Automation is the mechanization of tasks that formerly had to be accomplished by human labor. Automation is made possible by division of labor's allowing the various processes of production to be split into minute tasks, some of which are suitable for mechanization. Automation does not cause unemployment; any savings in labor costs must be either passed on to consumers (who then have extra money to spend or save, either of which produces more jobs) or pocketed by the employer, who then has extra money to spend or save, again producing more jobs. In the event the money is spent, that results in more labor being used to provide products; in the event the money is saved, that makes more investment money available with which to establish or expand businesses in hopes of reaping profits later. Savings results in resources being used for production of capital goods, rather than for production of consumer goods. This makes increased production, and therefore increased consumption, possible in the future.
One way or another, jobs will be created to make up for those that were lost. Of course, it is possible that skilled labor might displace some unskilled labor. For example, a machine operated by one skilled laborer, paid $12/hour, may be able to do work that would have otherwise required three unskilled laborers paid $5/hour apiece. Even then, however, there will be a tendency for those unskilled workers to find jobs somewhere or another; it simply might not be for as high a wage as before. But there is always work for whoever is willing to, in Ludwig von Mises' words, "abate his pretensions."
- Mises, Ludwig von. "The Effects of the Division of Labor". Human Action. http://mises.org/humanaction/chap8sec5.asp. "The division of labor splits the various processes of production into minute tasks, many of which can be performed by mechanical devices. It is this fact that made the use of machinery possible and brought about the amazing improvements in technical methods of production. Mechanization is the fruit of the division of labor, its most beneficial achievement, not its motive and fountain spring. Power-driven specialized machinery could be employed only in a social environment under the division of labor. Every step forward on the road toward the use of more specialized, more refined, and more productive machines requires a further specialization of tasks."
- Hazlitt, Henry. "The Curse of Machinery". Economics in One Lesson. http://www.fee.org/library/books/economics-in-one-lesson/#0.1_L8.
- Hazlitt, Henry. "The Assault on Saving". Economics in One Lesson. http://www.fee.org/library/books/economics-in-one-lesson/#0.1_L24. "But when money is invested it is used to buy capital goods–houses or office buildings or factories or ships or motor trucks or machines. Any one of these projects puts as much money into circulation and gives as much employment as the same amount of money spent directly on consumption. “Saving,” in short, in the modern world, is only another form of spending."
- Mises, Ludwig von. "Catallactic Unemployment". Human Action. http://mises.org/humanaction/chap21sec4.asp.