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Higher Minimum Wages Bring Automation and Job Losses, Study Suggests (axios.com)
An anonymous reader shares a report via email: As of the start of the year, 19 U.S. states had raised minimum wages, dramatizing a long simmering debate: Do minimum wages kill jobs, and make the working class worse off in the end? Or do they simply make them a little richer, with little or no loss to overall employment? In a new paper, economists Grace Lordan of the London School of Economics and David Neumark of UC Irvine parse 35 years of census data and come down on the worse-off side: For lower-skill jobs like bookkeepers and assembly-line workers, they say, higher minimum wages encourage employers to automate -- according to their calculations, a $1 increase can cost tens of thousands of jobs nationally.
We know how many jobs will be lost. Do we know how many workers will benefit from a $1 per hour increase? I think that number will be larger than the number of jobs lost.
I wouldn't say its controversal, just that there is more to the discussion..
1) Would the automation happen naturally regardless? A machine needs a 0 wage, which a human can't beat and automation will continue to get cheaper.
2) What are these jobs providing unlivable wages really worth?
The laws of supply and demand have been well-understood for generations. Both ends of the political spectrum regularly enact legislation based on them (sin taxes, etc.). For some reason certain people feel that this one area "needs" to be exempt from what is basically a law of nature, because it's politically inconvenient to them. Ironically, it's the folks that tend to go around insisting that they are a "reality-based community." The pseudointellectual contortions required to do this are pretty funny to watch, even though they're wrecking the portion of the economy most important to the most financially vulnerable. Maybe the whole "Fight for $15" thing is just a world-class troll by the 0.1%.
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Not as duh as you think it is.
Just a few years ago Germany had no minimum wage at all. No jobs were lost since it was introduced even though many conservative politicians and heads of German industry prophesied doom and destruction.
"It's such a fine line between stupid and clever" -- David St. Hubbins, Spinal Tap
In a free market, demand is always a function of price: the higher the price, the lower the demand. What may surprise most politicians is that these rules apply equally to both prices and wages. When employers evaluate their labor and capital needs, cost is a primary factor. When the cost of hiring low-skilled workers moves higher, jobs are lost. Despite this, minimum wage hikes, like the one set to take effect later this month, are always seen as an act of governmental benevolence. Nothing could be further from the truth.
When confronted with a clogged drain, most of us will call several plumbers and hire the one who quotes us the lowest price. If all the quotes are too high, most of us will grab some Drano and a wrench, and have at it. Labor markets work the same way. Before bringing on another worker, an employer must be convinced that the added productivity will exceed the added cost (this includes not just wages, but all payroll taxes and other benefits.) So if an unskilled worker is capable of delivering only $6 per hour of increased productivity, such an individual is legally unemployable with a minimum wage of $7.25 per hour.
Low-skilled workers must compete for employers’ dollars with both skilled workers and capital. For example, if a skilled worker can do a job for $14 per hour that two unskilled workers can do for $6.50 per hour each, then it makes economic sense for the employer to go with the unskilled labor. Increase the minimum wage to $7.25 per hour and the unskilled workers are priced out of their jobs. This dynamic is precisely why labor unions are such big supporters of minimum wage laws. Even though none of their members earn the minimum wage, the law helps protect their members from having to compete with lower-skilled workers.
Employers also have the choice of whether to employ people or machines. For example, an employer can hire a receptionist or invest in an automated answering system. The next time you are screaming obscenities into the phone as you try to have a conversation with a computer, you know what to blame for your frustration.
There are numerous other examples of employers substituting capital for labor simply because the minimum wage has made low-skilled workers uncompetitive. For example, handcarts have replaced skycaps at airports. The main reason fast-food restaurants use paper plates and plastic utensils is to avoid having to hire dishwashers.
As a result, many low-skilled jobs that used to be the first rung on the employment ladder have been priced out of the market. Can you remember the last time an usher showed you to your seat in a dark movie theater? When was the last time someone other than the cashier not only bagged your groceries, but also loaded them into your car? By the way, it won’t be long before the cashiers themselves are priced out of the market, replaced by automated scanners, leaving you to bag your purchases with no help whatsoever.
The disappearance of these jobs has broader economic and societal consequences. First jobs are a means to improve skills so that low skilled workers can offer greater productivity to current or future employers. As their skills grow, so does their ability to earn higher wages. However, remove the bottom rung from the employment ladder and many never have a chance to climb it.
