In the United States and other advanced economies, the major disruption will be in the service sector—which is, after all, where the vast majority of workers are now employed. This trend is already evident in areas like ATMs and self-service checkout lanes, but the next decade is likely to see an explosion of new forms of service sector automation, potentially putting millions of relatively low-wage jobs at risk.
San Francisco start-up company Momentum Machines, Inc., has set out to fully automate the production of gourmet-quality hamburgers. Whereas a fast food worker might toss a frozen patty onto the grill, Momentum Machines’ device shapes burgers from freshly ground meat and then grills them to order—including even the ability to add just the right amount of char while retaining all the juices. The machine, which is capable of producing about 360 hamburgers per hour, also toasts the bun and then slices and adds fresh ingredients like tomatoes, onions, and pickles only after the order is placed. Burgers arrive assembled and ready to serve on a conveyer belt. While most robotics companies take great care to spin a positive tale when it comes to the potential impact on employment, Momentum Machines co-founder Alexandros Vardakostas is very forthright about the company’s objective: “Our device isn’t meant to make employees more efficient,” he said. “It’s meant to completely obviate them.” The company estimates that the average fast food restaurant spends about $135,000 per year on wages for employees who produce hamburgers and that the total labor cost for burger production for the US economy is about $9 billion annually. Momentum Machines believes its device will pay for itself in less than a year, and it plans to target not just restaurants but also convenience stores, food trucks, and perhaps even vending machines. The company argues that eliminating labor costs and reducing the amount of space required in kitchens will allow restaurants to spend more on high-quality ingredients, enabling them to offer gourmet hamburgers at fast food prices.
Those burgers might sound very inviting, but they would come at a considerable cost. Millions of people hold low-wage, often part-time, jobs in the fast food and beverage industries. McDonald’s alone employs about 1.8 million workers in 34,000 restaurants worldwide. Historically, low wages, few benefits, and a high turnover rate have helped to make fast food jobs relatively easy to find, and fast food jobs, together with other low-skill positions in retail, have provided a kind of private sector safety net for workers with few other options: these jobs have traditionally offered an income of last resort when no better alternatives are available. In December 2013, the US Bureau of Labor Statistics ranked “combined food preparation and serving workers,” a category that excludes waiters and waitresses in full-service restaurants, as one of the top employment sectors in terms of the number of job openings projected over the course of the decade leading up to 2022—with nearly half a million new jobs and another million openings to replace workers who leave the industry.
In the wake of the Great Recession, however, the rules that used to apply to fast food employment are changing rapidly. In 2011, McDonald’s launched a high-profile initiative to hire 50,000 new workers in a single day and received over a million applications—a ratio that made landing a McJob more of a statistical long shot than getting accepted at Harvard. While fast food employment was once dominated by young people looking for a part-time income while in school, the industry now employs far more mature workers who rely on the jobs as their primary income. Nearly 90 percent of fast food workers are twenty or older, and the average age is thirty-five. Many of these older workers have to support families—a nearly impossible task at a median wage of just $8.69 per hour.
The industry’s low wages and nearly complete lack of benefits have drawn intensive criticism. In October 2013, McDonald’s was lambasted after an employee who called the company’s financial help line was advised to apply for food stamps and Medicaid. Indeed, an analysis by the Labor Center at the University of California, Berkeley, found that more than half of the families of fast food workers are enrolled in some type of public assistance program and that the resulting cost to US taxpayers is nearly $7 billion per year.
When a spate of protests and ad hoc strikes at fast food restaurants broke out in New York and then spread to more than fifty US cities in the fall of 2013, the Employment Policies Institute, a conservative think tank with close ties to the restaurant and hotel industries, placed a full-page ad in the Wall Street Journal warning that “Robots Could Soon Replace Fast Food Workers Demanding a Higher Minimum Wage.” While the ad was doubtless intended as a scare tactic, the reality is that—as the Momentum Machines device demonstrates—increased automation in the fast food industry is almost certainly inevitable. Given that companies like Foxconn are introducing robots to perform high-precision electronic assembly in China, there is little reason to believe that machines won’t also eventually be serving up burgers, tacos, and lattes across the fast food industry.
Japan’s Kura sushi restaurant chain has already successfully pioneered an automation strategy. In the chain’s 262 restaurants, robots help make the sushi while conveyor belts replace waiters. To ensure freshness, the system keeps track of how long individual sushi plates have been circulating and automatically removes those that reach their expiration time. Customers order using touch panel screens, and when they are finished dining they place the empty dishes in a slot near their table. The system automatically tabulates the bill and then cleans the plates and whisks them back to the kitchen. Rather than employing store managers at each location, Kura uses centralized facilities where managers are able to remotely monitor nearly every aspect of restaurant operations. Kura’s automation-based business model allows it to price sushi plates at just 100 yen (about $1), significantly undercutting its competitors.
