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Friday, July 15, 2022

“It’s In-Your-Face Capitalism.” Low-Paid ‘Virtual Cashiers’ Provoke Outrage among Labor Activists

Virtual cashiers may be coming to a restaurant near you.

Image Credit: YouTube screenshot - Percy

A new start-up called Percy is based on a simple yet revolutionary idea: virtual cashiers. Essentially, a video calling device is set up at the cash register of your local restaurant or shop. When you want to buy something, you are connected with someone in a remote location, sometimes thousands of miles away, and they take your order. That way, if a store is having trouble finding local workers, or if staff members call in sick, stores can simply outsource the cashier job, often at a fraction of the cost.

Sounds brilliant, right?

The founders of Percy certainly think so. CEO Matthew Corrin and his co-founders Angela Argo and Ali Aqueel have been working on this project for months after initially trying it out at their Canadian restaurant company Freshii.

“The pandemic created this mass exodus of workers in the restaurant industry,” said Argo in a recent interview. “It made us start thinking about what roles in a restaurant can be done without a human being physically present. How can a restaurant owner capitalize on the virtual world?”

“The demand for fast-food workers far outweighs supply right now,” Argo continued. “You can look on and you’ll see for yourself that everyone is offering more than minimum wage for restaurant workers — and they still can’t get staff.”

Percy’s track record so far is making a good case that Argo is on to something. The company already has more than a dozen clients in North America, including several fast-food chains.

“We’re growing quickly,” said Argo. “We tried [Percy] out at a few Freshii locations, and the response from restaurant owners, again and again, was: ‘this is a lifesaver.’”

But while restaurant owners may be celebrating, not everyone is thrilled about this new idea. Labor activists in particular have taken issue with the low wages being offered to workers in developing countries. The company currently employs about 100 workers in Nicaragua, Pakistan, and Bolivia, and a recent investigation revealed that some of the Nicaraguan workers are paid as little as $3.75 USD an hour. By comparison, an Ontario worker is guaranteed a minimum wage of $15 CAD an hour (~$11.43 USD).

“This … moves entirely in the wrong direction,” said Ontario labor minister Monte McNaughton in April. “I expect better from a Toronto-based company and know customers will vote with their feet.”

“They can keep their outsourcing jobs pilot project away from our province,” said British Columbia’s labor minister Harry Bains in a tweet.

Retail analyst and author Bruce Winder also had harsh words for the company.

“It’s in-your-face capitalism,” said Winder. “It reminds the customer, while they’re ordering food, that the company is taking away a live person and replacing them with a video of someone earning much less money.”

Helping or Hurting?

The concerns raised by labor activists are unsurprising, but the activists miss a key piece of the puzzle. Yes, the workers in developing countries are getting paid low wages by our standards, but think about it from their perspective.

If you’re a poor person living in a Third World country, a job that pays $3.75 USD an hour is an opportunity. Sure, it’s not the best, but it’s probably far better than the alternatives, which could range from sifting through trash to prostitution.

The point is, by choosing this job, these employees are demonstrating that, in their opinion, this job is better than any other alternative available to them. By coming into these countries, Percy is expanding these workers’ options, giving them opportunities they wouldn’t otherwise have. In short, Percy is helping them, not hurting them.

Now, some may want to ban this kind of outsourcing out of compassion for these workers, but a ban would only leave them worse off. By taking away the best opportunities these workers have, a ban on this practice would force them to take other, less appealing jobs.

Another option would be setting a minimum wage for this kind of labor, but that runs into similar problems. With higher wages, fewer businesses will buy into the program, which means fewer workers will be hired. With a wage of $3.75 USD an hour, a restaurant might be induced to hire a worker. But if that wage has to be at least, say, $10 USD an hour, restaurants will very likely avoid hiring them. Thus, instead of making $3.75 an hour, many potential workers will be left sifting through trash. It’s a textbook example of making perfect the enemy of good.

The Problem with Government Interference

Aside from helping workers in third world countries, Percy is also helping restaurants deal with their labor problems. This, in turn, helps consumers, who will get better service and lower prices thanks to these initiatives.

It’s really a win-win.

This is the magic of capitalism. When we have economic freedom, we can come up with all sorts of creative ways to help each other. We can create jobs for poor people in developing countries while solving our own labor shortage problems at the same time. They need jobs. We need workers. Everyone is better off as a result.

Once we understand this, we can start to see why government interference in the market creates problems. By getting in the way of these win-win transactions, government prohibitions take away mutually beneficial opportunities that would otherwise have been pursued. “The minimum wage law provides no jobs,” Rothbard reminds us, “it only outlaws them; and outlawed jobs are the inevitable result.”

With this in mind, it becomes clear that the labor-activist paradigm is not just wrong, it’s actually backwards. They say companies like Percy are hurting poor people in Third World countries and that government rules will help these people. But in reality, these companies are being incredibly helpful, and it is government restrictions that are causing problems.

The best thing we can do for workers in poor countries is to bring them into the global economy, and the easiest way to do that is by giving them the freedom to make the best arrangements they can. Companies like Percy should be celebrated for helping these people by facilitating mutually beneficial arrangements. Instead, they are vilified as exploiters.

But guess what, all trade is exploitative, at least in a sense. The buyer is exploiting the fact that the seller wants his money, and the seller is exploiting the fact that the buyer wants his product. And there’s nothing wrong with that, we do it every day. Free-market transactions are all about this mutual “exploitation.” That’s what makes them mutually beneficial.

In this case, Percy may be “exploiting” workers who have limited options, but these workers are just as much “exploiting” the labor shortage in richer countries to their advantage. And I say, good for them.

So, does this initiative qualify as “in-your-face capitalism?” Absolutely. And that’s precisely what makes it so beautiful.

This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.

  • Patrick Carroll is the Managing Editor at the Foundation for Economic Education.