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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.
I, for one, welcome our new French-fry bagging robot overlords
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.
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.
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.
McDonalds et. al. are about a predictable customer experience - God knows not an excellent one, just predictable. Robots should deliver that much better than high school kids.
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
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.
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.]
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.
Jumpstart the tartan drive.
Foxconn cuts 60000 jobs, replaces them with robots
That means that robots can be cheaper than a $320/month wage. It's not a minimum wage issue.
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.
I read the internet for the articles.
And when you replace all the workers with robots, who's going to buy your fast food?
People on guaranteed basic income. Liberals are pushing for it, but it's going to co-opted by the 1% who will dump the burden of paying for it, as much as possible, on the middle class. Partially through high taxes on the middle class and partially through debt that will be inflated away, which will destroy the savings of the middle class. The 1% will, of course, pay for as little of it as possible.
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.
If you do it slowly enough, the fast food prices won't rise as quickly as inflation, and consumer buying power will increase. That's what actually happens. To buy more stuff, we need more workers--operating the machines, of course--which means new jobs. We spend a smaller proportion of our income on the stuff we buy now, and the remainder goes to new things--since the 80s, we've moved our money from food and clothing onto more and better healthcare, as well as smart phones and electronic entertainment; and houses have gotten bigger, while cars have gained luxury, performance, and safety features while remaining roughly 56% of the median income.
If you do it quickly, you get an unemployment spike, which damages the economy. The bigger the spike, the longer it takes to recover, and the poorer your society comes out of it.
If you do it poorly, you get rough destruction of wealth. Raising minimum wage already concentrates wealth into a poor elite--some minimum-wage workers get richer, all other consumers become poorer, and we lose jobs: The cost of a burger increasing by 17 cents, with 282 billion burgers sold per year, is $50 million; that's over 3,000 $8.25/hr jobs. Raising minimum wage such that the old wage was cheaper than a machine *and* the new wage is more expensive ($8.25 wage becomes $15 wage; machine is $9.50) eliminates the minimum wage jobs and exchanges in more-expensive machines, so your economy takes it both ways.
A lot of people can't grok this because it's a continuous-operation function. Basically, people reason, "Hey, but the minimum-wage worker has more money to spend, and so you wouldn't lose any jobs!" By such reasoning, you have infinite money, and thus infinite jobs, and we are all fabulously wealthy (we are, but that's not the point). You have so much income *per* *time*, and the cost of purchasing certain goods increases, and so the number of goods increased *per* *time* decreases, thus the jobs decrease. Again: doubling down on this kind of damage by making wage workers non-competitive with machines is bad.
It gets even worse: normally, product price increases occur slightly more slowly than inflation for products whose costs have decreased. That is to say: If you displace 10% of the labor cost of making a hamburger, that hamburger will approach 1.8 times the price after 100% inflation--10% of its price doesn't keep up. As this money returns to the consumer, the consumer base becomes capable of paying the wage of another worker, and thus can buy new products. If you've pushed up the cost of labor, then it takes *longer* for those two things to intersect, and so the transitional period of unemployment extends: jobs lost to technical progress take more time to become new jobs.
So you're de-employing workers *quickly* (unemployment coming more rapidly); you're increasing the cost of goods instead of decreasing it (setting the far point of technical progress growth years farther out); and you're making human labor more expensive (requiring much more purchasing power movement back to the consumer's hands before replacement jobs are created--and reducing the total replacement jobs possible).
That's a recipe for an economic disaster and a permanent feedback loop to make a society poorer. It's one of the reasons I push for a Citizen's Dividend that migrates costs off wage-labor (reduce payroll taxes and replace minimum wage raises with a non-wage income basis): that plan increases the number of consumer take-home dollars per employer wage-labor dollars paid to have an employee. You can describe that as "decreasing costs" or "increasing consumer buying power"; if you stare long enough, you realize the two things are eventually the same.
Technical progress is what makes the middle-class, the poor, *and* the rich richer. It's what's given us the ability to *afford* modern healthcare, high-speed internet, wireless ph
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This scaremongering makes zero sense, there are plenty of countries with higher income than USA and they don't starve from unemployment, rather the opposite.
Citation needed.
You're correct only if by "plenty" you mean 3-5. There are 5 countries with higher median income than the US: Luxembourg, Norway, Sweden, Australia, and Denmark.
There are 3 countries with higher average wage than the US: Luxembourg again, Switzerland, and Ireland (according to the OECD). (Though this depends on who you ask: according to the United Nations Economic Commission for Europe, the US is flat-out No. 1 for average income.)
All but 2 of those (Norway and Switzerland) have higher unemployment rates than the US.
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.
Take it easy, Charlie, I've got an Angle...
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.
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?”
