How minimum wage costs jobs

Raising the minimum wage paves the way for kiosks...

from JoeUser Forums

The economy is a complicated thing. That is, as a general rule, I don't like politicians of either party monkeying around with it.  The average politician has virtually no understanding about economics. Often times, it's worse than no understanding -- often they have no common sense about it.

Let's use the minimum wage laws as an example.  To help those who make relatively little money, some people argue that we need to raise minimum wage.  So let's say we raise it to oh...$9. Now, I'm not going to bore you with statistics about the fact that most people who make low wages are employed by small businesses who would simply hire fewer people. I won't point out that such things help encourage outsourcing or hiring illegal immigrants. I won't point out that in the cases where it doesn't cost jobs it instead raises costs which are then passed on to us all in higher prices which put us back at square one.  These are all interesting but ultimately too debatable.

Instead, I'm going to use an example that most people, I think, can recognize the truth in.  Fast food.  McDonalds, Burger King, and other fast food restaurants employ approximately 12 million people. That's a lot of people. Most of them make between minimum wage and $8 per hour depending on where they live.

So let's say suddenly minimum wage jumped to $9 per hour. That's a huge cost increase for those restaurants. So what do you think they'd do? I'll tell you one likely solution: Kiosks. Been to a grocery store lately? Checkout lines at grocery stores were one of the first victims of the last minimum wage increases. At some point, a threshold is crossed and it becomes cheaper to have customers enter in their orders/purchases onto a friendly looking computer kiosk.

A typical shift at McDonalds consists of 10 people. Of those 10, half of them are dedicated to various degrees to taking orders.  Next time you're at a McDonalds, look at it again. How many of those people do they really need? I mean, how many could be replaced by a kiosk where people would simply enter in their orders, receive a print out of what they ordered and an order ticket, and wait for their order to be fulfilled?  I'd get at least 2 of those people could be replaced by kiosks. Probably 3 eventually as people become more comfortable with ordering via kiosks.

That's a 20% reduction.  Spread across the entire industry and you're talking 2.4 million lost jobs. Now, you might say that I'm over-reacting. But mark my words, raise minimum wage and that is what you're likely going to see. A wholesale movement to kiosks in the fast food industry.  It may happen anyway -- eventually. Like ATMs. Like what is happening at grocery stores (courtesy of the last increase in minimum wage). 

Minimum wage jobs are for entry level positions. Most of those positions are very low skill. Their competitors are other low skilled people but increasingly also from machines. Businesses will automate at the point where automation costs them less than hiring low-skilled workers. It's a very simple calculation for them.

politics
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Reply #1 from JoeUser Forums Top
I have read a couple of your articles and I simply hate your point of view. I don't mean to say I hate you, I don't know you and I haven't hated more people than I have fingers (that's counting grade school). The right wing ethic stems from a simple lack of compassion. You do not care about people starving on minimum wage. You have a naive faith in the non-existent deregulated free-market. Regardless of what politicians think or what the law is, people who slave for a corporation doing something they hate deserve to make a decent living wage. Your prediction that a rise in wages will result in a diminished workforce is probably true, but that will not be because it is wrong to raise people's wages so they can stop hating their lives, but because it is wrong, abhorent, and outrageous that the holders of capital enrich themselves with the labor of slaves with no care for their well-being. If the owners and rulers of the could raise their compassion to the level of basic human decency, maybe we wouldn't have to have minimum wage laws.
Reply #2 from JoeUser Forums Top
*laughing a bit at everett...*

Theoretically, as minimum wage workers are replaced by electronics, the price of living will at first skyrocket and then fall dramatically- because as we all know, it costs almost nothing to run a machine. Eventually, an entire fast food chain could consist of large robots with perhaps a single manager/maintenance man. The food would cost practically nothing to make, since most business costs are related to personal.

~Dan
Elemental: Reforged
Reply #3 from JoeUser Forums Top
Of course minimum wage laws will cause businesses to employ less labor. The question is how much less? And how soon?

You don't really address these questions--you just assert an answer without giving empirical evidence. Of course there's a point at which humans will be replaced by machines. Is it at a minimum wage of $5.00? $6.00? $8.00? $10.00? $15.00? The answer to this is crucial when you are making guesses about the level of unemployment that a minimum wage shift would cause. I have no idea what the answer is, and, as far as I can tell, neither do you.

