, the general economy, and thenational population. For it is only through a fairdistribution of the benefits of technological changethat the continued improvement in the economy andthe standard of living, which the nation is seeldngfor all, will be attained.

America needs the increased productivitythat automation makes possible. We need it toupgrade the welfare of millions of Americanfamilies, to open new vistas of leisure and cul-ture, to provide public services consistent withshifting population patterns, to strengthen na-tional defense, and to provide leadership andassistance for the peoples of developing andnewly emerging nations.

Such goals demand creative planning andmoral policies. For the mere emergence anddevelopment automation carries with it noguarantee t t it will be used well or wisely orthat the ber.--dits made possible will be sharedby all. Men, not machines, must prevail. Ourtechnology must not outrun our ethics. Theenormous power of the cybernetic world mustbe the handmaiden of society, not its master.

STATEMENT


United Mine Workers of America

Washington, D.C.

Statement by United Mine Workers ofAmerica

AutomationPromise and Problems

Introduction

If we were to rank the foremost problems ofour age, automation would head the list. Noother single problem looms so large in our na-tional affairs and carries within it such acapacity for good and for evil.

Millions of Americans are directly affectedtoday by the coming of automation. Othermillions will feel its pressures in the yearsahead. Indeed, automation amounts to no lessthan another industrial revolution, a change soradical that it can alter, in a permanent way,the social, political, and economic institutionsof this Nation.

Nor does automation exist by and of itself.Rather, the decision to automate and the actualautomating process is taking place within anenvironment of rapidly changing technologyand greatly intensified national and interna-tional economic competition, and on a moralbase which has undergone fundamental changes.The net result is a vacuum in our national life,

a vacuum created by forces as of now beyondour comprehension. At the same time, auto-mation has opened the door to vast new sourcesof wealth. To our generation has been giventhe tools to eliminate poverty in our Nation,to expand the material and spiritual values ofall of our citizens, to conquer disease, andliterally to reach for outer space. All of thesethings are possible today because of our newtechnology, because of the forces unlocked by

our scientists and engineers.On the other side of the ledger are millions

of men left behind by the onrush of technology.Obsolete, too, are hundreds of communities all

across this Nation which have been unable toadjust to the new age, whose industries havebeen outstripped by other methods of produc-tion, and which have fallen victims to changingtimes. Finally, there are the children, theyoung people who must face a tomorrow with-out hope, a tomor -w which will see themfurther and furthet behind a prosperous andgrowing America.

Always there is the speed at which changeoccurs. Speed is the hallmark of our present

civilization. The new is rapidly rendered obso-lete by the newer and today's advanced systemis obsolete tomorrow. So rapid is such changethat man cannot cope with it. Adjustmentswhich were made in years must now be accom-plished in weeks. Skills which once wouldlast a lifetime are literally outdated overnight.It is a bewildering world, a world where orderhas given way to a frantic scramble to keepapace with the times. In one way or anotherall of us are affected and the course of our livesis permanently altered. We must meet thechallenge of automation. We must understandits intricacies and unravel the complexitieswhich arise in the normal course of the intro-duction and use of automation. We must bendthis new and somewhat terrifying technologyto the welfare of man.

It is against this background that we wishto discuss automation. We are seeking notonly understandintr, but also a plan of action,a plan which will permit a wise utilization of thenew technology- without the destruction of basichuman values. We hope that this paper will

serve that end. We also hope that the forcesof labor, management, and government can beharnessed to meet effectively the challengesimposed upon our society by the onrush ef tech-nology. For in the final analysis, we mustmaintain those basic concepts of human dignityand individual worth in an era when scienceand technology- seem to be assuming a dominantrole in the operations of our society.

Basic Assumptions

Any study of automation, or of any subjectof a technical nature, often flounders because itdoes not have a central theme, an objective.Therefore, to guard against this, we will setforth our basic assumptions and objectives inrelation to which we shall discuss automation.

First, we believe that automation, or anyother economic activity, is good only so long asit serves human welfare. Automation is not anend in itself. New technology of production,better products, lower prices, are not good

per se. Rather, the objective of any economic295


activity must be the betterment of man. Webecome very indignant at those who substitutetechnical progress for human welfare. Forwhat good is a better way to produce if thereare no people to consume? What good willautomation be if in the process human valuesare destroyed and people are reduced to ciphersin a larger and impersonal industrial machine?

We have an example of what can happen. Inancient Rome, the increasing wealth of largeestates, made possible by slave labor, was paral-leled by moral degeneration among the rest ofthe citizenry. Il'e---le came to be a place wherea once proud 1 lived only for bread andcircuses and wi, k. che wealth of an empire wasdissipated to satisfy the base urges of the mob.We must guard against this. We, as a nation,must never foresake our d.,clication to indi-vidual human welfare. It is true that timeswill change and new technologies will emerge.Yet, if our commitment to human values re-mains, if we are determined to maintain thecore of our civilizationour peoplewe willcontinue to make progress in human as well asmaterial values.

