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Truth be told, their pricing reflects the extra "shrink", so you actually are indirectly paying for other people stealing due to their corresponding margins that they choose. It's been a while since I worked there, but I'd hazard a guess that they increase margins by about 2-3% to offset increased theft.
You are paying indirectly for other people stealing, but not because they raised prices, just because they couldn't lower prices as much as they'd otherwise be able to after reducing cashier hours.
If the money they have to spend to offset increased theft was less than the money they'd have to keep spending on non-self-checkout cashiers then they'd happily keep the extra cashiers and the extra profit.
That assumes we all just care about store prices, though. If self-checkout raises shrinkage from 1.5% to 2.5% of revenues and reduces labor costs from 15% to 13% of revenues (all numbers here are 10% from Google and 90% pulled out of my hat) then price conscious shoppers are going to push for self-checkout, but there may be shoppers who hate the extra work, or like or hate the reduced contact, or have opinions on changes in line lengths ... or, while we're on the subject, I suppose there may be a few shoppers who would rather pay 2% more to employ more cashiers instead of 1% more to enrich more thieves.
And in fact slightly nicer grocery stores (and fancy ones) both currently still exist and at least appear to be doing well for precisely this reason! Hard to separate out the geographic effects, and I do have an admittedly suburban bias, so can't say that the tradeoff you describe is for sure the reason why, but seems reasonable despite that.
I still opt for the line almost every time though. Scanning, let alone bagging, really does feel like work to me, so if someone will do it for free? Sign me up. I'll wait a little longer in line, no problem (though shorter would be better, and long lines do actually drive some people away -- my mother hates WinCo for this reason)
There's lots of high-end options out there these days. We tried delivery and curbside pickup in 2020, and the former wasn't worth the price but the latter is still how we do our regular grocery shopping. A few bucks extra, and we can't pick produce ourselves, but saving 40 minutes per trip is usually more than worth it.
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