Are businesses preparing for the impact of the perpetually-increasing minimum wage? Absolutely. From the Argus Leader:
Sioux Falls McDonald’s customers will soon be able to order and pay for their meals from an app on their cell phone.
The technology will virtually eliminate the odds of some 16-year-old behind the counter messing up your order, checking “ketchup” when you wanted “mustard.”
As for that 16-year old, will their job be the next thing to go away?
Local restaurant owners insist the answer is no, but experts elsewhere predict a radical transformation is on the horizon for retail and restaurant workers as artificial intelligence, robots and other automation takes over many of the tasks humans perform today.
Sorry local restaurant owners. If you disagree, you’re either kidding yourselves, or the article writer isn’t talking to many of them. When it becomes cost neutral to install an automated system versus using a live employee, guess which one the employer is going to pick?
And as we experience the perpetually-increasing minimum wage for jobs that aren’t worth $10 or $15 an hour, that trend is only going to accelerate.
McDonald’s posted more than a billion dollars in profit for the year 2014. That sounds like a lot until you spread it around to nearly 800,000 employees. One can completely erase last year’s profits by giving everyone a dollar an hour pay increase. The profit margins in fast food are very small. These jobs will almost certainly disappear with higher minimum wages.
Nice try, but this anecdotal evidence is not even close to addressing the truth of this matter.
McDonald’s – you may not know this, but at many McDonalds stores when you get the voice on the drive-in speaker, it is connected to a call center far away from your actual restaurant? That had nothing to do with minimum wages – but everything to do with cost effectiveness.
You need to go read the book, “Race Against The Machine,” where you will find the true cause of low-wage, non-skilled job loss. There is an incessant drive to become more efficient, regardless of the minimum wage.
Another great example is the financial industry – particularly insurance – where consolidations have resulted in the loss of hundreds-of-thousands of jobs. And all were pretty good paying jobs, but the companies found that they could use computers to do the job more efficiently and more accurately than those humans did it. This had not one thing to do with minimum wage.
So you can whine about the will of the voters all you want, but these technological advances are not a result of increases in minimum wages. They are a result of developers who have built and marketed a better way to do things. Period.
These types of jobs are on the way out – all across the world and all across the economy. But not because voters decided it was prudent to increase the minimum wage.
Heisenberg,
You made the anti-minimum wage argument. The higher the cost of employees, the greater incentive to concentrate on cost efficiencies. Every mandated increase in minimum wage, the less of these jobs will ultimately be available.
False, Mr. Jones. I asked you to read the book, “Race Against the Machine,” which clearly explains why the loss of minimum wage and low-skill jobs is NOT a minimum wage issue.
It is simply an efficiency issue. Example:
If you could hire a ten-year-old boy to give you twelve solid hours of labor each day, pay them $6 for the day’s work and produce you somewhere around $50 worth of product OR hire a machine that costs you $24 per day and produces you somewhere around $250 worth of product, which would you use?
Of course, any smart business owner would hire the machine. So let’s take a look at a couple options that would help the boy be more competitive in the market and help him keep his job.
To get a better cost/profit ratio from the boy you could probably whip him and get $55 product out of him – a very respectable 10% increase. Or you could drive that ten-year-old boy’s wages down to $3 a day and maybe even still get $50 worth of product out of him. But there will be someone out there making that machine cost $12 per day and still produce you $250 – or more – of product. And, of course, that type of effort is being applied every single day all around the world.
So in this example and around the rest of the real world, unlike the fantasy world the minimum wage complainers live in, buying cheap labor is not going to save the ten-year-old boy’s job at $3 per day – or even $1 per day – it is the machine that made it happen.
I know that using a ten-year-old boy as an example is close to being vulgar. But I assure you, the concept I’m trying to help the readers understand works for anyone of any age, from ten to ninety. It really does.
I can’t wait to read some of the geniuses in here say, “Well that kid should be happy to have a job.”
I’d strongly encourage you to read the book, “Race Against the Machine.” It may make you feel uncomfortable from time to time as it bashes some of these wrong-headed, obsolete beliefs that seem to hang on far longer than helpful. But I assure you, it will be worth your time.
Fast food is especially susceptible to wage inflation. Who on Earth would pay $2 or $3 for a McDonald’s cheeseburger? No one. Fast food has two qualities: It is fast and cheap. It is inherently geared toward the working class and poor. If it is no longer cheap, it undercuts most peoples’ reasoning for ever going to such a place.
Heisenberg,
I don’t disagree with the assertion machines can significantly change certain industries. It’s been happening for years and railed against since the Luddites. That said, the choices are not so simple or stark as you infer.
Not having a clerk at the register can impact customer service and revenue which is a consideration in addition to efficiencies. Machines aren’t suited to customization in many situations. Some machines capital cost can exceed the cost of the labor saved.
Within your argument which every business evaluates is the reality that higher wages MAY make the machine more attractive. Kiosk ordering at fast food restaurants has been available for at least a decade but not often used. Why? Because the labor savings don’t justify the capital cost of the kiosk. Raise the cost of labor to a certain level, the kiosk is economically viable.
There is a very successful businessman in Sioux Falls who gives a talk that he learned everything about being successful working at McDonalds- be on time, be a good team member, take care of the kitchen, be well groomed, and be grateful.
There is a wage level where machines are more cost effective in most everything and where people are best. Every mandated minimum wage moves toward machine replacement. It is simple economics.
Troy got schooled.
yeah, at a school, where he learned things that make him smart enough to call heisenberg out on the flawed logic that was used. troy was schooled well in that regard. he might even have played basketball.
The minimum wage has been raised 20+ times since 1938..Can the conservatives support their claims based on historical facts of what happened after those wage increases.? I suspect if they could they would be doing that, but nope not a mention of the one indicator that apparently does not support their claims.
i wonder how many people would have voted for the increase in minimum wage last election if they realized it had an automatic yearly increase in it. My bet is that it would not have passed. The automatic continuing increase was hardly ever mentioned, on purpose, and the voting public who relies on simple sound bites for their education got snookered (as usual).
If an employee (of whatever wage) costs more than he’s worth, in the long run that’s bad for the company (and ultimately, the employee’s job).
Time will tell.