Substitutability of automated teller machines for tellers: with special reference to Bank of Ceylon

Surrogating technology for human beings is a widely discussed topic in today’s turbulent environment that has its own advantages and disadvantages. This study empirically explores the impact of Automated Teller Machines on the employment of the Bank of Ceylon, Sri Lanka. The research has been conducted using annual secondary data from 1990 to 2011, gathered from the Bank of Ceylon. The study employs the Constant Elasticity of Substitution production function in identifying the degree of substitutability between tellers and Automated Teller Machines. The results of the study confirmed that there is a negative relationship between cost per Automated Teller Machine to the cost per teller and number of automated teller machines to the number of tellers. Further it is indicated that there is a substitutability of 26 percent between Automated Teller Machines and tellers. The research findings indicate that replacing human tellers by Automated Teller Machines has led to a reduction of job opportunities at the Bank of Ceylon and suggest policy recommendations regarding the efficient re-allocation of employees in the bank.