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Former McDonald's USA CEO: $35K Robots Cheaper Than Hiring at $15 Per Hour (foxbusiness.com)
An anonymous reader shares an article on Fox Business: As fast-food workers across the country vie for $15 per hour wages, many business owners have already begun to take humans out of the picture. "I was at the National Restaurant Show yesterday and if you look at the robotic devices that are coming into the restaurant industry -- it's cheaper to buy a $35,000 robotic arm than it is to hire an employee who's inefficient making $15 an hour (warning: autoplaying video) bagging French fries -- it's nonsense and it's very destructive and it's inflationary and it's going to cause a job loss across this country like you're not going to believe," said former McDonald's USA CEO Ed Rensi during an interview on the FOX Business Network's Mornings with Maria. According to the Bureau of Labor Statistics, 1.3 million people earned the current minimum wage of $7.25 per hour with about 1.7 million having wages below the federal minimum in 2014. These three million workers combined made up 3.9 percent of all hourly paid workers.
Guess what? Those $35K robots are also cheaper than paying people $8/hr.
Human beings are incredibly expensive. They're also the economic engine that turns a single business into part of a functional economy, but I digress.
There are very, very few positions that could be automated in a way that makes sense financially at $15/hr that wouldn't also make sense at $5/hr. Either a position is automatable, or it is not, and at 4000-5000 hours per year (plus benefits, etc) that's a lot of money for a single position that could be thrown at a robot if that's the way you wanted to play it. Basically, automating that position will either be super-cheap or super-expensive.
Automation is a very important discussion point. Its disingenuous to tie it to the current debate over moving the minimum wage back up to a living wage.
You're special forces then? That's great! I just love your olympics!
Whoever does it first is going to cause a PR nightmare, but once that settles down - all of the competitors will be soon to follow the new norm.
Liberal answer: The benefits are localized, the pain spread throughout. In other words, its a tragedy of the commons. Typically, you need government intervention to prevent those.
Conservative answer: They'll get one of the many other jobs waiting to absorb the unskilled labor. Also, fucking government caused this problem by not allowing wages to settle at $5/hour
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McDonald's already has touchscreen systems where customers can touch pictures of food and run their own card to order, I suspect these will be quickly rolled out in any jurisdiction that raises the minimum wage to $15/hour. Using pictures also gets around language problems. Fully automated, you would still need someone to load the raw materials into stacks and watch the customers, but far fewer employees would be necessary. Using a touchscreen in the drive-through would be an improvement over talking over the intercom, but multiple stations would probably be necessary since people are slow.
I've abandoned my search for truth; now I'm just looking for some useful delusions.
Also on the front page is how Foxconn is replacing manufacturing with robots. I can guarantee they're not paying $15USD/hr to employees. The talk about minimum wage is just to cut costs until the robots can replace the guys making $8/USD/Hr.
There's a fundamental conflict in capitalism. As an owner, you want to cut costs, including wages. But wages are also known as "purchasing power". We've gotten past this by growth. Capitalism requires growth. But we're cutting so fast, im not sure we're growing fast enough to cover all the lost purchasing power. We'll see
Yup. This isn't really a valid argument against increasing the minimum wage.
At worst, it merely hastens the inevitable by a few years, but this is going to happen.
This is relevant to the current election cycle for multiple reasons - free trade agreements are a major source of contention, and Trump talks about bringing manufacturing jobs back to the US - the problem is, as the recent massive Foxconn layoffs proved, the majority of those jobs are NEVER coming back no matter what you do, unless you enact a New Jersey-style law against automation. (New Jersey requires all gas stations to be full-service, you cannot pump your own gas. One of the reasons for this rather unique law is to create jobs.)
retrorocket.o not found, launch anyway?
The whole push for a $15 minimum wage will been seen as a "Hold ma beer" moment for the minimum wage activists.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
This assumes that the Robot can clean itself daily, clean the fryier, and replace the oil.
And a robot in a hot oil and salt environment will be low maintenance.
