The Agenda

Thoughts on Where Self-Checkout Succeeds and Where it Fails

There is a perception that self-checkout has been a failure in U.S. convenience stores. But a better way of thinking about the rollback of self-checkout is as a failure in the context of a relatively open labor market. As The Economist observes, self-checkout has proven more successful in countries with rigid labor laws:

Strict labour laws, costly payroll charges and erratic strikes seem to make French firms especially keen on technology. Supermarkets, for instance, have enthusiastically adopted self-checkout tills. “All French hypermarkets have adopted this strategy over the past few years,” says Alexis Lecanuet at Accenture, a consultancy. The idea is to speed up queues at peak times for impatient non-technophobes carrying light baskets. But it also cuts costs. “Self-checkout has worked better in countries where labour is expensive,” says Serguei Netessine, a professor at INSEAD, a business school.

This reflects Eli Dourado’s “technologies of control/technologies of resistance” framework:

The key point is that labor is extremely regulated; firms that use labor are subject to intense government control. In part this is because policies that give labor a “bigger piece of the pie” are popular with voters, and in part it is because labor can complain and enforce its rights in a way that machines cannot. If you own a business and you are subject to intense government control, you are going to invest resources in circumventing the points of control. In our economy, that means getting rid of lots of labor as cheaply as possible, which means skill-biased technical change. As Arnold Kling has said, “if a job can be defined, it can be automated or outsourced.” But it’s because there is so much control exercised in the labor market that the incentive to automate and outsource is so high.

On the other side of the labor market, I wonder if post-materialism is not also part of an attempt to evade control. A lot of talented people are scaling back their labor efforts, and while surely not all of this is due to taxes and regulations, some of it may be. And other innovations which seem truly new, such as the development of autonomous vehicles, are the result of control of which we may not even be aware; for instance, how profitable would it be to develop autonomous vehicles if Pareto-improving trade with immigrant drivers were not made impossible by immigration and labor restrictions?

This also relates to high levels of “self-employment” in countries like Greece — it represents an effort to evade control. 

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