Along with self-driving cars, ride-sharing companies,
robots, and guaranteed income, we will remember 2016 for minimum wage raises,
both voted-in and proposed, in the jobs news.
Three months ago I addressed what had been written on this subject,
along with a few early results, over the previous two-plus years. There has been more, especially in May.
On the 5th of that month, Fox Business published a piece calling different views between
Florida’s and California’s governors an “epic fight over the $15 minimum
wage.” I don’t know if it was either,
but it showed some differences between how California’s Jerry Brown and
Florida’s Rick Scott saw the issue.
Essentially, Scott said California would lose 700,000 jobs by the time
its $15 became effective in 2022, whereas Brown maintained that his state had
recently been gaining many positions anyway.
Although California’s first, $1, increase was greeted by an end to 54
consecutive months of seasonally adjusted employment gains, the two are
different. Florida has many significantly
populated areas, throughout its panhandle and scattered throughout its
peninsula, with low costs of living and modest employment opportunities. Except for the southeast, most of the state
is economically conservative, with residents, the bulk of whom moved in from
elsewhere, enjoying the lack of a state income tax and, due mainly to what is
now a $50,000 primary-house homestead exemption, generally low property levies
as well. California, though, a perennial
Democratic presidential candidate chooser, has its population concentrated in
its unusually liberal cities, so its constituents are more likely to support
high taxes. With living expenses higher
than almost any other state, that $15 per hour has vastly more appeal than it
would in the likes of Gainesville or Panama City.
Two articles, “Wendy’s Serves Up Kiosks as Wages Rise, Hits
Fast-Food Drive” (Investor’s Business Daily,
May 11) and “Fast food workers are becoming obsolete” (Yahoo Finance, May 16) describe restaurant ordering
touchscreens. In Hong Kong in January I
saw such things at each McDonalds – they were not the only way customers could
order, but, maybe since they could be activated by smart phones as well, many
younger customers preferred them. They
are now making landfall here, also at Panera Bread and Wendy’s, and are not
only cutting labor costs but are proving to be more convenient for customers,
who not only use lists of possible ingredients to request custom-made
sandwiches but can store and reorder their favorite combinations. McDonalds and Wendy’s management both named
higher minimum wages as reasons for installing these devices, which, even if
they are not made mandatory, seem like improvements as well as cost-savers.
If he didn’t do it before, in back-to-back opinion pieces Forbes contributor Tim Worstall
established himself as an opponent of any mandated pay floor, let alone an
increased one. In “Sad But True: A Higher Minimum Wage Means That Some People
Will Be Worse Off, Will Get Lower Wages” (May 14), he showed that some British
workers lost shift and holiday differentials when their bottom rates were
forced up, and other employers had cut perks and other benefits. The next day, in “The Minimum Wage Kills Jobs
Through Automation Bit By Bit, At The Margin,” he made the point that every required
pay increase has potential to make machines more cost-effective. Boosting hourly rates from $7.25 to $8, for
example, will not facilitate introducing machines costing $12 for each
equivalent hour of labor, but if they work out to $7.75 instead, businesses may
have no choice. Another important thing
to realize here is that these job losses are not instantaneous – it may take
management months to agree upon the new equipment, and longer for it to be
manufactured, to arrive, and to be actually working. Therefore, early judgments that a higher
minimum has not cost jobs may be premature.
A third Worstall Forbes
contribution, July 26th’s “As I Predicted, Seattle’s Minimum Wage
Rise Is Reducing Employment,” cited research showing that while that area has
done well since its April 2015 increase, that lift could be charged with 1%
lower employment than would otherwise have occurred. He also made a supply-and-demand point I put
forth before, that even if we don’t know the extent, it makes no sense to think
that minimum wage enhancements do not cause at least some jobs to go away.
Although raising the lowest pay rate does not eradicate much
poverty, not every article pointing that out is on the right track, as shown by
“A Minimum Wage Problem or a Lifestyle Problem?” (Tom Gerdy, Huffpost Business, May 16). Lines such as “we mistakenly believe that the
road to happiness is found in things,” and listings of the prices of
smartphones, cable TV, and even the likes of “tattoos and piercings” seem equivalent
to those that could have been put together any year since 1945 or before. We need not conflate goods and services
priced for those with middle-class or higher income with those needed for survival
to critique forced pay raises – we have plenty of good reasons we can use
instead.
In Ars Technica on
May 24th, Sam Machkovech recapped how former McDonalds CEO Ed Rensi
expected higher fast-food minimum wages to open doors to a wide range of
machines, some of which, such as “a $35,000 robotic arm” cost less than “to
hire an employee who’s inefficient making $15 an hour bagging French
fries.” Rensi’s point is the same as
Worstall’s second one, that technology, which can improve given enough
incentive provided by increasing the cost of humans, will become more worthwhile.
Finally, The Economist
got into the act, with “Maximin” (June 25th), presenting various
data on 15 American cities with minimum wages above the still-current $7.25
national rate. It made arguments for and
against those increases, with perhaps its most salient in the last
paragraph: “The Fight for $15 campaign
is often guilty of a bait-and-switch, justifying much higher minimum wages with
reference only to food-service giants like McDonalds, but then endorsing them
across the whole economy.”
These points, namely differences in geographic areas,
employers cutting benefits and differentials, technological replacements being
delayed but permanent, and the gulf between huge national employers and weak
local ones, are all valid. They will all
play roles in how our higher minimum wages work out. Just how, and when, we will see.