by Andrew Yang
Unfortunately, the racial disparities are dramatic, with black and Latino households holding dramatically lower assets across the board and whites and Asians literally having 8 to 12 times higher levels of assets on average while owning homes at dramatically higher rates (75 percent and 59 percent for whites and Asians versus 48 percent and 46 percent for Hispanics and blacks).
Median Value of Assets for Households, by Type of Asset Owned & Race (2013)
Race: White alone
Net Worth: $ 103,963
Assets at Financial Institutions: $ 4,600
Stocks and Mutual Fund Shares: $ 35,000
Net Worth Excluding Own Home: $ 34,755
Race: White alone, not Hispanic
Net Worth: $ 132,483
Assets at Financial Institutions: $ 5,500
Stocks and Mutual Fund Shares: $ 37,500
Net Worth Excluding Own Home: $ 51,096
Race: Black alone
Net Worth: $ 9,211
Assets at Financial Institutions: $ 1,000
Stocks and Mutual Fund Shares: $ 9,000
Net Worth Excluding Own Home: $ 2,725
Race: Asian alone
Net Worth: $ 112,250
Assets at Financial Institutions: $ 7,600
Stocks and Mutual Fund Shares: $ 25,000
Net Worth Excluding Own Home: $ 41,507
Race: Other
Net Worth: $ 13,703
Assets at Financial Institutions: $ 1,300
Stocks and Mutual Fund Shares: $ 15,000
Net Worth Excluding Own Home: $ 4,270
Race: Hispanic origin (any race)
Net Worth: $ 12,460
Assets at Financial Institutions: $ 1,380
Stocks and Mutual Fund Shares: $ 10,000
Net Worth Excluding Own Home: $ 5,839
Race: Not of Hispanic origin
Net Worth: $ 99,394
Assets at Financial Institutions: $ 4,500
Stocks and Mutual Fund Shares: $ 34,000
Net Worth Excluding Own Home: $ 33,699
Source: U.S. Census Bureau, Survey of Income and Program Participation, 2014 Panel. Wave 1 (available online June 2017).
The racial statistics make my head and heart hurt.
There are also consistent differences between men and women. Women-led households have 12 percent less wealth than male-led households, and women on average make 20 percent less than men. This is also painful. However, women are pulling ahead of men on the education front—much more on this later.
We tend to use the stock market’s performance as a shorthand indicator of national well-being. However, the median level of stock market investment is close to zero. Only 52 percent of Americans own any stock through a stock mutual fund or a self-directed 401(k) or IRA, and the bottom 80 percent of Americans own only 8 percent of all stocks. Yes, the top 20 percent own 92 percent of stock market holdings. This means that the average American benefits minimally from a rising stock market beyond the wealth effect, which is that the rich people around them spend more money and the economy is more buoyant.
So what’s normal? The normal American did not graduate from college and doesn’t have an associate’s degree. He or she perhaps attended college for one year or graduated from high school. She or he has a net worth of approximately $36K—about $6K excluding home and vehicle equity—and lives paycheck to paycheck. She or he has less than $500 in flexible savings and minimal assets invested in the stock market. These are median statistics, with 50 percent of Americans below these levels.
If you’re reading this, this probably doesn’t describe your life or those of your friends and family. It may be shocking to you that this is statistically totally normal. It’s only somewhat less surprising to me because of my travel and work these past years.
When jobs start to disappear in large numbers due to technological advances, the normal American won’t have much to fall back on.
FOUR
WHAT WE DO FOR A LIVING
I recently emailed a friend, David, to schedule a meeting. When David replied, he copied in another recipient, Amy Ingram, who I assumed was his assistant. Here is the email I got from Amy:
Amy Ingram
Jan. 12
Hi Andrew,
Happy to get something on David’s calendar.
Does Tuesday, Jan 17 at 8:30 AM EST work? Alternatively, David is available Tuesday, Jan 17 at 2:00 PM EST or Wednesday, Jan 18 at 10:30 AM.
