Here is a heretical thought: What’s wrong with technological unemployment? The substitution of technology for human and animal labor is the basis of the prosperity of advanced societies like the United States. In 1800 almost everybody in the U.S. was a farmer. Today almost nobody is, even though the U.S. produces far more food per capita, thanks to tractors and other devices. Assembly-line workers are also an endangered species, now that four out of five Americans work in the broadly defined service sector jobs. Increasingly, too, many service-sector jobs, like those of receptionists and accountants, are being automated. In every generation, all the way back to when the first industrial revolution produced the first anti-industrial revolution in the form of the machine-smashing English Luddites, there have been predictions of mass unemployment caused by technology. Certainly the transitions have frequently been painful, but the children of displaced workers—albeit not all of their parents—have usually obtained more comfortable and often more intellectually demanding employment.
A case can be made, then, that the replacement of labor by machinery as a result of a higher minimum wage (or anything else that increases labor costs) is a positive step, not an evil to be avoided. Orthodox economists are curiously schizophrenic about this issue. On the one hand, they recognize that advances in technological productivity made possible by investment—as opposed to, say increases in the labor supply or raw materials—are the major sources of overall growth in modern economies. On the other hand, when they discuss wage rates orthodox economists warn that a higher minimum wage might create an incentive for employers to …gasp, horror!..invest in more productive technology.
During the boom of the late 1990s, labor shortages in some parts of the U.S. compelled grocery stores to replace semi-skilled cashiers with automatic checkout machines supervised by a technician. From the point of view of grocers and their customers, this was as good as the old system, perhaps better. An increase in the minimum wage would have had the same effect as the temporary labor shortage. That brings us to the key question: Will those who might have been cashiers be able to find work in different sectors of the economy—or will a new, high minimum wage prevent them from being employed anywhere?
One of the fastest growing sectors in the economy of the U.S. and similar countries, thanks to the rapid graying of the population, is health care. Much of this industry in labor-intensive, and will remain so at least until robots can provide tender loving care. If a higher minimum wage creates technological unemployment where machinery can easily replace humans, there is reason to be optimistic that technologically-unemployed people with limited skills can be vacuumed up by the rapidly multiplying job openings for nurses’ aides, hospital orderlies and other health care workers.
What difference does it make for the economy as a whole whether grocery store checkout stations are automated or not? The economic powers of the 21st century will be the “robot powers.” Despite all the chatter about globalization, the corporations that dominate world commerce in such fields as automobiles and aerospace remain those that can use their superiority in the vast domestic markets of populous nations like the U.S., Japan and Germany as springboards for expansion into foreign markets. Obviously the home market for national robot industries will be much greater in countries where employers in many traditionally labor-intensive sectors are compelled to invest in ever more sophisticated robots by high wages and tight labor markets.
That is why the majority of us who earn much more than the minimum wage should support the campaign to raise it. As a way of combating poverty, the living wage is neither better nor worse than a generous EITC. But as a means of promoting technological progress in the American economy by encouraging the automation on many labor-intensive industries, the minimum wage is greatly preferable to the EITC. In fact, because it subsidizes primitive enterprises, the EITC may actually retard technological progress in the United States, at least to some degree.
By creating an incentive for employers to replace workers with robots and computers, a living wage would ultimately benefit all Americans, thanks to the spillover impact of technological progress in various industries It is all the more unfortunate, therefore, that most advocates of a living wage continue to make the sophistic argument that higher wages will not produce significant unemployment or encourage employers to replace labor with skilled with capital investments. As long as low-skilled workers can find jobs in innately labor-intensive sectors like health care, the tendency of a higher minimum wage should be treated not as minor side effect but as a major selling point.
The sooner John Henry is replaced by a drill, the better. John Henry’s children, and John Henry himself, can do something more rewarding with their lives.
