Worker Training in an Age of Increasing Automation

In my last post, we talked about the factors pushing businesses towards automation. Many tasks have already been automated, but we are or will reach a critical mass in a few years. For those workers losing their jobs to automation, what can be done?

Some look towards the government for help and job training assistance. However, the government job training assistance has yielded little if any positive outcomes. Either the money gets spread out too thinly and the training is ineffective or the training is obsolete.

Organizations want to get skilled workers but demand outstrips supply in many cases. Some employers do not want to pay for training for fear of losing newly trained employees to competitors.

There are calls for job training and new skills but what are these “new skills” called for by many individuals wanting to help the laid off workers?

The solution to the problem has always been there, but not many people have looked at it for social reasons. For example, some individuals may shun traditional “blue collar” work. Some other individuals would rather stay on unemployment rather than train for a new career.

The solution is vocational school. Decades ago in high school, students would make a choice. The choice would be the college path or the vocational path. Both paths led to a job, but there was an increasing push to get people into college. The reasons for the push are numerous, but many people won’t become good college students. With vocational training, the education and learning leads to a tangible outcome.

For example, welders can earn $50K starting out after two years in school. Other skilled trades like air conditioning, plumbing, and electrical work pay great starting salaries and can later lead to workers starting their own businesses.

We as a nation have to make a decision about the world of work. Are we going to continue to push people towards a college education with immediate obsolescence or build a workforce with jobs that will be immune to automation? The solution is there, but are we willing to embrace it as a nation?

Only time will tell.

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The March Towards Automation

Lately, there has been a lot of press regarding the upcoming march towards automation. Usually these pushes coincide with an increase in the minimum wage. Lately, there has been a push towards a $15 per hour minimum wage which will take place in a few years. If you notice, most of the push for a $15 minimum wage comes from unions who want to increase the wages of their union members and then write in an exemption for unionized businesses into the minimum wage law. But this post is not about the minimum wage or union jobs.

Rather, it is about the increase in automation for certain low-skill positions. These include parking attendants, fast food workers, and so on. Some of this automation has already taken place. For instance, many parking lots now have automated pay stations.

The next big push is the automation of point-of-sale (POS) at the fast food restaurant. The reason is all to clear. A job has a certain amount of economic value, or worth, to the business. If it costs more to hire an employee than the job is worth, the job is ripe for automation. In a fast food place, most of the activity takes place at the drive through window. The order taker can be replaced by an app in the car. Inside, the order taker can be replaced by a kiosk with a credit card terminal.

Is this the first time fast food businesses have experimented with the kiosk? Jack-in-the-Box experimented with the ordering kiosk years ago but it didn’t take off and the kiosks were removed. Some other restaurants are experimenting with the kiosk or the tablet ordering concept (Chili’s) but the results have not been encouraging.

Ultimately, there will be a balance between the needs of the business and the needs of the employees. Will businesses migrate to lower-cost areas? It depends on the nature of the business and where its customers are located. Some businesses may close shop entirely and remove those jobs from the workforce.

What can be done about the workers losing these jobs?

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We have a nominee

and it isn’t Cruz. Ted Cruz bowed out this evening after getting second place in Indiana. Trump picked up the delegates and now the head of the RNC is imploring the party for unity. Even Trump is calling for party unity.

But there is a problem – a big problem.

There are a group of individuals in the party that get paid whether the nominee wins or loses. With Trump, things get very interesting very quickly as he becomes the presumptive nominee. Trump mentioned it tonight about the spending – $8 million versus the $900,000 spent by the Trump campaign. A lot of money was spent trying to stop Trump and what was the result? Another candidate was mathematically eliminated tonight.

Here’s what scaring everyone in the Establishment right now. Trump can’t be bought. He has enough money and doesn’t need a bribe. Plus, Trump is not one of “the club” and is resented. On one hand, Trump donated a LOT of money to politicians over the years. Now, Trump is running for the highest office in the land and has a legitimate shot at winning the election.

Trump can do two things at the same time – become President and clean out the rot in the Republican Party. If he cleans out the pundits and the consultants, it might do the country good.

Let’s get ready for another long, hot summer.