David likes Brooklyn Roasting Company, 25 Jay St, Brooklyn, NY 11201, USA, for coffee.
Amy
Amy Ingram | Personal Assistant to David
x.ai—an artificially intelligent assistant that schedules meetings
I responded and then got a calendar invite. Only days later did I register that “Amy Ingram” was a chatbot and that x.ai was a tech company. Laughing, David told me that he’d once scheduled a meeting with someone else who was using the same service. The two bots emailed each other repeatedly to hash out a time.
Of course, assistants do more than schedule meetings. They draft correspondence, conduct research, remind you of deadlines, sit in on calls and meetings, and do many other tasks. But increasingly all of these tasks are going to be the domain of cloud-based artificial intelligence.
The rise of the machine that makes human work obsolete has long been thought to be science fiction. Today, this is the reality we face. Although the seriousness of the situation has not reached the mainstream yet, the average American is in deep trouble. Many Americans are in danger of losing their jobs right now due to automation. Not in 10 or 15 years. Right now.
Here are the standard sectors Americans work in:
Largest Occupational Groups in United States (2016)
Occupational Group: All
Total Number Employees: 140,400,040
Percentage of Workforce: 100.00%
Mean Hourly Wage: $23.86
Median Hourly Wage: $17.81
Occupational Group: Office and Administrative Support
Total Number Employees: 22,026,080
Percentage of Workforce: 15.69%
Mean Hourly Wage: $17.91
Median Hourly Wage: $16.37
Occupational Group: Sales and Retail
Total Number Employees: 14,536,530
Percentage of Workforce: 10.35%
Mean Hourly Wage: $19.50
Median Hourly Wage: $12.78
Occupational Group: Food Preparation and Serving
Total Number Employees: 12,981,720
Percentage of Workforce: 9.25%
Mean Hourly Wage: $11.47
Median Hourly Wage: $10.01
Occupational Group: Transportation and Material Moving
Total Number Employees: 9,731,790
Percentage of Workforce: 6.93%
Mean Hourly Wage: $17.34
Median Hourly Wage: $14.78
Occupational Group: Production
Total Number Employees: 9,105,650
Percentage of Workforce: 6.49%
Mean Hourly Wage: $17.88
Median Hourly Wage: $15.93
Source: Bureau of Labor Statistics, Department of Labor, Occupational Employment Statistics (OES) Survey, May 2016.
Sixty-eight million Americans out of a workforce of 140 million (48.5 percent) work in one of these five sectors. Each of these labor groups is being replaced right now.
CLERICAL AND ADMINISTRATIVE STAFF
This is the most common occupational group. McKinsey suggests that between 64 and 69 percent of data collecting and processing tasks common in administrative settings are automatable. Google, Apple, and Amazon are investing billions in artificial intelligence (AI) administrative assistants that can replace these jobs. Many of the settings for these jobs are large corporates that, during the next downturn, will replace headcount with a combination of software, bots, and AI.
Consider that 2.5 million of the jobs in the clerical and administrative category are customer service representative
s. They are typically high school graduates making $15.53 an hour or $32,000 a year in call centers.
We’ve all had crummy experiences with voice recognition software and pounded our phone keys until we got a human on the line. But the AI experience is about to improve to a point where we’re not going to be able to tell the difference. Several companies right now employ a hybrid approach where voice recordings are combined with a human in the Philippines tapping buttons so that a Filipino can “call” you but you think you’re talking to a native speaker because you’re hearing a prerecorded voice. This is called accent-erasing software. Soon, it will be an AI hitting the buttons and our ability to distinguish between a call from a bot and a person will disappear.