Even at $15/hour, it's not a livable wage in most places. You can't survive on it when your pre-tax, gross income is less than the average one bedroom apartment costs per month, as is the case in Los Angeles. So what happens is that people making minimum wage doing scut work jobs are subsidized by family, friends, or, far more often than not, the taxpayer. They can't afford a car, so they go to work on subsidized public transportation. They can't afford medical insurance, so they get subsidized by the taxpayer, or go to the emergency room they can't afford to pay for. They can't afford child care, so they sign up for subsidized versions of that, or their children grow up feral, and the taxpayer pays for keeping them in prison.
All that so we can buy a cheap, mass produced hamburger for 99 cents.
The problem isn't paying employees $15/hour, the problem is paying McDonald's a quarter of the true cost of making a Big Mac, so that the corporate investors can get richer.
All big, national chains are heavily (if covertly) subsidized by the taxpayer. Sam Walton became a billionarire on those subsidies, while his employees were living on food stamps.
If you can't afford to pay your employees enough to live on without subsidies, then your business model is broken, and you should be driven out of business by pitchfork wielding mobs.
Except that it's not a straight-up comparison between the employee and the machine. When the machine doesn't make fries, it's idle. When the employee doesn't make fries, they're cleaning, etc.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
Automation is a good thing. That a livable minimum wage encourages some companies to automate is also a good thing. We MAY need to use other policies to maintain full employment, but at this point, I don't see why anyone should be making just $15/hour.
A big criticism of a minimum wage is that it's "not a free lunch" and just causes inflation. But if a minimum wage encourages automation, then it actually increases per-person productivity, thus partially paying for itself and keeping a minimum wage from being purely inflationary (there will, of course, be some amount of inflation due to a minimum wage increase, but nowadays a small amount of inflation is actually a good thing).
If we're paying just, say, $2/hour for people to work menial jobs, which is far below a livable wage, then they are, de facto, being subsidized in some other way. For instance, government assistance through subsidized housing, food stamps, etc. Or perhaps they're living off of charitable organizations. Or perhaps they're living off the good will of their family and/or friends. But paying a sub-livable wage is being subsidized in SOME WAY, perhaps even just being taken from that person's health. It's not a society-optimal solution.
In our society, even low-skilled workers' productivity has increased due to technology. But because there are so many low-skilled workers, their bargaining power is low, and thus their wages don't increase. Thus something like a minimum wage is necessary in order for those people to make a livable wage and to not be on foodstamps, etc.
Again, I see automation in response to a wage hike as a good thing. Ultimately, provided we maintain full employment, this will help everyone. Given our modern technology, human labor is worth more than $5/hour even if the workers do not have the bargaining power to get a higher wage. So employing people at below $15/hour in positions that could be automated if they were paid a livable wage is actually a misallocation of human resources. In a sense, by NOT paying workers a livable wage and NOT automating more, companies are, in fact, having their labor subsidized by the rest of society (government, family, friends, charities).
All wages at $5 an hour do is make the rest of us support the workers via the social safety nets.
And if you take the social safety nets away, then you have people who are earning $200/week for 40 hours labor.
That means no medical care, rent is impossible to pay in many circumstances, etc., etc., ad nauseum.
Even as it stands now, we subsidize those corporations with our taxes; that's the only thing that makes the wages they pay now survivable in any real sense of the word in any urban environment. Small town or country living, maybe you can make some kind of sane go of it for less than $10/hour, but it's definitely the exception, not the rule.
For McDonald's and the like, when the cost of functionally adequate automation falls below the cost of employment, they're going to move to automation. We either figure out how to handle the consequences ahead of time, or we take the beating when it happens without any fallback position. My guess is that it will probably be the latter, inasmuch as politics-as-usual always seem to target only the nearest term headlights-in-the-tunnel.
