Last week my daughter and I talked about how technology impacts economics. Really, the conversation started by answering the question of how banks make money and digressed into economics. I surmised that technology must also play a part in economics.
Banks make money several ways. First, they make a modest amount of interest by lending money. Second, they make money by charging fees. Finally, banks make investments in stocks, bonds and take other risks.
Way back before computers even existed banks stored their money in vaults . Those stockpiles of greenbacks were the bank’s guarantee. Bean counters would sharpen their pencils and keep paper books of transactions and records. Everything was done by people.
Banks today may hire an accountant to reconcile their books or audit computer records, but accountants simply aren’t needed for day-to-day business. Many of these accountants have been replaced by computers. As computers became more reliable, the need for human accountants became less.
Back in the 80’s I did all my banking with a huge bank that penalized me each time I used a teller. The bank made a substantial investment in ATM machines and forced the necessity of using them with $2.00 fees. Computerized ATM machines quickly took the place of humans.
I’ve been gearing up to purchase a new home and have started researching mortgages. Last time I applied for a mortgage I used a human originator. When I started the process last month I was directed to a website where I could start the mortgage process.
I probably should have mentioned that my daughter asked me about banking after visiting a branch of the bank I currently use. The branch is located in a very old building with ten teller windows. Of those ten, two were occupied. Of the four help desks, none were used.
There was a day when I’d visit a bank and there would be at least six tellers and two customer service representatives per branch. Customers would be lined up waiting to talk with someone and each person had a stack of papers they were waiting to do something with. Nowadays the ATM and bank’s website are busier than the inside of the branch.
I deduced that technology has replaced accountants, tellers and loan officers at banks. Computers work for less than humans and don’t need a break. Of course technology isn’t replacing only bankers, it’s all industries. Where did all the people go who were replaced by technology?
Our economy will always be impacted when people are replaced by technology. The $13.00 per hour or so a teller makes will have to be made up somewhere. The person who would have filled that job may have had to settle for a lower paying job which wouldn’t allow them extra spending money.
On the other hand, swapping people for technology frees up money the bank can allocate to other resources. My bank may spend $4,000.00 on a new ATM that replaces four years of a teller making $12.00 per hour (or $96,000.00). Money saved from implementing ATM machines may save customers thousands in fees.
I am certainly not an economist but wanted to throw out a couple views of how our economy may be effected by technology. One argument suggests extra earnings by human employees may put money back into our economy. The other argument I’ve heard is technology saves money, making the final product less expensive. No matter, there’s no way to truly know how technology impacts the economy without removing it altogether.
(Jeromy Patriquin is the President of Laptop & Computer Repair, Inc. located at 509 Main St. in Gardner. You can call him at (978) 919-8059 or visit www.LocalComputerWiz.com.)