My own guess--and I will emphasize that it is just a guess--is that kiosks will replace humans fairly soon, no matter what government wage policy is. I would guess that a reasonable hike in the minimum wage would not greatly hasten the arrival of the "break-even" point for fast-food chains to replace humans with machines. My justification for this guess is that computer and electronics costs are falling much faster than wages could possibly rise, so I would expect those computer and electronics costs to be the primary thing determining when the break-even point occurs.

I will grant that I don't really have any evidence for this other than my intuition on the subject, but you've made the opposite assertion ("2.4 million lost jobs") with about the same evidence. I think that unless one of us is willing to make a major research project out of this (I'm not) we're going to make much progress here.
Reply #4 from JoeUser Forums Top
Dan. This idea that everyone will be replaced by robots is idiotic. People will demand jobs or demand that they no longer need to pay to live, if all the work can be done without their participation.
Reply #5 from JoeUser Forums Top
The problem is, and Brad doesn't really address this, though he does dance around the subject in his post, but minimum wages are, by the very way our economic system works, below the poverty line. There needs to be radical shifts in the way that accumulating profit works in our society for this to change, but the rich want to be richer, and so do the poor. If the idea of accumulation wasn't so important to us it's possible that everyone would have enough. Call me idealistic.

Cheers
Reply #6 from JoeUser Forums Top
Various states have made significant increases to the minimum wage. When the increases are proposed the resulting scenario is always the same. Opponents argue that it will reduce the number of jobs, prices will go up, the sky will fall etc. I have done a fair bit of research on this subject and I have never come across any study or data that has shown harm to the economy after a significant minimum wage increase.
Reply #7 from JoeUser Forums Top
Grow up Everett Lee, do you think the owners of companies will actually keep their employment level at the expense of loosing money instead of earning it? Companies are to make money, not to keep the employed comfortable and satisfied. And big companies like McDonals and Microsoft have responsibilities to their shareholders which may as well be some of those poor people. If a CEO of such company will fail to make a profit, he/she will be replaced with someone who can. Besides, not generalizing, but a fair share of them who would loose their jobs to kiosks, could actually get a better job if they commited some of their time earlier into getting better qualifications, such jobs are much tougher (if not currently impossible) to replace by machines in the near future. I know a lot of people who despite all odds did that, and a bunch of those who failed inspite having all oportinities opened for them. And one thing you're actually very wrong about, brad is unlike many entrepreneurs I've met. He actually cares a lot about his employees. The problem you have is that he states facts you do not wish to admit, but those unlike opinions are not debatable.

Now think about it that way, once McDonalds standardize on kiosks it will spread them all over the world. So this madness may actually turn into the losses of jobs all over the world.
Reply #8 from JoeUser Forums Top
Ditto on Adam.

~Dan
Reply #9 from JoeUser Forums Top
This raises a whole slew of questions. For instance, what is the government doing to protect kiosks and the corporations that use them from the terrorism of disgruntled employees and angry leftist protestors? Will not America see an outbreak in anti-kiosk violence? If so, who will arm the kiosks to defend themselves? Perhaps the Department of Homeland Security, already a valuable asset to the government as it prepares for a period of insurgency and civil strife, will be able to step in. A possible solution would be to install high pressure paint-spraying valves in the kiosk so that anyone who tampers with them physically or electronically will be marked with permanent dyes. If this fails, a minor explosion or burst of retaliatory gun fire from a ceiling-mounted turret would work nicely.

Of course it will cost McDonalds and Wal-Mart quite a bit to install armed and armored kiosks. How will they maintain such low prices if they have to spend $6000 a year per kiosk to maintain and protect them while paying the cost of upgrade for the newest version of Microsoft Kiosk and the Microsoft Kiosk antivirus suite? It could be crippling to the economy and send us towards another recession! A possible solution would be tax cuts and subsidies for companies that are willing to install top notch spyware from vendors with offices in Washington. That way companies would be fully protected when they install kiosks. It would be a shame if Wal-Mart customers had to take the burden of pricy kiosks. Why not let taxpayers do it?

