Saturday, March 19, 2016

Minimum Wage Laws, Robots and the Poor Saps Who Aren't That Productive

Since my post, Will Robots Eliminate 5 Million Jobs in the Next 5 Years?, where I write that robots in general will not cause unemployment but merely shift jobs, I have received emails from a couple of readers with regard to situations where robots are being planned to replace workers.

These two situations involve the special circumstances I mentioned in my earlier post where lasting unemployment may occur because of an environment that involves low productivity workers in a region with a high minimum wage. I wrote:
 The one place robots may actually replace workers who won't find other jobs is when minimum wage laws are high. If there is a low productivity worker and it makes sense for him to be replaced by a robot---and the higher the minimum wage in an area the more sense it will make for him to be replaced by a robot, the less likely such a person will be able to find a job if he can't offer his services below the minimum wage.
The two situations brought to my attention by readers are these two.

Carl's Jr. CEO Andy Puzder wants to open a new restaurant concept that's "employee-free,"

And Domino’s Australia has developed a self-driving robot that can deliver hot food and cold drinks.

The four-wheeled machine dubbed DRU — for Domino’s Robotic Unit — completed its first trial delivery earlier this month.

“We improvised, we explored, and we discovered that this audacious idea could actually become a reality,” the company said in a promo video.

Because these two operations hire employees that tend to work for the minimum wage, as the minimum wage is increased, there is additional incentive for such business operators to consider robots.

Indeed, Crain's starts its reporting on Carl's Jr this way:
As  minimum wages across the country rise and restaurants face increased labor costs, one fast food CEO is thinking about replacing human workers with robots.

But because these workers are low productivity workers, the minimum wage restriction may have caused them to lose their jobs in the first place to robots and their low productivity may work as a barrier for them in finding new jobs in the high minimum wage area.

It is thus the minimum wage which would be responsible for permanent unemployment, not robots. Indeed, robots by themselves increase the purchasing power of each dollar. So once robots are operating, more products and services are being produced (barring minimum wage laws)  that even a worker who faces a small cut in pay may find that the purchasing power at the lower pay level is greater than before the robots when pay was higher pay but there was less overall product being produced.

Robot production may thus be considred a corollary to Say''s Law which says supply creates its own demand. Increased supply becasue of robots creates greater buying power for each dollar of wages earned. Except, of course, for the poor sap who can't find a job because of high minimum wage laws.



  1. As ever, the self-aggrandizing virtue signalling of the SJW crowd results in disastrous consequences for others. Usually the very people the policies are ostensibly intended to help. Good work.

  2. "even a worker who faces a small cut in pay may find that the purchasing power at the lower pay level is greater than before the robots when pay was higher pay but there was less overall product being produced."

    Doesn't govt created inflation pretty much cancel this altogether? Instead of your dollar having more purchasing power it has less AND you get a pay cut.

  3. The masses do not grasp that their problems are caused by government and reject the idea that they are. They feel more than they think.

    Last I looked business deaths exceed business births. People are not free to start a business. When people lose their jobs for whatever reason many fall back to doing that. But it's no where near as easy as it should be. Those who can still manage face much higher risks. As automation frees up labor to do something else that something else is more and more often not there to do and creating something else to do is walled off by barriers. As a result when automation replaces people there are fewer places for them to go and the minimum wage prevents them from using price to compete for what is left. And even if they could bid lower, they would get poorer as a result as the demand for employees is dampened.

    Automation in free market makes us all richer. But we don't have a free market. That lack of freedom makes people poorer. People are miseducated by the government and they are told to blame the free market (that we don't have).

    People don't think this through. The feel they should be paid at least X. They feel that their jobs were taken away by automation. They feel that there aren't any more good jobs to go to. They don't think about why. They will go for treating symptoms and the political class takes full advantage. As far as they are concerned automation is killing jobs because they don't make any attempt to do a root cause analysis to see that government control kills jobs.