Do You Want a Robot With Your Fries?

FrenchFriesAlc1Today’s media reports have breathlessly lauded a nationwide walk-out among employees of various fast food chains.  The “beef” (no pun intended) is that workers are demanding a minimum wage of $15 dollars an hour, twice what most of them are paid now.  They claim they cannot make ends meet on the federal minimum wage, and for those workers who are heads of households with children, they are right.  However, there are many things wrong with doubling the wage of a fast food worker as  the remedy to just trying to get by.

But consider how large retailers have evolved.  Thirty years ago there was no such thing as a self-check-out lane.  I used to walk in to my local big box retailer, and there was very little that was high tech about the check-out lanes. Scanners were just starting to be used to check out and price merchandise, but the clerks had to personally scan each item with a hand wand.  In spite of the burgeoning computer technology, a warm body was still needed.

Fast forward to today.  Most large retailers have at least one self-check-out lane, where the customer does most of the work of scanning and bagging groceries. Every so often a customer service worker will assist with the self-check-out but for the most part, the shopper is on her own. I sort of like it that way…I get a satisfaction from bagging my own groceries the way I want to bag them, and not having to make small chat with a clerk when I am counting change.  And there is a reason why retailers have adopted self-check-out machines:  Capital is cheaper to them than labor.

How does this relate to today’s walk out? It is simple.  If higher wages are forced on the fast food industry, capital will replace labor in the fast food industry as well. It will take some time though.  There is still an excess supply of people who are willing to work at the federal minimum wage. The unemployment rate among teenagers is the highest out of all age groups. In some cities, it is above 50 percent. It boggles my mind that people demand $15 dollars an hour when there are teenagers in places such as Washington, D.C. who would be happy to work for $8.25 an hour. The fast food industry will seek out those people.  But once those who are willing to work are employed, any excess demand for labor will be supplied in the form of machines.  It does not matter what is mandated by a city or the federal government, or what is demanded by protestors.  Businesses seek to maximize profits, and if they must replace human capital with automation, they will do it.

What does this mean?  It means that many more people who once had jobs in the fast food industry will be unemployed.  On the bright side, it means that many more skilled workers will be required to develop, program and support the technology that these restaurants will use. These computer automation jobs will require greater skill and pay higher wages.

The bottom line is, those who want to make $15 dollars an hour flipping burgers should put their picket signs down and instead pursue education and skills that warrant higher pay.


Comments (14)

Trackback URL | Comments RSS Feed

  1. Penn says:

    Minimum wage jobs are not supposed to be “careers”. They are supposed to act as a starting place where one can develop skills in order to find better employment. Getting references, gaining experience and learning a trade are all reasons why these jobs exist. Not to support multiple children.

    • Jeff says:

      While that may have been true in previous years, the market has changed and people typically use fast food jobs as a secondary income to their business jobs in this economic climate, because of the recession’s influence in stifling wages.

  2. Devon Herrick says:

    The Cobb-Douglas Production Function is used to describe the relationship of labor to capital (i.e. technology and machines) in a firm. If labor becomes cheap relative to capital, firms will substitute labor. If machines are labor-saving (e.g. think of a backhoe replacing 10 ditch-diggers), firms will substitute capital.

    One of my first economics professors explained the use of technology tends to boost productivity and boost wages in the process. Sometimes technology requires added skills to operate – also resulting in higher pay. In other instances, technology allows low-skilled workers to be more productive — possibly boosting their pay but more likely boosting the pay of the technology builders.

    It’s definitely true that raising the minimum wage for fast food workers would prompt firms to invest in labor-saving technology. It would also prompt firms to fire all but their best workers (or hire better workers) to operate the new assembly lines.

    • Jeff says:

      “One of my first economics professors explained the use of technology tends to boost productivity and boost wages in the process.”

      While it raises wages, doesn’t it also decrease the amount of jobs available? Because the technological advancements take over low skill jobs, and creates (depending on context) fewer new higher skilled jobs.

      • Pam says:

        Yes, technology boosts productivity and changes the job market, making some jobs even obsolete. However, this does not mean that jobs available decreases. If labor productivity increases and wages follow, people will buy stuff or invest in capital and the economy grows. This creates new job opportunities.

  3. Joe Barnett says:

    I suspect many of the protestors think that profits, relative to costs (such as wages) are big, whereas competition drives down prices until average profits equal the long-term cost of capital, which is roughly 3 percent, and labor costs are high.

    • Joe Barnett says:

      BTW, unemployment caused by the minimum wage has always been a problem. Here is an NCPA study from
      1995, for example

      • Clark says:

        Interesting study. Do those arguments still apply in our contemporary recession-filled economy? Because it seems like a lot of the arguments are based on worker demographics during the Clinton administration.

    • Gregory says:

      Exactly. That is why minimum wage laws distort the market defined wages for workers in certain demographics.

  4. James says:

    “It boggles my mind that people demand $15 dollars an hour when there are teenagers in places such as Washington, D.C. who would be happy to work for $8.25 an hour. The fast food industry will seek out those people.”

    Similar to why an auto industry emerged in the south, workers were willing to be paid less for the same jobs done by unionized workers in the north.

    • Clark says:

      Definitely. Statistical analysis proves that this will do nothing but harm their position.

      • Lewis says:

        How will it harm them?

        • Clark says:

          It will harm them because it provides incentives for business to innovate around those workers, and their jobs will be taken over by technological innovation, so they are worse off than before.

  5. Jack Towarnicky says:

    I think there are better words to describe this situation. You state:
    – People are “willing” to work for minimum wage; might be better stated as “resigned” to a minimum wage job.
    – There is an “excess supply” of labor willing to work at the federal minimum wage; better might be excess supply of unskilled labor.

    Not so sure there are that many willing to work for federal minimum wage – today there are millions of openings for unskilled labor, yet many of today’s unemployed and the discouraged who have left the workforce are obviously NOT willing to work for federal minimum wage. If they are older, for example, they are increasingly claiming social security disability benefits.

    And, many of the unemployed/discouraged are those same individuals who were once unskilled, but who pursued higher education, many now have extensive job skills, only to be on the outside of our jobless recovery looking in … standing on top of a massive pile of educational debt.