Planet Money - Would you like a side of offshoring with that?

Episode Date: September 30, 2022

A lot of restaurants took a hit during the pandemic. And when they struggled to find workers, some found surprising solutions. On today's show, what happens when you offshore cashiers.Subscribe to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoneyLearn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. One Sunday morning in April, reporter Jacob Lawrence was sitting at his home in Toronto when he looked down at his phone. I got a text from my friend saying, hey, I saw something strange at Freshie. You should go check it out. Freshie is a fast food chain that serves salads and burritos and smoothies with avocado blended into them, if that's your thing. And these restaurants, they're everywhere in Toronto.

Like, you take five steps, another freshie. Five more steps, freshie. Two freshies. Jacob says it's the kind of place people feel pretty warmly about. There are a lot of people who will just randomly tweet pictures of their salad bowls from Freshie. And they'll just caption it with things like, this is a great salad bowl. So he decides he will go to this particular Freshie

that his friend texted him about, and when he walks in, he immediately notices something a little odd. So there's nobody there. As in, like, nobody there to take an order or anything. And when I get to the counter, there's a little screen that is taped, I think, to the cash register. And it took me by surprise, but it suddenly lit up and there was a face on the other side of the screen. It is a real live human face from the

shoulders up on a tablet-sized screen. And that person says something like, hello, welcome to Freshie. Can I take your order? And this catches me off guard because I'm waiting for somebody to walk out from the back of the restaurant to come serve me. But no one comes out. So Jacob orders a raspberry smoothie and pays the person on the screen with his debit card. And, you know, Jacob is a reporter. And so he's thinking to himself like this, this cashier on the screen thing, like, I've never seen this before. Maybe this is a story. And so he asks that person, where exactly are you? When I asked that, the cashier sort of paused for a second and chuckled.

And she said, you know, most people would assume that we're in Toronto, but I'm actually in Nicaragua. She's in Nicaragua? In Nicaragua. She is like thousands of miles away. Yeah, if we can use a Canadian metric here. Sure. She's 6,000 kilometers away. A fast food restaurant in Toronto had outsourced and offshored their cashier job to a worker in Nicaragua.

Hello and welcome to Planet Money. I'm Amanda Aronchik. I'm Kenny Malone. You know, the food services industry took this massive hit during the pandemic, particularly in places with strict lockdowns. People avoided restaurants, business dried up, and when restaurants came back, it had gotten a lot harder for employers to find workers. Today on the show, we head to Toronto, where to try to survive, some restaurants have pivoted

to some surprising solutions. There will be robot baristas, pizza ATMs, and a cashier who telecommutes from thousands of kilometers away. Did you struggle with the word kilometer? I just don't say it very often yet. You want to try again?

Can I say K's? Is that what we say? K's? Thousands of K's? No, no, nobody says that. Okay, so before we go to Freshie to meet the cashier on a screen, I asked Kenny to come meet up with me in downtown Toronto. I see Amanda. Kenny Malone! What's up? Welcome to Toronto. It's Canada. Now Amanda, you told me that you were going to show me around.

And this is my hometown. So I made like a list of places for us to go. Have you ever been to any of these? I've never been to any of these. This is the best hometown tour ever. Yes. This was not a come see my hometown tour, but a tour that I'm going to call where did all the food workers go tour. Right. Because over the last couple of years, the food service industry has undergone a COVID shock. And this has given folks in the business some time for self-reflection, maybe a little panic. folks in the business some time for self-reflection, maybe a little panic. And one of the things that keeps these businesses up at night is the cost of labor. And like in a lot of industries, if you don't want to pay higher hourly wages, then there are two shiny looking options for lowering labor costs,

offshoring jobs or automating them. And you can really see this in Toronto, which is like kind of a foodie town in a country known for being a good test market. Yes, Canadians, they're a lot like us. Yes, we are. So let's start with the robots. We were off to see not just the self-checkout kiosks that you can use in McDonald's, but the more unusual versions. Cue up the montage music. All right, here we go. Here we go.

First stop, we're downtown in front of an office building. We're at RC Coffee Robo Cafe. Built into an old storefront is a touchscreen and a coffee robot. So we are going to have some robot coffee. You mean oil? No, I do not mean oil. There are zero human workers at this quote-unquote robo-cafe. To the left of the touchscreen, though, you can see a window into a small room.