Also... speaking now with my AI researcher hat on: I think it's a slam dunk that the automation that will suit the fast food service industries is going to arrive very, very soon. With other service industries soon to follow. This problem is basically on our doorstep right now. Most people fail to see it because it represents a paradigm shift - things will be as they have never been before in history, and it's just very difficult to imagine fundamental changes in one's worldview that have no precedent.
Grab the popcorn and lock your doors. Show's going to start shortly.
I've fallen off your lawn, and I can't get up.
Talk about wasted money. Overpaid senior execs actually reduce the ROI of any business, as numerous studies have shown.
-- Tigger warning: This post may contain tiggers! --
Let's not fool ourselves, replacing the minimum wage worker at McDonald's with a robot isn't a new idea. They've been working on that since the early 2000's. The increased minimum wage has been a slight, if not small, acceleration to the plan to do so.
Even when they were paying less than $8/hour, they were thinking they wanted to have a one-time-cost robot to do the work for them.
Awk! Pieces of eight. Pieces of eight. Pieces of seven... ERROR: General Protection Fault. [Paroty Error.]
When the machine doesn't make fries, it's idle. When the employee doesn't make fries, they're cleaning, etc.
If by "cleaning" you mean browsing Facebook while smoking pot behind the dumpster, then yes you're correct.
If the state runs prisons directly it's public expenditure, which is communism and encourages homosexuality.
If the state pays twice as much to corporations which run prisons that's private enterprise, which is 100% American and apple pie and NUMBER ONE!!!!
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Generally speaking, the fry bagger does not replace just one employee for $15, but two, possibly 3. There are many locations where they are open more than 16 hrs a day, and some 24hrs.
And $15 employee does not cost $15 per hour, it is more like $25 with payroll taxes, SS and benefits added on. $30K a year becomes $50K a year.
So that is $50K a year, X the number of shifts.
In reality, having actually worked at a McDonalds, it takes a full employee only during the rush hours to run the fryer and bag the potatoes. So call it 1 to 2 FTEs.
Never answer an anonymous letter. - Yogi Berra
Here's how it works from a previous comment (https://slashdot.org/comments.pl?sid=9101743&cid=52105397):
I imagine that not only customer facing personnel will be replaced by kiosks, but food preparation, waste disposal, cleaning, and restocking will become automated as well. Accompanying this, I can see a wave of new positions available for robotics, IT, and kiosk repair technicians. I can see a busy McDonalds location staffed by as little as 2 people, there mainly for emergencies and "turning the machines off and then on again" as necessary.
Its hard not to perceive the future of fast food locations. There will be an app that allows you to order on the way to the location. You pay from your phone and a robot prepares your meal just in time for your arrival. Timing this is trivial because you share your location with them. Forecasting the next 15-30 minutes of business through the app makes for fresher food and drastically more efficient order fulfillment. A dedicated lane for app-placed orders ensures quick in-and-out drive through service. Customers are served better, orders are machine precise, profits are higher, and the only people that lose are low income workers.
Customer service rep positions are replaced with machine repair and maintenance positions. The law of unintended consequences is preserved and the inevitable slide towards machine replacement for most human tasks is moved forward. Everyone wins, except of course for the people that the higher minimum wage laws and Affordable Care Act were designed to help. They have been priced out the job market. They are just too expensive to keep on board.
When the only tool you have is a claw hammer every problem starts to look like the back of someone's skull.
Yup. This isn't really a valid argument against increasing the minimum wage.
At worst, it merely hastens the inevitable by a few years, but this is going to happen.
I addressed this. You repeat a line that comes from the thinking that jobs go away forever and no new jobs come. Circa 1790, 90% of American workers were farmers; today that's 2%, and a total of 11% of the workforce (including the farmers themselves) provides all the supporting infrastructure (energy, machines, pesticides, fertilizer, shipping, retail, marketing) to supply our food.
It's not "Hastening"; it's "Compacting." You're creating a situation where people become unemployed at a higher rate--more jobs lost per month--and replacement jobs come at a lower rate. Instead of shaking a little as we push up to 6% unemployment and then come back down to 5% over 5-10 years, we spike up to 30% unemployment over 2-3 years and then require some 70 years to recover--if our economy doesn't fucking collapse first.
