$15 Per Hour Minimum Wage a Bad/Good Idea

Bored Teen Fast Food Worker

First, let me say the current Federal minimum wage ($7.25 an Hour) is too low. That minimum wage was imposed in 2009. In the past eight years, inflation has gone up 14.2 percent. That means in real purchasing power a person who has been working for the Federal minimum wage the past 8 years is effectively working for $6.23 an hour. Every year the minimum wage is not raised, that person falls further behind. Each year, their purchasing power erodes. What may have been a living wage eight years ago may not be one today.

In California, where I live we do a bit better at $10.00 an hour.  It will be increased gradually to 15.00 an hour over the next six year.

Increasing the minimum wage annually, I believe to be a good idea. After all, prices go up annually. However, I’m not sure that it should be a fixed rate or with a top out point.  I would rather see it tied to the Cost of Living Adjustment (COLA) which many employers and social security use to determine annual wage and benefit increases. That way the increase is tied to actual expenses. So, they are not losing income.

Now, some of you are saying, but they aren’t getting ahead. My response is that’s right. There should be NO INCENTIVE TO KEEP WORKING AT MINIMUM WAGE.

Minimum wage jobs are basically unskilled jobs requiring little more than manual labor. Those jobs are going away and people should not be lulled into believing their future lies with them.

The Tipping Point

If you have ever played a game requiring balance, you know there is a tipping point. You can push down one side or another of the balanced object a little and it returns to balance. Push it too far and it will tip over. After reaching that point, nothing can prevent the topple.

We reached a tipping point this year with the accelerated development of the autonomous vehicle. Otherwise known as self-driving cars. However, the development also includes buses, delivery vehicles, even 18-Wheelers. One proposed vehicle is even designed to intercept cars driven by humans that might be in danger of crashing into people working on the roads.

Why is this a tipping point? Well, let’s look at the simplest aspect first. A long-haul truck driver makes about $40,000 a year on average. Some more and some less. Initial costs when autonomous driving packets are rolled out in about five years could be between $15,000 and $40,000 depending on who you ask. Either way, that means the elimination of a single truck driver (at only a bit more than $15.00 an hour) will pay for the upgrade. That doesn’t include social security taxes, workmen’s comp, health insurance, sick days, or vacation pay. And if the early results are any indication, the self-driving vehicles will be safer resulting in fewer accidents.

Of course, there will be culture lag, lack of capital to upgrade for some companies, but within 10 years, how many truck drivers do you think will be still working? Probably the first impact, though, will be taxi cabs. One of the classic no-skills-required jobs is driving a cab. Uber has already announced its intent to put autonomous cabs on the road within five years. How quickly before the larger cab companies follow suit?

Add to that buses, local delivery vans, postal and private package and mail delivery, how many jobs will simply not be there? Well, I did a quick run through of some stats on Google. Between truck drivers, local delivery drivers, cab drivers, Uber drivers, school, and transit bus drivers, I added up 3.4 million drivers. That’s about two and a half percent of the entire U.S. Workforce. Put another way one person in 50 works as a driver. If only 1/4 of those jobs disappear over the next 10 years (and more than that probably will as the price of the autonomous driving equipment falls), that will be close to a million low skill, relatively low pay jobs that will disappear.

Making a massive increase in the minimum wage will likely accelerate that transformation. Usually, increases in the minimum wage make little difference to total numbers employed. Businesses don’t employ people they don’t need. So, they grumble and pay the extra. A few shut down the business, cut back on hours, or close individual stores, but usually, there is little actual impact on employment because they have no other alternative.  If you sell X number of hamburgers, you need Y number of people to make them, no matter how much you pay them.

But what about the automated worker? If the cost of installing the equipment falls below the cost of wages, guess where a business will put its money?

This is what makes this question different now. In the past, the alternatives were raising prices and pay the extra or going out of business. The first was usually preferable. Now, there is a third option, automate the operation.

This brings us to the second reason the autonomous vehicle is a tipping point. One reason we have so many low pay manual labor jobs done by humans or human assisted machines has been that computers do number crunching very well but traditionally had a harder time with operations which required the computer to visually recognize different types of objects and then to physically manipulate those objects. Also, making decisions based on circumstances instead of pre-programmed solutions were beyond the capabilities of all but large mainframe computers.

The autonomous car, though, demonstrates that computers can visually recognize and adapt to situations they have never experienced before. They also demonstrate visual recognition capabilities previously unable to be used in mobile settings except in highly experimental situations.

If a computer can respond in an uncontrolled environment like a city street, how much easier is it to design fully or nearly fully automated businesses in a controlled setting. Let’s take a classic minimum wage unskilled job – Fast Food worker.

Already in 500 restaurants across the country, McDonalds has essentially replaced cashiers with self-ordering kiosks. Since these restaurants also are featuring table service, the net change in employees is minimal. However, let’s say a fast-food restaurant wanted to virtually eliminate the human element, something a $15 minimum wage (just a bit lower than the average salary of a news reporter who requires a college degree to do his or her job), might inspire.

It is possible with current technology to do so. A self-driving truck delivers the raw food which is pre-packaged. That is already the case with fast-food places. An automated forklift can pick it up and store the food in mechanically accessible storage units. The order comes in, the ingredients are extracted from the various storage units using robotic hands (more sterile than any human hand could be) and either place in the appropriate cooker or set aside for the assembly of the sandwich. Already, most fast food places use some sort of automated system to cook their burgers and fries. The human just puts the burger on the conveyor belt or sits the fry basket on the deep fryer. The rest is timed and automated. The buns could go down another conveyor stopping for the condiments that the person programmed in they wanted. The meat is then placed on the bun and wrapped mechanically. From there it could be transferred to an autonomous cart for delivery to your table.

