Caliburger, a fast food chain with an outlet in Pasadena, Calif., is now using a robot to cook their burgers. It’s called, in an outburst of inventiveness, Flippy. This is just what happens with a minimum wage: the incentive to automate is increased and thus workers lose their jobs.
Of course, every business tries to automate as much of its processes as it can. Who wants to pay wages when they don’t have to? The point is that robots, just machines, have costs. So too does a robot’s human substitute. Whether to automate depends upon the relative costs of the two things: the wages paid to labor and the interest paid to capital. Low interest rates make automation cheaper, high wages make human labor more expensive.
Sure, everyone automates what they can, but what is worth roboticizing depends on the relative prices of the two solutions, the wages relative to the costs of capital. So if we raise wages, we push the economy as a whole further toward automation and away from employing humans – higher minimum wages kill human jobs. You may or may not care about that effect of voting to increase the minimum wage, but those who become unemployed as a result might not be so overjoyed.
We’ve also seen other minimum wage news: many Uber drivers are making less than minimum wage. Sure, this finding is hotly contested, but just consider the implication of it being true. You’re not allowed to sell your labor as an employee for less than that federal minimum wage of $7.25 an hour, higher in many states and locales. Yet when the opportunity to sell labor for less than this arises, in the form of self-employment, a large number of people are doing just that — voluntarily. They’re selling their labor for less than the government says they should.
This is simply a fact: People are doing what government says they shouldn’t. So, who is right here? Should we all be doing as we’re told? Or is government wrong to be banning what a large number of folks are obviously entirely happy doing? Working for less than minimum wage isn’t something unique to Uber.
Opinions can differ here, but my own intuition is that government shouldn’t be banning people from doing what they wish to do. Not unless they’re breaking Mill’s Dictum, the freedom to fist-swing ends where noses begin. That is, there has to be direct harm to third parties for legal banning to be moral. People wanting to work for less than the government says they should doesn’t harm anyone – banning them from doing so obviously harms those prevented from doing as they would wish.
We’ve thus got these two points to consider. The minimum wage increases the incentives to automate, thereby artificially increasing the number of people who lose their jobs to the robots. It also prevents people from doing what at least some people quite obviously are happy to do — work for less than minimum wage. Thus, we should abolish the minimum wage.
What, you’re against freedom and liberty? Isn’t that un-American?
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
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