Washington, DC, June 20, 2017 --  

The sale of a high-wage retailer to a low-cost competitor puts more working class jobs at risk.

When Wal-Mart opened its first store in Washington, DC 3 1/2 years ago, it was at the start of the battle over the $15 minimum wage. The sight of of the reviled company's logo just six blocks from the U.S. Capitol complex and nearby union headquarters provided a tempting target. Labor activists pounced, and helped push through a law last year that will see the District of Colombia 's minimum wage rise to $15 over the next thee years.¹ Even before the law was finalized, Wal-Mart cancelled plans to open two additional stores in the city.²

One year on, the Wal-Mart Supercenter on H street near the Capitol building still bustles with working class shoppers. These shoppers largely hail from parts of DC not yet displaced by relentless waves of gentrification that have seen housing prices soar to an average of over $500,000.³ The clientele contrasts sharply with that at the brand new Whole Foods Market just seven blocks down the same street. Here, richer, whiter, and far more politicized customers buy organic and cruelty-free products for far higher prices. They feel good about buying them from employees that have historically enjoyed far higher wages than those working at their more downscale competitor up the street.

But now, that bastion of wealthy liberal elitism has been bought out by another low-cost seller. Last week, online retailer Amazon announced plans to purchase Whole Foods.⁴ Much like its competitors at Wal-Mart, Amazon has long been associated with cutting costs and putting smaller retailers out of business. While its employees make more money than those at Wal-Mart, there are far fewer of them -- 314,000 at Amazon vs. 2.3 million at Wal-Mart. ^5,6

While both retailers sell at bargain basement prices, Wal-Mart does so by paying employees as little as possible, and Amazon does so by automating everything it can so it doesn't have to hire people in the first place. For every million dollars in sales in 2016, Amazon employed half as many workers -- 2.3 employees vs. Wal-Mart's 4.8.^7,8,9

This is why Amazon's acquisition of Whole Foods is terrible news for labor activists and their liberal allies who sought to use a $15 minimum wage as a means of fighting inequality. While Amazon has publicly announced to immediate changes in the way Whole Foods is run, you can bet that the online retailer will continue to invest in automation. The $15 minimum wage, rather than a tool of fighting inequality, will become a tool of perpetuating it. When wages are that high, only those with high enough skills will have a job at all.

This has long been the fundamental problem facing poorer Americans. They just don't have valuable enough skills to convince an employer to pay them a living wage. This problem only gets worse as automation increases. This decade has seen an assault of automation on low-skill workers at the cash register (by self-checkout stations), at fast-food restaurants (by self-ordering kiosks), in taxicabs (by self-driving cars) and at hotel lobbies (by Airbnb's key lockboxes). Vested interests will fight tooth and nail to slow these trends, but in the end it will be a losing battle.

To be sustainable long-term, working class jobs that pay a living wage can't be made by government fiat. Workers need to be accomplishing something that robots can't do. Highly paid skilled trade professionals like electricians, plumbers, carpenters, mechanics, and heating and cooling technicians have long been prime examples. In the service industry, waiters and bartenders seem like pretty safe jobs for many years to come. And in the healthcare industry, physician's assistants, dental hygienists, and home health workers have a bright future as well.

All of these working class jobs require skills. You can't wait tables if you aren't personable and able to remember complex orders. And many require highly technical training. You can't be a plumber or electrician unless you've been to trade school and can pass a test that lets you get a license. You can't fix cars, air conditioners or frame a house if you haven't been trained to do so.

America needs both a new generation of vocational high schools and incentives to get older displaced workers into training that can get them valuable skills that won't be easily displaced by automation. Until then, quick fixes like the $15 minimum wage will only accelerate job losses by the unskilled in favor of robots happy to work for free.

Related Web Columns:

Not Quite Cruelty Free, September 17, 2013

Notes:

1. Washington Post, DC Gives Final Approval to $15 Minimum Wage, June 21, 2016

2. Washington Post, District Leaders Furious Walmart Breaking Promise to Build Stores in Poor Neighborhoods, January 15, 2016

3. Redfin, Washington, D.C., Faces Lowest Supply of Homes on Record, August 18, 2016

4. New York Times, Amazon to Buy Whole Foods for $13.4 Billion, June 16, 2017

5. Geek Wire, Amazon Soars to More Than 341K Employees -- Adding More Than 110K People in a Single Year, February 7, 2017

6. Wal-Mart, Company Facts, as posted June 20, 2017

7. MarketWatch, Amazon Financials, as posted June 20, 1017

8. MarketWatch, Wal-Mart Financials, as posted June 20, 1017

9. Calculations by author based on notes 5-8. Amazon's 2016 revenue: $136 billion, Wal-Mart's 2016 Revenue: $482 billion, Wal-Mart's employee count: 2.3 million, Amazon's employee count: 314,000.