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Trump is the symptom

I have to address the rise of Donald Trump in the presidential campaign. Some may wonder how we arrived at this point. How come there is plenty of anger at the establishment of both political parties? To explain this, we have to look at recent history.

In 1988, George H.W. Bush was re-elected over Michael Dukakis. Dukakis was torpedoed by one ad and one video. The ad concerned Willie Horton, a prisoner on weekend furlough who raped one woman and assaulted her fiancee. As a result, Horton received two life sentences. That was strike one. The video of Dukakis driving a tank may have worked in a different situation but it was that image that doomed a presidential campaign. (See the blues bar scene in Naked Gun 2 1/2: The Smell of Fear. Dukakis is in one of the portraits.)

George H.W. Bush was voted out of office in 1992 over the “Read My Lips” pledge. Bill Clinton was a young governor and voted into office. Within two years, the Republicans took over the House of Representatives and brought in the Contract with America.

The Republican base, feeling great after getting in Newt Gingrich and the Contract, set their sights on making Bill Clinton a one-term president. The Republican Party nominated Bob Dole, an establishment senator. It was “his” turn. Dole didn’t have many appealing qualities in the eyes of the base, so Bill Clinton was re-elected. (It was Bill’s second term that led us to Monica and the famous “is is” statement.) The anger may have started here, but appeared underground during most of the George W. Bush presidency. We now know that issues came to a head in 2006 during the mid-terms resulting in the Democrats taking over the House.

In 2008, Barack Obama faced another Republican establishment candidate, John McCain. Again, it was “his turn” (sound familiar). At this time, the housing bubble popped and caused McCain to suspend his campaign to participate in votes related to TARP. Now, the base was upset at McCain for his votes and was then barely defeated by Barack Obama.

After Barack Obama was inaugurated, the Tea Party was formed by the conservative base to protest policies by both parties. The Tea Party was co-opted by the Republican establishment but by this time, the fire was underway. The fire was fully involved in 2012 when the Republicans nominated another establishment figure, Mitt Romney. By this time, the conservative base realized that their issues would not get an audience. Instead, it was more of the same. Barack Obama was re-elected by a slimmer margin than 2008 for a simple reason – 4 million voters stayed home instead of voting for Mitt Romney. Many reasons have been offered for the number of voters staying home, including Mitt’s Mormon religion. Another reason could be the abandonment of conservative values by the Republican Party.

After the 2012 election and not seeing an economic recovery from the 2008 housing crisis, the anger just exploded and looking for an outlet. The outlet came from an unexpected place – Donald J. Trump. Donald Trump already had media recognition and his speeches struck a nerve with many people. The first one was illegal immigration, and it just snowballed from there. His broad appeal to many people including minority groups initiated a groundswell of support.

Because of the groundswell of support and the change from the status quo from the Establishment point of view, Trump is now seen as a threat to the Establishment of both parties. He’s going after the political class in a way that no one has ever done before. We know what Trump is going to do in office, and it has the professional politicians and the other members of the “political class” shaking. Why are they coming after Trump so hard?

Simple. Donald Trump will end the free ride for many individuals in the political class if he gets into office. One of the most dangerous things in the world is a man whose meal ticket isn’t getting punched.

The Republican Establishment is trying everything it can to deny the nomination to Trump. It’s a rhyme to Barry Goldwater and 1964. Ted Cruz might be akin to Ronald Reagan in this rhyme to 1964. But, 2016 could become 1968 for the Republicans. If Trump can’t win enough delegates to win on the first ballot, then a brokered convention becomes a possibility. If that happens, many of the base will simply walk away from the Republican party unless a serious economic event or a terrorist attack takes place. If one of these scenarios become reality, Donald Trump will win.

If the brokered convention becomes a reality, Hillary Clinton will win the election. The Republican establishment would rather hand the election to Clinton than put Trump into office. It all comes down to money and power. If Trump gets in office, it will be the equivalent of a political earthquake.

The people are restless, angry, and looking for a change. But woe unto the person who becomes President in 2017. The big recession is coming and all that matters is the timing.

