As the left rages for its radical raise in the minimum wage, economics continues its relentless quest for equilibrium.
Like almost everything in the progressive ideology, this issue is based on feelings, not facts. The facts will end up putting a veto on such a massive raise, whether directly or indirectly.
If the workers at the bottom of the barrel are given a salary increase of almost 100% overnight, what do you think the rest of the employees are going to want? The rational response from everyone else is to demand a similar raise, which of course they won’t get as it would most likely bankrupt the employer. Eventually, this will foster hostility in the workplace and much greater anger toward employers by the more skilled workers who will end up being totally screwed. The Minimums will laugh at them.
But not for long.
Ultimately, the employer will be faced with raising prices considerably and reducing payroll. This may lead to going out of business, and it will look to replace workers as quickly as possible. The first step would be layoffs so that the business can operate with the bare minimum number, so those remaining will have to work harder. The second step is the adoption of robots to replace the minimums.
Take a look at the fast food industry as the perfect example since it has the largest number of minimum wage employees.
Momentum Machines, a California based manufacturer of robots, has clearly stated that their machines are meant to completely replace humans. They are faster, cleaner and much, much cheaper. There are no health care costs or employment taxes, just maintenance and replacement. They don’t get hurt and sue. They don’t call out sick and they don’t ask for huge wage jumps. They don’t ask for wages, period.
Is a hike in the minimum wage needed? There’s no doubt that it is currently too low and needs to move up, but jumping too quickly will cause serious disruptions in the economic system and it will have a devastating effect on the lives of millions of people. Those same people may never be able to get back in the game, because once the robots replace them, there will be no economic motivation to return to the human resources based business model.
With the recent legislation in California and New York, it won’t take long to find out whether or not I’m right.