| Minimum wage laws cause unemployment. I see this all the time, but I realize most people don't. My perspective comes from dealing with reality and concerns about productivity every day. This view of the world is very simple; it's based on the way the world actually works, and I hope by sharing it with you, you can understand why it has to be that way. Automation is a capital investment, with all the cost up front and with the justification in the ROI (Return on Investment) on the back end. Most industrial plants will buy any project with an ROI of less than two years. However, since it requires the up front expense, most plant managers will only start an automation project if they are kicked into it. The reason for their resistance is that manual labor is a continuous and almost level expense while investing in new systems is a risky and visible exercise. As the labor unions well know, raising the minimum wage raises all wages by the same amount, not just the lowest ones. I've been in automation since 1982, and I've learned that every time they raise the minimum wage, I get richer and employment goes down. The key is that it motivates lousy plant managers to consider automation projects because their costs (the usually "continuous and almost level" expenses) just got jacked up! For example, imagine a plant with 20 manual laborers making $8.00/hour, which is at least $10.00/hour or more to the employer, i.e., $8K per week and $832K per two years. Jack up wages by a buck, and the two-year cost goes to $915,200. After automating the process by spending $500K up front and now employing only three trained technicians for $18/hour ($224,640 over 2 years), the expense for the first two years is $500K+$224,640=$724,640. Automation was already justified, but jacking up the minimum wage motivates even incompetent management to look at options. Clearly, the ROI is far less than two years, and 17 fewer people are employed. (Automation has an expected life of 10 years, but I know of automation that has been in place for 30 years with the cost reductions holding.) Thousands of automation people like me are out there every day making the ROI case, but the upfront nut and, frankly, poor management, keeps thousands of plants from making the automation investment. Raising the minimum wage forces management to look at the other options anyway. In the above, very realistic case, management saves nearly $200K in reduced expenses over the first two years by listening to what I've been trying to tell them all along. They lay off low wage workers and I get richer. And so do they, their customers, their customers' customers and the consumers of the end products. I hope this helps your understanding! |