Second, automation is a national problem, achallenge for every person in the United States.We can, only at peril to ourselves and ourchildren, write off the victims of automationas mere casualties of our system. To date wehave done this. We have chosen to ignorethose people displaced and relegate them to thebackwaters of our American life.

Happily, this is changing. America is atlong last coming to the realization that unem-ployment resulting from automation must bedealt with. Some consideration is being givento the victims of automation, to the men andwomen who have suffered much so that ourNation could progress. We applaud these ef-forts. But they are not enough. Men still livein fear of automation. Jobs are still lost with-out replacement as the onrush of technologyaccelerates.

We are familiar with the consequences.Thousands of coal miners were thrown out ofwork when mechanization was introduced intothe mines. They were left to shift for them-selves, with only their own resources and thoseof their union to protect them. Want andpoverty came to Appalachia and has lingeredfor years because the Nation didn't care. Des-titution has become commonplace hi a landwhere plenty is the rule. We cannot permit thisto happen again. We must, as a nation, ac-knowledge that because a national good accruesfrom automation, a national responsibility like-wise rests with all of the American people tohelp the victims of technological displacement.

Third, adjustment to automation will not be

simple am it will require the full cooperationof all segments of our society. It is easy toassume that all will be well if car Nation doesnothing to assist in the transition to automa-tion. It is argued 0-it our own industrial revo-lution was accompli.ned without a great manyprograms to aid those displaced. It is alsocontended that we have hanc.fited from indus-trialization, from the introduction of largeindustry and mass production.

This is true. But it is also true that manyabuses occurred during our industrializationwhich would be intolerable today. Further,most of the abuses which confound the worldtoday began with the evils of industrialization,evils with which the leaders of that time wouldnot or could not cope. We are a mature econ-omy and our people can no longer look to thefrontier for the new and better life. Patternsof life are fixed, standards are set, and little,if any, deviation from such patterns and suchstandards is tolerable. Therefore, we as a peo-ple must not allow automation to work its willunhindered. Instead, we must plan for its in-troduction and learn to ease the transition froma nonautomated society to an automated one.We must care for the victims of change andstrive to reintegrate them into society. Mostimportantly, we must constantly guard againstthe development of a "cultural lag," a gap be-tween human values and technical progress.If this occurs, if technical skill outruns humanadjustment to such skill, much of the good thatcan come from automation will be dissipatedand major problems will arise to haunt us inthe years and decades ahead.

We have therefore made three basic assump-tions :

1. That human welfare is the objective ofall economic activity, including automa-tion.

2. Automation and the problems whicharise from it are national hi scope andcharacter.

3. Positive action must be taken by ournational leaders to help in the adjust-ment to an automated society.

The Forces Behind Automation

Automation in this country is the inevitableresult of strong economic forces interactingunder the discipline of free enterprise. Underour economic system it was nautral that a bet-ter way would be found to produce goods andservices, and once discovered it would bespeedily applied.

Nowhere is the truth more evident than inthe bituminous coal industry of the UnitedStates. We should like to examine some of

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UNITED MINE WORKERS

the events brought about by mechanization andautomation in this industry because, first, coalis an industrial prototype of what can happenwhen an industry changes to automation, andsecondly, all the benefits and all the woes ofrapid technical progress are reflected in thebituminous onnl industry.

Initially, it is necessary to discuss the eco-nomic background of technological change inthe coal industry. Basically such changestemmed from two causes :

1. A market loss brought about by tech-nical progress in the railroad industryand consumer preference for more con-venient household fuels.

2. Increasing concentration of coal con-sumption in the electric utility market,forcing the coal industry to become ex-tremely cost-conscious : The electricutilities purchase fuel almost entirelyon a cost basis and a small differentialin price is often the reason for successor failure in the market.

The market losses of coal are well known andneed little elaboration. Oil and later naturalgas made heavy inroads into coal's markets.The railroads, through dieselization, and thehome heating market have largely disappearedas major coal outlets for coal. Technical in-novation played a large role in these losses.The diesel engine is the result of many yearsof scientific and engineering research. Nat-ural gas became available on a national basisonly when the technology of long-distance pipe-lining was demonstrated. In any event, mar-kets were lost to the coal industry. Moreimportantly, these markets disappeared in ashort span of time, a factor which is crucialto an understanding of the rapidity with whichtechnological progress tookhold in the industry.

Fortunately, with the decline in coal's mar-kets in home heating and the railroads, anothermarketing avenue openedthe electric utilityindustry. But entry into the utility field pre-supposed an ability to meet stringent pricecompetition. Indeed, we might say that coal'ssuccess in increasing its usage by the Nation'sutilities is directly related to its record in re-ducing its delivered price. The declining pricestructure of bituminous coal was made possibleby the increasing productivity of the coal minerthrough mechanization, a record which is un-matched by any other industry in this Nation.Output per man-day in the coal industry hasjumped from 6.77 tons in 1950 to over 15 tonsin 1964. Behind this record lies a virtual revo-lution in production, a revolution which trans-formed coal from a pick and shovel industry toone utilizing the most advanced machinery.

