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.

Comments

If not now...

[Memophage]

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.

Re:If not now...

[boristdog]

And someone on Slashdot will make a 3-D printed, Arduino-controlled version for $250 that also checks the fry temperature and saltiness, and counts each fry for maximum efficiency.

Then someone else makes a 3-D printed, Arduino-controlled restaurant that takes raw potatoes, flour, and meat in big hoppers. It creates a burger and fries in a few minutes and is entirely controlled by a smartphone. And the whole thing fits in the space of a standard minivan. Cost? $8500.

Now McDonalds is out of business because any fool can buy one and put it on a corner.

BFD.

Re:If not now...

[bluefoxlucid]

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.

Businesses have risk appetite and risk tolerance. Risk appetite is how much money they want to throw in a hole for a likely conversion to more money; risk tolerance is the point at which they will not throw more money into the hole because the return--whether or not it's coming--is sinking the ship too hard, and they're no longer interested in trying to squeeze out more promised droplets of gold.

Because of risk appetite, different businesses will implement labor-reducing changes at different times. Sure, you have an $8.25/hr employee now, and the machine costs $8/hr; but next year the machine should compare to a $7.25/hr employee, and in three years it should compare to a $5.50/hr employee. It seems to me that, over the ten-year period, you will come out with a higher profit if you wait three years before deploying expensive machines. These are $35,000 machines replacing $16,500 employees, so you need a little over 2 years to get a break-even ROI (replace benefits with maintenance).

To some businesses, switching onto machines right away seems like a good idea. Poor foresight I guess. Other businesses will vary between how they roll out--how long to delay, how fast to carry out the roll-out, etc. That means moving everyone out of their jobs and getting machines in here could take a decade or more if wages are competitive with machines and we believe machines will get cheaper. The risk of moving onto machines isn't offset by the 25 cents savings, and the potential return for paying that 25 cents for the next few years is that you turn it into a 4 dollar savings instead.

This breaks when you suddenly make labor expensive.

Now instead of $8.25/hr vs $8/hr, you're doing $15/hr vs $8/hr. In one year, avoiding the 25 cent savings means $500 per employee per year; but at $15/hr, you're losing $7,000 per employee per year for not going in right now. That's going to hit risk tolerances a lot faster, and jobs are going away much more rapidly in those conditions.

It's even worse if machines are *more* expensive than people: you get the price increase that comes with, say, $11/hr (machine) labor, but you fire a bunch of $8.25/hr human labor. Normally, we replace a high-labor process with a lower-labor one and make cost savings, leading to a reduction of prices, leaving more money in consumer pockets, allowing more purchasing, creating new jobs to make the new stuff we're buying. If the machines are more expensive than wage-workers before the wage bump, then costs go *up*, and consumer ability to buy goes *down*: rather than reacting to the reduction of jobs by creating new jobs, the consumer base reacts to the increase in cost by not being able to financially support the wages of *even* *more* *jobs*.

In 1790, 90% of Americans laborers (in a ~58% labor force) were farmers; we've replaced most of them with machines, and they now make up 2% of the labor force, and about 11% of consumer spending in total goes toward food to cover those farmers, the people building and maintaining farm equipment, logistics and sales moving that kind of thing, chemical companies making fertilizers and pesticides, and oil mining and refining to get the fuel for energy to drive all this. That means 18% of the labor involved in making food is on the farm, and 82% is in supporting infrastructure. You'll notice we don't have an 82% unemployment rate today; and automated fast food won't destroy our job market unless the method by which we transition is damaging--which this particular method *is*.

Re:If not now...

[lorinc]

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.)

But then you won't be able to compete with countries that do not enforce anti-automation laws.

I think the game is already over. A significant fraction of the population is already useless to the economy, and in 30 year it will be the vast majority. Let's face it, for the past 40k years, we built our societies based on the value of human labour. Today, human labour is worth almost nothing. It's decreasing so fast, we will see it reaching 0 in our lifetime.

