While I expect LA's coming $15 minimum wage will spur robot development, improve the quality of local services, and reduce interactions between customers and service providers Megan McArdle thinks a high minimum wage will produce deadweight loss due to a loss of economic efficiency.
In the short run I think Megan is correct. But in the long run higher minimum wage will boost economic efficiency by speeding the development and spread of automation technologies. Also, in the short run and long run higher minimum wage will increase unemployment among the least skilled, least driven, and least talented. The relentless advance of computer hardware and software technology promise to do that anyway. But higher minimum wage will cause that to happen sooner.
What a much higher minimum wage will also do: gentrify cities that already have other local conditions attractive to gentrifiers. Such cities should gradually ratchet up their minimum wage to $20 per hour. This will drive the low skilled work to outside the city's boundaries along with the low skilled employees and their families. This will improve local school scores, lower crime, free up housing, and all this will attract the gentrifiers.
Ben Casselman points out that the cities raising their minimum wages to $15 have well above average living costs. The people who manage to continue to keep their jobs when their wages go up to $15 per hour will still be pretty poor.
What I'd do if I was running fast food joints around LA: by franchise locations right outside the city boundaries. Alternatively, switch to franchises that have low-labor meals and support for payment kiosks. Automate, automate.
So far the number of cities moving to a $15/hour min wage (SF, LA, Seattle) isn't large enough to cause a big boost in fast food automation technology development. But throw in some more big cities (hear the call NYC, Boston, Chicago, San Jose) and that would change.
|Share |||By Randall Parker at 2015 May 20 05:09 PM|