The same labor unions that have pushed higher minimum wages for entry-level jobs, paid sick leave mandates and restrictive scheduling rules are attacking Amazon for doing what virtually every economist said would happen. Heck, even Bill Gates warned of it.
Service industry CEOs have long cautioned a higher minimum wage is “encouraging automation.” Microsoft co-founder Bill Gates warned a higher minimum wage would “encourage labor substitution” and incentivize employers to “buy machines and automate things” and ultimately “cause job destruction.”
Of course, you don’t have to be an economist, or a computer-genius billionaire, to understand that when the cost of labor increases, employers find other ways to save money. One proven tactic—substituting machines and technology for people.
Grocery stores have already installed self check-out lanes to cut down on the number of human cashiers they need. Now Amazon is testing a new grocery store model called “Amazon Go.” The pilot store will have no cashiers or check-out lines at all. Instead, customers can pick out the products they want and simply walk out of the store. Technology will take care of the rest.
Welcome to the new business model.
Automation, in the form of tablet ordering, self-check out and other labor saving measures can reduce the number of necessary employees by 20%–25%. According to the Bureau of Labor Statistics, the number of businesses taking advantage of the cost savings of automation has increased nearly 25% over the past 10 years, while total employment at these businesses has decreased by 6%. The trend will get bigger, not smaller; such efficiency means fewer workers are needed.
And as Andy Puzder, CEO of fast-food chain Hardee’s and Carl’s Jr., explains, the appeal of an employee-free business goes beyond the minimum wage:
"They're [machines] always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex, or race discrimination case.”
Unions behind the movement for a higher minimum wage, such as the United Food and Commercial Workers International (UFCW), which represents grocery store workers, are right to be concerned. Replacing cashiers with self-service kiosks and automation is already a trend in the service industry. Considering cashiers are the second largest occupation in America, employing 3.5 million people, it isn’t hard to see how much employers stand to save by eliminating the people in those jobs.
But rather than acknowledge the unintended (but totally predictable) consequences of their demand for a higher minimum wage, UFCW has instead launched an attack against Amazon’s “blind greed” in pursuing this new frontier of the service industry. Perhaps UFCW would better serve its members by reevaluating its blind support for a higher minimum wage.
