What’s the Minimum Wage for Robots?


President Obama has called for an increase in the minimum wage, and fast food workers have been striking in hopes of increasing their wage to $15.00 an hour — roughly twice the current minimum wage.

Naturally, commentators are forecasting all kinds of consequences:

  • 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 and 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.

We’re not seeing predictions that more low-paying jobs will be replaced by automation. That’s surprising. Sales of industrial robots have risen by about 9% each year since 2008, with a record number of sales in 2011 nearly matched in 2012. Strides in AI and increasing levels of energy efficiency are making robots increasingly appealing — and they have no minimum wage requirements.

Only about 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 may 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.

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