The laws of economics need not apply, apparently.
Earlier this month, we wrote about McDonald’s and what appears to be a technological experiment that would replace cashiers:
McDonald’s employees who picketed for a better living wage (whatever that means) may come to regret that decision. According to a Redditor, a McDonald’s in Illinois replaced their cashiers with machines. The machines appear to be the cousins of the ones found in grocery stores, big box stores, and CVS that allow customers to complete transactions.
How cost effective is replacing an organic employee with a mechanized one? According to an economic blog, and unsurprisingly, the machines likely come out on top in terms of pricing.
When labor costs increase, employers are required to offset those increases elsewhere in order to remain profitable while still providing a product the market will want. So when workers demand to be paid $15 an hour to push buttons on a cash register, they can and should be expected to be replaced with cheaper, more efficient labor. When an employer can only afford three employees for what they once paid for five, that’s two jobs that have been eliminated.
Undeterred by facts and economics, Eric Garcetti, the mayor of Los Angeles reportedly plans to raise the minimum wage to $13.25 an hour, what would be one of the highest minimum wages in the country.
The Los Angeles Times reports that Mayor Eric Garcetti is expected to announce on Labor Day a three-year plan to implement a $13.25 minimum hourly wage. That dollar figure would receive annual inflation-based increases, the paper reported, citing businesses and local government officials briefed on the proposal.
The plan has faced a “cool reception” from many major business groups worried about costs, according to the Times. Some union leaders, meanwhile, are reportedly unhappy because the plan does not start at a previously stated labor goal of $15 per hour.
A spokesman for the mayor would not confirm the plan, the L.A. Times reported, but acknowledged that Garcetti had met with leaders across the city to “discuss ways to help L.A. families and our economy thrive.”
Seems to be a test balloon of public and community opinion, but raising the minimum wage does not help the economy thrive as the mayor’s spokesman seemed to imply. Government mandated wage adjustments might benefit a few individuals in the short term, but can and usually do have negative impacts on those same individuals in the long run.
The American Action Forum conducted a study to dive into the minimum wage issue. Their findings suggest, quite strongly, that raising the minimum wage results in increased unemployment and reduced job creation.
The analysis finds that in 2013, a $1 increase in the minimum wage was associated with a 1.48 percentage point increase in the unemployment rate, a 0.18 percentage point decrease in the net job growth rate, a 4.67 percentage point increase in the teenage unemployment rate, and a 4.01 percentage point decrease in the teenage net job growth rate.
Consequently, high state minimum wages increased unemployment by 747,700 workers and reduced job growth by 83,300 jobs.
It’s unlikely that California will head good economic sense or do something wild like lower business taxation and regulation to help grow the economy. Rather, they seem hellbent on placing ridiculous mandates on employers who at some point, will likely relocate to Texas anyway. Unfortunately, many hard working people trying to make ends meet will get caught up in this nasty wage experiment.
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