Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Grocery Wars

Technological Unemployment Grows Worse Walmart Kills 7,000 Jobs

The hollowing out of the American middle class is getting worse. Walmart Stores Inc. (NYSE: WMT) plans to eliminate 7,000 back office positions throughout the United States.

The move is a hit to the US middle class; because most of the jobs eliminated are accounting positions that pay around $27,000 a year, The Wall Street Journal reported. Those workers spend their days locked away in an office in the back of the store counting cash; or processing invoices for vendors that delivery directly to stores.

Now the counting will be done by cash recycling machines and the invoices will be processed by algorithms; or employees at Walmart HQ in Bentonville, Arkansas. That will make Walmart more efficient which is good news for its stockholders but bad news for employees.

It is also bad news for people with similar jobs at other chains like Target (NYSE: TGT) and Kroger (NYSE: KR). Those retailers will be forced to eliminate such jobs in order to compete with a more efficient Walmart; that will be in a position to offer even deeper discounts on merchandise and attract more customers.


The Bleak Future of the American Middle Class

Walmart is simply expanding a move it tested with several hundred positions on the West Coast earlier this year. Its latest job-killing thrust is a sign of the middle class’s beak future.

The accounting positions eliminated are the kind of clerical job that has historically served as a stepping stone to the middle class. Many of them are held by women whose jobs enable their families to enjoy the trappings of middle-class success such as cars and houses. Now those jobs are vanishing and knocking many people back down the ladder.

A lot of the people in the accounting jobs worked their way up the ladder at Walmart from the floor or the cash register. Now they’re being knocked right back down there. Eliminated next will be many college educated professionals including accountants.

Walmart will try to find those displaced jobs at its stores but their current wage level is not guaranteed, company spokeswoman Deisha Barnett admitted. A major problem will be that some of the clerical workers are older and physically incapable of doing retail grunt work like stocking shelves.


The New Class Warfare

The employees at Walmart are better off than those at retailers like Macy’s (NYSE: M) which is planning to close 100 stores. Macy’s is planning store closings because it cannot compete with Amazon (NASDAQ: AMZN).

Amazon is the ultimate retail job killer because it sells without a store. That’s good news for UPS drivers and Uber couriers, but bad news for retail managers; some of will undoubtedly up doing Uber to pay the bills.

Walmart is positioning itself to compete with Amazon by automating its stores. That process will kill large numbers of jobs and leave a lot of carnage in its wake. Many other retailers will follow because economics dictate it.

Walmart’s actions show us what a huge problem technological unemployment is becoming. It is hard to automate labor intensive jobs like bagging groceries or stocking shelves, but easy to automate clerical work. After all most clerical work can be done by an algorithm that works for free, but an algorithm cannot stock a shelf.

Since the clerical positions are higher paying and less likely to be unionized, management has an even stronger incentive to eliminate them. This will certainly lead to bad feelings and new class warfare.

The unemployed clerical workers are exactly the sort of people most likely to listen to demagogues like Donald Trump; or whoever replaces him as the self-appointed savior of the working class. The next Trump is likely to target technology; as well as immigrants and Wall Street. Trump himself has fired a few shots at Silicon Valley. His successor is likely to be openly hostile to technology, and find a receptive audience among the unemployed or underemployed middle class.

Walmart is demonstrating that technological unemployment is a threat to the middle class. One wonders how civil and political order can be preserved in the face of such massive layoffs.