Wal-Mart Stores, Inc. (NYSE:WMT) just provided us with a classic example of the technological unemployment that is gutting the American middle class.
The nation's largest retailer is planning to eliminate hundreds of back office jobs at its stores, Market Watch reported. The jobs eliminated will be clerical positions in accounting and invoicing.
Currently, there are around three such positions in the typical Wal-Mart store, Mark Ibbotson; the company's vice president for central operations, explained. The clerks count cash and process invoices and payments.
The counting will now be done by a cash-recycling machine, Market Watch revealed. Cash-recycling machines count the bills and automatically enter the money into the company's books. The cash is then returned to registers, or sent to the bank.
The invoices will be sent to a central office at Wal-Mart's headquarters in Bentonville, Arkansas, via intranet or internet. A strong possibility is that once in Bentonville, the invoices will be processed by some sort of algorithm.
This will save Wal-Mart money, and make it easier for the mega-retailer to open more of its smaller Neighborhood Market locations. WMT is trying to automate other positions as well; it now scans checks at the cash register, which allows for centralized digital processing. Many of its stores now have automated checkout and Neighborhood Markets now have registers that can be set to either manned or self-service.
How Technological Unemployment Creates Income Inequality
The positions eliminated are the kind of higher-paying jobs that provide families a middle-class income. Wal-Mart will try to find jobs for those laid off; behind the cash-register at a lower wage. Ibbotson admitted that the company cannot guarantee the clerks the same hourly wage they were receiving.
Wal-Mart's action shows us how technological unemployment creates income inequality and poverty. Worse it shows us how the new American economy is killing upward mobility.
Middle-class clerical workers get laid off and dumped back into the working class. The former clerks end up running the cash registers or stocking the shelves at Wal-Mart. There will be no job openings for working class people, who will be forced to take even lower-paying, less desirable jobs such as mopping floors or waiting tables.
Worst of all, there will be fewer entry-level jobs for young people, immigrants and others. The greatest effect will be felt by the most poverty-prone elements in our society; the uneducated, minorities, ex-cons, the mentally ill and substance abusers. Not surprisingly, some of these people will simply drop out of the labor force and move onto the welfare rolls. Others will choose a life of crime or end up on the streets.
Since these people will be either making less money, or no income, the amount of economic activity in the community will shrink. That will mean even fewer jobs, and more unemployment, poverty and income inequality.
Technological Unemployment Will Become A Political Issue
Stories like this will make technological unemployment a political issue in the near future. Sooner or later, some politician is going to seize upon this, and start demanding automation be banned or restricted.
The success Donald Trump has had with his simplistic trade policies make organized technophobia inevitable. Trump himself has engaged in some technophobia with attacks upon Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). Amazon is a major job destroyer, because it is wiping out hundreds of stores that employ thousands of people.
The growing job losses will increase the demands for basic income. That drama is already playing out in Switzerland where 23% of the nation's people, nearly one in five, voted for such a scheme. The Swiss plan would have guaranteed every adult $2,555 a month and an additional $25.85 for each child.
The level of success the guaranteed income plan achieved is surprising; because no major politician or political party supported it, the BBC reported. Around 77% opposed the plan, but the number of votes indicates such a scheme will be back on the ballot.
Expect to see something like the Swiss initiative on the ballot in at least one US state in the near future. A proposal to create single-payer health insurance is already on the ballot in Colorado.
Wal-Mart Is The First
Expect most major retailers to follow Wal-Mart's lead in the near future. Small-box discounters like Dollar General (NYSE:DG) and Big Lots (NYSE:BIG) will be early adopters because of their low operating margins. Chains with large numbers of stores like Walgreens (NASDAQ:WBA) and Dollar Tree (NASDAQ:DLTR) will quickly follow.
My prediction is that we are about to see serious unemployment in the retail sector due to technology. When that occurs, there will be major political, social and cultural consequences, which will seriously disrupt our communities.