But there is another side to the story. In

297

its struggle for survival, in its efforts to meetthe stern test of competition, the coal industrythrew thousands of men upon the industrialscrap heap. Much of this story is also known.The thousands of idle coal miners in Appalachiahave received widespread attention and havebeen the object of many Government programs.However, in our opinion, too little attention hasbeen given to the real cause of poverty andunemployment in ccal miningrapid and un-controlled economic and technological change.This change swept away the patterns of acentury in a few short years.

We cannot say that a shifting market pat-tern, with resultant mechanization, is the solecause of worker displacement in the miningindustry. Such a blanket statement would bea gross oversimplification of the facts. How-ever, we believe that much of the misery whichhas come to coal mining areas could have beenaverted if an intelligent national policy onenergy utilization were in effect. We contendthat a more gradual shift to other fuels wouldhave occurred and the frantic pace of mech-anization would have been slowed somewhat.

The Impact of Automation on Coal

Automation in the coal industry has had twomajor results :

1. It displaced thousands of coal minersand replaced them with highly sophisti-cated machinery.

2. It changed coal mining from essentiallya hand operation to a highly technicaland complex mechine process.

Each of these changes has had an impact uponthe social, economic, and political institutionsof coal mining areas. Obviously, the displace-ment of so many men in such a brief span wasa disaster to coal mining regions. In fact, sogreat was the shock that many of them havenever recovered and some never will.

Adding to the overall distress of coal com-munities was the lack of other job opportunitiesthere. Coal centers are notoriously dependentupon one industry, and with the decline in coalmining, there was a general economic decline.In addition, industries outside of coal areas,which were formerly sources of employment forex-coal miners, were themselves automatingand thus were unable to offer jobs in any num-ber. Therefore, job displacement in coal min-ing was all too often permanent, and entirecommunities were rendered destitute by thetwin forces of production technology andshifting market demands,

At the same time, the skill level required ofa coal miner has increased at a rapid rate. The


operation of mining machinery requires a greatdeal of experience and technical knowledge.The net effect has been to transform coal min-ing into a highly technical operation, an opera-tion demanding highly trained workers with avariety of skills.

.9,ome Implications el Coal's Experience

Coal's experience in the field of automation isnot unique. Indeed, in one way or another weare seeing a similar pattern develop in manyof our other industries and in communitiesacross the Nation. Therefore, it might be wellto draw some general conclusions from whathas happened in coal so that we may use themas a base for further discussion in the generalarea of automation.

First, competition underlies all automationefforts. Companies automate to cut costs,improve quality, and make a better product.This is done under the stress of competition,or at least as a defensive measure against whatcompetition might do. The tendency towardautomation is especially noteworthy in thoseindustries where foreign competition is animportant factor and where foreign industriesenjoy an advantage in the marketplace. It iswell known that many industries, especiallyin Western Europe and Japan, have modern andefficient manufacturing plants. Many werebuilt with American money after the war.These plants are often in direct competitionwith American industry. Such competitionhas forced upon our own companies the need forrapid automation, for speedy improvement inefficiency.

In addition, many foreign products aredumped in the United States. Such dumpingdestroys the price structure of competitiveAmerican industries and forces them to under-take efficiency programs on a massive scale.For example, in the coal industry there can belittle doubt that residual oil importation has-tened the mechanization process. Because re-sidual oil is sold strictly on the basis of price,coal has had to meet that price or lose tonnage.To compete with a foreign product, waste prod-uct, the mining industry has had to push formaximum efficiency, which has often beenobtained at the expense of human values.

In any event, it is clear that the greater theincidence of stringent competition, the moreintensive will be the drive to automate.

Second, once begun, automation proceeds at arapid pace. Improvement in productivity incoal mining has been going on for many, manyyears. Yet, once the intensive mechanizationdrive began, after 1950, the rate of improve-ment quickened perceptibly and tremendousadvances were made.

The same situation is true in other segmentsof the economy. The trend toward automationis a rapid one and each company is engaged ina frenetic search for better ways to automate.Thus, the transition period is short and theability of the Nation and its citizens to adjustis severely circumscribed.

This phenomenon is not new. All of themajor changes which have occurred in economicactivity have followed this pattern. In eachcase a rapid shift in traditional modes of opera-tion took place, a shift which far outstrippedthe capacity of the population to adjust. Thisfactor is perhaps the most crucial in dealingwith the problems of automation. There canbe little doubt of America's capacity to adjustto whatever change occurs. But such adjust-ments take time. If time is not available,social maladjustments will take place andpeople will suffer.

Third, reasonable adjustments to automationis dependent upon expanding markets.

Again, we might profit from the example ofbituminous coal. In that industry the rapidintroduction of new production technology wasmatched by an equally rapid deterioration ofthe market structure. The result was disasterin the employment sector. Each market losswas another stimulus for further improvementin productivity, with the resultant loss in man-power. The whole cycle of market decline-productivity improvement was repeated untilcoal's labor force plummeted to an all-time low.