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The Verizon Note 5 on Marshmallow

Something must have changed at Verizon recently. Earlier this week, Verizon offered a software upgrade to the Note 5 for Android 6 (Marshmallow). After downloading the update, the phone is better than ever.

The UI is cleaner and the apps seem to launch faster than under 5.1.1. I noticed this was more pronounced with apps that were updated to support the Android 6.0 features. One example of a fast launching app is the Daily Mail app. Other games may launch faster but only time will tell.

I also like the ability to set permissions on individual apps. Android 6 will notify you if the app is not capable of handling permissions under the new scheme. Facebook is one app that will allow you to set individual permissions. This is a good thing for maintaining privacy. I look forward to setting permissions on a lot of apps in the coming months.

I did find a few issues with Marshmallow. One is the removal of the “Car Mode” shortcut. I have not found the replacement yet but I think that the upcoming Android Auto support for several head units will be the solution. Another issue is the app fill permissions. Before checking the password manager, make sure app fill is enabled for your password manager.

As more phones get updated to Marshmallow, I foresee a resurgence in setting app permissions and enhancing privacy for all.

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New Tax Form This Year – 1095C

In the US, the New Year brings tax season. Starting with the 2015 taxes, a new form (1095-C) has appeared. As part of the IRS involvement for enforcing the Affordable Care Act or Obama Care, employers have to report the health insurance status of any employee that worked at a particular company for more than 130 hours a month during the year. Most individuals with a single employer will get one but others will get multiple forms.

The form seems to be simple to understand. The form has the listing for the tax payer, the employer, dependents, and a check box for each month or the whole 12 months. If you changed jobs during the year and you had employer health insurance, you will get two forms in the mail.

Just because you have the W-2 form and are getting antsy about a tax refund, wait a few days for this other form to appear in the mailbox. If you don’t include the form, you could receive a nasty note from the IRS.

Be warned.

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Chip Cards in Asia – Philippines

During a recent trip to the Philippines, I was able to see how far payment processing has come since my previous visit in 2010. Basically, the country has adopted the chip cards as I see so many chip readers. Most small retailers and businesses only accept cash, but the larger retailers do take credit cards.

I did not try the Samsung Pay / Android Pay in the country as I did not see any contactless card readers.

Every place that I was able to use a credit card took the chip card without any problems. Most businesses that take credit cards have one or more card readers from different banks. The largest card processors in the country appear to be Bank of the Philippine Islands (BPI) and Metrobank. The reason why most businesses will work with two or three banks is the reliability factor. If one card processor is not working, another one will work. I had this happen one time when one card processor terminal did not work but the other card processor did work.

It’s a good thing that chip cards are widely used in the country now.

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US Chip Cards in Europe

I had the chance to visit Belgium for a few days and while I was focused on my work, I did manage to take notice of a few things as far as credit card payments are concerned. The good news is that US chip cards do work over in Europe. Here is what I observed.

Restaurants – I saw the server come out with a wireless card reader. I inserted my card, put in the PIN, and that was it. Soon, this wireless reader will come to American shores.

Starbucks – No, I did not use my mobile app to pay. But I did see a similar combo – a little reader to insert the card, enter the PIN, and it worked. Note, the readers know how to determine the difference between chip and PIN and chip and signature. Most US chip cards are chip and signature. But some US cards have the ability to act as a chip and PIN card but your mileage may vary.

Most of the people I encountered in the retail stores were happy that we have finally come over to use chip cards. Lately, it has been very difficult to find a magnetic stripe card reader terminal in Europe. As we slowly move to chip cards, the need for magnetic stripes will continue to fade except for gas stations. While we still have a few more years before we move the gas pumps and ATMs to chip cards, we will start seeing chip enabled gas pumps in 2016 if the Chevron project yields good results.

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Two Weeks with Samsung Pay

So far, it has been a good experience with Samsung Pay on both NFC and mag stripe readers. Here are some of the places I have used Samsung Pay:

  • Rubios
  • Vitamin Shoppe
  • Firehouse Subs

The Vitamin Shoppe was an interesting one. The young lady assisting me said, “We don’t support Apple Pay.” I said that this was not an Apple phone. Because the terminal did not use NFC, I tried MST. The terminal took the card on the third try.

We still have a long way to go but we’re getting there.

