Sitting in the drive thru lane for 20 mins because the lobby is closed or waiting to use the ordering kiosk because of less workers due to cost of labor is removing some of that convenience. Another thing is the combination of price increases and product shrinking is that some of the inflation is hidden.
The only thing I have to say on the matter I think I’ve probably already said in some other thread. Well before the pandemic, here in Ontario the government implemented a program of staged minimum wage increases. When I went to pick up a chicken dinner order at one fast-food place which I had been in the habit of ordering from frequently, and was quite familiar with the cost of my typical order, I noticed that the cost had gone up.
When I commented on this, the tiny little young girl said matter-of-factly that “the minimum wage has gone up”. So this little waif was undoubtedly working for minimum wage. To which I replied, “Good! I’m glad it’s gone up! And you deserve more.” And I left having paid something like 25¢ more than before for my broiled chicken dinner. The minimum wage increase hasn’t bankrupted me yet, nor impacted service in any ways I can notice, but I bet it’s made lives better for many people living on the edge.
Well said. Well said man. I’ve felt the same way but you’ve put it concisely with fewer words than I could. Yet, the floor is held by plutocratic greedheads reflexively railing against raising the minimum wage ( or raising any wages, other than for themselves or their ilk ) and trot out the trite macroeconomic poo-pooing of how this would apply downward pressure on “the economy”. The micro bottom-up effect of increased income of the proles is either studiously ignored, or more often, framed in terms of fear of inflation. ( interesting at how they seem quite tranquil of inflation fears when the big money crowd amasses yet more wealth )
More than that, those workers can now afford to buy more themselves, so the general level of prosperity goes up. Putting more cash in the hands of the working poor is the best economic stimulus there is - a trickle-up effect indeed!
I have no numbers on this but it wouldn’t surprise me if it decreased crime levels too.
Bingo. Demand side economics writ large. An absolute affront to supply-side ( trickle down ) economics boffins. In turn in, as far as the latter group is concerned, increased income/spending by the rich = “driving the economy/job creation”, whereas increased income/spending by the working class = “oh no!!! Inflation!”. These “fears” would seem to strongly suggest a tacit admission that the economy is actually driven by the lower levels, that is, if, the plutocrats were being intellectually honest.
To those that say “Poor people don’t create jobs”. Yeah, they do, en masse. Where does Mr Big of XYZ Company get his money? From under his mattress, or from the lumpen masses buying his widgets?
So now you’re saying that kiosks were introduced because society wants minimum wage to go up? Not- as you initially claimed- as a result of minimum wage already having been increased? Huh.
Huh? All I am saying is that businesses respond to trends and predictions of the future. And I never made any claim about current vs future minimum wages. Imjust said that McDonalds responded to the increase in minimum wages by moving to kiosks. That will include their estimate of the trend of minimum wages in the future, as such digitization programs take years to complete.
Businesses don’t just react to what has already happened. Shockingly, they plan for the future as well.
I think this claim is overrated, and might simply reflect the old observation that “correlation does not equal causation.” I can well imagine that fast food places are moving to kiosks simply as a means of embracing technology, and reducing costs, as would typically be expected for any business or industry. Meaning, this is a trend that exists independent of employee salaries.
(Admittedly, the desire to cut costs does cross into both areas. I can easily see that a company like McD’s would want to move to kiosks to reduce the need for employees to take orders. And I can see that the company might think of ways to cut costs if the have to raise wages. I’m just not convinced that there was ever any sense of “we need to automate to respond to increased wages.”)
More generally, I’m suspicious of the trope that companies would respond to increased wages by raising prices. I mean, lots of stores give their employees raises every year; does that mean they immediately adjust their prices? I suspect not, and I imagine that the price that is charged is more generally a reflection of overall expenses versus revenue generated. And if customers have raised incomes, and then respond by spending more, there may be no need to raise prices; relatively speaking, an increase in minimum wage could mean more revenue is generated, offsetting any increase in expense.
That’s still macroeconomics, just looking at it from a different angle. Microeconomics are the more small-scale stuff- price elasticity, etc…
Raising the minimum wage isn’t a one-sided issue though, unlike what you’re making it sound like.
The big problem in the US right now is that we’ve waited too long to raise the minimum wage, and no option available to us is not extremely painful for someone. Not raising it at all hurts the people working for it, raising it to say… $15 is basically too much, too fast for a lot of small to medium sized businesses, and some sort of stepwise increase over time is unlikely to stick over time in the current political climate, even if it is the most sensible way to go about it.
Just about every fast food place here has raised their prices, substantially in some cases. I don’t think it has as much to do about wage increases as increased inflation and also logistics costs which are soaring (for things like transport and warehouse space). You can see this in a lot of non-food service industries as well, as prices have risen quite a bit.
When discussing economics, I have a habit of assuming that everyone understands we are talking about changes on the margin. Then people argue with me because they think I’m talking in absolutes. My bad, I guess.
