In Face Of Rising Personnel Costs, Companies Experimenting With Human-Less Models.

Minimum Wage Laws Kill Jobs

May 28, 2014 by Bob Livingston 

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THINKSTOCK

A business exists for one purpose: to provide profit for the shareholder(s). Failing that, every business will eventually close its doors.

To meet its purpose, that business must provide a good or service the public needs or wants at a price the consumer is willing to pay. This is economics broken down to its simplest form.

Over the past few months, there have been protests and strikes by fast food workers at various locations across the U.S. and in Europe for a higher minimum wage. They are operating under the false assumption that a business can pay its employees more than they return in productivity.

Anticipating a sharp rise in wages, the fast food industry is looking to alternatives to paying workers more than they are worth. It is turning to technology.

In 2011, McDonald’s deployed 7,000 kiosks in its European stores. Restaurants like Jimmy Johns, Potbelly and Wow Bao have already deployed on-site kiosks and mobile apps, enabling their customers to skip lines and place orders with a few finger taps and the swipe of a debit or credit card. The restaurant chains Chili’s and Applebee’s have also placed small kiosks on their tables that allow customers to order and pay without interacting with the human wait staff. Last month, Panera Bread announced it would bring in self-ordering kiosks and mobile ordering to all its locations over the next three years.

McDonald’s, which depends on drive-thru customers for about 75 percent of its American business, has begun testingmobile ordering in Salt Lake City and Austin, Texas. The company is apparently eschewing the kiosk idea in the U.S. because of the drive-thru traffic and for other reasons.

For the firm Nextep Systems, which specializes in touch-screen self-order systems, sales in 2013 were up 50 percent over 2012. According to a study by the University of Oxford, there is a 92 percent chance that all fast-food preparation and serving will soon be automated. Industry analysts predict at least a 5 percent to 10 percent drop in food industry employment in coming years.

Look at the Bureau of Labor Statistics employment data and you will see that food industry employment is one of the few sectors currently seeing consistent month-to-month hiring increases. A rise in the minimum wage will kill that growth.

By manipulating wages, government will hurt those it claims to be looking out for. Young, entry-level job seekers will see their employment prospects dwindle; and the young and the poor — the primary purchasers of fast food — will see their prices rise even more than demanded by food inflation, which is approaching double digits.