This need not have happened. Steps couldhave been taken by the Federal Governmentto provide a semblance of order to the market-ing structure of the coal industry. For exam-ple, Government agencies are themselves largeconsumers of coal. Such consumption is animportant factor in eertain segments of thecoal industry, especially in those areas mostaffected by automation. It would seem logicalthat coal would continue to be used in Govern-ment installations to help ease the transitionto automation. Unfortunately, such has notbeen the case. Many Government agencieshave converted to other fuels and other agen-cies are rushing headlong to do so. Very oftensuch conversions are made on the strength ofdubious economic logic and without a true eval-uation of all the facts involved. In any event,this Government policy has worsened the im-pact of automation on coal mining and made itstransition period more difficult.

There are other examples of adverse govern-mental policies. Imported residual fuel oil hashad an extremely detrimental effect upon em-ployment in the coal industry. So, too, has theuse of natural gas under utility boilers on aninterruptible basis.

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From all of these factors there is one gen-eralization which can be drawnautomationcan be accomplished with a minimum of adverseimpact only within the context of expandingmarkets. If, on the other hand, automationtakes place against a backdrop of decliningmarkets, a crisis is certain to occur and majoremployment dislocations will take place.

Corrective Action

It is evident that steps must be taken to alle-viate the impact of automation upon our workforce. Unless this is done, much of the bene-fits flowing from the introduction of automatedequipment will be lost and the forward sweepof automation blunted. We believe that auto-mation is both necessary and inevitable. How-ever, we feel that consideration must be givento the victims of automation and ways must befound to insure an orderly growth of the newtechnology.

We have listed below certain general areaswhere we feel effective action can be taken.

Economic Growth

Economic growth is of paramount impor-tance. Without it there -Mil be utter chaos inour society, as 3ess and less people are requiredto turn out the goods and services required byour citizens. Further, we believe that suchgrowth should be broadly based. Industrial de-velopment and the resultant job opportunitiesshould not be confined to a few favored areas ora few favored industries. Economic oppor-tunity sheuld be made available to all citizens.

The Congress, through the Full EmploymentAct of 1946, is already committed to securingfull employment in our land. This objectivemust be vigorously pursued and attained inour time.

New Technology

Our age is one of technology. We can reachthe moon and probe the ocean depths. Evenmore startling developments are already on thedrawing boards and the end is not in sight.This new technology can be put to use to createjobs. Indeed, the advances made by the appli-cation of scientific knowledge to resourcedevelopment holds the key to the successfuladjustment to automation.

For example, coal research can bring pros-perity to the coal fields of this Nation. It cando so in a permanent way because it can .reatemarkets for coal and, perhaps importantly,permit the construction of industrial complexesin coal areas. The industries dependent upon

anal as a raw material will provide employ-ment for thousands of workers and economicprogress for otherwise depressed regions.

Proof of the validity of this statement liesin the petrochemical industry. This industryhas been built upon the availability of oil andthe genius of American scientific effort. Ithas made possible the economic progress ofentire sections of our Nation and the employ-ment of thousands of our citizens. All of thisprogress is based upon resource development.The extraction of oil from the ground is merelythe beginning. From this point the petroleumis processed and made into thousands of usefulproducts, products which have a ready marketin our Nation and the world

Resource development is the traditionalgrowth pattern of the American economy. Wefeel that it can be expanded upon and made toserve our national goals.

We believe that research and full employ-ment are closely linked. This is especially truein the face of the billions of dollars spent eachyear by the Federal Government for research.We believe that Federal research efforts shouldbe tied to the task of creating jobs. Wefurther feel that Federal agencies engaged inor sponsoring research activities should be re-quired to so schedule their programs that theywill help to secure full employment in our land.

Education

In the final analysis, education will do a greatdeal to assist in the transition to automation.But education, like all other facets of our na-tional life, will also have to adjust to the rawdemands of the era. We must strengthen ourschool systems so that they may turn outstudents equipped to meet the challenges whichwill confront them. We must recruit and holdqualified and dedicated teachers, men andwomen who can provide our youths with theskills they will need and an insight into thosevalues which have made our country great.This can be done only when we give ourteachers the salaries that their profession de-serves, and, more importantly, our recognitionof the preeminent place which they should holdin our society.

We need more and better classrooms andfacilities in all sections of the country. Thisis especially true in rural and depressed areas,where educational facilities are often woefullyinadequate, where children cannot utilize theirfullest talents in the educational process.

Higher education is becoming increasinglyimportant. Our college graduates form a res-ervoir of talent which will serve our countryin good stead in the years ahead. Unfortu-


nately, many deserving youths for financial rea-sons cannot go to college. These young menand women represent a wasted resource, po-tential which our Nation will never realize.We believe that higher education should beavailable to all those who can qualify. Thereshould be a system of loans or grants to needystudents which will permit them to go on tohigher education.

