How a High Minimum Wage Can Cripple a Business
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Well, I dunno much about the US labour market, but I'd be really surprised to hear that a millionaire entrepreneur employing 120 people employs anyone who isn't productive.
Reading the article, it should be noted that the lawsuit is totally unrelated to the pay rise and there is no mention of an "exodus of the talent at the top". They quote two staff who quit, one of whom is a web developer who didn't want to work there long term anyway. The number of new clients far outweighs the number of clients who left and it sounds like the whole exercise has generally been a massive success. The OP uses the word "cripple", whilst the article uses the word "bonanza".
Whilst a high minimum wage is unlikely to suit every business, it appears to be a good fit for this particular one, and good on the owner for giving it a go. He's worth $3m so he's clearly no mug when it comes to money.
I'm curious to hear that a millionaire entrepreneur owner of a private financial services company choosing to pay his staff generously is something out of the communist manifesto. Have you read it?
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The main problem I have with setting a high minimum wage is that it encourages outsourcing. Let's say I employ Bob on $40k and I could outsource their role for $60k. I'm saving $20k. If I raise their salary to $70k then I become better off letting that person go and outsourcing the role. Let's say that Bob goes to work for the outsourcing firm and earns $35k. So I'm paying $60k, of which $35k goes to Bob, and $25k goes to the owner of the outsourcing firm.
In this situation, I'm worse off (I'm paying $60k rather than $40k), Bob is worse off (he's earning $35k rather than $40k), and evil-capitalist outsourcing firm owner is better off (he's earning $25k). This is neither efficient or altruistic, it is simply a transfer of $25k from my bank account to another firm's bank account.
Of course, this guy can avoid that by never outsourcing, but I'm sceptical that that will happen. It is so easy for him to take the high moral ground whilst outsourcing his guilt to some other firm. We see this all the time with US organisations who claim to be fair employers whilst turning a blind eye to the exploitation that is carried out by their sub-contractors in the Far East. But perhaps I'm being overly critical in this case.
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@Carnival-Boy said:
Of course, this guy can avoid that by never outsourcing, but I'm sceptical that that will happen. It is so easy for him to take the high moral ground whilst outsourcing his guilt to some other firm.
You have the added complication that many people, especially in the US, see the moral highground and going to the outsourcer because those people are deserving of the work because they are providing it at a better value. Many people view people fighting for high minimum wages as unethical or, a bit better, as clueless and that it is the moral high ground to make them reap what they sow.
So it even makes the moral high ground people sometimes choose the less expensive option.
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@Carnival-Boy said:
But perhaps I'm being overly critical in this case.
Not at all, this is exactly what happens. High wages means outsourcing, non-sourcing (giving up on the work completely) or automation (replacing people with machines.)
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Correct me if I'm wrong, but this is a situation that probably would never be tolerated in a public company either. The share holders would demand that you only pay what the market will bare for salaries to ensure they get the greatest reward for their investment, right?
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@Dashrender said:
Correct me if I'm wrong, but this is a situation that probably would never be tolerated in a public company either. The share holders would demand that you only pay what the market will bare for salaries to ensure they get the greatest reward for their investment, right?
In the US this is actually a legal requirement too. In a public company (except for B companies) you can't just waste money for the sake of it. A CEO could argue that the US staff works harder, is more productive, etc. but he'd better have something to back it up if the shareholders or the board decide that that was not the case.
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So yes, you are correct.
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@scottalanmiller said:
@Dashrender said:
Correct me if I'm wrong, but this is a situation that probably would never be tolerated in a public company either. The share holders would demand that you only pay what the market will bare for salaries to ensure they get the greatest reward for their investment, right?
In the US this is actually a legal requirement too. In a public company (except for B companies) you can't just waste money for the sake of it. A CEO could argue that the US staff works harder, is more productive, etc. but he'd better have something to back it up if the shareholders or the board decide that that was not the case.
Well, the shareholders only recourse would be to fire the CEO and hire one that cares more about having high share prices instead of well paid employees, right? Could they sue the CEO, and if so, on what basis?
