You’re Fired: Minimum Wage Demands Will Kill Opportunity

Punch Clock

“Fight for 15” campaign by unions will lead to more automation, fewer entry level jobs

May 31, 2016

by James Wigderson
Special Guest Perspective for the MacIver Institute

The Wisconsin Democratic Party issued a press release on Wednesday celebrating the anniversary of the increase in the minimum wage to $7.25. In the release, Democratic Party Chairman Martha Laning said, “As Democrats, we believe that anyone who is willing to work hard should have a fair shot to get ahead. That’s why we are are working tirelessly to increase incomes and give hard working Americans the raise they deserve.”

I’m sure that all of the unpaid interns helping Hillary Clinton will appreciate the sentiment. Here kids, have some cake.

Unfortunately for the Democrats there may be a few people who don’t celebrate the occasion. As the MacIver Institute reported in 2014, a study by economist David Macpherson of Trinity University showed that the increase in the minimum wage between 2002 and 2012 from $5.15 an hour to $7.25 caused a 27.7% higher unemployment rate for workers ages 16-19 and 7,000 jobs were lost. Another study showed that the increase in the minimum wage resulted in no reduction in poverty levels.

At the time of the study, the Democratic plan was to raise the minimum wage to $10.10 an hour. The study commissioned by the Wisconsin Restaurant Association showed there would be 16,500 jobs lost. 11,070 workers 21 years or younger and 9,200 women would lose their jobs.

Now the demand is $15 per hour, or even more, regardless of the consequences. This is prompting that giant symbol of the minimum wage job, McDonalds, to consider using more automation in their restaurants. Why pay a 16-year-old kid to fill french fry orders when a machine will be more reliable and cheaper?

Automation is already coming to one McDonalds location in Chicago in anticipation of the minimum wage increase to $13 per hour by 2019. Welcome to the McCafe kiosk. The Illinois Policy Institute reports:

The kiosk features a touch-pad for ordering and paying. The screen also prompts customers to answer questions about their kiosk experience, giving the impression this is something that could be adopted as an alternative to hiring. This kind of automation, which replaces a human employee with technology, is one of the unintended consequences of Chicago’s minimum-wage increase.

Lest anyone believe that this will happen at just the one location, former Former McDonald’s CEO Ed Rensi said on Fox Business Network’s Mornings with Maria what would happen if the minimum wage increased to $15:

I was at the National Restaurant Show yesterday and if you look at the robotic devices that are coming into the restaurant industry — it’s cheaper to buy a $35,000 robotic arm than it is to hire an employee who’s inefficient making $15 an hour bagging French fries — it’s nonsense and it’s very destructive and it’s inflationary and it’s going to cause a job loss across this country like you’re not going to believe.

Their fast-food competition Wendy’s is already moving to more automation. The Investor’s Business Daily reports, “self-service ordering kiosks will be made available across its 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.”

I’m just hoping that these new fast food robots are friendlier than Box in Logan’s Run.

SEIU-inspired protesters leading the fast food “strikes” are probably too shortsighted to see the future in automation. But the next time they go to the grocery store to buy their fair-trade organic coffee, they might notice that half the customers are happily checking out their own groceries.

Raising the minimum wage to $15 per hour won’t just affect the fast food industry. A study last year by Douglas Holtz-Eakin and Ben Gitis for the Manhattan Institute found that a minimum wage of $15 by 2020 could mean the loss of 6.6 million jobs. They also found “of the increase in income for low-wage workers, only 6.7 percent would go to families in poverty.”

So while our friends at the Democratic Party of Wisconsin are patting themselves on the back on how noble they are compared to the evil Donald Trump whom they mock in the same press release, their minimum wage policies would actually condemn millions to hear Trump’s famous catch phrase, “You’re fired.”