So the next time you are pumping your own gas in the rain, do not just think about the teenager who could have been pumping it for you, think about the auto mechanic he could have become – had the minimum wage not denied him a job. Many auto mechanics used to learn their trade while working as pump jockeys. Between fill-ups, checking tire pressure, and washing windows, they would spend a lot of time helping – and learning from – the mechanics.
Because the minimum wage prevents so many young people (including a disproportionate number of minorities) from getting entry-level jobs, they never develop the skills necessary to command higher paying jobs. As a result, many turn to crime,
We know how many jobs will be lost. Do we know how many workers will benefit from a $1 per hour increase? I think that number will be larger than the number of jobs lost.
Be careful of that calculation.
The justification behind Chinese off-shoring was that the benefits of reduced prices outweigh the domestic loss of wages. For example, the damage from losing one worker at $50K is more than compensated if 10 million people spend $1 less on some product. That frees up $10 million to be spent on other things, and the economy gets stronger.
The problem is that the benefits are not linear. You can easily see that by going to the limits of the policy - when all manufacturing is done in China and all workers are out of a job, for instance.
If you assume a fixed or shrinking pool of available jobs, then you quickly come to the point where there are more job-seekers than there are jobs. In this case the economic benefits can still be argued, but the cost of doing so is the loss of the $50K job and the extra burden of having an unemployed person in the labor pool.
It's not a linear function, and you can't rely on past economic studies that were done based on a previous historical situation.
So... be careful with that calculation.
"could be" instead of "is". The problem is that the benefits of automation are not trickling down in practice (other than cheap widgets and lawn-chairs). The benefits go mostly to the owners of the machines: it's becoming a winner-take-all economy.
I'm not a "commie", but this is just the kind of problem Karl Marx ranted about. I don't necessarily agree with his proposed solutions, but if some other solution is not found, then rioting etc. could lead to Marxism/communism, along with its down sides. Better to solve it smartly rather than let angry mobs "solve" it for us.
Table-ized A.I.
Where I live, $15/hour is still too low to live hear. (A one bedroom shit apartment is over a $1,100 a month) What folks do is commute an hour or more one way from the poor areas. So, two hours a day is just traveling to and from the job. Plus work the 8+ hours and try to do the things that one has to do to live.
That's a shitty life. But they do it because there's just Walmart as an employer and some small businesses that have no job openings.
Yeah yeah yeah, they made "poor life choices" - they should have went to medical school.
See, the trouble with our society is that a person's worth is based upon their economic value. Can't make a living with the intelligence you are stuck with? Well, you're stuck as a poor slob eeking out enough to eat - just a like a Third World country,
I think there is at least some truth to this study. It does make sense that businesses will automate whatever they can and raising the minimum wage may hasten that. But the thing not talked about is that as time goes on these technologies will come down in price and be cheaper than the current minimum wage and businesses will automate then anyway. So yes, it may hasten it a little bit, it certainly isn't the reason businesses are automating. So the choice is basically to keep the minimum wage where it is and have these jobs for an extra couple years while people still make less than they need to live or to raise the minimum wage and hasten the loss of these jobs but get everyone else closer to a wage they can survive on. If we wait, businesses will still save money with automation and will save money by continuing to pay wages people can't live on.
What needs to be addressed is how to help everyone who is pushed out of their job via automation. There needs to be some type of job training or something to help people adjust to the new economy, but that isn't happening. No matter what we do, people are going to lose their job to automation, it is just a matter of when. I think we should at least make sure that the people who don't lose their job to automation make enough money to live on.
"Information wants to be expensive" - Stewart Brand, the same guy who said "Information wants to be free"
I wish my 15 year old daughter could get a part time job for $8/hr. It would teach her responsibility, she'd learn a little about business, and she would have money of her own she's earned. It would be anything but demeaning. Unfortunately those types of jobs don't exist anymore.
It's called Universal Basic Income, because in a few decades it won't just be unskilled workers, automation and AI will be eating in to the more skilled professions as well.
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Why do those advocating the $15 hamburger wage not see this ?
Because you're making a detached economic argument in favor of business interests, and they're making a "I need enough food to survive" argument in favor of community interests and human rights.
In most areas of the country, especially near big cities, the cost of living is approximately $15 if not much higher (I've seen estimates of more like $20-25 in New York City, for example). This is the cost of basic rent, basic utilities like electric and water, food, transportation to a job (whether by owning a small used car or taking the bus - what you think buses are free?), and replacement clothing (nothing fancy, just new pair of jeans every once in a while as old one rips). Basically, inflation is increase in cost of goods and services, and if you took the minimum wage of the '60s and '70s and adjusted it for inflation, it really should be something like $15 per hour now. With the productivity gains of the average American worker due to increased education and technology, it should probably be even higher, but almost all of the profit gains have gone to top executives rather than increased the salaries of those that actually do the work.