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NYC is on track to have $15 min wage by 2018. These restaurants are just going to do what Sheetz (greatest gas station/fast food place ever) does. They will just replace the order takers with touch screens (if you put your order in wrong, it's your fault) and possibly use the robot that Momentum Machines has created. It will slice the veggies fresh before it makes the burger, and it makes 360 burgers per hour (1 every 10 seconds). It doesn't come in to work sick, angry because of family, depressed, etc. The employer doesn't need to pay workers comp, liability insurance (for the robot), and the robot can't sue the company for any reason. It just does it's work as long as you maintain it.
The fact that fast food companies employ most of the people they do, is almost a charity at this point.
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I wouldn't call it a charity, it's really simple economics, currently people are cheaper. Though even today, the long term pay out of a huge capital expenditure of those robots would probably pay for themselves, the short term markets would be screaming bloody murder.
But, as you have mentioned, as the cost of employees continue to raise through mandate, the robots become less and less impactful and the payoff period significantly reduces.
Of course we've seen this problem time and time again throughout history. The first example I can think of is the combine, we don't need 100's of people on the farm anymore. A crew of 2 to 3 can handle thousands of acres today. Those displaced people wound up somewhere.
So the question is, where will they wind up this time? -
Working in care homes? They've yet to develop a robot that can wipe my arse when I'm old and senile. Though it will probably happen.
The one interesting thing I've seen in the last few years in the UK is that pretty much all car wash machines have now been replaced by manual car washing - almost exclusively East European immigrants. I can't think of another example where automation has actually been reversed.
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@Carnival-Boy said:
Working in care homes? They've yet to develop a robot that can wipe my arse when I'm old and senile. Though it will probably happen.
You know there is a French / Japanese joint robot project that has to be tackling this issue!!
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@johnhooks said:
NYC is on track to have $15 min wage by 2018. These restaurants are just going to do what Sheetz (greatest gas station/fast food place ever) does.
OMG, we were discussing Sheetz down here in Panama just the other day and the efficiency of those screens!!
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@scottalanmiller We moved to Florida in 2013 and I went through withdrawal. We ended up moving back the beginning of this year because my daughter was born while we were here visiting family for Christmas. I think I ate Sheetz for a week straight.
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@johnhooks said:
NYC is on track to have $15 min wage by 2018. These restaurants are just going to do what Sheetz (greatest gas station/fast food place ever) does. They will just replace the order takers with touch screens (if you put your order in wrong, it's your fault) and possibly use the robot that Momentum Machines has created. It will slice the veggies fresh before it makes the burger, and it makes 360 burgers per hour (1 every 10 seconds). It doesn't come in to work sick, angry because of family, depressed, etc. The employer doesn't need to pay workers comp, liability insurance (for the robot), and the robot can't sue the company for any reason. It just does it's work as long as you maintain it.
The fact that fast food companies employ most of the people they do, is almost a charity at this point.
My wife's family is from Indiana PA.... we hit up Sheetz two or three times on the trip down. Can't get enough of it great food at a decent price.
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@coliver You're kidding. My wife is from Indiana. We actually live about 10 mins south of Indiana now.
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I was in a Panera bread on Monday in Elk Grove, IL (NW suburb of Chicago) and they now have screens installed for ordering. They were not active yet, but in testing.
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@JaredBusch said:
I was in a Panera bread on Monday in Elk Grove, IL (NW suburb of Chicago) and they now have screens installed for ordering. They were not active yet, but in testing.
Apple bee's has tablet things on the table to replace waiters. It let's you order, pay and ask for more drink etc/page someone. there is still someone to bring food out and drinks but there are getting replaced with technology. It's kinda sad. It's just not the same.
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@thecreativeone91 said:
@JaredBusch said:
I was in a Panera bread on Monday in Elk Grove, IL (NW suburb of Chicago) and they now have screens installed for ordering. They were not active yet, but in testing.
Apple bee's has tablet things on the table to replace waiters. It let's you order, pay and ask for more drink etc/page someone. there is still someone to bring food out and drinks but there are getting replaced with technology. It's kinda sad. It's just not the same.
Have they fully committed to that? At the Applebees near our house they are on the table but there is still a waiter.
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Chili's has had those table display screens for years here, the waiter still takes the order... the only thing you can order from the screen is apps and desserts.
