President Biden’s continuing efforts to get the minimum wage up to $15.00 an hour — roughly twice the current federal minimum wage — continues to face pushback, this time from a Colorado court. The idea of a $15 minimum wage is not new, though– President Obama called for this measure in 2013, a bill mandating it got 202 cosponsors in 2021, and the Center for American Progress recently claimed that this one step would make meaningful reductions in wage gaps for underserved groups.
But commentators are forecasting all kinds of consequences if advocates ever get their way:
- Unskilled workers will be replaced by more skilled workers.
- All wages will rise, as workers compare their compensation with the new minimum.
- Prices will rise, passing the added costs along to the consumers, thus removing the benefits of the higher minimum wage.
- Lower income workers will have more money to add into the local economy.
- Workers in entry-level jobs will have less motivation to work toward higher paying jobs.
- Workers will have less need of government programs like food stamps, saving the government money.
- Small businesses will go under.
- Large corporations will see that they must be more concerned about their workers and, like Ebeneezer Scrooge, open their hearts to the poor and happily give raises to everyone, accepting lower profits.
No one has actually suggested that the last item on the list will take place, though some are saying that it should.
Automation?
We’re not seeing many predictions that more low-paying jobs will be replaced by automation. That’s surprising. Sales of industrial robots have risen steadily for decades. It’s estimated that in 2026, global industrial robot shipments will amount to about 718,000. Strides in AI and increasing levels of energy efficiency are making robots increasingly appealing — and they have no minimum wage requirements.
Only about `1.2% of the jobs in the United States are actually paid minimum wage. They’re things like taking tickets at theaters, which probably doesn’t actually require a human being, and entry-level fast food jobs. Again, it’s easy enough to see how most of those jobs could be automated. Life guarding, another minimum wage job, might require a human being — but it definitely has perks.
Would replacing minimum wage jobs with automated systems end up being cheaper than hiring, training, and keeping human workers? It has been for some industries already. Automation is often used in jobs that are dangerous or which require an extremely high degree of precision, but that only makes sense as long as the cost of human workers is low enough to make the cost of R&D for automation unappealing. Once the up-front cost of shifting a burger joint to automated systems compares favorably with the cost of outfitting it with people, it will happen.
Will this free the minimum workers to learn new skills and do something more interesting and creative in the way of work, or lead to massive unemployment? Economists are debating this question, but we may not know until it happens.