May 12, 2016

Unintended Consequences & the $15/hr Minimum Wage

Wendy's image problem or stealth use of  Rule 5?
Somehow this issue is trending on Facebook. And you must already know that Donald Trump is going to be asked about this tomorrow (so too Hillary Clinton who will say "it's wrong" and then be she'll be left alone).

The real effect of the demand for minimum wage is on clear display at Wendy's.  Replace people with self-serve kiosks.  The unintended consequences for asking for an unreasonable wage relative to the work effort is - no more minimum wage jobs.
Progressives just don’t understand the fact (not science fiction) that robots are about to take over the majority of jobs (and especially low-paying jobs) in the coming decades.

That, and the real minimum wage is actually $0.00.

...After strikes and the demand that the minimum wage be raised to $15/hour, fast food chains have decided that instead of paying someone $15 to push buttons with pictures of food on them, it would be much more cost effective for companies to just roll out self-service kiosks that they can pay $0.00 an hour without benefits so customers can push buttons with pictures of food themselves.
This will become a campaign issue, guaranteed.  But the important thing to understand is this:

1.  Consumers benefit from increased efficiency in the forms of lower cost 
2.  Companies can only attract and keep customers by improving price and/or quality and/or customer service experiences.
3.  The natural tendencies for companies that survive is to improve what they do in those areas.
4.  Distortions to the capitalist operating system result in distortions to markets for everything - including labor.

Item 4 leads to offshoring of jobs to where labor is cheaper and requirements for companies in terms of taxes and even red tape are less cumbersome.  Now it also leads to onshoring of jobs by using robots.

People arguing for a minimum wage do not understand that their actions, their demands, have consequences.  Someone, or something, will do the jobs that they refuse to do, at an even lower wage.  At some point this becomes too low for anyone.  Perhaps the cost of maintaining a robotic cook becomes too expensive for the company.  In a situation where the floor is reached, things change. Wages adjust.  There becomes a natural equilibrium via the "invisible hand". People stop learning to serve burgers and start learning to program robots because that's where the money really is.

It's all common sense.  Unfortunately common sense has become a precious commodity these days.
Related Posts Plugin for WordPress, Blogger...

Share This