Rob LoCascio, the founder and CEO of LivePerson, which manages customer service for thousands of businesses, is one of the leading authorities on call centers as the inventor of web chat technology. LivePerson just started rolling out “hybrid bots” for clients like Royal Bank of Scotland; a customer can be passed between a bot and a human and back again depending on the set of issues. Rob estimates that 40–50 percent of tasks performed in customer care are ripe for automation today based on existing technology. He foresees an “automation tsunami” that will leave “tens of millions of workers stranded, with curtailed employment prospects… a hereditary shockwave of economic hardship that could be felt for generations.” He notes that most of the affected people are “likely to be in lower income brackets without the luxury of time to re-train… and without the savings to invest in re-education.” When the CEO of a company called LivePerson says that about the prospects of human workers in his industry, that’s a pretty terrible sign.
I met with a technologist who works with one of the major financial institutions. He estimated that 30 percent of the bank’s home office workers—more than 30,000 employees—were engaged in clerical tasks transferring information from one system to another, and he believed that their roles would be automated within the next five years. I had a similar conversation with a friend at another bank who told me that many of the people in the San Francisco homeless shelter he volunteers at used to work in clerical roles that are no longer necessary, and that his bank was similarly downsizing back office and clerical workers in large numbers.
Some argue that it will be possible to automate only a portion of each person’s job. But if you have a department of 100 clerical workers and you find that 50 percent of their work can be automated, you fire half of them and tell the remaining workers to adjust. And then you do it again the next year. Clerical tasks are almost always cost centers, not growth drivers. Office and administrative support jobs are going to disappear by the tens of thousands into the cloud as offices become increasingly more automated and efficient.
SALES AND RETAIL
We’ve all gone to our local CVS to be greeted by a self-serve scanner at the end. There’s only one employee, the troubleshooter, where there used to be two or three cashiers. This is the case where local stores still exist—a lot of them are closing outright.
About 1 in 10 American workers work in retail and sales, with 8.8 million working as retail sales workers. They have an average income of $11 per hour, or $22,900 per year. Many have not graduated from high school, yet their median age is 39. Sixty percent of department store workers are female.
The year 2017 marked the beginning of what is being called the “Retail Apocalypse.” One hundred thousand department store workers were laid off between October 2016 and May 2017—more than all of the people employed in the coal industry combined. Said the New York Times in April 2017, “The job losses in retail could have unexpected social and political consequences, as huge numbers of low-wage retail employees become economically unhinged, just as manufacturing workers did in recent decades.”
Wall Street analysts have deemed the entire sector borderline uninvestable. Dozens and soon hundreds of malls are closing as their anchor stores—JCPenney, Sears (soon to be bankrupt), and Macy’s—close dozens of locations. Among the chains that have declared bankruptcy recently are Payless (4,496 stores), BCBG (175 stores), Aeropostale (800 stores), Bebe (180 stores), and the Limited (250 stores). As of 2017, those in danger of default include Claire’s (2,867 stores), Gymboree (1,200 stores), Nine West (800 stores), True Religion (900 stores), and other fixtures that may be bankrupt or defunct by the time you read this. Credit Suisse estimated that 8,640 major retail locations will close in 2017, the highest number in history, exceeding the 2008 peak during the financial crisis. Credit Suisse also estimated that as many as 147 million square feet of retail space will close in 2017, another all-time high. For reference, the Mall of America is the biggest mall in the country, at 2.8 million square feet. The equivalent of 52 Malls of America are closing in 2017, or one per week.
CoStar, a commercial real estate firm, estimated in 2017 that roughly 310 out of the nation’s 1,300 shopping malls are at high risk of losing an anchor store, which typically begins a mall’s steep decline. Another retail analyst predicted that 400 malls will fail in the next few years and that 650 of the remaining 900 malls will struggle to stay open. Here’s a map of scheduled Macy’s, Sears, and Kmart closures as of 2017:
I grew up going to my local mall in Yorktown Heights, New York. It represented the height of many things to me at the time—commerce, culture, freedom, status. I would stake out a few clothing items and wait for them to go on sale. Buying a thing or two would give me joy. I would run into classmates at the mall, for good or ill. That time is gone for good in much of the country.