But while we recognize the necessity for col-lege education, we must also see the demandfor skilled tradesmen. We require mechanics,electricians, etc. We will need them more inthe future as our society increases in wealthand as mechanical and electrical equipment be-comes more commonplace. Our education sys-tem must take this into account. We havevocational education in our high schools forthose youths who will not go on to college, butwho possess the talent to become skilled crafts-men. We should also have technical schools forhigh school graduates where they can betrained to improve their skills and acquire thelatest techniques used in the industry. Wecannot overemphasize the importance of suchtraining. We believe it is sadly neglected atthe present time. Unless corrective action istaken, the problem will become more and moreacute in the future.

There are also many instances of high schoolgraduates who do not possess the desire norcapacity for college education, nor the mechan-ical aptitude for the skilled trades. However,many of these youths without a formal collegedegree but equipped with business or profes-sional training could meet a definite need. Weare referring to a subcollege program aimed atproviding training for young men and womenwhich would enable them to enter the variousfacets of our national life better prepared tocope with its complexities There are manyareas where this could be done. For example,a great deal of secretarial work is now per-formed by people with 2-year college or busi-ness school training. Many universities offerassociate degrees in such fields as engineering,science, and business. Also, there is a greatdemand for medical and dental technicians, etc.

There should also be a link between classroomtheory and industrial practice. Young peopleshould, as a normal part of their training, beexposed to on-the-job conditions. They shouldsee first-hand the demands which will be placedon them and the way in which an actual plantoperates on a day-to-day basis. This familiari-zation process will serve two purposes. First,it will aid in the transition process betweenclassroom and workplace. Second, it will pro-vide a stimulus for the student beeause he will

be able to see the value of his training at closerange.

Finally, we believe that a continual upgrad-ing of our work force should be made throughperiodic adult education. It is a known factthat no skill is immune from the inroads ofautomation. Further, technology is progress-ing so rapidly that few people are able to keepabreast of current condtions. Therefore, everyworker who wishes to do so should be able toreturn to the classroom at definite intervals toupgrade his skills and to learn the latest tech-niques. We are suggesting that learning inthe formal sense cannot stop with high schoolor technical school graduation. F ather, thestress of changing technology has made edu-cation a continual process, a necessary part ofmaintaining an adequate level of skill in afast changing world.

Such adult education can be carried on in anumber of ways. We will not presume todesignate any one as ideal. However, we dofeel that steps in this direction should be under-taken, and whatever has to be done to im-plement this should be done promptly.

Manpower Budgeting

One of the major problems in the field ofautomation is a lack of intelligent planning.Usually too little attention is given to theimpact of the change upon the workers in-volved. As a result the transition to automa-tion is abrupt with the dislocation of the workforce. This does not have to be the case. Ra-tional planning, which begins before the ma-chines are introduced, can do much to allow anorderly shift in productive methods. Further,when planning does take place, much of theuncertainty and mystery of the change areeliminated and men can come to grips with thereal problems involved rather than imaginaryones.

We believe that American industry canproject its manpower requirements. We feelthat a company executive can tell both thetype and number of men he will need to operatefor several years ahead. Our belief is sub-stantiated by the long-range planning which isnow commonplace in American industry. Cap-ital outlays are budgeted years in advance.

Those engaged in research and developmentwork look far beyond immediate markets inplanning to meet the future. Marketing anddistribution plans are carefully laid, often re-quiring months and even years for their fullestimplementation. There are many other exam-ples of such forward planning.

The same technique could be used to advan-tage in the manpower area. A company could

UNITED MINE WORKERS

easily define its future manpower needs. Oneeit had done this it would be in a position to pre-pare its work force for whatever changes wouldbe necessary and to assist in lessening anyunfavorable impact upon the individual workersin the plant.

Labor-Management Relations

The introduction of automated equipmenthas been a major source of acrimony betweenlabor and management. However, this dissen-sion does not have to exist. Both sides of thecollective bargaining table share in the respon-sibility to aid those affected by a shift to auto-mation in an industrial plant. Both will bearthe harsh consequences which will inevitablyfollow serious dislocation of our labor force inthe face of technical change. It must be clearlyevident then that the continuation of our freeeconomic and political institutions is dependentupon their ability to alter their operations tomeet the press of new challenges.

In a sense, the mechanism of collective bar-gaining is ideally suited to cope with the dislo-cations of automation. Within the frameworkof labor-management discussions, much of theplanning can take place to provide for humanwelfare in an environment of rapid progress.We do not mean to infer from this that labor-management discussions should be limited tocollective bargaining sessions. The demands ofthe age are too great, the burdens too heavyfor that. Instead, both labor and managementshould strive to meet, on a continuing basis, thedemands of automation and to so order indus-trial activities that worker dislocation will be

minimal. This is really the new challenge ofthe era for both labor and management. Wehope that it will be effectively met.

