04/05/2017

The Minimum Wage Should Be Called The Robot Employment Act

Andy Puzder, Wall Street Journal

Entry-level jobs matter—and you don’t have to take my word for it. In a speech last week on workforce development in low-income communities, Federal Reserve Chair Janet Yellen said that “it is crucial for younger workers to establish a solid connection to employment early in their work lives.”

Unfortunately, government policies are destroying entry-level jobs by giving businesses an incentive to automate at an accelerated pace. In a survey released last month, the publication Nation’s Restaurant News asked 319 restaurant operators to name their biggest challenge for 2017. Nearly a quarter of them, 24%, said rising minimum wages.

It’s no surprise that restaurants are rolling out the robots. McDonald’s said last November that it would install self-order kiosks in all 14,000 of its U.S. restaurants. Wendy’s announced in February it would add kiosks at about 1,000 locations to “appeal to younger customers and reduce labor costs.”

The trend toward automation is particularly pronounced in areas where the local minimum wage is high. Eatsa, a 21st-century version of the automat, now lists seven locations in four cities, each of which will be subject to a $15 minimum wage within the next 36 months.

Taking automation to the next step, Miso Robotics and the owner of CaliBurger announced in March they have developed a robotic arm, called Flippy, that can turn burgers and place them on buns. CaliBurger plans to install them over the next two years in 50 restaurants world-wide.

By encouraging automation, cities that significantly raise the minimum wage destroy opportunities for the least-skilled workers. In 2015 a scholar at the Federal Reserve Bank of San Francisco released a paper summarizing the available research on this effect. “The most credible conclusion,” he wrote, “is a higher minimum wage results in some job loss for the least-skilled workers—with possibly larger adverse effects than earlier research suggested.”

The loss of entry-level jobs also worsens racial disparities. In a 2011 report from the nonpartisan Employment Policies Institute, two university economists examined nearly 20 years of data containing 600,000 observations. They compared how each 10% increase in the minimum wage affected the employment of young males without a high-school diploma. For whites, the drop was 2.5%. For blacks, it was 6.5%.

These are jobs America cannot afford to lose. In 2014 nearly 40% of black men age 20 to 24 in Chicago and almost 30% in New York and Los Angeles were neither working nor in school, according to a report last year from the Great Cities Institute. For white men, it was about 10%. Nationally, February’s unemployment rate among white males age 16 to 19 was 14.1%; for young black males it was 24.1%.

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