(1) _Effects of Machinery upon the number of Employed._--The motive which induces capitalist employers to introduce into an industry machinery which shall either save labour by doing work which labour did before, or assist labour by making it more efficient, is a desire to reduce the expenses of production. A new machine either displaces an old machine, or it undertakes a process of industry formerly done by hand labour without machinery.
In the former case it has been calculated that the expenses incurred in making, maintaining, and working the new machines so as to produce a given output will be less than the corresponding expenses involved in the use of the old machines. Assuming that the labour of making and working the new machines is paid at no lower rate than the labour it displaces, and that the same proportion of the price of each machine went as wages and as profits, it must follow that the reduction of expenses achieved signifies a net displacement of labour for a given quantity of production. Since the skilled labour of making new machines is likely to be paid higher than that of making more old machines, and the proportion of the price which goes as profit upon a new invention will be higher than in the case of an old one,[174] the actual displacement of labour will commonly be larger than is represented by the difference in money price of the two machines. Moreover, since in the case of an old manufacturing firm the cost of discarding a certain amount of existing machinery must be reckoned in, the substitution of new machinery for old will generally mean a considerable displacement of labour.
Similarly, when a new process is first taken over by machinery the expenses of making and working the machines, as compared with the expenses of turning out a given product by hand labour, will, other things being equal, involve a net diminution of employment. The fact that the new machinery is introduced is a proof that there is a net diminution of employment as regards a given output; for otherwise no economy would be effected.
What then is meant by the statement so generally made, that machinery gives more employment than it takes away--that its wider and ultimate effect is not to diminish the demand for labour?