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Friday, March 29, 2024

Will a $15/hr minimum wage unleash the robot revolution?

Will minimum wage increases unleash the "robot revolution"? (Employers replace you with robots as their way of rebelling against the system.) Ed Rensi, Ex-McDonald's CEO, argues that they will. According to Rensi:

It’s cheaper to buy a $35,000 (£24,000) robotic arm than it is to hire an employee who’s inefficient making $15 (£10.20) an hour bagging French fries.

It's nonsense and it’s very destructive and it’s inflationary and [a minimum wage increase to $15 an hour would cause] a job loss across this country like you’re not going to believe.

[…]

It’s just common sense. It’s going to happen whether you like it or not. And the more you push this it’s going to happen faster. (Building robot McDonald's staff 'cheaper' than hiring workers on minimum wage)

Raising minimum wages may speed up the process, but the robot rebellion is happening anyway. Factors to consider:

1) Robots are cheaper than human labor and will probably continue to get cheaper (unlike humans).

2) Higher minimum wages will likely increase the incentive to replace human labor with robots, thus increasing the speed and the extent of the "robot rebellion." (Building robot McDonald's staff 'cheaper' than hiring workers on minimum wage and McDonald’s ex-CEO: $15/hr minimum wage will unleash the robot rebellion.)

3) Where it is cheaper for robots to do the job, they eventually will. Studies suggest that one third of jobs will be replaced by technology over the next two decades in Europe (source)

4) People who lose their jobs will stop paying taxes and start needing public assistance. The government may need to raise taxes and/or increase borrowing to increase funding for programs such as Medicaid/CHIP (Children’s Health Insurance Program or Children’s Medicaid), TANF (Temporary Assistance for Needy Families), EITC (Earned Income Tax Credit), and SNAP (Supplemental Nutrition Assistance Program or Food Stamps). (The High Public Cost of Low Wages.)

5) McDonald's et. al. will save money on labor costs (human labor – robot labor = savings). Costs will be transferred to the public domain in the form of public assistance. (The High Public Cost of Low Wages.)

6) Inequality will likely increase unless we take other measures to balance the changes that will likely result from 1) increased profitabilty to corporations using robotic labor, 2) increased unemployment, 3) increased need for government assistance. 

Sources:

Building robot McDonald's staff 'cheaper' than hiring workers on minimum wage 

Photo licensed under CC BY-NC-SA 2.0 by Drpoulette

A former McDonald's CEO warned that robots will take over staff jobs at the fast food empire – because it's cheaper than employing humans.

Ed Rensi has said that buying highly skilled robotics is a cheaper alternative than employing people on minimum wage to work in the company's worldwide restaurants.

He warned that huge job losses are imminent, and commented that it would be 'common sense' to replace humans in the workplace.

This comes as a study into the future of human employment has predicted a surge in machine-led work such as robotic counsellors, body part makers and virtual lawyers.

The worrying research, by professor of management practice at London Business School, Lynda Gratton, and futurologist David A. Smith, suggests that humans will be replaced because robots are able to produce better results.

[Full article.]

McDonald’s ex-CEO: $15/hr minimum wage will unleash the robot rebellion

For years, economists have been issuing predictions about how automation will impact the world's job markets, but those studies and guesses have yet to make a call based on what would happen if a given sector's wages rose. Instead, that specific guesswork mantle has been taken up by a former McDonald's CEO who declared on Tuesday that a rise in the American minimum wage will set our nation's robotic revolution into motion.

[…]

Rensi's math didn't account for current $15-an-hour initiatives, including arguably the most well-known one coming out of Seattle that allows lower wages for employee pools such as workers under the age of 18. Seattle's data is not yet conclusive, especially since the wage is currently $13 (the ramp-up will conclude in 2021), but initial reports from a city-run survey assert that "the sky is not falling." Additionally, Rensi didn't attach breakdown and replacement costs to his base "$35,000" guess for a single robotic installation.

The former McDonald's exec also insisted that a nationwide boost in the minimum wage would "keep people on the government dole." But studies point to a polar opposite issue: that America's current minimum wage is "unlivable" and creates higher demand for government services such as welfare.

[Full article] 

The High Public Cost of Low Wages (UC Berkeley Center for Labor Research and Education)

Low Wages Cost U.S. Taxpayers $152.8 Billion Each Year in Public Support for Working Families

Even as the economy has at last begun to expand at a more rapid pace, growth in wages and benefits for most American workers has continued its decades-long stagnation. Real hourly wages of the median American worker were just 5 percent higher in 2013 than they were in 1979, while the wages of the bottom decile of earners were 5 percent lower in 2013 than in 1979.1 Trends since the early 2000s are even more pronounced. Inflation-adjusted wage growth from 2003 to 2013 was either flat or negative for the entire bottom 70 percent of the wage distribution.2 Compounding the problem of stagnating wages is the decline in employer-provided health insurance, with the share of non-elderly Americans receiving insurance from an employer falling from 67 percent in 2003 to 58.4 percent in 2013.3

Stagnating wages and decreased benefits are a problem not only for low-wage workers who increasingly cannot make ends meet, but also for the federal government as well as the 50 state governments that finance the public assistance programs many of these workers and their families turn to. Nearly three-quarters (73 percent) of enrollees in America’s major public support programs are members of working families;4 the taxpayers bear a significant portion of the hidden costs of low-wage work in America.

CONCLUSION

When jobs don’t pay enough, workers turn to public assistance in order to meet their basic needs. These programs provide vital support to millions of working families whose employers pay less than a liveable wage. At both the state and federal levels, more than half of total spending on the public assistance programs analyzed in this report—Medicaid/CHIP, TANF, EITC, and food stamps—goes to working families.

Higher wages and increases in employer-provided health insurance would result in significant Medicaid savings that states and the federal government could apply to other programs and priorities.14 In the case of TANF—a block grant that includes maintenance of effort (MOE) provisions that require specified state spending—higher wages would allow states to reduce the portion of the program going to cash assistance while increasing the funding for other services such as child care, job training, and transportation assistance. Higher wages would also significantly reduce federal expenditures on the EITC and SNAP.15 Overall, higher wages and employer provided health care would lower both state and federal public assistance costs, and allow all levels of government to better target how their tax dollars are used.

[Full article.]

The problem of robots taking over jobs is not limited to countries with relatively higher wages, such as the US and Europe. A massive push to replace human labor with robots is occurring even China. 

Foxconn replaces '60,000 factory workers with robots' (BBC)

Apple and Samsung supplier Foxconn has reportedly replaced 60,000 factory workers with robots.

One factory has "reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots", a government official told the South China Morning Post.

Xu Yulian, head of publicity for the Kunshan region, added: "More companies are likely to follow suit."

China is investing heavily in a robot workforce.

In a statement to the BBC, Foxconn Technology Group confirmed that it was automating "many of the manufacturing tasks associated with our operations" but denied that it meant long-term job losses.

"We are applying robotics engineering and other innovative manufacturing technologies to replace repetitive tasks previously done by employees, and through training, also enable our employees to focus on higher value-added elements in the manufacturing process, such as research and development, process control and quality control.

[…]

Economists have issued dire warnings about how automation will affect the job market, with one report, from consultants Deloitte in partnership with Oxford University, suggesting that 35% of jobs were at risk over the next 20 years.

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