2015 March 14 Saturday
$15 Per Hour Minimum Wage Closing Restaurants In Seattle
$15 per hour minimum wage will reduce the demand for less skilled labor in Seattle. What will happen as a result? Less skilled people will find reasons to move somewhere else. So the city will more rapidly gentrify. Any desirable city that sets a high minimum wage will accelerate automation and drive up the average skill level of the citizenry. The latter will be accomplished by migrations in and out of the city.
A writer gets the obvious: technology will replace labor.
Bigger companies who can absorb the financial hit from implementing new technology have already been preparing for these changes. McDonald’s has been experimenting with point of sale automation for taking orders and Applebee’s rolled out smart tablets at tables in multiple locations last year.
Ordering and payment automation are coming to Chili’s, Applebee’s, Abuelos, Red Robin, T.G.I. Fridays, and Panera among others. Some of these restaurants are letting you order online so you can walk in and immediately get your order. That's an improvement in quality of service. Automated food ordering is going to become as common as ATMs and self-serve gas stations.
That leaves the kitchen still in need of automation. Well, a robot burger maker could be in the offing. Make the cost of labor high enough and restaurants will become highly automated.
In the longer run automated cooking robots will be able to handle so much complexity in food preparations that we'll see restaurants able to offer much greater selection.
What about unemployment? Yes, certainly. Far less low skilled immigration too.
By Randall Parker at 2015 March 14 08:19 PM
Well, OK, I get it - a higher minimum wage will increase automation and decrease employment opportunities for low-end workers. Sure. But what happens to these people - are they the Marx-Engels "reserve army of labor?" Gentrification may be desirable, but what happens when, as Steve Sailer said, politicians and communities start playing "hot potato" with the less affluent elements of society? Some will undoubtedly go elsewhere, but what comes next? Will other communities raise their minimum wages to get rid of them? Also, as we know, the Democrats would love to engineer a big increase in the national minimum wage. That will mean nowhere to run, nowhere to hide.
There are millions of Americans whose contributions are simply not worth $15 per hour. What will they do? Live off government freebies, all the while voting solidly Democratic to get larger handouts? Work off the books? Or indulge in crime or drug trafficking to support themselves? No good choices for them (or for society).
I'm not so sure of the effect that a big minimum wage increase would have on low-skilled immigration (the reduction of which, I agree, is highly desirable). Many low-skill immigrants are here illegally anyway. Big national corporations and their franchises (i. e., most fast food and mass retail) will not knowingly hire them. But that sure doesn't hold for small business - the farmers, roofers, pavers, builders, lawn care folks, etc. Right now they have no compunction at all about hiring illegal immigrants and paying them off the books. Increasing the minimum wage will just accelerate this trend.
I'm not unsympathetic to what Seattle wants to do, and if I lived there, I might even support it, although with reservations. But, long-term, it's only going to make things worse. BTW, what should the ideal minimum wage be, and why? Is there something magic about $15? Who came up with that number? Bureaucrats? Politicians? Labor union people? Are these the types of individuals in whom we have lots of confidence? If a small increase in the minimum wage is good (and $15 isn't exactly a small increase), is a larger one better? If not, why not?
fine...let the free market take its course, and the will of the public, who want higher wages, is ALSO part of the free market.
So don't cry for Argentina OR Seattle.
Let us just instead wait and see what happens.
How about that?
In my view it is not a question of whether millions of people become unemployable but when. I'd rather accelerate that process in order to put a halt to low skilled immigration. Actually, the process is pretty far along already. Most high school dropouts already do not work for a living. The science fiction future has already partially arrived.
Even high local minimum wages will accelerate automation. Though a national $15 per hour would certainly cause a much larger push to automate restaurants, supermarkets, stores, security, and many other functions.
What happens to these people: Some will get subsidized jobs. Others will get themselves eligible for disability insurance. I'm told by an RN who looks at disability settlements for a living that they are already full of fraud, especially packages from California. Others? Dunno. The political process will be pretty interesting about this.