So what does this mean? It means any job paying less than approximately $15 per hour is NOT LIVABLE. You will starve, or end up homeless, or some sort of big problem. It's not sustainable. What I don't understand is why people make the argument of the don't "deserve" $15. Who says? Who decided some arbitrary number is the cap? The REAL issue is: does every person deserve enough to meet basic needs in modern society? I think the answer is unequivocally YES. Every American deserves the dignity of basic needs met, especially when they're willing to work full time to do so. No matter what the work is, if it takes up a full week of work, then they deserve to have basic bills covered, end of story. Full time work is opportunity cost -- if you're working full time, it means you don't have free time to take other jobs, attend school or training, etc. IT HAS TO BE WORTHWHILE. It has to be enough to survive.
Having "more jobs" that pay starvation wages is not really an improvement. It makes job numbers reports and corporate profits look better, but those aren't the only metrics of the success of a society. In fact, I think they're bad metrics; a much better one is: do we ensure every American that works hard can take care of themselves, and has opportunity to improve their lives? By that metric we are failing disastrously.
In my view, businesses that cannot budget for and pay living wages are FAILING BUSINESSES. A business that requires its workers to starve for its owner to make a profit is a FAILING BUSINESS and deserves no sympathy or respect. They should have to drastically change their business strategy or go out of business and be replaced in the free market by business owners that DO pay a living wage.
As far as automation goes, do you think they'll ever decide "Nah, I don't need more profit!"?. At best, low wages slightly delay automation, but make no mistake: it's coming. It's the story of the industrial revolution and the Gilded Age, big business grew larger and larger until it controlled the economy and could automate or improve efficiency, and laid off many many workers once they were unneeded. The poverty and starvation was great, which is what lead to so many of our labor reforms and formation of unions. We have to start putting human interests first over corporate interests. Don't fall for their propaganda. Every American that works hard deserves to live without fear of where the next meal will come from or how to pay rent this month.
And really, we should be taking advantage of automation to work LESS. Lower the amount of hours for full time work. Give everyone more time to raise their families, get involved in the community and local politics, take classes and improve education, volunteer, etc. There's more to life than wage labor. We can make that happen if we stop obsessing with letting big business take more, more, more for themselves.
All over Israel the McDonald's use automated ordering kiosks instead of human beings. There's about 3-4 actual humans working in any given McDonald's branch. And I can assure you that there's no $15 equivalent minimum wage in Israel, yet this still happened, and it's what McDonald's USA has a wet dream for. It will happen, and it will happen a lot sooner than you realize, regardless of any regional or even national minimum wage.
The right stems from the very notion of "no taxation without representation". Even the Founding Fathers understood a government needs taxes. The right is inherent in the very nature of society. Libertarian fantasies about taxation as "theft" is just that, fantastical thinking that has absolutely no relation to how a real society could ever function.
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I'll play devil's advocate here. What right do you have to take money from somebody and give it to somebody else?
Maybe it is, maybe it isn't. That's actually irrelevant. Enlightened self interest says that wealthy people receive an enormous personal benefit in shoveling sufficient money at the starving classes that they don't rise up and revolt. I'm not wealthy, but I still don't want to be on the receiving end of the French Revolution so I support spending my taxes on basic life support for my neighbors.
You can be a complete sociopath and still support basic universal income for your own selfish reasons.
Dewey, what part of this looks like authorities should be involved?
A high school student working at a below living wage is doing a job that could be done by an adult at a living wage. Same for every other example. By paying these people less, you give the companies an incentive to use them instead, reducing the job pool for adults and driving down wages for everyone.
If the job isn't important enough for you to pay them a living wage for, then the job isn't important enough to society for it to be done.
So no such thing as an entry job meant for people to learn how to work so they can move onto real jobs? And we seem to have convinced businesses hat if the job isn't important enough to pay a living wage, it isn't important enough to hire a human.
What you are suggesting is basically what Milton Friedman suggested decades ago.
There is no getting around the fact that increased automation will eventually require universal basic income. The alternative is to vastly increase the size of the welfare system. Interestingly, as Friedman points out, the universal basic income would actually shrink the welfare system.
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You are welcome on my lawn.