Okay, so here you can see the robots. Oh, that's the robot. Whoa! Wait a second. What? What? Okay, there is a considerable robot arm. A robot arm that I think should be doing some kind of cancer research,

but instead is making my flat white. A little elevator deposits the flat white. Kenny also orders a cortado. Are you going to drink both of these? Yes. You going to be all right? I'll be fine. All right then, caffeinated Kenny.

Next stop, we head about 20 blocks south for lunch. Okay, here we go. Pizza Forno 24-7. Automated pizzeria is here. Is it a pizza ATM? It's a pizza ATM. Oh, yeah. We pick Hawaiian pizza on the old touchscreen screen, says it'll be three minutes. Now, while I pay, a still fairly caffeinated Kenny walks around the corner to watch through a window

as a robot-y thing grabs a pre-assembled artisanal pizza, slides it in the oven. Oh, look, look, Amanda, Amanda, Amanda. I'm typing in my name. Oh, Amanda! Kenny's gone to go, oh, shoot, I spelled my own name wrong again. It did grab our pizza. Finally, our pizza pops out of a little slot window thing.

Here it is. Look at that. Ooh, it's hot. Ow. Yeah, Amanda, we just watched it in an oven. It was hot, and it was not cut into slices. Yeah, they don't want the robots to have knives yet. Like, no, no, you can make our pizza, but no

cutting. Turns out there was a knife dispenser. We didn't find it and had to rip up the pizza with our hands. After the pizza, groceries. A big chain store called Sobeys with a self-checkout inside the shopping cart. It looks like where normally a child would sit

in a shopping cart. Yes. There's instead like a checkout screen, a credit card machine, and a scanner. Whatever you want to buy, you just scan it, toss it in the cart. Ooh, look, look, Canadian chocolate chip cookies, soft and warm. Ooh, maple cookies.

All right. Okay, here you go. Okay. Shopping cart malfunctions immediately. Okay, looks like you took an item out of your cart while the scale was stabilizing. Put it back. Oh my God. We did. Why is

Canada doing this? Don't touch the cart. The cart is supposed to weigh everything, but it doesn't work. What? It thinks you removed an item. No, I didn't do anything. Which makes Kenny kind of angry. I hate this cart so much. Oh no. But, we bought groceries. Never talk to a single

human. Oh man. We did it, we bought groceries. That sucked to a single human. We did it. We bought groceries. That sucked so bad. Now, robot coffee and ATM pizza. You can see what these restaurant owners are thinking. No need to pay for a barista or a pizza slicer, clearly. Or cashiers. And these places were, I don't know, fine.

It was a little annoying that we had to figure out how to cut our own pizza. There was no way to get exactly one and a half packs of sugar in my coffee, which is how I like my coffee. Amanda's very specific about her coffee. I am. But the coffee itself was good. And I don't need to talk to a human while I'm pre-coffee. Honestly, probably best that I don't. And I could totally see running by the pizza ATM on my way home so I could avoid cooking. But there's a whole spectrum of being pleased to annoyed by automation. And there's kind of a line you don't want to cross because you might alienate customers.

Because look, I mean, the thing about the self-checkout shopping cart is that it is not removing a human from the process. A human still had to scan the items. Us, we had to scan the items, except we weren't paid to do it. There's actually research on self-checkout from a couple economists at MIT. They say that, of course, automation can be positive. It can make workers more productive. Like, think of an ATM at a bank. The ATM meant that the tellers could do more complicated jobs than just handing out 20s. But the economists

argue that self-checkouts are not like ATMs at the bank. They don't actually boost productivity because someone is still doing the work. Kenny, they call these so-so technologies. Like, ah, like, ah, technologies. Yeah, not great. And that was my experience. It was so-so. Bad. So-so bad. I, for one, was done with trying to figure out a bunch of touchscreens, navigating all these menus, and I was ready to talk to some actual live human beings again. So next day, I headed to Freshie, the restaurant with a cashier on the screen. Okay, so I'm at the Freshie in Rosedale. And I'm walking in. Here I go. It's tidy inside. It's got these light wood panels. There are plants that amazingly appear to be alive. It's kind of classy. And just as Jacob, the reporter in Toronto, described, as I approach the counter, a screen blinks on.

I see a young woman with long, dark hair, and behind her is like one of those Zoom backgrounds, and it says, Freshy, Freshy, Freshy, Freshy. Hi, welcome to Freshy. What can I get for you? What do you recommend? What's popular? Well, the Oaxaca bowl is popular. Also, the Buda Sate bowl. Oh, yeah, the Oaxaca bowl sounds popular. Also the Budasate bowl. Oh, yeah, the Oaxaca bowl sounds good.

