How Automation Hurts American Unemployment & Spending

aediRapid technological advances will spread a new wave of automation across the U.S., increasing unemployment, depressing American consumer spending and further shrinking the middle class.

CHICAGO-(June  17, 2014)-“When a worker is replaced by a machine or computer, a consumer is lost.  The machine or computer that replaces the worker is part of the production cycle, but it does not represent final demand,” says Ronald R. Pollina, Chairman of the American Economic Development Institute (AEDI) and President of Pollina Corporate Real Estate, Inc. “If we automate everything and there is nobody who can afford the products produced, then the modern mass market that characterized America during the 20th Century will disappear.”


Dr. Pollina documents his research findings about the impact of automation on unemployment as well as American spending in a four-part monograph series that has just been published on the AEDI website ( ).  He explores the history and future of automation as well as what experts say about automation along with the impact of automation on American unemployment and consumer spending.

His findings are startling.  By the end of this decade, China will take America’s position and become the world’s largest consumer market.  In China today, wages are raising rapidly, the middle class is growing rapidly; domestic industries and employment are growing, as was the case in the U.S. during the 20th century.  In the U.S., we see wages stagnate at best, the size of the middle class diminish, domestic industries struggle, and high unemployment continue.

Multi-national firms are not as concerned about this problem, as they see their markets expanding offshore as is their employment and profits.  Yes, China is also automating and may eventually fall into the same dilemma as the U.S.  Labor intense Chinese manufactures are already seeking lower cost labor markets in other parts of Asia such as Vietnam.

However, Chinese labor is still cheap enough today that automation and offshoring has not accelerated at the same rapid pace it has in the U.S. China still has a vast market of low cost labor to draw from with a relatively low cost of living.  Why invest in millions of dollars to automate when there is still a large resource of workers who can get the job done efficiently and cost effectively without the initial investment?  China will continue to automate but at a slower pace.

“The bottom line is that if as we continue to automate jobs, we continue to drive incomes down resulting in less discretionary income,” Dr. Pollina says. “As Martin Ford states in his book, The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future, it is difficult to see how a modern mass market economy can survive.”



AEDI is a nonpartisan public policy and economics research institution whose mission is to improve the American economy by fostering economic growth and prosperity through employment creation and international trade. AEDI also seeks to improve federal, state and local economic development planning in the United States. Through research, training, conferences, demonstration projects, publications and multimedia, AEDI provides the highest quality, nonpartisan analysis and evaluation for federal, state and local economic development planning and policy decisions.