So no, kiosks aren’t the result of just minimum wage increases. But on the margin, raising minimum wages can be expected to increase this type of automation. Moving to automation often isn’t about saving wages at all, but rather improving quality. Order entry errors are common at fast food places, for example. Kiosks can remove that error (or push it onto customers who entered the wrong thing). Kiosks are also easier to manage, don’t call in sick, don’t take up precious space in the work areas, etc.
But basic economics suggests that the number of stores with kiosks you’ll get when the minimum wage is $7.25 is different than what you’d get at $15.
It depends on the industry, and how much the cost of labor makes up their overall costs. Fast food and the food service industry in general iis highly labor intensive, and it’s also low margin. There just isn’t a lot of room to absorb higher salaries without raising prices. The average profit margin in the fast food industry is around 6-9%. Labor costs run between 25% and 40% of revenue depending on the type of restaurant. I hope you can see that, say, a 50% increase in labor costs cannot be absorbed without raising prices. Driving minimum wages from $7.25 to $15 would require substantial changes in prices and operation.
And raising prices in one food sector (fast food) will shrink that sector on the margin, causing job losses.
Aren’t the kiosks the change in operation that occurs with the increase in prices?
And since that reduces the number of employees needed, prices don’t have to raise, because costs are reduced. Right?
I mean, the change from people taking customer
Orders to kiosks (or more self service grocery store lanes, as another example) probably mean that there aren’t as many people who work at these places.
I realize that some will say that this Is a negative - fewer jobs.
I don’t see it that way. Okay, we have fewer jobs. But they are in the fast food industry. So people have to figure out other things to do. And of those who stay in the fast food industry, perhaps they make enough to survive. (Although $15/hr is still paltry).
I’m not following the doomsday predictions here.
Demand side only works if production side grows in proportion to the money supply that is generating the demand. Otherwise you have shortages and inflation. It doesn’t matter if you have a 10% more paper and coins in a pickle jar if the total cost of living goes up by more than 10%. Folks on boards like this and in leftist economic space in general have a very selective short term memory when it comes to economic issues that are inconvenient to remember. Housing bubble? Easy credit. Student loan ‘crises’? Easy credit.
I’m all for increasing demand side. But you cannot do it, if economic growth and prosperity are the actual goals, by wage floor fiat. You need production.
On the subject of inflation, in addition to product shrinkage we also have diminished quality of service and diminished quality of product. These also need to be taken into account with what it is that your money is purchasing. If you are paying more money for less goods and doing more work at the store to get the goods you are losing more than the 15% that the price of a Starbuck’s coffee increased.
Lobby closed and drive thru line is 3 times as long? How much gas is being burnt? How much time is wasted? 10 extra minutes of idle time with one’s car isn’t free in terms of gas and additional maintenance. It’s not mileage because you ain’t driving but the engine and systems are still running.
Even Chik-Fil-A seems to be pinching the customer a bit with, this is anecdotal, smaller pieces of chicken and smaller nuggets. And for the first time ever they did a McDonalds and had a shake machine down. THAT was a sign of the upcoming apocalypse if there ever was one.
Yes, of course. When faced with increases in wages above the current level of productivity, employers can respond with some combination of replacing workers with capital investment (kiosks), lowering business hours (cutting the night shift, for example), or making the workers more productive by simply working them harder. Another option is to simply go out of business if the prices you would need to charge make you uncompetitive and you don’t have the capital needed to upgrade your operation.
What they can’t do is just ‘absorb’ the new wages, or ‘take it out of profits’, or provide it by lowering the wages of management.
It’s capital incestment that ultimately raises the wages of workers in most industries. For example, if I have a worker dedicated to pouring drinks from a soda machine, another taking orders, and a third making burgers, their individual productivity is low so the wagesmthey can command are also low. If I fire two of them, install a kiosk for ordering and automated drink dispensors, and make the third person a supervisor overseeing all of it, I have raised the productivity of the third person, given them more responsibility, and subsequently can pay them more.
Auto workers don’t make way more than minimum wage because of a union - they make it because each worker is leveraging millions of dollars in equipment, magnifying their productivity. If you made thise workers build cara with hand tools, you couldn’t afford to pay them minimum wage.
Freudian slip of the month.
The doomsday is that if you make the minimum wage $15, these major things will happen:
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Things that we would like be done, but which aren’t worth $15/hr, will no longer be done. Or, they’ll be done under the table. See the amount of illegal immigrant labor that goes on. You’ll get a lot more of it, at the expense of citizens who have to play by the rules and can’t find a $15/hr job.
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People who for whatever reason do not have the capability to provide $15/hr in value to employers become unemployable.
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The price of goods and services go up in the affected industries. Since the consumers of goods produced by low wage employees are often low wage people themselves, the good you do in one area causes more pain in another. The primary consumers of Wal-Mart goods are low income people. They are also over-represented as consumers of fast food. They will all face higher prices if you raise the minimum wage.
