From Marketwatch an article referencing new study on Minimum Wage impacts — nice article from Marketwatch looking at the results from 2021 Princeton study on the effects of raising minimum wage. The usual most vocal critics are people like Andy Puzder back in the day that he ran Carl Jrs. Labor costs were very dear to his heart. It is what we might call a “the sky is falling” or flat earth warning. Empirical data never backs them up which is why a verbal interview is usual choice. Automation is a good thing and it will continue to expand.
Automated Fulfillment – Sounds Nice Doesn’t It?
Today we see Walmart expanding into automated fulfillment centers. Walmart is also testing automated drive-through, giving an alternate option for shoppers as they can drive up to the designated area and grab their products by scanning a code.
Excerpt from Marketwatch:
What does this mean for the fast-food industry?
The leisure and hospitality industry, which includes restaurant workers, employs the greatest share of workers (11%) who earn hourly wages at or below the federal minimum across all industries, according to research published by the Bureau of Labor Statistics in 2019.
A separate 2013 study by University of California Berkeley economists found the fast-food industry has the largest share of workers who rely on public benefits, with 45% using government assistance.
A McDonald’s USA spokesperson previously told MarketWatch that “the average starting wage at U.S. corporate-owned restaurants is over $10 per hour and exceeds the federal minimum wage.”
The National Restaurant Association, a trade group, spoke out against a push in Congress to pass the Raise the Wage Act of 2021 that was unveiled on Tuesday. Similar to the Raise the Wage Act of 2019, which passed in the House, the legislation calls for the federal minimum wage to increase to $15 an hour by 2025.
“Our industry runs on a 3-5% pre-tax profit margin in a good year — during a pandemic is not the time to impose a triple-digit increase in labor costs,” Sean Kennedy, executive vice president of public affairs at the NRA said in a statement. “Far too many restaurants will respond by laying off even more workers or closing their doors for good.”
Ashenfelter and Jurajda’s findings indicate the opposite. However, Ashenfelter acknowledged that these findings may not be translatable to other fast-food chains or industries because “other firms might behave differently.”
In other words, instead of raising prices of goods as McDonald’s did, other businesses may instead layoff workers.
Excerpt from the Atlantic – Counterintuitive Workings of the Minimum Wage
The proposal has raised three major sets of concerns. The first is jobs: Many businesses might not be able to make the pay-hike mandate work without laying off employees or not hiring them in the first place. The Congressional Budget Office has estimated that a $15 minimum wage would reduce payrolls by 1.3 million workers, squeezing the country’s overall employment level by 1 percent and the number of low-wage jobs by 7 percent. Those job losses would be concentrated among the people who want but cannot get anything other than very low-wage jobs in the first place, meaning teenagers and other younger workers, women, Black and Latino workers, and immigrants.
“It’s a slam-dunk case that a $15 minimum wage would be devastating to low-wage workers in much of the country, even after the economy has fully recovered from the pandemic recession,” Michael Strain, an economist at the right-of-center American Enterprise Institute, has argued.
Three decades ago, this was conventional wisdom. But not now. A large body of research has upended the old consensus that higher minimum wages necessarily reduce employment. One recent survey, for instance, examined 138 minimum-wage hikes at the state level and found essentially no effect on payrolls. The open question is how high is too high, Arindrajit Dube, a co-author of that paper and a professor at UMass Amherst, told me.
Download the pdf – Minimum Wage 2021 Study