Conclusion

The challenge of automation will not be fullymet tomorrow or next year. The problem istoo complex, the change too radical to speakof easy solutions. But, we can move ahead withprograms that will bring the forces unleashedby automation under some sort of control. Wecan take steps which will protect the peoplemost affected by automation and which will

prepare those who are entering the labor forcefor a lifetime of service to the economy andthe Nation.

301

We have outlined in this paper certain broadareas which we believe hold promise for effec-tive action in meeting the awesome nature ofthe task before us. In so doing, we have notforgotten those programs already underwaywhich also can make a tremendous contributionto the struggle and which can meet most effec-tively the immediate distress caused byautomation.

To give an example, the United Mine Workersof America has consistently called for astrengthening of the unemployment compensa-tion program. This program has been of tre-mendous value in meeting the distress causedby layoffs. It can continue to serve in thiscapacity for the victims of automation and cansustain them until other methods and otheractivities can give them permanent employment.

In the same manner, an improved social se-curity program will do much to provide finan-cial independence for our older population andpermit many to leave the labor force, thusopening up jobs for younger men. We applaudthe efforts of Congress in improving the socialsecurity program, especially with respect tothe medicare provisions. We hope that an evengreater liberalization of this program will bemade, not only to aid in the struggle for ra-tional adjustment to automation, but alsobecause of the increasing needs of our retiredcitizens.

We also believe that a continuing studyshould b-. made into a shortening of the work-week. As productivity increases, the averagelength of -1,he workweek will and should godown, thereby providing more job opportunitiesfor all of our citizens.

However, the various programs now under-way have not met our Nation's needs in thefield of automation. Rather, what has beenlacking is our national determination that thechallenge must be met, that the transition willbe made with a minimum of damage to the peo-ple involved. More importantly, we must con-stantly rededicate ourselves to the principles ofthe founding fathers, principles which are asvalid today as they were two centuries ago,principles which placed the dignity of manabove all other considerations. And by sodoing, we are firmly convinced we can unravelthe complexities of the technological revolutionand channel the change into constructive pathspaths which will advance the stature anddignity of man.

STATEMENT


Xerox CorporationRochester, New York

Statement by the Xerox CorporationTo take the five related "mandates" of the

Commission in order, and attempt to make themost useful and pertinent comment possibleon each, requires personal judgments whichare necessarily suspect. The following issubmitted subject to that caveat.

A. For most people, the past effects and thecurrent and prospective role and pace of tech-nological change can be made real only byrather startling examples. These may engagethe attention and provide a measure of com-prehension, but they lead nowhere in terms ofprescribing useful action. Statements to theeffect that the national debt, if paid in dollarbills laid end to end, will soon reach all the wayto Mars, may engage the attention but theyprovide little guidance as to what to do aboutthe national debt. Perhaps the best way todescribe the past effects of technological changeis to point to the present U.S. society and say,"There it is." It is difficult to find one singlefacet of this society which has been immune tothe effects of technological change; but it isimpossible to determine the extent to whichtechnological change is responsible for eachspecific effect in conjunction with other forces.The precise degree and quality of any effect at-tributable to technological change cannot beseparated out ; and even if it could be, theinformation would be of limited value, becausein some cases technological change serves asa catalyst, not participating in the reaction,but speeding it up ; in other cases, technologicalchange is itself catalyzed by political or socialforces. It is much more important to knowhow technological change participates jointlyand inextricably with the other forces whichproduce change in our society than to be ableto assess the specific effects attributable totechnological change; because from the formercase we can predict to at least some degreeand from the latter case we cannot.

The current role of technological change isthat of catalyst to other changes (social, eco-nomic, political, philosophical) ; as instrumentused deliberately to bring about such changes ;and as part of an automatic feedback mech-anism involving all these interrelated forcesand operating at least partially outside the con-trol of the society. Technological change istriggered deliberately to produce some effect

which someone desires, but once triggered, itis involved in reactions of such complexity asto evade the complete control of the triggeringagency.

The prospective role of technological changeis that it becomes more controllable and hencemore controlled because of iterative feedbackwith itself ; that is, advancing technology isitself providing us with the mechanism for ex-tending our control over advancing technology,via instrumentation and control systems andthe related information systems whch can makesuch control effective, and via statistical modelswhich permit us to make reasonably accuratepredictions as to the effect of the interactionsin which technology participates. This in turnmeans that the pace, as well as the effect, oftechnological change will become more pre-dictableand hence more controllable.

For the time being, however, both the roleand the pace of technological change mustcontinue to increase exponentially in the UnitedStates. This is because we are involved in aninternational situation in which we are numeri-cally so inferior that only via a very rapidlyincreasing technological base can we hope tocompete successfully for any length of time ;and almost equally, because we have now struc-tured a domestic situation in which thedemands made upon technology are no lessurgent and no less staggering than those im-posed by the international situation; further,the technology required to satisfy our internaldemands is increasingly less an offshoot orfallout from that required to meet our externaldemands. In the past, it has been true thatalmost all major developments in technologyhave resulted from military applications. Thishas caused technology t, ,,,ach a threshold, orcritical mass, such tha' .atively little fuelingfrom such applications .ilay be required to sus-tain an explosive growth rate; the feeling maybe expected to comkz: instead from the necessityof satisfying in at least some measure the ex-ponentially increasing wants of an exponen-tially increasing world population.

