8 ms·

Sounds like a great argument to increase the federal minimum wage so everyone is forced to pay their employees more.

username444 7y ago
Great idea. Until you realize that no level on minimum wage is adequate in SF, while $10/hr is livable in rural Arkansas. It's not a silver bullet even with COL factored in. Higher staff costs? Replace them with automation. You can see the largest employers of minimum wage employees (eg. Mcdonalds) hedging against a rising minimum wage with kiosks to replace cashiers. At $15/hr for labor, those capital investments start looking like a mighty fine ROI.
- fwip 7y ago
  The cost of technology falls much faster than wages rise. Wages currently are responsible for about 4% of the cost of the burger. https://www.purdue.edu/newsroom/releases/2015/Q3/study-raising-wages-to-15-an-hour-for-limited-service-restaurant-employees-would-raise-prices-4.3-percent.html https://www.purdue.edu/newsroom/releases/2015/Q3/study-raisi...
  - estebank 7y ago
    So you're saying that by increasing the cost of the burger by ~5% some of their employees could double their salaries? That's great!
    - fwip 7y ago
      Yep.
- donarb 7y ago
  Cashiers helping one customer at a time are a bottleneck in a fast food restaurant. It's not that those jobs are eliminated, food still needs to be cooked and served. Kiosks allow up to 2, 3, 4 times the number of customers to order food at the same time (this also includes food delivery services who can order remotely). Kiosks are just the last part of efficiency that fast food restaurants have been developing over the last 50 years.
  - darioush 7y ago
    Increasingly surprised how we need all these various ipads/terminals in businesses. Seems by now technology should be able to push something to the customer's phone when they walk into the store and have them complete their order on their phone without having to install apps.
setr 7y ago
One interesting result of that is it becomes more viable to look for strategies that eliminate the employees altogether, eg the food-ordering terminals that are going up everywhere, as the relative cost diminishes with wage increase. In such situations, it becomes an irreversible effect, as the cost to transition was mainly up front.
- mcguire 7y ago
  One interesting question: is the tipping point for switching to automation in the range of the minimum wage? Does increasing wages move you across that tipping point, or is it cheaper to get rid of employees no matter what the minimum wage is?
  - setr 7y ago
    The existence of minimum wage at all enforces the property — you can otherwise just keep lowering pay until its not worth replacement (eg india can get away with paying very low wages, so the threat of automatic replacement isn’t nearly as high). So the real question is: at what point does minimum wage draw automation as a response? And that of course depends on the economics of automation at any given point in time — if a human isn’t drawing enough value (compared to the cheaper alternative), then the only rational thing is to replace the job entirely. But minimum wage is also independent of automation (or any other alternative) costs, which is why its a bit of a hamfisted solution — it ignores the possibility that human labor simply isn’t worth that much. So you get this awkward line where everyone above the line is better off, and everyone below the line is homeless — the line being how much value you can produce. Using India again as an example, that line doesn’t really exist — you have a fluid scale of wealth, where the bottom-most aren’t jobless (we can always produce enough work, if the price is right; you don’t want a daily maid?), but they barely make anything, and they live a lifestyle that we as a first-world country would deem unacceptable, but they find acceptable (especially compared to the alternative — no job/money at all). Notably the poor indian probably lives better than the poor american, because the economy of the poor is significantly more developed. Partly because there are so many poor people in india, and partly because their income is allowed to be so much more fluid. So there’s also the additional question of whether minimum wage “starves out” the poor economy, compounding how bad life can be at the bottommost rungs of our society
coredog64 7y ago
In economic theory, this is what’s known as an efficiency wage. If you pay more, there’s more competition for your openings and you attract a better class of employee. As other comments have pointed out, simply raising the minimum wage doesn’t accomplish the same thing. Instead, all those people who were marginal at $7-8/hour simply don’t get hired, and employers use automation or forego the opportunities that additional labor offers.
- curyous 7y ago
  If your business is only viable when paying people below what they need to live, then your business shouldn't exist. The fact that you can do that now is simply people in power exploiting the weak. Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. Generally in economics, making a business only viable through subsidies is a bad thing. It is much more efficient to give that labour to better businesses.
  - vonmoltke 7y ago
    > Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. How do you define "cost"?
    - rocqua 7y ago
      The 'cost' of labour is the income required for such labor to maintain itself. I.e. living costs + healthcare costs + groceries & other expenses + a little saving. This is the base cost of a person, and thus the base cost of labour.
      - xamuel 7y ago
        You're just pushing the bubble around under the wallpaper: who defines "living costs" etc? A person can technically stay alive in extremely spartan conditions.
  - 7y ago