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Sectors which employ low-wage people will shrink relative to sectors whixh don’t. I often hear a glib, “Well, maybe those jobs shouldn’t exist” when pointing this out, but society needs entry level jobs that people of low productivity can get, so they can learn how to be more productive. Kill all those jobs, and you’ve just created a dependent underclass.
This is not speculation. Go look at what high minimum wages and other worker protection laws have done in France, especially to immigrants. The combination of high minimum wages and the extreme difficulty of firing someone once you hire them was supposed to help workers at the bottom. Instead, what it did was benefit young people from good backgrounds with connected family members who could vouch for them. Muslim immigrant from Somalia with no documentation? No chance.
Part of the productivity of a worker is wrapped up in the cost of hiring, training, and turnover. Raise those costs, and you start to exclude certain workers. If I can’t fire a low-productivity worker, I’m goong to be a lot pickier about who I hire in the first place. So people without job experience or credentials or connections get slammed. He same is true if I am forced to pay a high minimum wage. The cost of picking the wrong person goes higher, so people on the bottom get hurt the most.
For example, the unemployment rate in 2017 for French women in France was 8.7%. For immigrant women from outside the EU it was 26,7%. The youth unemployment rate is also over 20%.
I think those future chronically unemployed people who are productive at $7.25 but not $15 would consider a national $15/hr minimum wage law a form of doomsday. They just had the bottom rung of the ladder of prosperity cut off for them. And being a ward of the state on welfare or UBI is a very poor substitute.
Holy smokes, that was a good one, wasn’t it?
Of course, the US doesn’t have those same rules with respect to firing people, so that part doesn’t really apply and I seriously doubt that’s going to change any time soon…if ever. And right now, with several labor shortages and automation systems still in their infancy, I think that short-term companies are going to have to raise their salary caps on the low end if they want to get enough staff to stay operating. In fact, even raising them in my area hasn’t really helped that much, as I still see fast food businesses and other foodservice businesses who are short-staffed and sometimes are closed for shifts, open late/close early, or have signs up saying something like ‘we are sorry but due to staffing issues service may be slower than normal’.
Eventually, I think you are correct…automation is going to essentially make those jobs mostly obsolete, or at least lower staffing requirements to maybe a few people instead of the current number. Basically, the labor market will price itself out of jobs on the low end. What companies will do with that potential pool of labor going forward is a good thought exercise and one that will probably be worth a ton of money to anyone who figures it out.
I remember about 5 years ago, Seattle had made headlines by having a $15 minimum wage. I, living in Las Vegas with a minimum wage of $8-something, mentioned to my uncle that I was bummed out that my favorite BBQ place had totally redone their prices with a huge increase, like a 50% increase in prices across the board. They were an outlier, nowhere else was having a huge jump in pay - I don’t know what the cause was, perhaps new management.
Of course he said “of course, everywhere needs to raise their prices, this is what you get when you force people to pay $15/hr”
But of course that had nothing to do with it. Nevada/Vegas did not raise their minimum wage nor was there any talk of doing so. So he used something that didn’t happen here and was never seriously likely to happen here (a min wage increase) to reinforce his notion that the minimum wage ruins everything.
That’s because he was very motivated to do so. His reasoning was motivated. He thinks that low wage workers deserve to be treated like dirt and not paid anything, and anyone who thinks otherwise is entitled. He probably thinks that government intervention in the economy like minimum wages always cause harm. So when anything bad (from my perspective - the price increases) happened, in order to explain it, he started from his conclusion (workers getting more bad, government regulation bad) and worked his way backward as to why his conclusion was justified. Even though his argument was counter-factual since no wage increase was present or even likely to happen, and yet he used this completely flawed and disconnected line of thinking to reinforce his beliefs and confirm he was right.
I will leave why I’m sharing that story as an exercise to the reader.
I don’t think McDonald’s seriously anticipated a $15 federal minimum wage. They’re smart enough to know that things that benefit people at the low end almost never happen in America anymore and there was no serious expectation that it would pass. Even if they had, it would’ve been phased in over years, which would’ve given McDonalds a chance to automate. They didn’t have to do it in anticipation that it might happen later.
More likely, automation became better, cheaper, and more acceptable to society. Technology almost always gets better and cheaper, and importantly, people have a growing tolerance for interacting with technology in places where they didn’t before, so people’s willingness to use something like ordering terminals is higher now than it was 10 years ago.
Since automation is going to get better and cheaper and more acceptable, in order to “compete” with potential automation, people with those jobs are going to have to do more work for less pay. This is not really desirable to anyone except those looking to exploit people. It is inevitable and a sign of good progress that these jobs are replaced by technology, as we get more benefit for less toil. Saying “well, you have to make sure you don’t improve people’s lives in any way or the big bad automation will come and take their jobs away” is not progress, that’s awful.
I noticed that fast food in Arizona seemed to cost more after every min. wage increase. It now costs about the same to buy a drive through burger, fries and coke as it does to call ahead to a sit-down place and get take out. When I was in Nevada last week, I was shocked at how low the fast food prices were. There was more than a five dollar difference between the same combo in Nevada and Arizona.