Raising the minimum wage; it hurts everyone but the robots

by Mathew Strong

My first day working at McDonalds is still indelibly imprinted on my brain. I was there at 5 am, staring at a computer system I had never used, trying to figure out who was responsible for what at that time of day, wondering if I had my uniform on correctly, listening to “training-on-the-go” from the shift manager who was handling the drive-thru, and a customer came in and ordered something that was not on the menu. I tried modifying multiple options on the screen, I tried explaining it to the food assembler, the shift manager tried to help, but to no avail; it was too weird and apparently took too long. The customer left in an angry huff, and I was initiated. Nine months later when I left for a better job, I could have handled it in my sleep while training someone else, and I often did as a shift manager. It was an extremely valuable experience for me, that paid dividends many years into the future.

Today, throughout the country, minimum wage workers and activist groups targeted McDonald’s in a coordinated protest in an effort to have the federal government raise the minimum wage to $15 per hour, from its current rate of $7.25. Democrats and many advocacy groups are attempting to highlight the plight of minimum wage workers who they say deserve a “living wage”; the idea that a minimum wage job would provide enough income to provide for a family. Some economists believe that this will also stimulate the economy by providing more disposable income to those same workers.

There is usually a conglomeration of outcomes when the minimum wage is raised, and unfortunately, it is never the outcome they were hoping for.

As the cost of labor increases, companies will find new ways to replace workers. In 2011 McDonald’s installed 7,000 automated kiosks in European restaurants, to take orders and payments, eliminating those human jobs. In California, robotic machinery (operated by a single worker) is able to thin (and soon pick) lettuce without bruising the produce, each machine replacing 20 workers. Grocery and department stores have been steadily increasing the “self-checkout” options for many years as well.

All consumer prices rise as the companies employing minimum wage workers pass the cost onto consumers in an effort to stay afloat. The market shifts and shakes itself into a new equilibrium at a new level of cost to all consumers, wages are higher but so are prices. You’ve managed to pull the floor up, but you’re still standing on the floor. More people become too expensive to employ, companies go out of business, the middle class pays the highest price because its disposable income is diminished, and anyone who is already making more than the minimum wage is thrown into a jealous tug-of-war with their employer about what their salary is now really worth.

“In 2012 1.6 million people in the U.S. earned exactly the prevailing federal minimum wage of $7.25 per hour. About 2.0 million more had wages below the federal minimum (although these also had tips and commissions on top of an hourly rate). Together, these 3.6 million workers with wages at or below the federal minimum made up 4.7 percent of all hourly paid workers. Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the Federal minimum wage or less.” This according to the Bureau of Labor Statistics. The upheaval in the economy required to assist the 1.6 million who actually earn the minimum wage would be extremely dramatic to everyone else, and would cost a lot of high-school and college kids their jobs. These jobs are vital to many who need an entry level job to acquire valuable experience, to earn spending money, to buy a first car, to help defray college costs, supplement their social security income, or to pay bills while between higher-paying jobs. Minimum wage jobs are not, and never have been, designed by employers as a way to provide for an entire family long term. They are a vital part of our economy, but not a necessary one. The more the government intervenes the more likely they will be forced out completely. Technology and cost go hand in hand. When was the last time you saw an elevator operator?