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ESPN layoffs – harbinger of things to come?

Today, ESPN announced layoffs of 300 people or 4% of its workforce. See here and here. Disney CEO Bob Iger also ordered $100 million in cuts at ESPN. While the network has changed over the years, has its left-leaning slant applied to sports news become a liability? ESPN and other properties are experiencing income drops due to people cutting the cord on cable and using their mobile devices. But this Breitbart article from September 2015 lays out an interesting perspective on how cable channels make money. Let’s expand on this further by going through the economics of a video distribution company such as your local cable company or satellite provider.

The video distribution provider usually receives a license and operates as a monopoly within a given area. The big providers in Southern California are Time Warner Cable and Cox Cable. I won’t get into the conditions of the license such as public access and the “must carry” rule. Each company has several major expenses – labor, physical plant, and content.

Labor costs are significant for every company, and video distribution is no different. These are the people who perform customer service functions and maintain the lines to each residence or location. (Please note that actual in-house installations are performed by contractors most of the time.) Management and back-office functions are included in this cost.

The next big expense is the distribution system and the physical plant. This system includes the local receive facilities where the cable system receives the over-the-air signal for distribution, trunk lines, amplifiers, distribution facilities, and the cable to each individual house. Like the incumbent phone company, physical plant infrastructure is very expensive to build and maintain. In the case of a satellite provider, the teleports, local receive infrastructure, and the satellites are counted in this cost. In either case, the physical plant cost is amortized over many years and maintenance is always being done.

Content costs are the other large expense. We have seen many times disputes between media groups and distribution providers over carriage fees paid indirectly by the cable subscribers to the content providers. These disputes get resolved over time but the higher costs are passed on to subscribers. Every distribution provider has to pay these fees to carry groups of channels.

Using the Breitbart article as an example, ESPN receives $6.61 per month from each cable and satellite subscriber. This comes out to $79.32 per year per subscriber. ESPN makes 7.3 billion dollars per year from around 91 million subscribers. Other content providers charge carriage fees. This CNN Money article states that per subscriber per month, Fox News receives $1, CNN receives $0.61, and MSNBC receives $0.30. CNN and MSNBC do not receive a substantial portion of their income from advertising. Instead, CNN and MSNBC receive the lion’s share of their income from carriage fees. Using the ESPN numbers as a comparison, Fox News receives $1.1 billion in carriage fees per year, CNN receives $667 million, and lowly MSNBC receives $329 million. Once the carriage fees are taken into account, we now see how two news networks that anyone barely watches make money. There is no way to escape paying these carriage fees for channels you don’t watch.

Unless you cut the cord.

Last year, 3.2 million cable subscribers cut the cord according to the Breitbart article.

Using the same estimated numbers for carriage fees, last year ESPN lost $253 million, Fox News lost $38 million, CNN lost $23.4 million, and MSNBC lost $11.5 million. Comparing these numbers with the numbers above show each channel taking a significant hit in carriage fee losses. Fox News can make up the $38 million lost in cable fees from advertising increases. CNN and MSNBC cannot do the same because of low viewership.

Unlike the cable news channels, ESPN has additional problems. As a sports provider, ESPN pays to carry sports content. ESPN signed a 20-year agreement in 2014 with the SEC to carry sports from the Southeast Conference. ESPN also signed a similar agreement in 2011 with the University of Texas to carry primarily Longhorn sports. ESPN has significant long-term liabilities that become worse for the parent network over time. If the cord-cutting trend continues, ESPN may not have the money to bid on contracts such as NFL Monday Night Football.

As streaming becomes more prevalent and people cut out traditional distribution services, it will be very hard to justify the stock valuations of the channels’ parent companies. If we have a recession in 2016, I expect increasing numbers of cable and satellite subscribers to terminate service and move on to streaming. But if an avalanche of subscribers terminate service, how long can channels like MSNBC, E!, Comedy Central, and Discovery hold out? Could whole groups of channels disappear from the lineup? It all comes down to the actual operational cost for each individual channel. Below a certain point, every cable channel becomes unprofitable.

Now that the proverbial tide is going out on cable and satellite, who’s swimming naked now?

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