When a mall closes or gets written down, there are many bad things that happen to the local community. First, many people lose their jobs. Each shuttered mall reflects about one thousand lost jobs. At an average income of $22K, that’s about $22 million in lost wages for a community. An additional 300 jobs are generally lost at local businesses that either supply the mall or sell to the workers.
It gets worse. The local mall is one of the pillars of the regional budget. The sales tax goes straight to the county and the state. And so does the property tax. When the property gets written down, the community loses a big chunk of tax revenue. This means shrunken municipal budgets, cuts to school budgets, and job reductions in local government offices. On average, a single Macy’s store generates about $36 million a year. At current sales tax and property tax rates, that store, if closed, would leave a budget hole of several million dollars for the state and county to deal with.
If you’ve ever been to a dead or dying mall, you know that it’s both depressing and eerie. It’s a sign that a community can’t support a commercial center and that it may be time to leave. It’s not just you. Dying malls become havens for crime. One declining Memphis-area mall reported 890 crime incidents over several years. “Cars are keyed randomly in mall parking lots, and there is not enough security to provide the level of safety a family wants while they are at the mall,” said one local resident. In Akron, a dying mall was the site of a man’s electrocution death when he was trying to steal copper wire, while a homeless man was sentenced to prison for living inside a vacant store. The mayor of Akron eventually instructed residents to “stay clear of the area” before the mall was targeted for demolition.
Ghost malls are an example of what I call negative infrastructure. The physical structure of a mall has immense value if there is commerce and activity within. If there isn’t, it can very quickly become a blight on a community. It reminds me of when I first visited Detroit and its surrounding suburbs at the bottom of their decline. You could see all the hallmarks of people leading lives in a once-thriving economy—hair salons, day care centers, coffee shops, and so on—but as the economy decayed, people left and businesses closed. The value of all of those buildings, storefronts, and homes went from hugely positive to hugely negative. Unused infrastructure decays quickly and gives an environment a bleak, dystopian atmosphere, like a zombie movie set. I’m glad to say that Detroit has gotten a lot better since 2011.
Ther
e have been heroic efforts to repurpose malls in innovative ways—churches, office parks, recreation centers, medical offices, experiential retail, even public art spaces. There’s a giant mall outside San Antonio that the web hosting company Rackspace has turned into its corporate headquarters; it’s amazing to visit. But for every successful adaptation, there are going to be 10 others that lie vacant in disuse and become crime-ridden shells that reduce property value for miles around.
Why are so many malls and stores closing? Developers may have built too many of them. But the main cause is the rise of e-commerce. Particularly Amazon. Amazon now controls 43 percent of total e-commerce in the United States. It has a market capitalization of $435 billion. Overall, e-commerce has been rising by $40 billion a year since 2015, which is now pushing traditional retail into extinction. Amazon just bought Whole Foods to expedite their move into grocery delivery. Most everyone I know buys a lot of stuff on Amazon. It is virtually impossible for any brick and mortar retailer to compete against Amazon on price. This is because Amazon doesn’t have to invest in storefronts and can focus on building an efficient delivery system at the highest volumes.
Here’s their other advantage—Amazon doesn’t even need to make money. In its 20 years as a public company, Amazon often has not turned a profit. A number of years ago, some financial types noticed and shorted the stock, saying, “Amazon doesn’t make money.” In response, Amazon founder Jeff Bezos stopped investing in anything new for a year and ramped up profitability. The people betting against the stock were burned badly. Now, no one bets against Amazon, and its stock price is over $900 per share, making Jeff one of the richest people in the world. Jeff is dedicating $1 billion of his personal wealth to his space exploration company, Blue Origin, each year. A friend of his joked to me that “we’ll get Jeff to care about what happens on this planet one of these days.”
Amazon is known for its competitive—some might even say ruthless—practices. In 2009, they were trying to push Diapers.com to the negotiating table, so they discounted diapers to a point where no one was making money. It worked and they bought Diapers.com for $545 million a little while later.
