Automation versus a $15 minimum wage

One of the joys of being an American citizen living outside the United States is that it can give you at least the illusion of separation from the shouting and anger of the current American political scene. I may have my own feelings, but they are not significant to what I am doing here at Future Brief. However, an issue has been raised that strikes directly at my concerns regarding our ability to deal constructively with the consequences of technological change.

Recently, Senator Bernie Sanders, a candidate for the Democratic presidential nomination, has promoted an increase in the minimum wage to $15 an hour for federal employees, an idea that is now being proposed at state and municipal levels as well.   This is not for lack of sympathy for people trying to get by on the current minimum wage, but this is all but certain to cause more problems than it solves.

The difficulty in raising a topic like this is that partisan liberal Democrats have frequently turned to this as a solution in past years and they can instantly assume that any criticism comes from Republicans or otherwise from the right-wing.  In the current political atmosphere, this kind of “knee-jerk” reaction can be seen on both the liberal and conservative ends of the American political spectrum on many different topics and that leads to a lot of emotion, but little else.

So it is that I was very impressed with a recent commentary by Harry Holzer, a Senior Fellow at the Brookings Institution.  As described at the Brooking Institution website, “Harry Holzer is a Nonresident Senior Fellow in Economic Studies at the Brookings Institution and a professor at the McCourt School of Public Policy at Georgetown. He previously served as Chief Economist for the U.S. Department of Labor and professor of economics at Michigan State University. Over most of his career, he has focused primarily on the low-wage labor market, and particularly the problems of minority workers in urban areas. In recent years he has worked on the quality of jobs as well as workers in the labor market, and how job quality affects the employment prospects of the disadvantaged as well as worker inequality and insecurity more broadly.”

I would add that Dr. Holzer was Chief Economist for the U.S. Department of Labor under President Clinton.  This is not a conservative Republican.  Indeed, with his background, one would expect he would more likely endorse a major increase like the one proposed.

Instead, he raises serious red flags in an essay for Brookings titled A $15-hour minimum wage could harm America’s poorest workers.   His approach is very, very gentle.  I do not know him, but I suspect he words it as he does so as not to instantly force a negative emotional response from the Brookings audience most likely to read his essay, liberals and Democrats.  I appreciate that as I, too, am tired of the angry shouting coming from both “sides of the aisle” and would not want to be caught in the crossfire.

I have no political “horse” in this race in either party.  I am an independent and will wait until all the shouting is done and the candidates are selected and the final election process is underway. I will consider them all, third party candidates nominated by the Libertarians, Greens, etc as well as the Republicans and Democrats.  Long ago, I decided to never vote “against” a candidate, but only “for” a candidate.  If I have no one I can vote for, I simply do not vote.   We are about a year from the point when I can begin that process.  In the meantime, I am happy to sit on the sidelines and let the partisan folks do their thing.

The only reason I bring this matter up today is the result of one sentence, “”For instance, fast-food workers might be more easily replaced by robots.”  That is the only reference made to an issue I have discussed here more than once – automation.  It is an indirect reference, but it is important to note.

As nearly five million people have seen at the YouTube video, Humans Need Not Apply, as well as from many other sources, automation is already here and more is coming.  Automation is not going away.  It is already a part of our lives and will only continue to grow as its benefits are too obvious to ignore.  But so are its negative consequences.  Those will not be enough to stop automation’s growth, but they are enough to cause a great deal of pain to some substantial segments of our population, and not just in the US.

Harry Holzer raises, no matter how gently and indirectly, an important issue.  A sudden increase in the minimum raise is a real incentive to automate.  As a business owner myself, I am very annoyed by people who think we hate our employees and look for any excuse to replace them.  That is simply not true.  My employees in various businesses over the years have been my associates and my friends.  Losing them because I cannot afford them is extremely painful.  I hate it.  It is the worst reason for letting someone go.  But if it is that or go out of business, I do what I have to do or we all end up unemployed.  And even if I and all my current competitors decided to raise our prices to cover the increase in wages, this would only be a clear incentive for new competitors to rise who automate from the start and offer lower prices we cannot meet.

The $15 minimum wage is an example of trying to use a 20th century “solution” to a 21st century problem.  It is not just automation, it can be found with many topics from artificial intelligence to genetic engineering.  Politicians know that technology is bringing momentous change now and much more in the near future, but they are not dealing with it.  It is too painful and there are no easy solutions to the negative consequences that will arrive along with the technology.  They are not in denial, they are in avoidance.  That is not going to work.

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This is a personal blog, more of a personal notebook, unadvertised and without promotion. I try to post on a weekly basis, but there is no guarantee. Should you stumble across it and wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. Rest assured, yours will be kept private. I also now tweet to share articles and essays that I think are important, but do not have room for here. You are welcome to make comments, if they are on topic and polite. I have no time or space for insults, foul language, or anything I judge to be offensive to readers.

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