So warns Mr. Obama in this year’s Economic Report of the President.  And the fear is that this accelerating automation will replace low-skilled jobs.

It’s intuitive that automation will take low-wage jobs.But the White House, in its annual economic report of the president, has broken down just how much that is so.

There’s an 83% chance that automation will take a job with an hourly wage below $20, a 31% chance automation will take a job with an hourly wage between $20 and $40, and just a 4% chance automation will take a job with an hourly wage above $40….

The White House says the findings demonstrate the need for training and education to help displaced workers find new jobs.

Its a matter of basic economics that labor and capital are substitutes, and that if you raise the price of one relative to the other, there will be a shift in production processes towards the relatively cheaper input variable.  Translation–raise the price of labor and you get more robots!

The White House writes about this as if this automation just happens, but in fact it is an entirely predictable market response to the ever increasing costs thrust upon employers for labor.  So when you pass the Affordable Care Act and increase the costs of low-skilled labor, you should expect to have less demanded.

When economists point out this unintended consequence of government regulation, they are often accused of being “in the tank” for business, trying to protect the profits of business.  Yet as this story of automation shows, it is not business that will ultimately be hurt by regulation.  Businesses are often able to optimize on some other margin; in this case it is in favor of more capital.  But what other options do low skilled laborers have?  Welfare is surely not the option we want to force–yes force–them into.

Its important to note that low-skilled labor is hurt the most by regulation for two reasons.  First, low-skilled labor’s productivity is by definition low–there is little “profit margin” per employee from which to absorb increased costs.  Second, low skilled labor’s function is more easily replaced via automation–the tradeoff between labor and capital is easier in low skilled jobs.

No doubt we should continue to try and develop the human capital of people made in the image of God–but God has not endowed everyone equally.   We cannot naively think that we will be able to create a world of only high skilled college graduate laborers.   There must be a place for entry and low skilled workers.  When the Obama administration warns of the dangers of automation, they need to first see how they can stop their own contribution to that trend.