Now, would we see a totally automated fast-food place with no humans around? Factors other than pure economics and technical feasibility don’t cover everything. Even if it would work, there would likely be a resident “manager” available to take care of breakdowns and customer complaints. But you are still looking at one or two people and not 10 or 12. And that manager position is likely to require some basic computer skills and probably some business management. It would not be a job for a high school drop out and not the sort who is going to settle for minimum wage.

The advantages to the employer are manifold. They do not have to provide benefits, the employees won’t be distracted by phone calls from their latest girl/boyfriends, they don’t have to carry workman’s comp, there’s no need to accommodate everyone’s work schedule, and they are likely to work faster and more efficiently.

For the customer, the food will be prepared more uniformly and in a sterile environment.

Unskilled = Unemployed

This brings us to the major disruptive factor the convergence of autonomous technology and a high minimum wage produces. Minimum wages are usually paid to unskilled or low skilled people. They are not quite mindless, but definitely, do not require serious training or education.

They depended largely on people being able to see and recognize objects, pick them up, and place them somewhere with a modest level of precision. The autonomous car has already demonstrated that visual recognition is possible and reasonably reliable.

We have had mechanical hands capable of precision manipulation for several years. Recently, the development of “soft” robotics has incorporated new soft, but rigid self-healing materials. This makes it even easier for a mechanical hand to pick up something small, like pickles to put on a sandwich.

So, routine work that required only rudimentary eye-hand coordination forms most of what is the current minimum wage employment. Those jobs were generally safe from automation as long as computers couldn’t see very well and robot hands were clumsy affairs.

Those two problems have largely been solved and will only improve over time. Several new approaches to computing like quantum computing will continue to increase the power and speed of processing.

So, where does that leave the unskilled worker? The simple answer is “Out of work.” Of course, such is not going to happen overnight. The full serve gas station, buggy whip manufacturers, and schooners didn’t disappear immediately. Like old soldiers, old economic systems and technology fade away.

The politically popular approach of promoting new manufacturing initiatives won’t help, nor will providing land and tax breaks to large retail outlets. These new facilities will likely be highly automated. The jobs available will likely be in management, marketing, systems engineering, technology development, and maintenance. These are jobs for people with college degrees or specialized technical training.  The day of taking your high school diploma down to the auto assembly plant and getting a job on the line has been disappearing for 50 years. We have found it easy to blame foreign competition and outsourcing. However, the manufacturing workforce keeps shrinking as machines can do the job faster, better, and cheaper than the human laborer.

After all, the strength of a human being does not lie in his or her physical body. Aristotle rightly pointed out that a horse is faster than a person, and many animals stronger, but what puts humanity in a superior position is the human ability to think and reason.

The same can be said of machines. While artificial intelligence can produce amazing results, attempts to produce creative works or to respond to human emotional situations are beyond the capability of computers. There are some intriguing examples of computers attempting to cross that line, but they are not terribly impressive.

Human beings have been useful substitutes for machines, but we are reaching a point where if you want something made, the machine has the edge. However, designing what is made is still a human activity. Likewise, is making decisions about what should be produced and how to sell it to other people.

However, those types of jobs require more than a couple of hours training. They all require some sort of formal education. That education may take place in a college, technical school, or possibly through some sort of apprenticeship training, but it is going to require training.

So, Should We Raise the Minimum Wage?

It is easy to say that, since raising the minimum wage to $15 an hour will bring this on, then maybe we shouldn’t raise it. It is likewise easy to say, people are hungry today and what you are mentioning may be five or ten or even twenty years away. I hear both of those. What we need to do is move away from the simplistic solutions of activists on both sides. So, here are my modest recommendations:

  1. Raise the minimum wage to $10.00 an hour. That’s reasonable and not high enough to cause a mass immediate rush to more automation.
  2. Realize that raising the minimum wage is a temporary fix at best. The problem is not how much we pay unskilled workers, but the fact that we still have so many unskilled people in need of jobs. Whether or not we raise the minimum wage this is coming. Continuing to suggest to people, especially young people, that you can earn a living without having to learn a skill is doing them and our economy an injustice.
  3. Invest in education. Certainly, I believe we need to invest in traditional higher education like colleges and universities. It’s time we guarantee a BA to anyone who can hack the academics. Providing a community service payback might be a wise approach. You get your degree for free but you provide a certain number of comp hours working for the community. That could offset part of the costs. If one did not wish to do community service, then they could buy out of the program.

    This should also extend to technical training. Many advanced educational skills can be gained through technical school training. Sometimes these may use innovative approaches to learning. They might provide education entirely online or in a hybrid setting. Many do a single course at a time and people go four or five hours a day two days a week for a month. Experimenting with alternate educational scales might help extend educational opportunities.

  4. Raise the minimum wage over time to $15 an hour, but with a condition. The individual must provide proof to their employer and to the IRS that they are enrolled in some sort of post-secondary education program. Employers will get higher quality employees, and employees will be preparing themselves to grow out of minimum wage.

Those are my modest proposals. I know I haven’t hit everything. One thing I will cover in a future article is going to be the emergence of Creatives (artists, writers, musicians, theatre and movie people) as a key component of this new economy.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s