What's a smoothie bowl? Well, it's a smoothie in a bowl. Amanda, context clues, context clues. Come on. Yeah, I missed that one. Anyway, I asked the cashier a few questions. Her name is Carla. She's a college student in Santa Cruz, Bolivia,

7,000 kilometers from the Freshy. And she works in, I guess you'd call it a video call center with about 10 other people who will all politely explain what a smoothie bowl is, if you ask. Have you ever tried the smoothie bowl? No. I'm in another country, so I can't try them. But since I know the ingredients, I try to make it here. What have you succeeded at making? Well, the most easy one, it's the strawberry banana smoothie. Are there some ingredients that you could not get? Well, not to get, but there's some ingredients that I wouldn't try, like the freshy green. Here it's not common that we put avocado in a smoothie, so I wouldn't try that.

So this is the argument for having a person instead of a robot. Carla can answer my questions, even if she hasn't tried the food. If I want my beet slaw in the shape of the letter A, she can make that happen. And she's funny. The self-checkout shopping cart? Not so funny. No, zero funny. That said, when people first heard about this virtual cashier system being tried out at the Freshie, they did not like the sound of it. After the break, the backlash against the Freshie virtual cashier. Hey, it's Amanda Aronchik.

Don't miss our next episode for subscribers to Planet Money+. We are talking about our first jobs in journalism. First stories, the first thing we do when we start working on a new episode. It is another edition of our behind-the-scenes segment, Five Firsts. That's out Monday. Subscribe to hear it at the link in our episode notes. Firsts. That's out Monday. Subscribe to hear it at the link in our episode notes. In April, after Jacob first saw The Virtual Cashier, he wrote an article about it for the Toronto Star. And he was surprised at how the article took off. Really tons of people started

sharing it and reading it. And on our analytics system, we saw the numbers really shoot up on that story. You know, tons and tons of people were reading it. Okay, so people are passing around your article and are they like, wow, this is really innovative and exciting. This is so great. No, they're really mad. Like really, really mad. Because of the part of Jacob's story that basically said Freshy had taken Canadian jobs and outsourced them to workers who were making much less than Canadian minimum wage. It became one of those giant internet freak outs where everybody is like retweeting the article, firing off their angriest, hottest takes. Extremely disappointing, Freshie. And even worse, exploited it. This is a dystopia I hadn't even

considered before. Stop outsourcing. Shameful. Do not eat at Freshie. Angry Twitter starts hashtag boycott Freshie. By the mid-afternoon, labor ministers around the country were putting out tweets talking about how disgusted they were with the company. One labor minister went so far as to say that Freshie's new cashiers were not even welcome in his province. Outsourcing and offshoring, very controversial.

Some people argue that when companies choose this option, they are prioritizing profits over paying a living wage or paying taxes or protecting workers. Freschi decided that their best course of action was to just keep their head down, basically say nothing, and wait for the outrage to pass. Which it did. There was no big boycott. Then a couple of weeks after the article came out, the CEO of Freshie stepped down and he spun that entire virtual cashier idea off into its own company. He and his co-founders named that company Percy. One of those co-founders, Angela Argo, says that the timing of the article was not great. We had not even launched as a

brand. Like there was no marketing. We were in stealth mode. This story broke and forced us to go public. But we still weren't at the point where we wanted to have conversations like this, talking about Percy. It was so new. At that point, the company was so focused on the technology and the logistics that they hadn't thought much about the optics of, you know, remote workers on little screens in restaurants. The backlash was really surprising and shocking for us.

Why were you surprised? I mean, we thought this was the most boring concept ever. We literally said, this is so boring. We're just creating a cashier. No one is going to care. It's solving a really big problem, so business owners are going to care. But everyone's used to Zoom. We've done weddings, funerals, doctor's appointments on Zoom.

We get it. So we were very shocked when the backlash came. And besides, Angela says, it's not like their company had invented outsourcing. When we first saw the articles posted about the wages we were paying and stealing American or Canadian labor, the first thing that came to our mind was, this is probably very hypocritical. She figures Toronto Star, they probably have a number that customers can call. We called the Toronto Star customer support and they were in India. And again, that's no problem, but it's a problem when you make us bad for it and you don't acknowledge that you are doing it.

