Bernie Sanders wants a $15 minimum wage law. Voters in Seattle have agreed. Starbucks and a variety of others companies have acted. The change is great for the many low wage earners who struggle to get by working multiple part-time, minimum wage jobs. Low wages are a drain on the talents of society who struggle with juggling food, medicine, education, shelter and other costs while supporting families. Since 1980, the actual wage rates, when adjusted for inflation, have fallen form many people, shrinking the middle class and expanding the number of economically challenged. Economic challenges lead directly to social, and health vulnerability. If you want to cut medical costs, increase the standard of living for people at the lower income levels. You want to sell more stuff, create more disposable income for people to spend across all income levels, not just at the top. Ditto if you want to have less debt, and more savings. That is what the intent was in the 1960s under the reforms of the “Great Society.” Progress started, then 1980 showed up and many reforms were reversed before the trends could really show. Not that those 1960s ideas were perfect, but clearly the last 30 years has shown the reversal is not unless you are among the 0.1%.
As an example, back in the day, fast food restaurants were the purview of students, not twenty and thirty something adults and grandma. These were low income jobs, and have remained so. The intent was not to make these jobs “permanent.” But they have become jobs for adults. Back in the day there were more workers, more customer service and more food prep. Over the years, though, ingredients started to arrive packaged and pre-mixed, so that the only labor was to heat it up, bag it and hand it out the window. Fast food is now packaged at factories in mass production which requires less labor. Less jobs, same low pay. Gas station attendants were also commonly kids, who washed your windows, checked your oil and pumped your gas (no, really they did!). They got paid minimum wage as well. Not anymore – that was too costly and got cut. The list goes on. Customer service is apparently only important if you are trying to attract customers.
So now more adults are in these industries, and many must work multiple jobs to make ends meet. So a higher wage is welcome news. Or is it? Let’s see what happens when the wage doubles up without increased growth. Well, the gas station attendants that used to pump gas were replaced with computers. You even have gas stations that are completely automated – no people!. You have computers putting in orders now at restaurants. About 30 percent of the restaurant industry’s costs come from salaries, so could burger-flipping robots and computer ordering system like some restaurants already employ, become more cost-competitive and may displace more workers if the current federal minimum wage of $7.25 an hour is doubled. At risk are 2.4 million wait staffers, 3 million cooks and food preparers and 3.3 million cashiers.
So where will we see this? Electronic menus can be constantly updated so that items that are out of stock can be removed. Connecting the point of the sale to the oven’s operating system allows precise amounts of food to be cooked, which helps cut down on costs. Other inventions save energy, reduce maintenance and better dispose of grease. On the digital side, restaurants are working on apps that include reward systems and location tracking that prompt customers to eat with them more frequently. Olive Garden said earlier this year that it would roll out the Ziosk system at all its restaurants, which means that all a server has to do is bring out the food. The employees would be reduced to fixing things when they break. That could be a lot less employment.
Corporations have a priority to make money, which can mean cutting costs and becoming more efficient. Bottom line profits are king, not people. See GM, VW and others who ignored defects in their products, preferring to pay the costs of the lawsuits as opposed to fixing the defect. So the $15 minimum wage will be cheered by those making less, but jeered by low margin corporations that will be forced to raise prices and become more efficient. Too often those changes do not include paying people – at least in this country. The winner will be……. to soon to tell, but I won’t bet against the corporations.