Great idea. Until you realize that no level on minimum wage is adequate in SF, while $10/hr is livable in rural Arkansas. It's not a silver bullet even with COL factored in. Higher staff costs? Replace them with automation. You can see the largest employers of minimum wage employees (eg. Mcdonalds) hedging against a rising minimum wage with kiosks to replace cashiers. At $15/hr for labor, those capital investments start looking like a mighty fine ROI.

fwip 7y ago
The cost of technology falls much faster than wages rise. Wages currently are responsible for about 4% of the cost of the burger. https://www.purdue.edu/newsroom/releases/2015/Q3/study-raising-wages-to-15-an-hour-for-limited-service-restaurant-employees-would-raise-prices-4.3-percent.html https://www.purdue.edu/newsroom/releases/2015/Q3/study-raisi...
- estebank 7y ago
  So you're saying that by increasing the cost of the burger by ~5% some of their employees could double their salaries? That's great!
  - fwip 7y ago
    Yep.
donarb 7y ago
Cashiers helping one customer at a time are a bottleneck in a fast food restaurant. It's not that those jobs are eliminated, food still needs to be cooked and served. Kiosks allow up to 2, 3, 4 times the number of customers to order food at the same time (this also includes food delivery services who can order remotely). Kiosks are just the last part of efficiency that fast food restaurants have been developing over the last 50 years.
- darioush 7y ago
  Increasingly surprised how we need all these various ipads/terminals in businesses. Seems by now technology should be able to push something to the customer's phone when they walk into the store and have them complete their order on their phone without having to install apps.

setr 7y ago

One interesting result of that is it becomes more viable to look for strategies that eliminate the employees altogether, eg the food-ordering terminals that are going up everywhere, as the relative cost diminishes with wage increase. In such situations, it becomes an irreversible effect, as the cost to transition was mainly up front.

mcguire 7y ago
One interesting question: is the tipping point for switching to automation in the range of the minimum wage? Does increasing wages move you across that tipping point, or is it cheaper to get rid of employees no matter what the minimum wage is?
- setr 7y ago
  The existence of minimum wage at all enforces the property — you can otherwise just keep lowering pay until its not worth replacement (eg india can get away with paying very low wages, so the threat of automatic replacement isn’t nearly as high). So the real question is: at what point does minimum wage draw automation as a response? And that of course depends on the economics of automation at any given point in time — if a human isn’t drawing enough value (compared to the cheaper alternative), then the only rational thing is to replace the job entirely. But minimum wage is also independent of automation (or any other alternative) costs, which is why its a bit of a hamfisted solution — it ignores the possibility that human labor simply isn’t worth that much. So you get this awkward line where everyone above the line is better off, and everyone below the line is homeless — the line being how much value you can produce. Using India again as an example, that line doesn’t really exist — you have a fluid scale of wealth, where the bottom-most aren’t jobless (we can always produce enough work, if the price is right; you don’t want a daily maid?), but they barely make anything, and they live a lifestyle that we as a first-world country would deem unacceptable, but they find acceptable (especially compared to the alternative — no job/money at all). Notably the poor indian probably lives better than the poor american, because the economy of the poor is significantly more developed. Partly because there are so many poor people in india, and partly because their income is allowed to be so much more fluid. So there’s also the additional question of whether minimum wage “starves out” the poor economy, compounding how bad life can be at the bottommost rungs of our society

coredog64 7y ago

In economic theory, this is what’s known as an efficiency wage. If you pay more, there’s more competition for your openings and you attract a better class of employee. As other comments have pointed out, simply raising the minimum wage doesn’t accomplish the same thing. Instead, all those people who were marginal at $7-8/hour simply don’t get hired, and employers use automation or forego the opportunities that additional labor offers.

curyous 7y ago
If your business is only viable when paying people below what they need to live, then your business shouldn't exist. The fact that you can do that now is simply people in power exploiting the weak. Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. Generally in economics, making a business only viable through subsidies is a bad thing. It is much more efficient to give that labour to better businesses.
- vonmoltke 7y ago
  > Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. How do you define "cost"?
  - rocqua 7y ago
    The 'cost' of labour is the income required for such labor to maintain itself. I.e. living costs + healthcare costs + groceries & other expenses + a little saving. This is the base cost of a person, and thus the base cost of labour.
    - xamuel 7y ago
      You're just pushing the bubble around under the wallpaper: who defines "living costs" etc? A person can technically stay alive in extremely spartan conditions.
- 7y ago