AI-powered shopping carts are here to take your jobs because of basic economics
Robots Are Taking Their Jobs!
Today I stumbled on an article about how AI-powered shopping carts are coming to Kroger grocery stores [1]. The message here is crystal clear.
If your job involves standing around doing something that can be readily done by a machine, $15 an hour minimum wage is not going to save you.
As President Biden and many others have called for a federally mandated $15 minimum wage that “could lift 1 million people out of poverty” as a major benefit to normal working people people, this is based on a tenuous economic proposition [2]. Namely, that the people who are working for minimum wage will actually still have jobs at which to work.
Good Economics is Often Bad Politics
Let’s just get it out of the way now. Politicians wanting to raise the minimum wage, I believe, generally think they are trying to do something good and should be praised for having a heart. However, as someone with a degree in economics and an active business owner, the reality is that increasing the minimum wage for people whose marginal product of labor is not worth their wage is only going to hurt the people the government is trying to help. As much fun as drawing out the graphs would be, Jack Kelly’s article in Forbes does a better job that I would giving a human perspective to this idea [3].
Sure, some people are going to benefit. Those who still have their job where $15 is a big jump from the current minimum wage will be happy. However, there will be a lot of people who lose their jobs or never get hired as a result of the government creating a surplus of labor via a binding price floor in the labor market.
Incentives Rule the World
What is so interesting about AI-powered shopping carts effectively taking minimum wage workers’ jobs away is that this has been a long time coming with the incentives finally making Kroger, the largest grocer in the US, pull the trigger on scaling up the experiments because they see the writing on the wall [1].
Consumer preferences are clearly changing to want contact-less (or minimal contact at least) shopping experience, digital payments, less human interaction, and no more waiting in line. Well, what do most grocery store workers do? They come in contact with customers, handle cash payments, interact (specifically greet and checkout) with people, and are the bottlenecks that lead to people waiting in line.
With that in mind, why does it make sense for a business to pay the same amount of people more money to do a job function that their customers no longer demand?
Businesses are fundamentally profit-maximizing entities that understand that the marginal costs of increasing everyone’s minimum wage outweigh the marginal benefits of being altruistic and politically palatable. The only real option is to cut workers and replace them with technology that has a high marginal product of capital to increase the overall efficiency of the business while decreasing their reliance on human labor.
The Software Engineer’s Job
I also did a little reading on the career’s page of Caper.AI. As of this writing there is a software engineering job that in the description says that “Any retailer can buy the carts and their entire store is upgraded with cashierless capabilities. Caper costs less than 1% of Amazon Go’s infrastructure.” [4].
I write a lot of code and have a decent understanding of what they are trying to do. Good for Caper, and the fundamental principles of economics are on their side. I am excited to try it out and see what it’s like when a store near me implements the solution to see how it compares to traditional shopping. We’ll see if the software engineers did their job.
Cobb-Douglas Strikes Again
Just about every business faces some kind of production function. In plain English, output is a function of productivity, capital, and labor.
For those of you who like math:
Y = A(K^α)(L ^β)
Where Y is output, K is capital, L is labor, α is an exponent between 0 and 1, and β is an exponent between 0 and 1.
If you want to read about the math, go read a short synopsis from Caltech at the link in reference 5 below [5].
What this means for the grocery store example is that the output of the grocery store is shifting to me much more heavily dependent on capital and less dependent on labor. For their system, productivity is increasing at the same time. Bluntly, the value of grocery workers is going down because the stores can effectively have increased productivity by throwing more capital into the system rather than hiring more labor.
Ultimately, a handful nerds mashing buttons somewhere is going to get them a lot more bang for the buck than physical workers being in the store. So you tell me. What is the rational choice for a business?
Be Careful What You Wish For…
Workers want to work for a million dollars an hour. Business would love to have high-quality labor for free (slavery). Neither of those are good ideas in principle or practice, so we need to compromise somewhere in the middle here.
It is not the fault of the workers that their jobs are being automated away. It is not the fault of business for being rational and fulfilling their duty to shareholders. As much as I wish I could say it is the fault of the government, it just simply is not either. The incentives for this story to repeat around the world in all sorts of industries are only going to get stronger. The only real question is on what side you will be when this trend comes for your industry.