You will incur enough injuries and blood loss in your life that, were I to take all that blood from your body today, you would die immediately.
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And in six months buying a $25,000 robot will be cheaper than paying an employee $12/hr... And in a year buying a $15,000 robot will be cheaper than paying an employee $9/hr...
They're going to replace employees with robots anyhow, I don't buy that increasing the minimum wage to whatever has anything to do with it.
Robots will replace people in lots of professions. Economically this will be fantastic, but it's going to require a serious restructuring of our economy, and the faster it happens the more painful it will be.
Raising the minimum wage will increase the pace of the transition, which will make it hurt more.
2 robots at $70k is still cheaper than one employee. One for cleaning and one for frying.
Here's the thing though, that $15 wage is a strawman. They are already planning on buying the robots, they're just using the wage increase as a smokescreen. If the wage continues to stagnate they will still buy the robots and dump those workers! They've been talking about centralizing the drive thru to a call center so they don't have to staff the window for years.
Personally I think robots are the worst thing they'll ever do, for a lot of reasons.
Robots won't stop teens from coming into the store and spray painting penises on all the terminals.
Robots won't notice when the homeless guy who smells like a tuna sandwich that's been in the sun for a week decides to take a nap in the store.
Robots won't stop the aforementioned homeless person from shitting on the table.
Robots have no idea how to deal with humans who give no fucks and want to be destructive.
Of all the things they could have supported and glamorized, they chose shitty fast food. Pathetic.
Any gang of capitalists would do the same. When stuff costs money, then stuff that makes money happens — and that's about it.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
This is why we need to completely drop the minimum wage and bring in a basic income. If something can be done by a robot, then there's no reason a human should be doing it. Productivity will keep going up with fewer and fewer workers needed, but we're still going to have people who need to live and consume.
Customer service rep positions are replaced with machine repair and maintenance positions. The law of unintended consequences is preserved and the inevitable slide towards machine replacement for most human tasks is moved forward. Everyone wins, except of course for the people that the higher minimum wage laws and Affordable Care Act were designed to help. They have been priced out the job market. They are just too expensive to keep on board.
If this analysis is correct, not changing the mimium wage delays this type of thing by only a few years I would guess.
The basic problem with McDonalds is that it's the same generic pseudo-food everywhere.
This generic pseudo-food concept is, actually, once of the keys to their success.
McDonalds' marketers found that a *lot* people often want to go to a place where they know exactly what they're going to get (i.e. familiarity and uniformity) and they've capitalized on that. A place where you order "X" and you'll get "X" just like you do in the next town over, or the next country over.
One time when we were tired and wrecked from traveling we went to a McDonalds in Vietnam....and we got *exactly* the same familiar food we'd have gotten in Seattle or Denver or Memphis. Yes, it was shit food but it was familiar and that was a kind of comfort all in itself.
McDonalds knows this, they understand this bit of food psychology, and that's why they're soooooooo big on everything being exactly the same in every restaurant (food-wise, anyway). You go there and you know what you're gonna get, no surprises. It's one of their keys to success.
Just cruising through this digital world at 33 1/3 rpm...
When a burger flipper starts getting $15.00/hr, what do you think my skills are going to cost you? Right now I'm only making 3 times minimum wage, if minimum wage doubles, so will mine, sooner or later and a lot of people think that way. Oh yeah and Business owners are going to want to keep wages at 20% of revenues so you know what that's going to do to the price of a burger, that $6.75 meal deal will go up to $8.45.
Talk to me about hedge fund managers Ken Griffin and James Simon who each made 1.7 billion last year - which is the equivalent of around 300,000 minimum wage jobs. Explain how minimum wage workers are paid too much, and how it is good policy for your's and my tax dollars to subsidize them.
The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
You should watch "humans need not apply"
This time is different.