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You keep making this point over and over, but I don't think you understand the reality of the situation from a business owners perspective. I'll talk from the
by krschultz 16y ago
You keep making this point over and over, but I don't think you understand the reality of the situation from a business owners perspective.
I'll talk from the perspective of someone who has both earned minimum wage at McDonalds and designed manufacturing robots to replace people.
When I was working for minimum wage, I worked my ass off. We'd retunely serve >$1,000 an hour in business with 10 employees making minimum wage. 10x7 = $70. There is plenty of overhead but when your payroll expense is less than 1/10th of your revenue, would lowering the minimum wage really do much? In our case the limiting factor on how many people were working was literally how many jobs there were. Add in some more poeple, what do they do? Nothing. So all the minimum wage does is set a floor on what they paid us. I was horribly overqualified, so was everyone else, anyone who walks in the door can handle the job, so they would just pay the cheapest people to do that job required by law.
Now fast forward to when I had graduated college and was designing robots, I was working on a system for a production line where the parts cost >$50,000 each. The person it was moving aside (they weren't actually fired) made >$40,000 a year. Much more than minimum wage. The reason for the replacement was that the robot could do it more precisesly and thus waste fewer compononets. The value was not the cost of labor, but the ability of the robot to do something better than what a human can do.
The robot cost a lot of money, hundreds of thousands of dollars, and the person it was replacing only made about 1/5th of that. This was a relatively long pay off project just looking at labor vs robot costs. The real savings was in reducing wasted procduct. So the robot was replacing high skilled labor that was far above minimum wage anyway.
If your argument ever relies on McDonalds replacing people with robots, you're just wrong. Robots are not that cheap and people are not that expensive. Minimum wage is peanuts already, lowering it won't add more workers. Would you really replace the person handing cups out of the window for $5 an hour? What kind of robot would you need with the articulation to pick up a cop, hand it out the window and find the person sitting in their car. Would it really be worth the tens of thousands of dollars to replace a $7 an hour worker? Hell no! That's why we don't have robots at McDonalds. But if the minimum wage was $2 an hour, the guy at the window would be making $2 an hour, and there wouldn't be 2 workers just becuase the minimum wage was that much lower, becuase you only need one guy at the window handing out cups no matter what he costs.
Another example: my uncle owns a gas station in New Jersey, he is required to have paid pump attendants 24/7 by law. He pays them miminimum wage. This barely even factors into his bottom line at all, he believes it lowers the insurance more than it costs him in wages. Yet he has to do it by law, and he has to pay them by law. If minimum wage was lower, he would just hire exactly the same number of people and pay them less. There is no extra work for the extra people. There is no reason for him to pay any more becuase there is no skill required for the job.
It is relatively simple and established economics, but more importantly it is something that you can feel as a business owner (if you are one). For a lot of this stuff there is a set number of people you need to get the job done and price of labor does nothing but affect how much profit you have. Lower prices of labor doesn't change how many people you need at a restaurent or a gas station. There is a minimum and maximum number of people that is effective regardless of cost. Thus minimum wage is helping those people in no skill jobs to have a realistic wage instead of just a race to the bottom.
- grandalf 16y agoYou are forgetting to ask the question "Why can McDonalds hire such unskilled workers and still run a successful business?" McDonalds has put many millions of dollars into automation systems and foolproof menus that allow the food to be prepared effectively by minimum wage employees. Short order cooks generally earn roughly double the minimum wage, so you can see how significant an accomplishment this was. Most of the items sold by McDonalds could probably be sold out of an "automat" style vending machine, so I imagine that the decision to use actual humans is more about marketing than about production. As for the NJ gas station attendant, the law requiring gas stations in NJ to hire people to pump gas (self service stations are outlawed) was simply intended to increase employment among very low end workers. The objective could have also been achieved by outlawing dishwashing machines or farm combines, etc. So your point rings true -- the value of a pump attendant is very low (lower than minimum wage) when set by the market precisely because people don't want the service and it wouldn't exist without a social policy driving it. The situations you have mentioned all involve unskilled labor. The invention of modern farm equipment and many appliances is to blame for decreasing the value of unskilled labor. The question that I consider most important is in how you look at unskilled labor. Is it a "class" of people who will never improve their skills and are doomed to live on whatever wage is the market price for unskilled labor? Or are the currently unskilled workers (many of whom are in high school) likely to obtain skills and experience that makes them command a far higher wage? I'd argue that artificially inflated minimum wages, not intrinsic quality improvement, is why McDonalds relies far more upon pre-prepared items assembled (bun, pattie, cheese, lettuce, bun) in the store than on semi-skilled short-order cooking. A restaurant like Noodles & Co. is a great example of how a chain was able to introduce one small skill (the art of stir frying a bowl full of noodles, sauce, and a few other ingredients) to make the food taste significantly better than if it were made in a factory and heated up, or stored in a vat then ladled on. Again, I haven't argued that a living wage is unreasonable. I'd just rather see market wages left alone and separate state subsidies of the unskilled, along with career counseling, community college availability, and possibly free daycare. The approach we have today is to proudly proclaim that our $6 minimum wage helps people, when it actually (and measurably) harms them, as I've illustrated elsewhere in this discussion.