Matt HealeyTuesday,10 December 2013

The Snap:

Yesterday I posted the first in my series on income inequality. That post focused on how corporations are using public assistance to augment their profits. Personally I don’t want my tax dollars going to augment Walmart’s profits. Today’s post will look into some of the problems with solving this by simply raising the minimum wage.

The Download:

The simple solution to the problem is to raise the minimum wage. After all, if employees are not being paid a living wage, then requiring employers to raise the minimum wage will solve this. Unskilled or low-skilled workers will be receiving more money and thus will not have to rely on SNAP or other forms of public assistance. While it is true that raising the minimum will accomplish this for the employees that have and can hold these jobs, it will have other consequences. Namely, the acceleration of the replacement of humans with technology. This has been happening for a centuries but the speed of technological advancement has increased dramatically and shows no sign of slowing. This is increasing the rate at which unskilled or low-skilled workers can be replaced with technology. There was a recent story about Amazon experimenting with using drones to deliver packages, thus reducing the number of truck drivers required. Anyone who has gone to a Home Depot recognizes the self-checkout terminals that reduce the number of check-out clerks required. Several fast-food chains have begun to deploy self-service terminals to order and pay for the “food” (I put that in quotes because I am still not convinced McDonalds serves food).

So clearly there are ways that corporations can limit the use of people. Now, granted not everything can or should be replaced with technology. Corporations will select the optimal mix of human and non-human methods of getting tasks accomplished. They take into account both the costs and the effects on revenue and optimize for total profit. If the cost of one input increases, like labor, they will adjust. So, for proponents of an increase in the minimum wage, you have to factor in the inevitable increase in layoffs and the acceleration of the replacement of human with non-human labor. This needs to be factored into the decision to increase the minimum wage and what to increase it to.

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