This article won’t end with a conclusion, but it will hopefully catalyze some thinking on the matter. If food service goes to ghost kitchens, how many jobs will it kill? And one might use the term ghost kitchen as a placeholder to simply mean a streamlined business model that prioritizes off-premises dining. For example, some of the largest quick service brands are redesigning their stores to eliminate in-store dining. Here’s Burger King’s layout, Taco Bell’s layout, Chipotle’s layout, etc.
The point is that many of these redesigns require a much leaner workforce as the front of house is cut back substantially, or in some cases made entirely redundant. Yet we should first look at some history to give ourselves some context.
There were predictions about the end of the bank teller with the advent of the ATM. But that didn’t happen. At least, it didn’t happen in the first technological wave.
Basically starting in the mid-1990s, ATM machines came in in big numbers. We have, now, something like 400,000-some installed in the United States. And everybody assumed –including some of the bank managers, at first — that this was going to eliminate the teller job. And it didn’t. In fact, since 2000, not only have teller jobs increased, but they’ve been growing a bit faster than the labor force as a whole. That may eventually change. But the impact of the ATM machine was not to destroy tellers, actually it was to increase it.
What happened? Well, the average bank branch in an urban area required about 21 tellers. That was cut because of the ATM machine to about 13 tellers. But that meant it was cheaper to operate a branch. Well, banks wanted, in part because of deregulation but just for deregulation but just for basic marketing reasons, to increase the number of branch offices. And when it became cheaper to do so, demand for branch offices increased. And as a result, demand for bank tellers increased. And it increased enough to offset the labor-saving losses of jobs that would have otherwise occurred. So, again, it was one of these more dynamic things where the labor-saving technology actually created more jobs.
James Besson
Now with mobile banking, which we’d argue is the second technological banking wave, it looks like this might come to pass. Banks are closing branches in record numbers, and while branches won’t disappear entirely for some time, this is undoubtedly correlated with the decreased need for physical interaction thanks to mobile banking applications and software.
There were predictions about the end of retail jobs with the advent of ecommerce. This is obviously still very much in flux as ecommerce penetration hasn’t reached equilibrium. ATMs, for comparison, were introduced in the 1970’s while ecommerce is a phenomenon of the past two decades – i.e. we have less historical data to analyze. But some studies have shown that for every job created in e-commerce, four and a half jobs are lost by traditional retailers. Other studies, contradictorily, have found that the jobs lost in traditional retail are transferred to warehouse fulfillment work for ecommerce retailers. Michael Mandel, head of the Progressive Policy Institute, estimated the e-commerce industry created 397,000 jobs in the U.S. from December 2007 to May 2017 versus job losses of 76,000 in the traditional retail industry in the same period.
This might be the naive view of the first wave of innovation in our opinion, as warehouses are definitely seeking to automate where possible. We suspect ecommerce will end up like the ATM transformation and fewer people will ultimately have a paycheck.
Is the evolution to ghost kitchen going to be any different?
Hard to say. Clearly those that lose their jobs in the front of house can find work in delivering food for ghost kitchens, but is it a one-to-one job transfer? There are an estimated 15 million workers in the US restaurant industry. Let’s assume a third of them are front of house workers. Uber has 1 million US drivers, and the number appears to have plateaued. To be conservative, let’s assume all 1M Uber drivers are also on UberEats, and UberEats has 20% of the market. Therefore, in total, there would be 5M US food delivery drivers..
These ~5M drivers were responsible for $25B of online orders. How much goes to 3PDs (third party delivery companies) vs direct restaurant orders is up for debate. But to accommodate an additional 5M workers, the market would effectively need to double overnight.
Seems really tenuous. And again, this is looking at the first wave of innovation; the second wave is pushing for autonomous delivery.
We offer no conclusion on the matter at this point, but at least this should provide enough information to think about things in a more complete manner. Ghost kitchens might not look entirely terrible for hourly workers to begin with, but as innovation wears on it could turn out pretty bad for millions in the restaurant industry. Then again, freeing the majority of people from the hourly toils of farming over the past century has produced all sorts of unbelievable benefits, so maybe that’s not such a bad thing.
Add comment