Where do we go from there? Do we fight barbarian style to survive while the 0.1% enjoy the robotic enabled leisure society utopia? It seems so inevitable, it's extremely sad. Look at what happening right now in France: it's obvious all these guys will be replaced by cheaper and more docile robots in less than a generation, what will they do when that happens? Riots, civil war.

The sad part is, while a few will be happy, the vast majority will not, whereas it could have been to other way around thanks to technology if the right political decisions were taken in the 70s.

Re:And then those employees burn down your restaur

[Midnight Thunder]

Sure seems like it would cost a lot more than $35k.

True, but that means the employee(s) would make way, way less than $15/hr. at their new job - stamping out license plates in prison.

Pretty sure that's not what most folks would want to end up doing...

So essentially moving the cost burden from the private industry to the state? Always find it curious that we oppose elements of a social system and then end up paying for it anyhow, but in some other way.

All talk

[jandrese]

Last time we had a discussion about raising the minimum wage (decades ago) McDonalds actually demonstrated a fully automated restaurant. It promptly went back to wage slaves once the talk died down. Now they're so lazy they're not even bothering with the proof of concept store.

If these robots were practical at the price he is quoting they would be in use today. Payoff period would be 2/3 of a year instead of 1/2 a year, but that's barely any difference. This is a scare tactic pure and simple.

Nothing to See Here...

[WheezyJoe]

The only news here is a former McDonald’s CEO got some air-time on FOX Business Network’s "Mornings with Maria", saying something that happens to dove-tail with Fox's anti-everything that keeps its audience agitated and receptive to ads for Cialis (for daily use) and other products directed to the aging demographic that sits at home watching cable news all day.

Flash: There are already automated order-taking machines in McDonald's restaurants throughout Europe. And automated check-out lines in Supermarkets throughout the U.S. And robots welding cars together throughout the world. Progress marching on, regardless some barely adequate minimum wage.

OTOH, whether people LIKE robot-made-and-served food remains to be seen. The only thing that's certain is robots are far more sexy in the Board Room than people. Nobody gets props anymore for motivating people to be more productive, not when there's a guy with a fancy suit and a toothy grin from Acme Robots showing fancy color pamphlets to a hungry Vice President who wants the Big Promotion.

By the time the dust settles and McDonald's is shelling out support contracts to third, fourth, and fifth-party vendors who show up as reliably as a Comcast repairman, the VP with the great idea will have moved on, maybe to run HP (another nail in that coffin). And who keeps the McDonald's running when the robots break? That same tired assistant manager you always see picking up the slack at the fryer or turning the key when the cashier fucks up. At least he'll be making $15 whole dollars an hour for his trouble.

On target

[Anonymous Coward]

In the 1950s, Henry Ford II, the CEO of Ford, and Walter Reuther, the head of the United Auto Workers union, were touring a new engine plant in Cleveland. Ford gestured to a fleet of machines and said, “Walter, how are you going to get these robots to pay union dues?” The union boss famously replied: “Henry, how are you going to get them to buy your cars?”

Re:And then those employees burn down your restaur

[Hylandr]

There's more to hiring people than just giving them a paycheck. On average, an employer has to pay an additional 2/3's of the employee's pay in taxes, insurance and in some places other benefits.

But lets forget all that for a moment and stick to the numbers we have, while thinking in MAN HOURS:

35k divided by 15 an hour is 2,333 *man hours*
Most stores at peak times have 5 crew members.
That's 466.6 hours of operation for 5 people.
Assuming there are 5 people running a 24/7 store that's 19 *days* of operation that will be required to return on that investment. ( Gross )

But without people the costs of operation will drop also.
- You wont need the space or restroom facilities for a crew.
- Without people Minimal HVAC will be required.
- Robots can certainly run 24/7
- The building size for a drive through only restaurant can now shrink.
- Multiple lanes with highly efficient production will shorten wait time and provide much more consistent quality.

Cons:
- You still need someone to unload trucks, restock machines, and maintain the automated devices. An owner can pay one person minimum wage to do the rounds, responding to alerts for low stock or malfunctioning equipment etc.

Additionally, I KNOW someone won't be spitting or adding any other 'secret sauce' to my food in the back.