It’s fairly easy to envision many of the strategies that have worked for Kura, especially automated food production and offsite management, eventually being adopted across the fast food industry. Some significant steps have already been taken in that direction; McDonalds, for example, announced in 2011 that it would install touch screen ordering systems at 7,000 of its European restaurants. Once one of the industry’s major players begins to gain significant advantages from increased automation, the others will have little choice but to follow suit. Automation will also offer the ability to compete on dimensions beyond lower labor costs. Robotic production might be viewed as more hygienic since fewer workers would come into contact with the food. Convenience, speed, and order accuracy would increase, as would the ability to customize orders. Once a customer’s preferences were recorded at one restaurant, automation would make it a simple matter to consistently produce the same results at other locations.
Given all this, I think it is quite easy to imagine that a typical fast food restaurant may eventually be able to cut its workforce by 50 percent, or perhaps even more. At least in the United States, the fast food market is already so saturated that it seems very unlikely that new restaurants could make up for such a dramatic reduction in the number of workers required at each location. And this, of course, would mean that a great many of the job openings forecast by the Bureau of Labor Statistics might never materialize.
The other major concentration of low-wage service jobs is in the general retail sector. Economists at the Bureau of Labor Statistics rank “retail salesperson” second only to “registered nurse” as the specific occupation that will add the most jobs in the decade ending in 2020 and expect over 700,000 new jobs to be created. Once again, however, technology has the potential to make the government projections seem optimistic. We can probably anticipate that three major forces will shape employment in the retail sector going forward.
The first will be the continuing disruption of the industry by online retailers like Amazon, eBay, and Netflix. The competitive advantage that online suppliers have over brick and mortar stores is already, of course, evident with the demise of major retail chains like Circuit City, Borders, and Blockbuster. Both Amazon and eBay are experimenting with same-day delivery in a number of US cities, with the objective of undermining one of the last major advantages that local retail stores still enjoy: the ability to provide immediate gratification after a purchase.
In theory, the encroachment of online retailers should not necessarily destroy jobs but, rather, would transition them from traditional retail settings to the warehouses and distribution centers used by the online companies. However, the reality is that once jobs move to a warehouse they become far easier to automate. Amazon purchased Kiva Systems, a warehouse robotics company in 2012. Kiva’s robots, which look a bit like huge, roving hockey pucks, are designed to move materials within warehouses. Rather than having workers roam the aisles selecting items, a Kiva robot simply zips under an entire pallet or shelving unit, lifts it, and then brings it directly to the worker packing an order. The robots navigate autonomously using a grid laid out by barcodes attached to the floor and are used to automate warehouse operations at a variety of major retailers in addition to Amazon, including Toys “R” Us, the Gap, Walgreens, and Staples.
A year after the acquisition, Amazon had about 1,400 Kiva robots in operation but had only begun the process of integrating the machines into its massive warehouses. One Wall Street analyst estimates that the robots will ultimately allow the company to cut its order fulfillment costs by as much as 40 percent.
The Kroger Company, one of the largest grocery retailers in the United States, has also introduced highly automated distribution centers. Kroger’s system is capable of receiving pallets containing large supplies of a single product from vendors and then disassembling them and creating new pallets containing a variety of different products that are ready to ship to stores. It is also able to organize the way that products are stacked on the mixed pallets in order to optimize the stocking of shelves once they arrive at stores. The automated warehouses completely eliminate the need for human intervention, except for loading and unloading the pallets onto trucks. The obvious impact that these automated systems have on jobs has not been lost on organized labor, and the Teamsters Union has repeatedly clashed with Kroger, as well as other grocery retailers, over their introduction. Both the Kiva robots and Kroger’s automated system do leave some jobs for people, and these are primarily in areas, such as packing a mixture of items for final shipment to customers, that require visual recognition and dexterity. Of course, these are the very areas in which innovations like Industrial Perception’s box-moving robots are rapidly advancing the technical frontier.