Hot potato: Yes, I expect the Democrats to do a great job of pushing the poor away from the coasts and toward current Red states. I expect Dumb Republicans to go along with it. They are the stupid party after all.
Why $15? This is politics. It was pulled out of the air. It sounded good and hefty. It is really going to be a boon for higher IQ people in Seattle. I want $15 per hour minimum wage in the town where I live and all towns that border on it. How about $20 per hour? That'd make for a very interesting local area.
I'd like to see a few cities institute $20 per hour minimum wage so that we can see what'll happen as a result. I would expect heavy restaurant automation and more home delivery from warehouses. Wouldn't boost car repair costs much if at all.
And that ain't all.There is a company called instacart which intends to deliver groceries from the internet.Couple that with self driving trucks and automated warehouses and well there goes the neighhood grocery.I already buy most of my stuff over the internet except for groceries.Now I'll be able to do that.
Randall, I don't see in any way how a high minimum wage has anything to do with low skilled immigration. Economics doesn't necessarily translate into good public policy. As far as illegal immigration goes, those people are either working with fraudulent ID's or off the books, so the impact will be minimal. And as for legal immigration, most of that is family, chain migration, so the persons skills, or lack thereof, are irrelevant to their immigration status. The political pressure is for more and more immigration, and the less skilled the better. It won't matter how high the minimum wage goes, poor, unskilled people will keep coming. They'll either find work or the taxpayers will support them. Either way, for the immigrants it's a win/win, and for the politicians who are buying their eventual votes, it's also a win/win. It's mostly lose/lose for everyone else.
Disability is just another fraud-ridden vote-buying government giveaway, sort of in the same category as welfare, food stamps (now SNAP, plus lots of others such as school meals, WIC, etc.), Medicaid, free housing, and so on. These programs will be the final refuge for the Marx-Engels army of the (permanently) unemployed, a growing Democratic constituency. Is the process underway already? Of course. But that doesn't mean we have to step on the gas.
Local increases in minimum wages may displace some low-skills folks, but many of them will stay put, because blue states have higher welfare benefits. The migration of the poor from red to blue states has been going on for a long time.
Great the one position in a restaurant where the employee can spit in your food will be the last to be automated!
Let's not forget that those "low-skilled" jobs are the foundation of any society.
Mike, a high minimum wage does not need 100% enforcement to have the positive effects Randell correctly identifies. Small independent places might not comply, but retail, restaurant, and fast food chains all will. So will local governments and their contractors, colleges, hospitals, etc.
And these direct positive effects in the legal economy will cascade down to the underground economy. If the legal immigrant working at McDonalds is displaced by automation because they won't pay her $15, she may end up taking the off the books maid job, thus displacing an illegal immigrant who goes home. And she'll tell family back home that there are not any jobs there.
California also has extremely intense penalties for minimum wage violations, and large bonuses for ratting out employers who fail to pay the minimum, which here at least means compliance is very high. I think the only people you might regularly encounter who make less than the minimum are family members of the owners of small immigrant businesses.
Another point is, for the jobs the aren't automated, the supply of people willing to work at McDonald's for $15 is very large compared to $8. The employer might prefer an immigrant for $8, but if he gets swamped by applications because he's forced to pay $15, he's going not going to choose a low-human-capital FOB.
Another reason that even small businesses, like mine for example, don't hire people illegally is that we want to be able to deduct the cost of employees from our taxes. You can't do that paying an illegal in cash. If you're a restaurant that does 80% of its business in credit cards, you'll need those deductions since the IRS can easily find out your revenue.
Lot's point about choosy employers who have to pay $15 per hour is very important. If you have to pay $15 per hour then hire far more productive people. Employers will have their pick. The average store or restaurant employee will be much smarter and much more able to handle complex equipment and provide more complex services. At $15 per hour employers won't hire high school drop-outs. Why should they? No need.
Enforcement depends on state policies. A liberal jurisdiction with high minimum wage will also provide incentives for reporting and stiff penalties for violations. Compliance also depends on employer size. Big employers are going to comply. Medium sized employers will too. Some smaller employers (especially ones with fixed location) will comply.