Not clear whether wage increases drive automation
Richard LoGuercio employs hundreds of people to run his Los Angeles event rental business, Town and Country Event Rentals. He said the city’s minimum wage increase, which goes up to $15 an hour over the next several years, is too much and too fast.
“Now I’ve gotta be the bad guy, I gotta start really watching pennies,” said LoGuercio at his warehouse in Van Nuys. LoGuercio’s undecided about how his business will adjust to the minimum wage increase long term. He could raise his prices, move, or cut worker benefits.
For now, he’s looking into technology to cut costs. He just bought an industrial dishwasher, which will do the work of 6-8 people. “If I could find robots to buy and to load trucks, I would do that,” said LoGuercio.
Conflicts between humans and machines are a common movie theme. But in real life, there's a question about what minimum wage increases will mean for the interplay between workers and technology.
Business groups against minimum wage increases — like the California Restaurant Association — say wage hikes will drive more decisions to replace human work with machines. Take, for example, touch screens for ordering. Those may become more prevalent in fast food restaurants.
“When the minimum wage goes up, you tend to see that employment in cashiers declines,” said Brian Phelan, a labor economist at DePaul University in Chicago.
Phelan said minimum wage increases can cause the loss of some low wage jobs, but a study he did also shows growth in other kinds of jobs, balancing out overall losses. Phelan says a good example of this phenomenon is when supermarkets invest in self check-out technology. “They may have to hire people to help customers learn how to use that technology,” said Phelan.
But another economist says the falling price of technology is the more significant driver of automation, not minimum wage increases. Michael Reich of University of California Berkeley says machines on the job shouldn’t scare you.
“We’ve had more and more machines and automation for the last 250 years, and we have more and more jobs,” said Reich.
After all, Reich said, even after the rise of ATMs, we still have bank tellers. “It is an opportunity for more interesting work,” he said. “And also, for less backbreaking work.”
Whether we’ll see blowback or benefits — we won’t know the full effects of wage hikes on automation for several years.