Is a Higher Minimum Wage Good for Robots?

Businesses are constantly looking for ways to lower costs, and labor remains one of the biggest expenses. There’s no way to get around paying the people who work for you; at least not legally. If you need something done, you have to do it yourself or hire someone to do it for you. Automation technologies have improved significantly over the years, however. Machines and automated systems can do more than they’ve ever been able to do before. While most businesses still depend on human workers, technological advancements and increasing minimum wages could increase the rate at which employers look towards automation.

Is minimum wage good for people or machines?

A higher minimum wage seems like the positive, humanitarian thing to do. Everyone should be compensated fairly for their work, after all. There’s no arguing against this. In reality, however, increasing minimum wage may not have a positive effect for workers. It could actually discourage businesses from hiring low-skill workers and increase the prevalence of automation.

A recent study that examined 35 years worth of Current Population Survey data found that employers tend to choose machines over human workers for automatable jobs whenever minimum wage increases.

According to 2017 statistics from the U.S. Bureau of Labor Statistics, roughly half of people earning federal minimum wage, or less, were under the age of 25, and service occupations have the highest percentage of workers earning minimum wage. Roughly two-thirds of the people who earned minimum wage or less were employed in service occupations, especially food preparation and serving jobs. Three-fifths of all people earning minimum wage worked in restaurants or other food services.

If minimum wage increases, the incentive to automate low-skill, minimum wage positions increases. Restaurants hire a large share of minimum wage workers, and many restaurants are now implementing automation. If you own a restaurant, you have the option to hire an unqualified teenager who doesn’t really care about the job and may or may not take pride a job well done for $12 or $15 an hour, or you can install an interactive kiosk that’s fun to order from, pays for itself, doesn’t make mistakes, and has a high add-on sale rate.

It makes sense to invest in automation

Whether or not a higher minimum wage actually hurts or benefits workers is highly debated. One thing that is for certain is that automation is here to stay, and we can expect to see more automation in more places. Of course, you have to make sure that you maintain your machines once they have been installed.

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