Robot Rentals

Economists have long said that r, the interest rate, is the rental rate for capital in the same way that w is the rental rate (wage rate) for labor. Now it’s becoming literally true:

Bloomberg: The robots are coming—and not just to big outfits like automotive or aerospace plants. They’re increasingly popping up in smaller U.S. factories, warehouses, retail stores, farms, and even construction sites.

…a nascent trend of offering robots as a service—similar to the subscription models offered by software makers, wherein customers pay monthly or annual use fees rather than purchasing the products—is opening opportunities to even small companies. That financial model is what led Thomson to embrace automation. The company has robots on 27 of its 89 molding machines and plans to add more. It can’t afford to purchase the robots, which can cost $125,000 each, says Chief Executive Officer Steve Dyer. Instead, Thomson pays for the installed machines by the hour, at a cost that’s less than hiring a human employee—if one could be found, he says. “We just don’t have the margins to generate the kind of capital necessary to go out and make these broad, sweeping investments,” he says. “I’m paying $10 to $12 an hour for a robot that is replacing a position that I was paying $15 to $18 plus fringe benefits.”

…Formic is offering to set up robots and charge as little as $8 an hour, aiming first at the most tedious tasks, such as packing and unpacking products and feeding materials into existing machines. The potential market is huge, and it will only grow as the robots become more sophisticated, Farid says.

Robots will bring manufacturing back to America. A robot workforce should also make human unemployment less volatile because a robot workforce can be increased or shrunk quickly and isn’t worried about nominal wage stickiness. Also, as of yet robots don’t unionize. Robot wages will make the minimum wage more salient. Working out the interactions between a monopsony buyer of labor facing a perfectly elastic supply of robots will be interesting.