B. Any such estimate must involve assump-tions which should be noted if the estimate is tohave any value. The basic assumption usedhere is that man-made impedances to technolog-ical change will delay but will be unable to

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306 STATEMENTS : IMPACT OF TECHNOLOGICAL CIIANGE

halt such changes when they are clearly to thebenefit of the total population. This implies thatboth government and industry will be increas-ingly responsive to the needs of those groupswhich would halt such change in the interestof serving their own short-sighted objectives.This is a large osrder, and can come about onlyin a world which has been further altered bytechnological and other forces. Without somesuch assumptions, however, nothing valid canbe said about technological change: The society,if it chooses, can make it go negative as well aspositive.

Assuming reasonable promotion of and re-ceptivity to such change, the next 10 years willsee an almost total change in the way in whichgoods are produced and in the employment pat-tern. Those industries which can be automa-tized efficiently will be ; many of those whichcannot be, will be replaced by or leap-froggedby competing industries which can be. Majorjob classifications involving almost any type ofrepetitive behavior capable of unambiguous de-scription and response to stimuli will have beenvirtually eliminated (these will range fromassembyline production to design engineeringand routine clerical functions). Personal serv-ices will have increased greatly, as will otherareas involving creativity, genuine decisionmaking, and unique skills and capabilities. Allsignificant production, including that of food,hardware, software, and ideas, will be achievedby a very small part of the total population.The rest will be engaged in distribution, in sup-port activities, personal services, education, etc.At some point a majority of the population willbe given more by the society then they con-tribute to it. Perhaps most important, theNew England-Protestant ethic of the nobility ofhard work and thrift will have begun to disap-pear 1 from the national consciousness ; effec-tive use of leisure time in terms of education,recreation, and, in particular, consumption, willbe the new virtue ; there may in many instancesbe little if any distinction made between workand work-related recreation.

The industries which will expand most arethose related to very basic requirements : com-munications, information (including education),transportation, energy (including food andfuel) , recreation, and distribution. The geo-graphic areas most affected will likely be themegalopolis (from Boston to Norfolk) , theGreat Lakes area (Chicago eastward), South-ern California, Texas (for at least the next 7years), and Florida.

From almost every standpoint, but particu-larly from the employment standpoint, themost important single characteristic will be abroad background, flexibility, and adaptability.

The most notable requirement for the citizen,as well as for the worker, will be that hepossess an ability to learn and to adapt farbeyond that expected of the current generation.Education may be expected to concentrate moreupon teaching people how to learn and lessupon detailed curriculums which are often ob-solete before they can be taught. The require-ment for adaptability to a world which we can-not foresee with clarity, even a decade ahead,will have praound impact upon the family,upon social structure, human values, and thecommunity. We shall not be able to affordthe inflexibilty of the last generation.

C. The greatest unmet community andhuman needs are for better education, betterdesigned to prepare the individual to meet thechallenges of a rapidly changing and unchart-able future ; and for adequate water, clean airto breathe, satisfactory motivation, and accessto all the information required by the individualto fulfill his role in his own society and as acitizen of the world. On a broader basis, thechallenge is for production and distribution ofadequate food for not only the present worldpopulation, but for expanding that populationuntil the entire earth is populated at a reason-able density. This involves populating thoseareas which are now deemed inhospitable : aformidable challenge for which technology isalready adequate, but which will probably occuronly as the result of increasing populationpressure.

In none of these areas of great human needis technology the limitation. The limitation israther in our ability to plan, to motivate, tomanage, and to execute. We know how toclean up pollution of river and of atmosphere ;how to educate; how to motivate ; how to de-sign information and transportation and dis-tribution systems ; how to grow food ; how tomake the desert bloom and the mountainhabitable. Our failure to do these things ispolitical, social, and managerialnot techno-logical. We call upon our technology for onlya small fraction of what it can deliver.

Federal Government R&D programs are tak-ing the lead in solving all these problems.Federally supported R&D will continue to playa crucial role, but eventual solution of all theseproblems will depend upon the devising of bet-ter ways for governmental, industrial, and aca-demic R&D to work together in closer team-work which recognizes and exploits thestrengths of each.

D. The channeling of new technology into a

1 In 1780 John Adams wrote to his wife, Abi.,:ail: "I must studypolitics and war, that my so.as may have the liberty to study mathe-matics and philosophy in order to give their children a rig-ot tostudy painting, poetry, music, architecture, statuary, thpestry, andporcelain."