But I digress. Of course the minimum wage laws should be revoked to allow companies the option of cheap labor to service, polish, distribute, and masturbate their kiosks. Anyone who does not think so doesn't grasp the important role kiosks will soon play in the economy, and the devestating effect it would have on our economy and the pocketbook of the consumer if companies had to pay more than $2.50 an hour to hire people to maintain machines that will work for free.

Reply #10 from JoeUser Forums Top
So it's not compassionate to pay little for an entry-level job that requires no experience, but it's compassionate to lay off these people (even just one person) so that they never receive any experience and can never move up to social ladder?

If the owners and rulers of the could raise their compassion to the level of basic human decency, maybe we wouldn't have to have minimum wage laws.


Notice how these so-called compassionate people never own their own businesses. What's up with that? Is compassion and entrepeneurship mutually exclusive?
Reply #11 from JoeUser Forums Top

Dan. This idea that everyone will be replaced by robots is idiotic.

Everett, get out much? Low wage jobs get replaced by automation. ATMs have eliminated thousands of teller jobs. Grocery stores already have self-check out lines.

The problem with those who advocate higher minimum wages is that they really don't seem to be that concerned about whether it actually solves a problem.They just want to be, like Everett, showing their compassion. Never mind if raising minimum wage will toss people out of jobs and turn them into dependents.

Those who want to raise minimum wage don't even fully buy into their own "logic". If raising it to $8 is a good idea, why not $80?

But bottom line - when in some years you're entering in your Big Mac order at a kiosk rather than giving it to a person, think back to this article and wonder what happened to the person who once had that job.

Reply #12 from JoeUser Forums Top
BTW, while I fully admit to not having time to put together statistics on this issue (Because such statistics con't prove anything because it's too complex an issue), I can at least say that my position is based on quite a bit of common sense and not emotional infantilism such as what a few in this thread have exhibited.
Reply #13 from JoeUser Forums Top
"I can at least say that my position is based on quite a bit of common sense and not emotional infantilism such as what a few in this thread have exhibited."

What a truly constructive statement that was. ;)

~Dan
Reply #14 from JoeUser Forums Top
How much is enough for people anyway? From what I understand, Wal-Mart doesn't pay their workers enough, and I'm sure that they don't pay all their workers minimum wage. I've never worked at Wal-Mart nor do I know anybody who works there, but surely if we really want people to have wages that're above poverty, the minimum wage should be something above what Wal-Mart pays its own employees.
Reply #15 from JoeUser Forums Top
Thomas Huxley, Aldous's biologist father, has a quip apropos this discussion. "The greatest tragedy in science? The slaying of a grand theory by ugly facts!" From the perspective of the originator of this thread, the "Living Wage" campaigns, of which there have been scores in this country alone, the 'ugly facts' in question are that dramatic increases in minimum wage, instead of causing a net job loss, or an increase in unemployment, have had a slight effect in the opposite direction, slight job gains and small drops in unemployment.

People might ask themselves a simple question. What will poor people do if they have a little more money? DUHHHH! 'Spend it and create jobs' is one theory, and, thankfully since I like the idea of higher minimum wages, one more in alignment with facts instead of some anti-human Republican agenda that would have most folks groveling for a pittance, or perhaps re-enslaved one way or another. Let's try a minimum wage of $12.50/hour, just as an experiment. If all the corporations pick up their toys and split, I know plenty of people who still will be RWA to bust their butts and make the world safe for democracy.
Reply #16 from JoeUser Forums Top
The problem with those who advocate higher minimum wages is that they really don't seem to be that concerned about whether it actually solves a problem.They just want to be, like Everett, showing their compassion. Never mind if raising minimum wage will toss people out of jobs and turn them into dependents.


