Capital, Labor, and Modernization
Many years ago, I had a Cultural Anthropology professor who discussed the glories of the mechanical cherry-picker. The only catch was that (1) it had upfront and maintenance costs and (2) it performs less well than experienced cherry-pickers. In short, it would be useful if you have a shortage of labor and an excess of capital, but not—as is common in cherry-picking areas—the reverse.
Roy Mayall at The London Review of Books blog notes that the same type of conceit is being used by the Royal Mail:
Walk-sequencing machines sort the letters into the order that they are going to be delivered in. The old walk-sorting machines only organised the post into rounds: postal workers had to do the final sorting. Under the old system, all the post was in the delivery office by 7.15 and we were usually out on our rounds by 9.00. Under the new system, the last lorry arrives at 9.15 and sometimes we don’t get out until after 11.00. It’s quite normal for a postal worker to finish work at 3.30 these days, and for posties doing rural rounds still to be delivering letters as late as four in the afternoon. The machines also have a tendency to break down, as we’ve just discovered, so on some days no post is delivered at all. But they are central to the Royal Mail’s ‘modernisation’ programme. [italics mine]
And, as with newspaper deliveries in the United States, the emphasis on capital over labor has collateral costs to both:
The Royal Mail have scrapped all the bikes in Milton Keynes and replaced them with vans. Vans are obviously much more modern than bikes. They are also more expensive. Not only do they cost several thousand pounds to buy, they cost several hundred pounds a year to tax and insure….
Vans are also slower and less versatile than bikes. They are quicker along the road, but once on your round you have to get out and walk, pulling the post behind you on a trolley. It’s awkward. After a while it puts a strain on your back. And you can’t read the envelopes as you’re walking, which slows things down even more. Rounds that used to take three and a half hours to complete are now taking up to five. Whoever devised this method has obviously never delivered a letter in their life.
There’s a possibility that the shift to cars allows you to downsize labor. (It also means you cannot deliver the post without a driver’s licence.) But the cost of labor is virtually never the primary cost in a service industry, and it is unlikely to be cost-saving when you go from spending nothing on petrol to buying a commodity whose cost increased 9.9% in the past year, and which is currently running about 1.30 per litre. When your Fixed Cost of “0” becomes a Variable Cost much larger than zero, those “savings” disappear rather quickly.
As Mr. Mayall summarizes:
‘Modernising’ the Royal Mail means replacing a tried and tested method that’s been good for more than a hundred years with one that is more tiring, more polluting, slower and more expensive.
If the goal were optimal processing, he would be correct. If, instead, the idea is to exploit a difference in net pricing between capital and labor and leave the consequences and externalities to the future, then the Royal Mail becomes just a contemporary example of bad economic policies leading to poor social outcomes.
In that context, it’s not even especially noteworthy. Just ask, say, Jaime Dimon.
Hi Ken:
Do tell?
One thing as a consultant we would tell companies is:
“Don’t chase technology for technology sake.” Seems like we do a lot of that now and in the past.
not sure but seems you are arguing against competition, capital deepening, productivity differentials and technological rent,,,,,which can, i believe, be found throughout industrial capitalism’s history and are systemic.
juan
not sure i know what all the big words mean, but as a former worker, the process looks familiar. we always thought it was because the bosses were stupid. but nowadays i tend toward the theory that the kind of bosses we get these days are more comfortable with machines than with people. or else they have degrees in “management” which means they have been made stupid by an educational “system” that works on the same theory… that is that human beings can be treated like machines.
“But the cost of labor is virtually never the primary cost in a service industry”
I simply don’t believe this.
Certainly, in education (a service industry), the cost of labor is the primary cost. Same with food service and most medical care. In my research laboratory, the most expesive thing is time (e.g., labor).
The US post office fixed this in newer subdivisions, with central mailboxes one per block or less. So no door to door delivery, and a van does work well. There is an additional benefit the boxes have locks so its harder to steal the mail. Note that in the early 70s the first step was to go to rural style mailboxes in new developments the UK will likley adopt the second soon. I wonder when the US postoffice will start the cluster concept in existing developments that have door to door delivery, it would reduce costs.
coberly
lets see if i cab put this togethr in short, but first, yes, ‘seen as/treated like machines’ includes the worker as wel – alienation of product alienates the producer who can then feel less consrqurntial tthan the means of production s/he/they use.
‘capital deepening’ is only to say thhat capital increases more rapidly yjan labor – progresivvely, though uneven, higher cap/labor ratio resulting from comprtition,,,interrelates to relative productivity and/or productivity differentials that allow a firm or some firms to sell at samr or slighyly lower price than competitors.
this [price] differential can result in higher mass of profit, ‘super profit’, technological rent to the higher productivity/relatively lower labor firms…..which can then give them sectoral advantage and possibility of stagnationist national/global oligopoly/combine/cartel until cracked by nrw invention/innovation.
but this places too much emphasis on the technological and insufficient on the ditrct relation between capital and productive labor.
add: differences in skill anf mode of organization……first might resullt from greater differences [heterogeneity] within means of production withinin singlr plant or sector and can be retrogressive. srcond can provide greater competitiveness and productivity even witj no change in cap/labor ratio or tech.
I wonder whether there is a bit of a class blindness going on here. I wouldn’t be surprised if the managers live in the kind of suburban neighborhoods were vans DO make more sense than bicycles. And they have promulgated the sort of one size fits all solution because they’re unfamiliar with neighborhoods where vans DON’T make sense.
Of course I grew up in a town that has a history of fighting the USPS to PREVENT home delivery of mail. Instead we still have a town post office and everybody gets a PO box. It complicates dealing with people like the state motor vehicle administration and the census who insist on knowing your street address when you HAVE a street address, but mail is NOT deliverable to it.
juan
i think i get that, or could get it. my only point was that there is some tendnency (as in overwhelming) for folks in charge to look at books instead of at the reality in front of them.
sometimes this works, sometimes not.
in my (best) experience, management let us alone and we adopted the technology to improve our productivity by a factor of about three. they ignored us when we tried to tell them, but they did leave us alone, so we got even more productive and used our “free” time for human uses of human beings. about five years later management read about technology and decided to impose it on us from afar, cutting out productivity by a factor of about three…
i would hazard that there is some danger that even good guy economists can get carried away with books and fail to pay attention to what happens in the real right here and right now.
jim a
yes, but class blindness is a subset of normal human blindness. what “works” for me in my very small and artificial world is projected onto the universe and, if i have the power, i demand that the universe acts the way i expect it to. that’s a lot easier than learning anything at all about how even a small part of it actually works.
There is also a general tendency for managers to try and standardize everything at the organization level below them while they do everything to emphisize that their particular orgainzation is special and unique. Standardizing those below you makes managing them easier, and means more sub-organizations can be effectivly controlled with fewer resources. eg companies usualy insist on the same time-keeping and payroll system for everybody. But insisting on your own uniquness means more control and a reduced chance of being combined with those guys down the hall.
So “everybody should use vans,” is, to some extant, an example of this, as is “we should still be using bikes, cause we’re differerent.”
Joel:
And the cost of the buildings stoves, steam kettles, materials, hopsitals, MRI equip, etc. has a lesser cost than the Direct Labor Input? In healthcare, we are not discussing the cost of doctors other than to rearrange the priorities from specialists to primary care. The healthcare costs that have been taking over the economy are in the innovation, redundancy of equipment, procedures and meds that have lesser benefits than the typical procedures and meds, etc.
I suspect your actual labor input has a far lesser impact than you suspect when compared to non labor cost to the product, the cost of the building you work in, legislated overhead, etc.