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promising direction depends upon identifyinga great human need, matching need with tech-nology, planning, assessing risks against ex-pected results, and finally executing a program,if the expectation is satisfactory. Civilian in-dustry must, in our economy, measure theexpectation in terms of financial profitabilityand return on investment ; the Federal Govern-ment is able to think more in terms of humanvalues, although the measures used must stillrelate to some form of profitability and returnon investment, perhaps in terms of humanrather than of financial values. The more re-sponsible segment of industry, however, is will-ing to forego immediate profit in the interest ofdeveloping the capability to satisfy some majorhuman need which offers the potential of even-tual significant and profitable activity. It is insuch areas that collaboration between privateindustry and government can be most fruitful :When government is interested in seeing a greathuman need satisfied; when industry is willingto operate on the basis of an enlightened andlong-range viewpoint which says that the ca-pability to satisfy any major human want mustautomatically imply good business opportun-ities ; and where both are willing to definejointly objectives which reflect the essentialmission of each.

In general, the great human problems oftoday cannot be solved either by industry orby government alone. Such problems are nec-essarily the preoccupation of government; butthey are increasingly becoming the preoccupa-tion also of private industry. The role of gov-ernment is perhaps less in the solving of suchwoblems than it is in identifying them andseemg to it that they are solved. When thesolutioii involves new technology, then thatpart of private industry which possesses suchtechnology should be involved, just as anyother great natknal resource should be appliedto appropriate problems.

E. The support and promotion of technolog-ical change in the interest of economic growthand improved well-being for the people depends

upon determining the needs (many of them stilllatent) whose satisfaction will promote suchwell-being and fuel such growth. During thenext decade, the list of obvious, basic needsmay well become exhausted ; the needs whichmust be addressed may become more sophisti-cated. Instead of water to drink, air to breathe,and food for the body, we should be concen-trating more on providing more satisfactorytransportation, energy, communications, andinformationon education for the mind andmotivation for the spiritand perhaps oncreating an environment in which education,work, recreation, and entertainment becomeless distinguishable.

The necessity for training people to be moreadaptable has already been noted. Unless suchadaptability is developed early, and reinforcedthrough continuing education and training,there can be no solution to the problems posedby requirements for continual occupationaladjustment and geographical mobility. In part,this will come about naturally through bettereducation, better transportation, communica-tion, and information ; but in part it must be'deliberately fostered and maintained. Meas-ures taken to alleviate the results of attemptingto force unadaptable people to adapt to newsituations can only reduce the damage ; theycannot prevent it.

It is to be expected that, in general, at thepoint at which a worker suffers technologicalunemployment, it is already too late to retrainhim. There are exceptions, but they are notlikely to be very significant. The ability tobe retrained is the important thingpot theact of retrainingand that must be taughtearly. The concept that industry will requirean increasingly small percentage of the totalavailable output of all potential employees andcannot use those who do not meet minimalspecifications at all, and that an increasinglylarge percentage of the society will receivemore from it than they put into it, must beexamined in terms of the alternative societieswhich are implied.

Appendix

Members cf the Commission and Interagency Advisory Committee

Commission

ChairmanDr. Howard R. Bowen, President, University of Iowa, Iowa City, Iowa

Members

Dr. Benjamin Aaron, Professor of Law and Director, Institute of Industrial Rela-tions, University of California, Los Angeles, California

Mr. Joseph A. Beirne, President, Communications Workers of America, Washing-ton, D.C.

Dr. Daniel Bell, Chairman, Sociology Department, Columbia University, New York,New York

Mr. Patrick E. Haggerty, President, Texas Instruments, Incorporated, Dallas,Texas

Mr. Albert J. Hayes, Past President, International Association of Machinists,Washington, D.C.

Mrs. Anna Rosenberg Hoffman, President, Anna M. Rosenberg Associates, NewYork, New York

Dr. Edwin H. Land, President and Research Director, Polaroid Corporation, Cam-bridge, Massachusetts

Mr. Walter P. Reuther, President, United Automobile Workers, Detroit, MichiganMr. Robert H. Ryan, President, Regional Industrial Development Corporation of

Southwestern Pennsylvania, Pittsburgh, PennsylvaniaDr. Robert M. So low, Professor of Economics, Massachusetts Institute of Technol-

ogy, Cambridge, MassachusettsMr. Philip Sporn, Chairman, System Development Committee, American Electric

Power Company, New York, New YorkMr. Thomas J. Watson, Jr., Chairman of the Board, IBM Corporation, Armonk,

New YorkMr. Whitney M. Young, Jr., Executive Director, National Urban League, New

York, New York

Advisory Committee

Cochairmen

John T. Connor, Secretary of CommerceW. Willard Wirtz, Secretary of Labor

MembersGardner Ackley, Chairman, Council of Economic AdvisersWilliam C. Foster, Director, Arms Control and Disarmament AgencyOrville L. Freeman, Secretary of AgricultureJohn W. Gardner, Secretary of Health, Education, and WelfareDonald F. Hornig, Director, Office of Science and TechnologyRobert S. McNamara, Secretary of DefenseGlenn T. Seaborg, Chairman, Atomic Energy CommissionJames E. Webb, Administrator, National Aeronautics and Space Administration

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* U. S. GOVERNMENT PRINTING OFFICE: 1966 0-211-724