No, it has nothing to do with 'showing compassion' and everything to do with trying to help stop the bleeding from America's middle class. Us liberals are peculiar in that way. We don't worry about that hypothetical welfare dependent who decides to rebel against human nature and pursue a career of laziness. We worry about large statistics and broad social observation, such as those that show the tax burden of middle income families increasing; such as those that show the income ratio between the richest 20 percent and the poorest 20 percent widening beyond that of any other modern industrial democratic nation; such as those that show that while it becomes harder and harder for more people to attain a median income, the cost of elections is skyrocketing... and voila... skull and bones or skull and bones. I'm not in favor of large increases to minimum wage, but I think we had ought to tax the living sperm out of big corporations who are paying CEOs ungodly salaries and accumulating massive wealth for the richest 1% of Americans. And we had ought to distribute that wealth into our public schools and provide government that is more responsive to the needs of average Americans.
Reply #17 from JoeUser Forums Top
Let’s face it, the reason businesses open up every day is for one purpose, to maximize profit, not to feel “compassion” for humanity.
Reply #18 from JoeUser Forums Top
Here is the deal. I work at a fast food place called White Castle. The intake we are supposed to achieve is $32.00 that is $32.00 dollars an hour per hour for each worker. One average it is achieved The resturant I work at makes between 32,000 and 35,000 a week. That is about 1.7 million a year. Even at that the labor cost is about 25% of all of the costs. We are open 24 hours a day and we have at the most 8 to 10 employees on a shift. But the people talking about the kiosks are wrong especially at my restraunt.. We only have 2 sellers at the most. One on drive-thru and one for the inside. On midnights when there is only 3 or 4 employees. The kiosk thing would really not work since most of the people from 1am to 5am are so drunk that they have a hard time speaking let alone using a kiosk. We are in a very competitive area where in the last 5 years 4 other fastfood restraunts have opened within a block. We employ less people than we did 5 years ago whe n we did about 50% more business than we do now. There is also a large amount of shopping in the area. Minimum wage is 5.50 in the state where I live. To bring in good workers the starting wage is $7.00. and the minimum wage is being raised on 1/1/2005 to 6.50 so they are going to raise our wages. I am actually thinking about leaving this job and going to the street where I can start out at $9.00 and hour. And that is the reason why the wage is higher than minimum wage to get people to stay and to get poeple to apply at my restraunt.
Reply #19 from JoeUser Forums Top
There are companies who do both, treat their workers well and make money. One of them is Ben and Jerry's.
Reply #20 from JoeUser Forums Top
Now that's what I call word of mouth advertising:)

~Dan
Reply #22 from JoeUser Forums Top
No, it has nothing to do with 'showing compassion' and everything to do with trying to help stop the bleeding from America's middle class


Are middle class workers making minimum wage? If not, then how will raising it help them?
Reply #23 from JoeUser Forums Top
There is probably lots of propoganda out there that can "prove" that a higher minimum wage is bad for business.

I am no economist, but it seems to me that the companies that can afford to employ basically unskilled workers at minimum wage are just trying to get by "on the cheap." A higher minimum wage may cut into profit margins, but I doubt it would be that noticable.

It may be a good compromise to keep the minimum wage low for employees who are able to make a minimum amount of tips, but raise the minimum wage for those workers use their salaries (without tips) to support themselves and their families.

If one of a conservative mindset would claim that "the world needs ditchdiggers too." One would have to think that the ditchdigger consumer class deserves access to healthcare, housing, and at least some access to recreation. The money "given" to the lower classes will "trickle up" anyway, won't it?
Reply #24 from JoeUser Forums Top
Does anyone ever actually read and think about other people's posts before they reply?
Reply #25 from JoeUser Forums Top
I think that most of the people who are commenting on this specific topic need to take Business Princples 101. The one thing missing in this discussion is something called an operating ratio. The operating ratio of a company encompasses a large amount of space to write about, but least see if I can break it down to just a few things that are key to running a company. First is wages (salary, and hourly) on the average is somewhere around twenty-five percent. Then equipment (regardless of the type of business) is close to wages (this can be higher in some industries such as trucking, and aircraft manufacturing). Now we're up to 50% operating ratio. Now comes insurances (health benefits); this is hard to determine because each state along with the feds require different levels for specific jobs, so lets say at the low end may be 10%. This places us at 60%. There are other areas that can be added or subtracted depending on the type of work a company is performing. This I can tell you, and that is trucking company I spent twenty some years with (no longer in business—union forced us out) have a daily operating ratio of 89.7 to 95%. Oh, here is another important factor; replacement cost.

Pam