After introducing casual market observers to the concept of the bullwhip effect, Michael Burry is again sounding the alarm, this time regarding what he views as the development of a bifurcated labor market. Essentially, Burry says the economy has become too top heavy with white-collar workers, a circumstance he believes Covid-19 exacerbated. Moving forward, some of the biggest beneficiaries could be tradespeople.
Referencing a Wall Street Journal article that detailed the most recent layoffs at Tesla (NASDAQ:TSLA), Michael Burry tweeted, “I see a bifurcated labor market developing as unskilled and semi-skilled remain in short supply, but white collar workers, having proven their redundancy during COVID, will find gross excess in the labor market, pressuring wages at the end.”
I see a bifurcated labor market developing as unskilled and semi-skilled remain in short supply, but white collar workers, having proven their redundancy during COVID, will find gross excess in the labor market, pressuring wages at the end. https://t.co/jak9utVRKM
— Cassandra B.C. (@michaeljburry) June 29, 2022
Per the WSJ report, Tesla informed employees that it was closing a San Mateo, California, office which mainly focused on improving the electric vehicle manufacturer’s advanced driver-assistance system known as Autopilot. The subsequent pink slips impacted approximately 200 people, which included both hourly and salaried staff members.
It’s worth mentioning that Michael Burry, who runs hedge fund Scion Asset Management, has a history of criticizing Tesla. Additionally, he has sparred online with CEO Elon Musk.
Nevertheless, the legendary investor featured in the film The Big Short offers substantial food for thought.
Michael Burry Endorses Blue-Collar Labor
To add some context, TechCrunch.com pointed out that most of the workers affected from the Tesla Autopilot layoffs were in “moderately low-skilled, low-wage jobs.” Therefore, Michael Burry targeting Tesla specifically might not be the best example to articulate his point.
Still, his argument carries great resonance. The pink slips distributed at Tesla are emblematic of the headcount cuts within the broader technology space. For instance, Coinbase (NASDAQ:COIN) let go of 1,100 employees while Netflix (NASDAQ:NFLX) cut 700 people from its workforce. If white-collar specialists were so important, these tech giants have a strange way of showing it.
Should economic conditions worsen, it’s very possible that other companies will follow suit, leading to a glut of educated office warriors. What’s potentially worse, with most workers demanding permanent telecommuting privileges, the white-collar labor market could become decentralized. When that happens, theoretically anyone can compete for open opportunities.
However, blue-collar work is different. If your pipes burst at three in the morning, someone must manually address them right away.
One Caveat to Recognize
Before you start dialing up the best Michael Burry stocks to buy now, you should realize that not every tech segment views its workforce as redundant. For instance, International Business Machines (NYSE:IBM) is experimenting with a program that provides paid classroom instruction and on-the-job training to fill certain high-demand roles.
Ironically, these tech firms are taking a page out of the blue-collar playbook to address their worker shortages.
Ultimately, though, the state of the economy may be the arbiter of how the labor force is distributed. Given the soaring student loan debt crisis, it’s fair to assume the trajectory of labor imbalance supports Burry’s thesis. And that’s an issue we should all be paying attention to.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.