The second transformative force is likely to be the explosive growth of the fully automated self-service retail sector—or, in other words, intelligent vending machines and kiosks. One study projects that the value of products and services vended in this market will grow from about $740 billion in 2010 to more than $1.1 trillion by 2015.Vending machines have progressed far beyond dispensing sodas, snacks, and lousy instant coffee, and sophisticated machines that sell consumer electronics products like Apple’s iPod and iPad are now common in airports and upscale hotels. AVT, Inc., one of the leading manufacturers of automated retail machines, claims that it can design a custom self-service solution for virtually any product. Vending machines make it possible to dramatically reduce three of the most significant costs incurred in the retail business: real estate, labor, and theft by customers and employees. In addition to providing 24-hour service, many of the machines include video screens and are able to offer targeted point-of-sale advertising that’s geared toward enticing customers to purchase related products in much the same way that a human sales clerk might do. They can also collect customer email addresses and send receipts. In essence, the machines offer many of the advantages of online ordering, with the added benefit of instant delivery.
While the proliferation of vending machines and kiosks is certain to eliminate traditional retail sales jobs, these machines will also, of course, create jobs in areas like maintenance, restocking, and repair. The number of those new jobs, however, is likely to be more limited than you might expect. The latest-generation machines are directly connected to the Internet and provide a continuous stream of sales and diagnostic data; they are also specifically designed to minimize the labor costs associated with their operation.
In 2010, David Dunning was the regional operations supervisor responsible for overseeing the maintenance and restocking of Redbox movie rental kiosks in the Chicago area. Redbox has over 42,000 kiosks in the United States and Canada, typically located at convenience stores and supermarkets, and rents about 2 million videos per day. Dunning managed the Chicago-area kiosks with a staff of just seven. Restocking the machines is highly automated; in fact, the most labor-intensive aspect of the job is swapping the translucent movie advertisements displayed on the kiosk—a process that typically takes less than two minutes for each machine. Dunning and his staff divide their time between the warehouse, where new movies arrive, and their cars and homes, where they are able to access and manage the machines via the Internet. The kiosks are designed from the ground up for remote maintenance. For example, if a machine jams it will report this immediately, and a technician can log in with his or her laptop computer, jiggle the mechanism, and fix the problem without the need to visit the site. New movies are typically released on Tuesdays, but the machines can be restocked at any time prior to that; the kiosk will automatically make the movies available for rental at the right time. That allows technicians to schedule restocking visits to avoid traffic.
While the jobs that Dunning and his staff have are certainly interesting and desirable, in number they are a fraction of what a traditional retail chain would create. The now-defunct Blockbuster, for example, once had dozens of stores in greater Chicago, each employing its own sales staff. At its peak, Blockbuster had a total of about 9,000 stores and 60,000 employees. That works out to about seven jobs per store—roughly the same number that Redbox employed in the entire region serviced by Dunning’s team.
The third major force likely to disrupt employment in the retail sector will be the introduction of increased automation and robotics into stores as brick and mortar retailers strive to remain competitive. The same innovations that are enabling manufacturing robots to advance the frontier in areas like physical dexterity and visual recognition will eventually allow retail automation to begin moving from warehouses into more challenging and varied environments like stocking shelves in stores. In fact, as far back as 2005, Walmart was already investigating the possibility of using robots that rove store aisles at night and automatically scan barcodes in order to track product inventories.
At the same time, self-service checkout aisles and in-store information kiosks are sure to become easier to use, as well as more common. Mobile devices will also become an ever more important self-service tool. Future shoppers will rely more and more on their phones as a way to shop, pay, and get help and information about products while in traditional retail settings. The mobile disruption of retail is already under way. Walmart, for example, is testing an experimental program that allows shoppers to scan barcodes and then checkout and pay with their phones—completely avoiding long checkout lines. Silvercar, a start-up rental car company, offers the capability to reserve and pick up a car without ever having to interact with a rental clerk; the customer simply scans a barcode to unlock the car and then drives away. As natural language technology like Apple’s Siri or even more powerful systems like IBM’s Watson continue to advance and become more affordable, it’s easy to imagine shoppers soon being able to ask their mobile devices for assistance in much the same way they might ask a store employee. The difference, of course, is that the customer will never have to wait for or hunt down the employee; the virtual assistant will always be instantly available and will rarely, if ever, give an inaccurate answer.
While many retailers may choose to bring automation into traditional retail configurations, others may instead elect to entirely redesign stores—perhaps, in essence, turning them into scaled-up vending machines. Stores of this type might consist of an automated warehouse with an attached showroom where customers could examine product samples and place orders. Orders might then be delivered directly to customers, or perhaps even loaded robotically into vehicles. Regardless of the specific technological path ultimately followed by the retail industry, it’s difficult to imagine that the eventual result won’t be more robots and machines—and significantly fewer jobs for people.
Excerpted from "Rise of the Robots: Technology and the Threat of a Jobless Future" by Martin Ford. Published by Basic Books, a division of the Perseus Books Group. Copyright 2015 by Martin Ford. Reprinted with permission of the publisher. All rights reserved.