Walmart is Paving The Way of The Future: Automation and Subcontracting

We’ve had intense debates about the minimum wage for years. The reason is that having a very limited Welfare State is practically the only legal mechanism to reduce poverty.

All this debate has made minimum wages increase in many States, although at the federal level the amount has remained unchanged since 2009 ($7.25 per hour). And, in addition, the media pressure on some companies, such as Walmart, the largest private employer in the country with 1.5 million workers, is very strong for raising salaries. (Yes, I know this is old news, but since when have we ever been concerned with timing. It’s the analysis that counts 🙂

Earlier this year, Walmart announced that it will raise its employees’ salaries to a minimum of $11 an hour. However, behind this movement there is something more. Walmart is beginning to establish what will be the future of work throughout the world.

Salaries and future

Walmart made this announcement for three reasons. First, because the pressure on them is unbearable. The press has for years been pointing out the low salaries in Walmart, and how many employees live with social benefits because the salaries they receive keep them above poverty levels.

Second, because they had an excuse, Trump’s tax reduction, which is going to provide them with more benefits.

And the true measure of whether a salary is appropriate or not is the productivity of the worker. And although many jobs are needed in Walmart, the value it generates for the company is low, and you can not afford to raise those salaries without seriously laminating the viability of the company.

Reality: automation and subcontracting

The truth is that Walmart is carrying out a process of eliminating the employees with the lowest salaries, the least productive ones. And this strategy has two aspects.The first is that of automation and the second is that of subcontracting to self-employed workers.

Automation involves robots performing tasks that make humans can essentially do in their sleep. But automation also involves things things the client normally do not see, such as the transit of merchandise, the replacement of goods on shelves, cleaning, inventory management etc…

But there are tasks that the machines still can not do, such as managing online orders. There must be employees who take the client’s order and deliver it to their homes.That’s where subcontracting to self-employed people comes in: people who are not Walmart employees but who charge to deliver the order; people who are not employees of Walmart but transport it to customers.This allows Walmart to perform tasks at a very low price without labor costs in the company’s accounts. 

An automated future with autonomous workers

Salaries didn’t take off despite economic recovery and full employment. There is no inflation either. The model of the past seems broken, when in good times salaries and inflation soared.

Economists seek explanation to this phenomenon and one of them is that the employment that is being created in the less productive segments is in the form of autonomous work: sporadic, very much linked to the collaborative economy (Uber, Lyft) with really low salaries.

And also those jobs run the risk of disappearing in the future, since the automation of certain tasks is coming little by little. And if the salaries are higher, it will come even faster, since the benefit for the companies that implement them will be even greater.

In addition, there is another effect that is rarely mentioned. In the past, the most efficient form of business organization was the hiring of workers. If an organization wanted to do something, the normal thing is that it hired people, since maintaining control of quality and information was impossible any other way. In a hyperconnected society like the one we have now, it is much easier to outsource tasks.

Where before it took 10 employees to keep the accounts of a company now you only the right software, and maybe the company realizes that to have half an employee you do not need to hire one, but have a self-employed person half of your time.

What is clear is that Walmart is paving the way of employment of the future. A few years ago, that would seem dystopian, today not so much.

Leave a Reply

Your email address will not be published. Required fields are marked *