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.'"
if McD's cost is $35,000, and they're open 16 hours per day, then it pays for itself in less than a year with employees making less than $8/hour.
(8 * 16 * 365 = $46,720)
I know that for myself, I go to McDonalds embarrassingly often, and I would absolutely not go if that were the case, just as when I go to the super market, I intentionally don't use the self checkout lines. I don't care if its cheaper, and even if they extended a fraction of the savings to me, I'd RATHER help kids keep employed and have some money to spend. And even if they're not kids, I'd rather they get paid the money, than just give huge bonus' to the C-level guys for thinking "hey, lets automate away everyones jobs! what could possibly go wrong with that? oh and while we're at it, lets support politicians who want to do away with social safety nets! Like anyone actually needs those things!"
And I wish I was sarcastic about that...
Bullshit, 3 seconds on google show that fast food workers in the United Kingdom make $7.79 USD.
Germany? $9.87 USD.
France? $10.28 USD.
Italy? Monthly salary of $333.52 USD. So unless they're only working 20 hours/month, it's no where near $15/hr
So which magical first world countries have been paying fast food workers more than $15/hr for decades??
most workers work 40 hrs/week * 50 weeks/year for 2,000 hours...
Not at McDonalds they don't. The vast majority work part time and there's a reason for that. Hint: it's not to benefit the employees.
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.
Perhaps, or perhaps not. $70k is the equivalent of 2 1/3 years of a $15/hour wage (eight hours per day, five days per week, 50 weeks per year). So even in a perfect world, it'd take 2 1/3 years to break even, assuming you can only replace one employee's job with each robot. And that also assumes that your robots never need maintenance, adjustment, calibration, cleaning etc., nor do they use any power or consumables.
That's a pretty unlikely scenario, to be honest. Far more likely is that your two robots will set you back the equivalent of around three years before you've saved a cent. After all, while you got rid of the unskilled labor to assemble burgers, you replaced it with skilled labor to maintain the robots, and you probably have to pay that skilled labor for their travel time and expenses servicing robots at many, many locations around the country. (No single location or district is going to provide sufficient work for the robot techs to live locally, so they'll be traveling to and from your stores for a large proportion of their time.) If much maintenance, calibration or cleaning is needed at all, you'll find the projected cost savings quickly vanishes.
And then what's the service life of the robots? Answer that, and you'll know whether this is going to be worth the PR downside. If a robot lasts ten years and pays for itself in three, you've got a good argument for phasing out the meat puppets it replaces. If it takes three years to pay off, but you're having to replace it after just four or five due to its service life or obsolescence, well, that's another matter entirely.
But then all of this is pulling numbers out of our butts -- both on your part and mine -- and has little to do with the real world.
Why?
The robot that fills the baskets with fries does not brake down that often.
It is not precision engineering here, it is sticking the right weight of fries in the bag. Ever watch "How It's Made"? They show lots of machines that do exactly that, hundreds of times an hour for things like bagged candy. The only difference is they seal both ends of the bag.
And believe me, they spend a LOT of time training people to do it right, even a 5% overfill makes for losses, 10% underfill makes for pissed off customers who think they were cheated.
Never answer an anonymous letter. - Yogi Berra
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.
~ People that think they are better than anyone else for any reason are the cause of all the strife in the world.
You can't just design a machine that doesn't need to be cleaned.
but you can design a machine that only needs to be cleaned occasionally.
Everything that touches food needs to be cleaned. Food has to be removed from all the cracks and crevices.
It can be designed literally without cracks and crevices, and with self-flushing systems for any parts where that's not true.
I agree that machines could be designed to reduce cleaning, but cleaning of automated food service equipment is a nontrivial and very important part of the operation.
Taking the humans out of the process is nontrivial, but removing them will actually improve cleanliness and quality! Every leaf of lettuce can be UV-inspected for contaminants before it's used and every slice of tomato can be checked for sugar content with laser spectroscopy and rejected if it's sour, let alone has a discoloration indicative of some defect. A human touch may be beneficial for more complex foods for the foreseeable future, but the sad truth of fast food is that the human touch is often primarily a vector for pathogens.
Most humans wouldn't use a spatula to flip burgers if the spatula was very dirty. They would clean it, or get another one. The machine is going to keep going because that's what it was programmed to do.
The machine will both clean its own spatula and scrape its own grill, and it will sense when the bucket is full and a robot will come to empty it. It's not 1985 any more. These days, we can use visual processing to determine whether a spatula (or grill) is dirty. I would scrape every time, and use visual processing to determine if I had been successful.
The automated burger flipping mechanism may be buried inside the machine where it can't even be seen.
Personally, if I were building an automated restaurant, I'd put the machines where they could be seen, with shutters to pull down to hide them if I needed to perform maintenance. People would come in just to watch the machines work. How very postmodern.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"