Minimum wage hikes may please crowds, but they kill jobs

As Michigan’s economic comeback gains steam and the dismal decade of staggering job losses becomes just a bitter memory, along comes a group of people with good intentions – but terrible ideas – who would take Michigan backward. A coalition called Raise Michigan is launching a legislative initiative petition drive to raise Michigan’s minimum wage to $9.50 an hour. It’s a crowd-pleasing proposal for sure. The trouble is that it’s also a job-killing one.

Now let’s stipulate that academic research on the subject of how minimum wage increases effect employment levels are rather equivocal. It’s surprising that a subject that’s received this much attention has research findings that are so unclear. But let’s put that aside, because there’s actually little that studying minimum wage increases in the 70s, 80s and 90s can tell us. We’re simply in a different time.

Never has it been easier or more cost effective to substitute automation and self-service for employees. We see it all around us.

President Obama instinctively understands this. He once famously blamed ATM machines for the unemployment rate. Obama told NBC News, “There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate,” he said.

The President has it right. That’s why it makes little sense to drive up the cost of entry-level employees. More than ever, tablet computers can easily replace those employees.

Think about your local fast food restaurant. There used to be an employee there pouring every drink. But those days are long gone; customers serve themselves and that employee is gone. It’s easy to see how the next step will be eliminating the employees who take your order. They’ll be replaced with an inexpensive touch screen device that will be happy to ask you if you want fries with that.

The same thing can happen back in the kitchen as well. One California company has invented a fully automated machine that can create 300 gourmet hamburgers an hour. There is virtually no part of today’s fast food restaurant that can’t use machines in the place of employees.

This proposal will also hit the restaurant industry like a bomb. It more than triples the minimum wage for tipped employees like waiters and waitresses. With such a dramatic increase in wages there is no doubt that more and more restaurants will follow in the footsteps of Applebee’s by replacing their service staff with tabletop computers. Instead of a dozen waiters or waitresses on the job, there will be just a few food runners.

Jobs in retail stores will be hit hard too. Many grocery stores already have stations where customers scan their own cart full of goods and bag the groceries themselves. Expect that trend to explode with a higher minimum wage.

Of course the small businesses on every Main Street in Michigan will be hurt as well. They won’t have the capital to invest in new computer hardware and software, or new forms of automation. The local sandwich shop won’t be able to automate sandwich making, and the local florist will still need employees to arrange the flowers. They’ll be faced with either absorbing sharply higher labor costs, or simply eliminating employees.

Again, the men and women promoting this proposal have good intentions. We all want to see people enjoy a higher standard of living. But raising the minimum wage in a soft economy is simply guaranteed to cut the bottom rung off of the economic ladder for thousands of Michigan’s workers, especially young people who are just getting started in the job market.

One especially damaging feature of this initiative is that if enacted by voters at the polls, it would take a super-majority vote of the legislature to change it, no matter how much economic damage it was doing. Michigan has had plenty of experience with special interest groups trying to impose their will at the ballot box, and voters have wisely said no again and again. This should be another one of those times.

With a stronger economy and a very low unemployment rate, wages will rise all throughout the workforce. Voters should focus on policies to create that booming job market rather than accelerating the trend toward automation with a destructive proposal like this one.

Fred Wszolek is a spokesperson for the Workforce Fairness Institute (WFI)

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