Will Automation Negatively Impact Member Income?

Throughout this fall’s planning cycle we’ve engaged in a number of conversations about the possible impact of automation and artificial intelligence on credit union operations. The working assumption is that there is a strategic advantage to automate certain tasks and functions in order to make better use of personnel for higher purposes.

Automation and AI, in other words, are fast becoming important operational initiatives for credit unions of all shapes and sizes.

But there is another area of interest when it comes to the impact of automation on credit unions – member income.

We share a number of articles and research papers with planning clients to prep for strategy dialogue, and we have a new one to add to the mix. It is a paper recently published by the Federal Reserve Bank of San Francisco. We’ll let the abstract speak to the paper’s focus…

The portion of national income that goes to workers, known as the labor share, has fallen substantially over the past 20 years. Even with strong employment growth in recent years, the labor share has remained at historically low levels. Automation has been an important driving factor. While it has increased labor productivity, the threat of automation has also weakened workers’ bargaining power in wage negotiations and led to stagnant wage growth. Analysis suggests that automation contributed substantially to the decline in the labor share.

What is the credit union strategy dialogue here? Member qualification for credit union loans in an era of stagnant member wages – especially if loan costs and terms continue to increase (take a look at this recent WSJ article for an interesting view on automobile prices and financing costs & terms from the consumer perspective – subscription required).

You’ll find the Fed’s paper here: https://www.frbsf.org/economic-research/publications/economic-letter/2019/september/are-workers-losing-to-robots/

Note that I’m not drawing conclusions of a bleak future. I’m simply suggesting that the topic of discussion should be of interest to credit union planners – with the question being, “How do we find success in serving members in the event labor shares continue to decline and/or wages stay stagnant?”

Seems like an important question to consider.

Glatt Consulting Planning

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Image by kalhh from Pixabay

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