The minimum wage: Guaranteeing more jobs … for machines

Alex Adrianson of the Heritage Foundation’s “Insider Online” blog examines an interesting side effect of efforts to increase the government-mandated minimum wage.

Rising labor costs—whether caused by higher minimum wages or ObamaCare mandates—run the risk of inducing employers to cut jobs and use more machines instead. How easy is it for businesses to substitute capital for labor? When it comes to low-skill, manual labor in restaurants—the kind of work most likely to pay the minimum wage—employers are already moving ahead with automation. Just a few examples from a report by Ira Stoll:

McDonald’s announced this month that it will deploy computer kiosks at 7,000 restaurants in Europe, allowing customers to place their own orders and pay by swiping their own credit card.

Another restaurant chain, Panera, is deploying the computer kiosks for customers in the U.S., a development that Bloomberg News reported under the headline, “More Kiosks, Fewer Cashiers Coming Soon to Panera.”

The fast-food trade publication QSR reports that a McDonald’s in Laguna Niguel, Calif., is experimenting with iPads that let customers customize their hamburgers. A White Castle in Columbus, Ohio, has deployed computer kiosks that let customers place their own orders, unassisted by a paid human being. …

… When machines can do work more efficiently than humans, then it makes sense for employers to use them. That’s just creative destruction: Innovations that economize on the need for labor make us all more productive—and wealthy. But when minimum wage laws and other regulations artificially raise the price of labor relative to capital, then low-skilled workers lose jobs that would have benefitted both them and their employers.

By the way, the CEO of Panera has stated publicly that he supports raising the minimum wage. But given his company’s plans to use more automated kiosks, why wouldn’t he? It’s a way of raising the costs of Panera’s competitors for whom automated kiosks don’t make economic sense.

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