Opponents of the drastic minimum wage hikes championed by progressives finally have a chance to say it: “I told you so.” We’ve seen this coming from miles away.
Wendy’s recent announcement that it will be offering ordering kiosks at its 6,000-plus locations due to minimum wage hikes and tight labor markets is bad news for low-skilled employees. The immediate ramifications are obvious: Instead of the raise promised them by progressives advocating for a $15 minimum wage, many fast food workers will end up being let go. Their opportunities to take the first steps up the economic ladder toward a livable wage will dwindle further still.
The shift to automation is not unique to Wendy’s. McDonald’s is also considering self-service kiosks. And the latest edition of the Duke CFO Global Business Outlook surveyed 600 businesses and found that about 70 percent of those that pay less than $15 an hour would seek to use more automation to save costs if they faced a higher minimum wage.
Scholars at the left-leaning Brookings Institution have drawn a similar conclusion. “A higher minimum wage changes cost considerations for businesses seeking to automate more of their operations,” wrote researchers Jack Karsten and Darrell West last year. “Increasingly, low-skill workers will not only have to compete with each other for jobs at higher wages, but also with computers.”
The perpetrators of these government-imposed wage hikes are found in the states. Normally the fact that states are free to try new policies on a smaller scale to see whether they are effective or not is a good thing — one of the great advantages of the U.S. system of government. The $15-minimum wage movement afoot in the states, however, is reckless.
The city of Seattle got the ball rolling in 2014 when they passed a law raising the minimum wage to $15 an hour for most employers over the following five years. Fourteen cities and states followed suit in 2015. This year California and New York have jumped on the $15 minimum wage train. Oregon is not far behind with a $14.75 minimum wage and it looks like New Jersey will soon follow. These four states alone represent more than a fifth of the U.S. population. Changes in these large markets will force large corporate chains to start considering some major ways to reduce labor costs — namely, hiring fewer people and using machines to make up the difference.
Did states and other municipalities wait to see what kind of an impact Seattle’s radical new minimum wage would have on the city’s economy? No. They embraced similar laws of their own because it seemed like the politically popular thing to do. Had lawmakers in California, New York and elsewhere actually looked at what has happened in Seattle it would have given them pause. Since the preliminary raises kicked in in April of last year, Seattle has seen its unemployment rate grow faster than at any time since the Great Recession.
Fast-food corporations see the writing on the wall. Wages are going up in some of their largest markets, and they will find ways to adapt. Companies like Wendy’s and McDonald’s have the scale and the resources to use technology to reduce labor costs and the need for human workers. But what about the local burger joint trying to keep up with the rising labor costs imposed by these states? Already the wage hikes are driving many local restaurants out of business. Raising the minimum wage from $9.32 to $15 effectively amounts to a tax on restaurants of $11,360 per employee. That’s simply not feasible for restaurant owners.
This leaves progressives advocating for a policy that favors big business, tipping the field in favor of large corporations that have the resources to adapt to more hostile business environments.
The problem is not automated technologies putting people out of work. Advances in automation, like fast-food order kiosks, disrupt but ultimately strengthen our economy. The problem is setting artificial wage standards that make it harder for low-skill workers to get their feet on the first rung of the economic ladder and make it harder for small businesses to compete with large corporations. If states that plan to raise the minimum wage want to be true “laboratories of democracy,” they should look at places like Seattle where the experiment has already been tried.
Andrew Collins is the Digital Media Manager for the Franklin Center for Government and Public Integrity, a nonprofit that publishes public-interest journalism at Watchdog.org. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