Rohit Verma, a business professor at Cornell University, says ordering from one of these virtual cashiers may feel different from calling a call center, but they're just the crest of a wave that has been rolling in for decades. So the example you are giving is not unique. Actually, it's happening for quite some time. Rohit says that, of course, this started with manufacturing. Companies found it so profitable to offshore manufacturing jobs that outsourcing, along with automation, transformed our economy from being a manufacturing-based economy to a service-based one. Very few people in U.S. right now are employed in either factories or in agriculture. It's actually between 10 to 20 percent. 80 percent or so are employed in services. In other words, all of us basically we serve each other.

Now, services like hospitality or healthcare, education, these turn out to be a lot harder to outsource than manufacturing jobs. Like, you know, how does a plumber in Beijing fix the leaky pipes in your house in Dallas? Or how would a babysitter in Paris take care of your kid in Toledo? Of course, some services have been outsourced. Take customer service. A couple of big things happened to make that possible. The first is something Rohit calls the manufacturing of services. It basically means that you train a group of individuals to do a small portion of a job,

but do really, really well. Yeah, the same way a factory worker might only attach widget A to widget B all day long, A to B, A to B, A to B, a call center might also break down the job. So maybe there's one person who handles canceling subscriptions. A different person handles signing up new customers. All of this makes it easier to centralize these tasks in a remote call center and then scale all of that up. Another major development was technology. Go back to the 1960s.

It was super hard to make international phone calls. Connections were so limited that only 138 conversations could go between the U.S. and Europe at any given time. That was it, 138. And it wasn't until the 1990s that there were enough fiber optic cables to start to solve this problem. And then, all of a sudden, companies could make enough simultaneous and cheap phone calls from the U.S. to India or Ireland or Jamaica to then open an overseas call center. A couple more decades pass, computing gets faster, the World Wide Web shows up, and each new technology makes it possible to outsource even more services.

What has happened in the recent years is that the bandwidth and the ability to compress video and send information quickly has become cheap and very fast. information quickly has become cheap and very fast. And next thing you know, a reporter in Toronto shows up to order a Oaxaca bowl from Carla, a woman on a screen in Santa Cruz, Bolivia. The reality is this. A lot of the decision making over which jobs get outsourced has always been about more than just the economics or the politics of it. As important, do we have the technology to make this happen? Yes or no? And now, for virtual cashiers, the answer is clearly yes. Angela, one of the co-founders of Percy,

says that she's been getting a lot of interested calls from the restaurant industry. So how many Percys are in Toronto? In Toronto specifically, from the outset of when we started to about five months in, we're at about 20 locations in Toronto. And we are adding three to six Percy locations a week across the US and Canada. Angela says that at the moment, they have about 100 virtual cashiers working from video call centers in Bolivia, Nicaragua, Pakistan, with another one opening soon in the Philippines. And while restaurants seem to be eager to try this out, for now, the customer experience of it is kind of

weird, kind of new. Carla, the virtual cashier, she and I were both still trying to figure it out. I'm going to wait for my bowl. Have a great day. Thank you. You too. Yeah, and obviously Carla could not make Amanda's Oaxaca bowl remotely. So then a real live in-person person did have to come out from the back of the restaurant to assemble the bowl. And while that was happening, Carla was finishing up her cashiering part. So she and I just kind of stood around and waited. Like, should we keep chatting? Do I pretend she's not there? Walk away? When I walk away, will the screen go dark? Do you know?

Oh, do you want to see? Yeah. What happens? Okay. You can go to a beverage. Okay. I'll be right back. I'm going to get a beverage. Okay. I walk about 10 feet away and casually peruse the lemonades. And when I look back, Carla's gone. I see. So you have a way of disappearing so you can have a little privacy if you need a moment. I only disappear, yeah. And I don't want them to feel observed. So sometimes when I see they're awkward with the situation, I just look to another place or I just disappear. Carla only really needs to be there for this one discrete part of the transaction, taking my order and taking my money.

When she's done, there's not really that much else she can do. She can't grab my napkins or put my Oaxaca bowl in a bag. But maybe in that slightly awkward pause, she could go up here at Chipotle or Burger King or Walmart. Who knows where she could go? This week, the Planet Money newsletter is musical chairs in the labor market. Where have all the workers gone? As it turns out, other jobs. You can sign up at npr.org slash planet money newsletter to read more.

Today's show was produced by Emma Peasley. It was mastered by Robert Rodriguez and edited by Keith Romer. Jess Jang is Planet Money's acting executive producer. Special thanks this week to Kevin Northrup, Anil Verma, and Mary Claire Peet. I'm Amanda Aronchik. I'm leaving. Find a robot to sock out. Bye.

Oh, no, we got to get the Kenny robot. Wah, wah. I'm Kenny Malone. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.