Prepare for the rise of the “labour-lite” business

Staff shortages are not going away any time soon – businesses that can do without a big workforce will thrive, says Matthew Lynn.

In Britain, labour shortages are getting more and more acute every week. Some supermarkets are running low on stock at critical points in the week because there are not enough truck drivers to make all the deliveries. Restaurants are turning down bookings, or closing at lunchtimes, because they don’t have enough chefs and waiters. There are already warnings that we may face a modest Christmas, not because of Covid-19, but because gifts and food will be in slightly shorter supply than usual.

And this is not just a British problem. The head of Germany’s federal employment agency said last week that the country needed an extra 400,000 workers to fill all its vacancies. American logistics companies are trying to ship in extra drivers from abroad to fill all the gaps. It is a global issue. 

It is not going to end any time soon. Brexit aside, changes in demographics and lifestyles are driving much of the change. In the UK the “participation rate” among 16 to 25-year-olds has dropped by a full percentage point over the last two years as more choose to stay in education. The number of over-55s still working has also started to go into reverse, as many older people opt for early retirement. Female participation, which drove huge increases in the total workforce from the 1960s onwards, has also now plateaued, since most women who want one now have a job. The female workforce has not gone into reverse, at least not yet, but it is no longer growing. With populations stable, or falling in some countries, little net immigration, and fewer people working, labour shortages are going to be with us for a long time to come. 

The important point for investors and businesses is this: the 2020s will be dominated by labour-lite corporations – that is, by companies that can get by, and even better keep growing, with very few staff. That means we will see three big trends. 

Tech will become even more dominant

First, technology will become even more dominant than it already is. True, some tech start-ups use plenty of people. Amazon needs people to deliver and Uber its drivers. Invariably, however, they use far fewer staff than traditional rivals. An app-based bank doesn’t have anyone staffing the branches. A streamed, online college needs fewer teachers and no one at all to rearrange the desks and sweep the floor. A messaging app may be able to get by with hardly anyone – WhatsApp famously had only 55 people when it was sold for $19bn to Facebook. Labour shortages will affect tech too, but it will hit their legacy rivals far harder.  

Capital investment will boom

Second, expect a boom in capital investment. The only way most businesses can cope with a global shortage of workers is through greater automation. There are already robot bartenders on the market, but they start at £80,000 a go. Anyone who can make a cheaper one that serves up a whisky sour with a smile will find a huge market. Hotel check-ins can be automated, and so can restaurant orders and booking an appointment at the dentist. Very few businesses can be completely automated. But lots can switch 10% of the workload to machines. Over the next decade, companies will be investing a fortune in every kind of labour-saving device – and anyone supplying it will see their business boom. 

A tough decade for the rest 

Finally, and on the flip-side, expect labour-intensive industries to go into steep decline. The more imaginative retailers are experimenting with labour-saving technologies: Amazon has its cashierless stores, and self-scanners are everywhere. But the truth is, it is a difficult industry to automate. Likewise hospitality. You can order through your phone, perhaps, but robots will find it hard to cook a pizza and deliver it to the table, and even harder to clear up and wash the dishes afterwards. Lots of manufacturing industries such as food production fall into the same category. There are some industries that are very hard to automate and they will face a tough decade of relentlessly rising costs.

Recommended

The charts that matter: more pain for goldbugs
Economy

The charts that matter: more pain for goldbugs

Gold investors saw more disappointment this week as the yellow metal took a tumble. Here’s what’s happened to the charts that matter most to the globa…
18 Sep 2021
The new social-care levy: an unfair tax that protects the “assetocracy”
National Insurance

The new social-care levy: an unfair tax that protects the “assetocracy”

The government’s regressive social-care levy will make Britain’s tax system even more complex. Root-and-branch reform is long overdue.
18 Sep 2021
Kieran Heinemann: the history of shareholder capitalism
Investment strategy

Kieran Heinemann: the history of shareholder capitalism

Merryn talks to Kieran Heinemann, author of Playing the Market: Retail Investment and Speculation in Twentieth-Century Britain, about the history of t…
17 Sep 2021
Cryptocurrency roundup: litecoin blunder, cardano update and bitcoin mining in Laos
Bitcoin & crypto

Cryptocurrency roundup: litecoin blunder, cardano update and bitcoin mining in Laos

Saloni Sardana looks at the week’s biggest stories in the world of cryptocurrencies.
17 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021