The Gaping Hole In The Robotic Plot

By now, I safely assume that all of you have at least a nodding acquaintance with the steady movement of the US economy toward both one driven by robots and logarithms and a cashless society to boot. Some of the futuristic forecasts are exciting and are upon us. Amazon Go will be a new chain of stores that is opening up where you enter, fill your basket with groceries and then leave with no checkout. All you need is an Amazon Account, apply for the free Amazon Go App, and have a recent generation iPhone or Android phone and an electronic statement is sent to you on your phone shortly after you leave the store.

The big news, of course, go beyond the customer convenience with the Amazon Go Store. Carrington Capital Group projects that over the next 10-15 years some 7.5 million clerical jobs in retail (cashiers being the largest group) will be eliminated as automation invades retail in a profound way and the “retail apocalypse” hits its stride. So, it will be very convenient for virtually everyone reading this post. We will also enjoy self drive cars, our companies will likely have self drive delivery trucks, and self drive Lyft and Ubers have to be on the horizon as well. In urban areas, many of you will have a Smart Fridge that will reorder staples for you automatically. The benefit to companies is huge. If you can cut costs, you have to benefit. Insurance, wages, social security and health care costs will plummet for many companies. Sounds almost too good to be true, doesn’t it. Well, for many of us it will be a reality.

Not so for everyone, however. For the underclass, this brave and exciting new world will likely be out of reach. While those of us in good financial shape will love the convenience and perhaps cost savings, millions may have their noses pressed to the glass but will be excluded. Consider the following statistics: Some 7% of US citizens are totally unbanked (I could not get a projection for the unregistered US residents). Approximately 29% do not have a credit card and in the course of a year, a stunning 19.9% of Americans use a check cashing service, buy money orders, take at least one payday loan or have a transaction at a pawn shop. That group will not be using Amazon Go. Nor will the 17% who are functionally illiterate (cannot read beyond a 5th grade level).

Fees are much higher if you are downscale. Ever bounce a check? Probably not. If you did, it used to be $25. Now the fee is $33. Lawyer and writer Daniel Hatcher, a Baltimore based law professor writes that “If they are lucky enough to have a job, they have to pay to cash their check, then they have to get money orders to pay their bills. It is fee after fee after fee.” Why the low rate of being unbanked? The data is fuzzy but some companies refuse to cut paychecks to employees. One CFO I read about takes new employees to a nearby bank on their first day, gets them a checking account and is able to direct deposit their first pay. The problem is many do not know how to handle it and bounce checks early on and due to the high fees are back at the payday lenders again. (For a lengthy description of the uphill battle the underclass faces read “The High Price of Being Poor” from the Annie E. Casey foundation—available for free online).

Also, what happens to those millions of people who worked in jobs that will be replaced? Historically, when technology eliminated jobs the economy created more than those that were lost. Will that happen again? It seems unlikely. People with a high school degree or less are in trouble. A few million cashiers will see their jobs evaporate. There are 1.8 million truck drivers in the U.S. Fortunately, their median age is 49 so by the time the crunch  hits, they will be at or close to retirement in most cases. And, there will always be a few drivers left. Wal-Mart is testing going cashier-less in some locations according to media accounts. That is great but what about the 29% who do not have a credit card? They are a large market with buying power.

Some marketers are trying to take this market while others are shunning it. In their defense, banks probably lose significant money on accounts that never have a significant balance. In a free market, necessity is the mother of invention. Wal-Mart and some drug chains now offer low cost wiring of money for workers so they can send money home to places as far away as Latin America. I have been told that some upscale individuals give their cleaning crews grocery store gift cards. They are as good as cash and safer to carry than currency. The IRS may not like it and some people will work for years not getting full social security credit if they stay in the states, but it is an imaginative way to skirt the banking system.

This exciting new era will be upon us very soon. Three days ago, I had an experience that prompted me to draft this post. I was at a major supermarket chain buying two items. As I was about to leave, an employee guided me to the self checkout aisle. Within 45 seconds, I had my credit card receipt and was good to go. A fellow at the station next to me was about 50 and roughly dressed. He asked an employee for help and she answered harshly telling him to read the instructions on the screen. He froze. I asked if he needed help and quickly guided him through the process. Then the machine would not accept his tattered $20 bill. I traded him for a crisp double sawbuck that I had just obtained from an ATM perhaps 15 minutes before. He thanked me and said, “I ain’t a reader, sir.”
I tried to smile. As I made my way to the car, I wondered what our future economy held for him and how mine was likely to be sunshine and gold.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com